positioned to deliver · ahmad al farouk bin ahmad kamal (appointed on 15 august 2019) mohd khalid...

ANNUAL REPORT 2019

POSITIONED TO DELIVER

001 Corporate Structure

002 Corporate Information

003 Directors’ Profiles

007 Senior Management Team’s Profiles

010 List Of Events/Corporate Social Responsibility

012 Management Discussion And Analysis

018 Sustainability Statement

027 Performance Highlights

029 Audit Committee Report

034 Corporate Governance Overview Statement

048 Statement Of Directors’ Responsibility

049 Additional Compliance Information

051 Statement On Risk Management And Internal Control

055 Directors’ Report And Audited Financial Statements

139 List Of Properties

140 Analysis Of Shareholdings

145 Notice Of 16th Annual General Meeting

151 Administrative Guide For Shareholders/Proxies Attending The Sixteenth Annual General Meeting (“AGM”)

• Form Of Proxy

• Documents Requisition Form

WHAT’SINSIDE

16thANNUAL GENERAL MEETING

Platinum Ballroom, Level 2

Novotel Kuala Lumpur City Centre

2 Jalan Kia Peng

50450 Kuala Lumpur

Wilayah Persekutuan

Friday, 14 August 2020

10:00 am

Go DigitalGo paperless to help our environment. Instantly access an online copy of our comphrensive report through your device by scanning this QR code.

THHE FABRICATORS SDN. BHD. 200101001422 (537178-X)

THHE DESTINI SDN. BHD. 201601017699 (1188632-X)

O&G WORKS SDN. BHD. 200601010495 (730245-A)

FLOATECH (M) SDN. BHD. 201101035197 (963331-V)

THHE OPTIMA SDN. BHD. 200601000363 (720110-M)

GLOBE WORLD REALTY SDN. BHD. 200601002200 (721948-A)

THHE TRAINING SERVICES SDN. BHD. 200601010491 (730241-K)

100%

FLOATECH (L) LTD. (LL08400)80%

49%

CORPORATESTRUCTURE

. 001TH HEAVY ENGINEERING BERHAD 200301032354 (634775-D) | ANNUAL REPORT 2019

002 . TH HEAVY ENGINEERING BERHAD 200301032354 (634775-D) | ANNUAL REPORT 2019

CORPORATEINFORMATION

REGISTERED OFFICE

Level 7, Menara Milenium,Jalan Damanlela,Pusat Bandar Damansara,Damansara Heights,50490 Kuala Lumpur,Wilayah PersekutuanTel : (+603) 2084 9000Fax : (+603) 2094 9940 / 2095 0292

CORPORATE OFFICE

Level 26, Menara Bank Islam,No. 22, Jalan Perak,50450 Kuala Lumpur,Wilayah PersekutuanTel : (+603) 2787 9000Fax : (+603) 2787 9001Website : www.thhe.com.my

SHARE REGISTRAR

Securities Services (Holdings) Sdn. Bhd.Level 7, Menara Milenium,Jalan Damanlela,Pusat Bandar Damansara,Damansara Heights,50490 Kuala Lumpur,Wilayah PersekutuanTel : (+603) 2084 9000Fax : (+603) 2094 9940 / 2095 0292Email : [email protected] (for Annual Report request and / or general meeting registration matters)

SECRETARIES

Chua Siew ChuanSSM PC No. 201908002648(MAICSA 0777689)

Tan Ley ThengSSM PC No. 201908001685(MAICSA 7030358)

BOARD OF DIRECTORSEncik Izad ShahadiBin Mohd SallehuddinChairmanNon-IndependentNon-Executive Director(Appointed on 15 August 2019)(Re-designated as Chairman on13 September 2019)

Encik Ahmad Al FaroukBin Ahmad KamalNon-Independent Non-Executive Director(Appointed on 15 August 2019)

Tuan Haji Mohd Khalid Bin Mohamed Non-Independent Non-Executive Director(Appointed on 15 August 2019)

Dato’ Haji Ghazali Bin AwangIndependent Non-Executive Director

Dato’ Indera Dr. Haji Md Yusop Bin OmarIndependent Non-Executive Director

Dr. Ir. Samad Bin SolbaiIndependent Non-Executive Director

Mr. Too Kok LengIndependent Non-Executive Director

AUDITORS

Deloitte PLT (LLP0010145-LCA)Chartered Accountants (AF 0080)Level 16, Menara LGB,1, Jalan Wan Kadir,Taman Tun Dr. Ismail,60000 Kuala Lumpur,Wilayah PersekutuanTel : (+603) 7610 8888Fax : (+603) 7726 8986

SOLICITORS

Izral Partnership

STOCK EXCHANGELISTING

Listed on Main Market of Bursa Malaysia Securities Berhad

Stock Code : 7206

Stock Name : THHEAVY

Sector : Energy

Sub-sector : Infrastructure, equipment & services

PRINCIPAL BANKERS

Malayan Banking BerhadBank Islam Malaysia Berhad



DIRECTORS’PROFILES

ENCIK IZAD SHAHADI BIN MOHD SALLEHUDDINChairman/Non-Independent Non-Executive Director

Encik Izad Shahadi Bin Mohd Sallehuddin (“Encik Izad”) was appointed as a Director of the Company on 15 August 2019 and re-designated as the Chairman on 13 September 2019. Encik Izad is currently the Chief Executive Officer (“CEO”) of Urusharta Jamaah Sdn. Bhd. (“UJSB”).

Encik Izad has over 15 years of experience working in financial institutions, including top global bulge bracket investment banks, focusing on equities. Encik Izad started his career in HSBC Bank Malaysia Berhad before moving to Maybank Investment Bank Berhad to join the Corporate Finance Division. Thereafter, Encik Izad joined UBS Securities Malaysia Sdn. Bhd. and was part of the pioneer team in Malaysia after it was awarded a full foreign broker license by the Securities Commission Malaysia in 2005. Encik Izad quickly rose to the rank of Director before taking up a new challenge to join Citigroup Global Markets Sdn. Bhd. as the Head of Equity Dealing.

In 2018, Encik Izad joined Prokhas Sdn. Bhd. as the General Manager in the CEO’s office and was in charge of the capital markets division, which is responsible for fund-raising activities for projects, such as the Mass Rapid Transit (MRT) system and the Pan-Borneo Highway before assuming his current position. In 2019, Encik Izad was appointed as Director of Danainfra Nasional Berhad.

Encik Izad holds a BSc Economics (Hons) from the London School of Economics and Political Science and a Master’s degree in Business Administration from University of Nottingham. Encik Izad has also completed the Berkeley Executive Leadership Program at the Haas School of Business, University of California Berkeley.

Malaysian Age 40 Male

ENCIK AHMAD AL FAROUK BIN AHMAD KAMALNon-Independent Non-Executive Director

Encik Ahmad Al Farouk Bin Ahmad Kamal (“Encik Farouk”) was appointed as a Director of the Company on 15 August 2019. Encik Farouk is currently the Head of Equities of Urusharta Jamaah Sdn. Bhd. (“UJSB”). He is part of UJSB’s pioneer team responsible for the managing of assets worth approximately RM10 billion.

Encik Farouk has over 15 years of working experience in investment banking, corporate finance, equities research and equities trading. He started his career with Credit Suisse as part of Malaysia’s equities trading and research team.

In 2008, Encik Farouk joined J.P. Morgan’s Investment Banking team and subsequently worked with Deutsche Bank’s Investment Banking team in 2013.

Encik Farouk has advised clients on numerous mergers and acquisitions, corporate restructuring, equity & equity linked as well as debt capital market transactions and was involved in a number of landmark deals in Malaysia.

Encik Farouk graduated from the London School of Economics and Political Science with an MSc in Finance & Economics as well as a Bsc in Economics.




DATO’ HAJI GHAZALI BIN AWANGIndependent Non-Executive Director

Dato’ Haji Ghazali Bin Awang (“Dato’ Ghazali”) has been a Director of the Company since 7 October 2015.

Dato’ Ghazali has extensive experience in corporate finance and the oil and gas industry, having held positions as Chief Accountant and Senior Manager Finance & Administration in Amanah Saham Nasional Berhad, Permodalan Nasional Berhad and Shell Companies in Malaysia. He had also served as Executive Director of Finance and Corporate Services of Kumpulan Guthrie Berhad.

Besides being an Independent Non-Executive Director of the Company, Dato’ Ghazali is also currently an Independent Non-Executive Director of Heitech Padu Berhad and BIMB Investment Management Berhad.

Dato’ Ghazali graduated with a Degree In Commerce from University of Newcastle, Australia and has a Master’s degree in Religious Studies, Institute Agama Islam Negeri, Imam Bonjol, Padang, Indonesia. He is also a qualified Chartered Accountant, being a member of the Institute of Chartered Accountants in Australia and Institute of Accountants Malaysia.


TUAN HAJI MOHD KHALID BIN MOHAMEDNon-Independent Non-Executive Director

Tuan Haji Mohd Khalid Bin Mohamed (“Tuan Haji Khalid”) was appointed as a Director of the Company on 15 August 2019. Tuan Haji Khalid is currently a Director of Dasar Wijaya Sdn. Bhd., a construction firm that carries out housing development and civil construction related works.

Prior to that, he was involved in the East Klang Valley Expressway (EKVE) Project as a Senior General Manager with Ahmad Zaki Sdn. Bhd., where he had led the negotiation of technical and commercial terms of the Concession Agreement with the Ministry of Works.

During his time there, Tuan Haji Khalid also assisted the company to secure sukuk financing of RM2 billion and collaborated in securing Government Support Loan of RM635 million.

Among other positions he has held were the General Manager of IJM Construction Sdn. Bhd., where he was entrusted to set up and lead the concession company towards full operations of the Kajang Seremban Highway (LEKAS) Project as well as General Manager of Gamuda-Percon Joint Venture for the Shah Alam Expressway (KESAS) Project.

Tuan Haji Khalid was also the Head of Engineering for Projek Penyelenggaraan Lebuhraya Berhad (PROPEL) and was involved in the construction of PLUS Expressway. Tuan Haji Khalid began his career with Jabatan Kerja Raya in 1979.

Tuan Haji Khalid obtained his Ordinary National Diploma in Engineering in 1975 from Southampton Technical College, United Kingdom before furthering his studies at the Loughborough University of Technology, United Kingdom where he obtained a Bachelor of Science in 1978.




DATO’ INDERA DR. HAJI MD. YUSOP BIN OMARIndependent Non-Executive Director

Dato’ Indera Dr. Haji Md. Yusop Bin Omar (“Dato’ Indera Md. Yusop”) was appointed as a Director of the Company on 25 May 2012. He graduated from University Malaya in 1975 with a Bachelor of Arts and obtained his certificate in Public Administration in 1976. Dato’ Indera Md. Yusop served as Administration and Diplomatic Officer in the Government sector for 20 years.

Dato’ Indera Md. Yusop was a Director of Asie Sdn. Bhd. from 1994 to 1997 and was a Director of Premier Ayer Sdn. Bhd. from 1997 to 2000. He was then appointed as Executive Director of Konsortium Abbas Sdn. Bhd. from 2000 to 2006. Dato’ Indera Md. Yusop is a Director of Malaysian Strategy Leadership Foundation from 2009 to 2016.

Besides being an Independent Non-Executive Director of the Company. Dato’ Indera Md. Yusop is currently also a Director of TH Plantation Bhd since 2015.


DR. IR. SAMAD BIN SOLBAIIndependent Non-Executive Director

Dr. Ir. Samad Solbai (“Dr. Ir. Samad”) was appointed to the Board of the Company on 25 May 2012. He is a registered Professional Engineer and a Fellow of the Instituition of Engineers, Malaysia. He is an Independent Non-Executive Director of the Company.

He has a wide, hands-on experience in the fabrication of oil and gas platforms projects. Dr. Ir. Samad’s employment career included 13 years in academia (including as an Associate Professor and Dean of Mechanical Engineering, Universiti Teknologi Malaysia) and more than 20 years in the oil and gas Industry. He holds a Ph.D. in Chemical Engineering from the University of Cambridge, M.Eng.Sc. in Materials Engineering from Monash University, B.Eng.(Mechanical) from Caulfield Institute of Technology and Graduate Diploma in Islamic Studies from International Islamic University, Malaysia. He also attended Advanced Management (Executive Programs) courses at the Wharton School of Business at University of Pennsylvania and GE’s training centre at Crotonville, New York.

Prior to his retirement from full-time employment, Dr. Ir. Samad was the CEO of PT. Gunanusa Utama Fabricators, Indonesia from 2005 to 2011. He also held a number of key positions in oil and gas related companies including nine (9) years in the Sime Darby Group as Group General Manager of the oil and gas Division of Sime Darby Berhad and CEO of Sime Sembcorp Engineering Sdn. Bhd. Dr. Ir. Samad was the Group Managing Director of Shapadu Corporation for a brief period of 18 months from mid-1999.

Dr. Ir. Samad is currently a Director of a number of private companies in Malaysia including THHE Fabricators Sdn. Bhd. and Li-Zainal Sdn. Bhd.




Save as disclosed, none of the Directors has:-

1. any family relationship with any Director and/or major

shareholder of the Company;

2. any conflict of interest with the Company;

3. any directorship in public companies and listed issuers; and

4. any conviction for offences within the past five (5) years other

than traffic offences and has not been imposed any penalty

by the relevant regulatory bodies during the financial year

ended 31 December 2019.

MR. TOO KOK LENGIndependent Non-Executive Director

Mr. Too Kok Leng (“Mr. Too”) was appointed as a Director of the Company on 28 January 2008.

He holds a B.A (Hons) in Law and was admitted to the Malaysian Bar in 1983. He started his own practice in 1988 and was practising under the name and style of Rahman, Too & Co. in Seremban and Kuala Lumpur. He specialized in the corporate and banking fields rendering legal advice to several banks and public listed companies.

He is the member of Audit Committee, and a member of Nomination Committee of the Company.

Besides being an Independent Non-Executive Director of the Company, Mr. Too is also currently the Executive Vice Chairman of Menang Corporation (M) Berhad, a position which was re-designated on 1 December 2019 from a Group Managing Director/ Group Chief Executive Officer.



SENIOR MANAGEMENTTEAM PROFILES

Suhaimi Bin Badrul Jamil (“Encik Suhaimi”) was appointed as Chief Financial Officer (“CFO”) of THHE on 2 December 2013. Encik Suhaimi was subsequently appointed as Chief Executive Officer (“CEO”) of THHE on 1 September 2016 and being designated as CEO cum CFO. Encik Suhaimi relinquished his position as CFO and has been re-designated to CEO with effect from 3 July 2018.

Encik Suhaimi obtained a Bachelor of Economics (with specialisation in accounting) from the Australian National University in year 1985, a Graduate Diploma in Accounting from the Australian National University, Australia in 1986 and a Master Degree in Business Administration from Deakin University, Australia in year 2004. Encik Suhaimi is a qualified Chartered Accountant, being a member of Malaysian Institute of Accountants (MIA) and a Fellow CPA Australia.

Encik Suhaimi started his career with HRM Arthur Andersen, Chartered Accountants in the Audit and Financial Consulting Department. He left to join the corporate world and went on to be appointed as a Group Financial Controller, Group General Manager and finally as a Group Executive Director for a Malaysian conglomerate whose activities included property development, transportation, insurance and banking, plantation, construction, manufacturing and investment holdings.

ENCIK SUHAIMI BIN BADRUL JAMIL

Chief Executive Officer


He then went on to start his own business and has been involved in various start-ups covering diverse areas including education, international trading, agriculture, manufacturing, mining and private equity. Apart from that, he was also a Special Administrator for Danaharta, regularly consults various companies in areas of corporate finance, corporate restructuring, risk management, turnaround management, cross border investments in South East Asia, mergers and acquisitions and strategic management and leadership.

Encik Suhaimi held various board directorships in public listed companies as well as licensed financial institutions. Currently, he is an Independent Non-Executive Director of Protasco Berhad. Among the companies in which he was a board member were MEMS Technology Berhad as Chairman of the Board, Petra Energy Berhad, Credit Corporation (M) Berhad, MIMB Investment Bank Berhad, Gadek Capital Berhad, SPK-Sentosa Corporation Berhad, Intrakota Consolidated Berhad, eB Capital Berhad and SJ Kumpulan Berhad. He was also an Executive Director with Ferrier Hodgson MH and Baker Tilly MH.

Encik Suhaimi Bin Badrul Jamil had tendered his resignation on 1 April 2020 to pursue other opportunities. His resignation is effective 1 July 2020.

Prior to joining THHE Group, Azizul Hanafee Bin Mohd Zain served as the Chief Operating Officer with Labuan Shipyard & Engineering Sdn. Bhd. A graduate in Naval Architecture and Marine Engineering from University of Michigan, Azizul started his career in 1992 as a Planning & Estimating Engineer at Malaysia Marine & Heavy Engineering (MMHE). He subsequently served Boustead Naval Shipyard Sdn. Bhd. and Boustead Penang Shipyard Sdn. Bhd. for 17 years, holding various positions namely Chief Operating Officer, General Manager, Project Manager, Production Manager, Commercial Manager and Planning & Estimating Manager. He was also a Director of BHIC MSM Sdn. Bhd., a JV company between Boustead and MTU Services Malaysia specialising in the maintenance, repair and overhaul of MTU diesel engines. Azizul is also an HRDF-certified trainer.


ENCIK AZIZUL HANAFEE BIN MOHD ZAIN

Senior General Manager,Ship Building & Ship Repair



Tuan Haji Zainalabidin Bin Ismail joined THHE Group on 1 November 2016 as General Manager, Legal & Secretarial Services. He holds a Master of Laws and a Bachelor of Laws from University of London. Tuan Haji Zainalabidin started his career as a Law Lecturer at the then Institut Teknologi Mara. Shortly later he joined PETRONAS and served with the PETRONAS Group of Companies for 35 years, holding various positions in the holding company as well as a number of major upstream and downstream subsidiaries from Legal Officer to Company Secretary, Senior Legal Counsel and General Manager, Legal. Prior to joining THHE Group, he was a Senior Consultant at Azmi & Associates and General Manager, Operations at Prudenz Corporate House Sdn. Bhd.

TUAN HAJI ZAINALABIDIN BIN ISMAIL

General Manager, Legal & Secretarial Services


Abdul Malik Bin Abdul Rahim joined THHE Group as Senior Manager, Finance on 8 December 2014. On 1 June 2016, Abdul Malik was appointed as General Manager, Finance. Abdul Malik is a qualified Chartered Accountant, being a member of Malaysian Institute of Accountants (MIA) and Malaysian Institute of Certified Public Accountant (MICPA). Abdul Malik holds a Bachelor of Accountancy from Universiti Teknologi Mara. He started his professional career in 2004 with KPMG as an Audit Associate. In 2010, he joined Chemicals Company of Malaysia Berhad as Group Finance Manager. He then joined Scomi Group Bhd Group Finance, before joining THHE Group.


ENCIK ABDUL MALIK BIN ABDUL RAHIM

General Manager, Finance

Roshidi Bin Mat Saad joined THHE Group as Manager, Human Resource and Administration on 2 July 2010. On 2 March 2012, he was appointed as Head, Human Resource and Administration and on 4 February 2014, he was appointed as General Manager, Group Human Resource. Roshidi holds a Bachelor of Business Administration (Majoring in Human Resource Management) from University of Wales, Cardiff. He also holds several local certifications which include Diploma and Certificate in Human Resource Management (MIHRM), Safety, Health & Environment (NIOSH) and the National Examination Board in Occupational Safety and Health (NEBOSH). Prior to joining THHE Group, he served with MBSB, Utama Merchant Bank Bhd, Malaysia Shipyard Engineering, Shapadu Engineering, Ramunia Holding Berhad, FPSO Ventures Sdn. Bhd., DRB-HICOM and Labuan Shipyard and Engineering Sdn. Bhd. in numerous positions in Human Resource Management.


ENCIK ROSHIDI BIN MAT SAAD

General Manager, Group Human Resource



Save as disclosed, none of the Senior Management Team members has:-

1. any family relationship with any Director and/or major shareholder of the Company;

2. any conflict of interest with the Company;

3. any directorship in public companies and listed issuers; and

4. any conviction for offences within the past five (5) years other than traffic offences and

has not been imposed any penalty by the relevant regulatory bodies during the financial

year ended 31 December 2019.

Tuan Haji Kamaruzaman Bin Mohd Tahir, joined THHE Group on 20 May 2008 as Operations Manager. On 1 November 2013, he was appointed as General Manager of O&G Works Sdn. Bhd. Tuan Haji Kamaruzaman holds a Bachelor in Mechanical Engineering from University Technology Malaysia, Skudai. He has 26 years’ experience in the oil and gas industry and 3 years in civil construction. Prior to joining THHE Group, he served with Rocon Equipment Sdn. Bhd. (1996-1997) and IMPSA (M) Sdn. Bhd. (1997-2008) until 2008, where he held the position of Erection Yard Manager.

TUAN HAJI KAMARUZAMAN BIN MOHD TAHIR

General Manager, O&G Works Sdn. Bhd.


Abdul Wahab Saaroni Bin Abdul Aziz, joined THHE Group on 2 December 2019 as Senior Project Manager for the Piles Fabrication Project for AFCONS’s Offshore Process Platform (CPP & LQUP) Project in relation to the Development of KG-DWN-98/2 NELP Block offshore India.

Abdul Wahab Saaroni holds a Degree in Mechanical Engineering from University of New South Wales, Australia and has 33 years of commercial and technical experience in oil and gas offshore/onshore projects as well as shipbuilding and ship repair projects.

After graduating from Malaysia’s Royal Military College, Abdul Wahab Saaroni started his career with the government of Malaysia in the Defence Ministry as a Royal Malaysian Navy officer. After 13 years, he left the service as Lt Commander before joining the private sector.

He then worked for 7 years in various shipbuilding projects with Hong Leong-Lurssen Shipyard Sdn. Bhd. and Singapore’s Miclyn Offshore, before moving onto the oil and gas industry.

Prior to joining THHE Group, he had served with various Malaysian and international companies, namely, as a Project Manager with Sapura Project Services Sdn. Bhd. and Science-Tech Solutions Sdn. Bhd. Earlier, he was with Leighton International Oil and Gas Division as project engineer for 7 years, working on various international oil and gas projects across Asia and Middle East.


Muhamad Suffian Bin Salleh, joined THHE Group on 13 January 2006 as Senior Executive, QA/QC. On 1 May 2011, he was appointed as Head of QHSE. Muhammad Suffian holds an Advance Diploma in Welding Technology and has 26 years’ experience in QHSE. He holds a NEBOSH IGC and is also a certified CQI & IRCA Lead Assessor/Auditor for ISO 9001:2015, ISO 14001:2015 & ISO 45001:2018. Prior to joining THHE Group, he served with Bureau Veritas Sdn. Bhd. as Certification Authority Surveyor. He had also served Germanisher Llyod (M) as a Certification Authority Representative for various Talisman projects. He had also been seconded to Petronas Carigali Sdn. Bhd., OGP Technical Services Sdn. Bhd., Imsa Malaysia Sdn. Bhd. and Sime Sembcorp Engineering Sdn. Bhd. as Certification Agency Surveyor, Project QHSE Engineer, Piping/Mechanical Inspector, QA/QC Inspector and PMT.


ENCIK MUHAMAD SUFFIAN BIN SALLEH

Head of Support Services and Quality, Health, Safety and Environment

ENCIK ABDUL WAHAB SAARONI BIN ABDUL AZIZ

Senior Project Manager




LIST OF EVENTS/CORPORATE SOCIAL RESPONSIBILITY

MIDF SITE VISIT

Pulau Indah Yard

30JAN

MAJLIS BERBUKA PUASA DAN SOLAT TERAWIH THFSB & OGW

Pulau Indah Yard

15MAY

15TH ANNUAL GENERAL MEETING AT NOVOTEL KUALA LUMPUR CITY CENTRE

Novotel Kuala Lumpur City Centre

19JUN

FACTORY VISIT TO OGW/ THHE BY ATB RIVA CALZON

Pulau Indah Yard

19FEB

LAWATAN TIMBALAN KETUA PENGARAH OPERASI, AGENSI PENGUATKUASA MARITIM MALAYSIA (APMM)

Pulau Indah Yard

4MAR

THE LANGKAWI INTERNATIONAL MARITIME AND AEROSPACE EXHIBITION (LIMA’19)

Mahsuri International Exhibition Centre (MIEC), Langkawi

26MAR

30MAR

ROAD SAFETY CAMPAIGN

HQ Menara Bank Islam & Pulau Indah Yard

• Lauching, Distribution of phamplet and awareness presentationon road safety

30MAY

31MAY


LIST OF EVENTS/CORPORATE SOCIAL RESPONSIBILITY

LAWATAN TAPAK OLEH TIMBALAN KETUA SETIAUSAHA (P) KEMENTERIAN DALAM NEGERI

Pulau Indah Yard

24SEP

THHE DIRECTORS’ SITE VISIT

Pulau Indah Yard

26SEP

HARI RAYA AIDILADHA CONTRIBUTION

Masjid Al-Qayyum, Pulau Indah

• Paticipated in Korban at Masjid Al-Qayyum, Pulau Indah

12AUG

IEM SITE VISIT

Pulau Indah Yard

17OCT

OPV 1 MAJOR BLOCK ERECTION OPERATION

Pulau Indah Yard

18NOV

25NOV

UNSAFE ACT UNSAFE CONDITION CAMPAIGN (AFCONS PROJECT) - PULAU INDAH

Pulau Indah Yard

3DEC

PROGRAM SURAU AS SALAM: SOLAT HAJAT/ BACAAN YASIN/ TAHLIL

Pulau Indah Yard

• Surau As Salam

26DEC

012 . TH HEAVY ENGINEERING BERHAD 200301032354 (634775-D) | ANNUAL REPORT 2019012 .

MANAGEMENT DISCUSSIONAND ANALYSIS

ECONOMY IN 2019

Malaysia’s gross domestic product (“GDP”) growth of 4.3% for the year 2019 was lower compared to the 4.7% in 2018 due to pronounced decline in net exports. At the same time the Global economy faced underlying uncertainties, US-China trade war, depressed commodity prices and slowdown in China’s growth were among the major global economic concerns in 2019. These external factors had an adverse impact on the home front as reflected by lukewarm economic performance, uncertain business outlook and subdued corporate performance.

sizeable that can add to the Group’s earnings favourably while ship repair, additionally, is assessed as a low risk industry by its very nature of being recurring work and growth-based.

In 2019, the oil and gas industry experienced a slowdown despite showing signs of recovery in 2018. The price of Brent crude oil ranging between USD 55 per barrel and USD 75 per barrel during 2019 was due to the imbalance of supply and demand. Growing production from the United States has restrained the upward trend of Brent crude oil price despite OPEC members’ continued curtailment of production. In addition, a slowdown in oil demand attributed to dampened global economic growth also weighed down the average price of Brent crude oil in 2019.

Nevertheless, the Group whose core activity traditionally involved the fabrication of offshore structures for the oil and gas industry has successfully secured the subcontract for the fabrication of piles from AFCONS Infrastructure Ltd (“AFCONS”) during the year 2019. With the securing of this additional project, the yard utilisation is expected to increase and will keep the fabrication facilities busy until end of 2020.

In early 2020, the global market was hit by the outbreak of the novel coronavirus pandemic (“COVID-19”), causing a global economic downturn. Global oil and gas demand fell significantly as several major economies went into lockdown to control the pandemic. The Brent crude oil spot prices fell from a monthly average price of USD63.60 per barrel in January 2020 to an 18-year record low of USD23.34 per barrel in April 2020.

INDUSTRIES DEVELOPMENT

The maritime sector of Malaysia contributes about 40% to the GDP which comprise shipping and logistics sector, the fisheries sector, the maritime-related industries and tourism sector. Despite its relatively small size, Malaysia is a strategic maritime hub in Southeast Asia. Two of the region’s main maritime corridors are the South China Sea and the Straits of Melaka on account of which international shipping navigate through Malaysia’s territorial waters and exclusive economic zone.

As a maritime nation straddling one of the busiest sea lanes in the world, Malaysia offers many opportunities in Shipbuilding and Ship Repair (“SBSR”), especially for small to medium-sized vessels below 120 meters in length. However, an analysis by Malaysian Industry Government

Group for High Technology has shown that Malaysian shipyards only cater to approximately 50% of the domestic market and 1% of the global market, which generates between RM5 billion to RM11 billion in revenue annually. Thus, the industry is open to significant growth opportunities moving forward.

With the strategic location of the Company and its subsidiaries’ (“Group”) yard at Pulau Indah, sandwiched between the major Malaysian ports of Northport and Westport and directly accessible by vessels plying the Straits of Melaka, the Group is poised to take advantage of these SBSR opportunities. The expansion into SBSR provides opportunities for future growth of the Group and will ensure that it remains relevant and will become more resilient moving forward. Shipbuilding projects are typically

TH HEAVY ENGINEERING BERHAD 200301032354 (634775-D) | ANNUAL REPORT 2019


FINANCIAL PERFORMANCE

In 2019, the Group registered a revenue of RM57.5 million, an increase of RM55.0 million as compared to 2018 of RM2.5 million. The increase in revenue is mainly due to the recognition of revenue from the supply, delivery, testing and commissioning of 3 Offshore Patrol Vessels (“OPV”) for the Malaysian Maritime Enforcement Agency (“MMEA”). The contract sum for this OPV project is RM738.9 million.

Accordingly, the Group recorded a net profit after tax of RM9.9 million due to better contribution from all business segments as well as lower impairment charges, written off and provisions.

REVIEW OF OPERATING ACTIVITIES

The Group’s Pulau Indah Yard is equipped with the necessary equipment and facilities to fabricate offshore structures and undertake medium scale shipbuilding. The Group’s load-out jetty dimension in Pulau Indah Yard is 70 meters in length with a draft at zero tide of approximately 3.5 meters, while the Group’s fabrication yard’s capacity is 10,000 metric tons per annum, with a load out capacity of 2,500 metric tonnes (“MT”).

Ship Building and Ship Repair (“SBSR”)

The OPV project was awarded by the Government of Malaysia for 3 OPVs for the Malaysian Maritime Enforcement Agency, with each vessel having a length of about 83 metres and a displacement of 1,800 MT. The overall progress of completion of works done as at 31 December 2019 was 64.4%. Major activities included:

• OPV 1. The vessel has been completed and transferred to the launching site for final outfitting works prior to launching.

• OPV 2. There is a significant progress made on the construction and outfitting of the Main Engine blocks in conjunction with the preparation of the main engine and power generation sets for which the installation was completed in

January 2020. Concurrently, the steel construction works has reached 80% completion for the hull sections.

• OPV 3. Currently the steel construction works have achieved nearly 30% of the hull sections.

For the OPV project, the Group has started recognising revenue of RM45 million in 2019 after fulfilling the criteria under MFRS 15, Revenue from Contracts with Customer. Based on the accounting standard, the revenue was recognised based on the over a time method and as the performance obligation was completed.

Oil and Gas Business

On 15 June 2019, the Group secured a subcontract for the Fabrication of Piles related to Offshore Process Platform for the development of KG-DWN-98/2NELP Block offshore east coast of India from AFCONS the main contractor for India’s Oil and Natural Gas Corporation (“ONGC”). The contract sum for this fabrication works is USD9.7 million. The scope of work of the subcontract entails the fabrication of 15,361 MT of piles for the Central Processing Platform (“CPP”) and 9,156 MT of piles for the Living Quarters Platform (“LQUP”).


. 013

GROUP’S REVENUE

RM57.5million

“The OPV project was awarded by the Government of Malaysia for three OPVs for the Malaysian Maritime Enforcement Agency...”


014 . TH HEAVY ENGINEERING BERHAD 200301032354 (634775-D) | ANNUAL REPORT 2019014 .


The scope of work also includes the load out and sea fastening of the completed piles on barges furnished by AFCONS. The main piles are to be fabricated in four segments, ranging from approximately (P1-71 meter), (P2-50 meter), (P3-46 meter) and (P4-35.3 meter). Skirt piles are to be fabricated in three segments ranging from (P1-88 meter), (P2-47 meter) and (P3-42.36 meter). Pile fabrication will also include the fabrication and assembly of pile stabbing guides, welding of shear keys or weld beads for skirt piles, pile guide welding, pile stoppers, pile pad-eyes etc. and other fabrication aids. Work pursuant to the subcontract commenced on 19 August 2019 with preliminary works and site preparation such as levelling the land, installation of electrical supply, laying the crusher run and cabling for cranes.

The overall progress of completion was 42.24% for CPP piles fabricated as at 31 December 2019. The Group recognised the revenue of RM9 million from this project and clocked 230,880 man-hours of work without any Lost Time Injury for this project as at 31 December 2019.

Quality and Safety

The Group has always given Quality, Health, Safety and Environment a very high priority. In this regard, the Group clocked 27,118,653 man-hours of work without any Lost Time Injury from 2012 to December 2019. This is a testament to the Group’s commitment to Health, Safety and Environment and standard of care.

Participating at Langkawi International Maritime and Aerospace Exhibition 2019 (“LIMA 19”)

In line with the Group’s diversification for SBSR businesses, the Group participated in LIMA 2019 from 26 to 30 March 2019 to create awareness and gain new business opportunities from the prestigious international event. The exhibition witnessed a participation of 555 companies from 36 countries. Malaysian companies and government bodies topped the chart in participation of the event, followed by Russia, France, Australia, United Kingdom and the United State of America.

International Ship and Port Security Licence

The International Ship and Port Facility Security (“ISPS”) Code is the minimum security arrangement for ships, ports and government agencies which prescribes responsibilities to governments, shipping companies, shipboard personnel, and port/facility personnel to detect security threats and take preventive measures against security incidents affecting ships or port facilities used in international trade.

In 2019, the Group obtained the ISPS Licence from the Marine Department of Malaysia in compliance with the International Maritime Organisation (“IMO”) Safety of Life At Sea (“SOLAS”) Chapter XI-2 regulation, which certifies the Group’s compliance with global maritime standards on security requirements for contracting governments, port authorities and shipping companies.

CORPORATE DEVELOPMENTS

The major corporate developments undertaken by the Group are as follows:

(A) Proposed Regularisation Plan

On 28 April 2017, the Company announced that it has become an affected listed issuer pursuant to the amended Practice Note 17 (“PN17”) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”). As an affected issuer, the Company is required to submit a Regularisation Plan to address the PN17 status within 12 months from 28 April 2017 to Bursa Securities for approval. The Company is currently in


. 015TH HEAVY ENGINEERING BERHAD 200301032354 (634775-D) | ANNUAL REPORT 2019 . 015

the process of formulating the Proposed Regularisation Plan for submission and during the financial year, it has applied and has been granted extension of time up to 22 October 2020 by Bursa Securities to submit the Proposed Regularisation Plan.

The Proposed Regularisation Plan will mainly comprise the following:

(i) Proposed capital reconstruction exercise involving the conversion of the existing Islamic Irredeemable Convertible Preference Shares (“ICPS-i”) into ordinary shares, proposed issuance of new ICPS-i, and a capital reduction and amalgamation exercise for which the quantum has not been finalised;

(ii) Proposed disposal of certain non-core assets; and

(iii) Proposed acquisition of a business.

On 13 March 2020, the Company entered into a non-binding memorandum of understanding (“MOU”) with ICE Petroleum Ventures Sdn. Bhd. (“Vendor”) in relation to the acquisition of 12.9 million ordinary shares in ICE Petroleum Engineering Sdn. Bhd. (“ICE”), representing the entire equity interest in ICE by the Company from the Vendor (“Proposed acquisition”). ICE is principally engaged in mechanical engineering works and services, plant fabrication and installation for the oil, gas and petrochemical industries. Subject to the outcome of the due diligence exercise, both


parties irrevocably confirm and agree to enter into an agreement within 4 months from the date of the MOU or such other extended period to be mutually agreed in writing by the parties (“Term”) within 14 days prior to the expiry of the Term.

The MOU allows the Company and the Vendor to negotiate exclusively and outline the salient terms in relation to a share sale agreement to be entered into between the Company and the Vendor. The Proposed acquisition forms part of the Company’s proposed regularisation plan to regularise its financial condition in efforts to maintain its listing status on the Main Market of Bursa Securities.

(B) Debt Restructuring

In 2017, the Company and two of its subsidiaries namely THHE Fabricators Sdn. Bhd. (“THFSB”) and O&G Works Sdn. Bhd. (“OGW”) (“Scheme Companies”) had each formulated a Scheme of Arrangement (“Scheme”) with their respective Scheme Creditors.

The respective Scheme Creditors approved the Company’s Scheme and that of THFSB and OGW (“Approved Scheme Companies”) at the Court Convened Creditors Meeting held in December 2017 and the same were subsequently approved by the High Court on 6 February 2018. Pursuant to the approved Schemes, the total debts due and owing to the Scheme Creditors have been reduced and will be settled by way of cash (“Cash Portion”),

proposed issuance of new ICPS-i in the Company and term out of the existing facility. Any remaining amount owing to the Scheme Creditors after the aforesaid shall be completely waived. Accordingly, all pending litigation proceedings including all winding up petitions have been withdrawn or terminated as the debts are deemed to have been compromised under the Schemes. Currently, the issuance of new ICPS-i to the Scheme Creditors is still pending.

BUSINESS STRATEGIES

The Group remains focused on the two main business segments i.e. shipbuilding and ship repair as well as fabrication of oil and gas structures.

(a) Shipbuilding and Ship Repair

The Group is expanding its core business to include SBSR with the securing of the contract for the building of three OPVs for MMEA in 2017 and are targeting contracts in the shipbuilding business via participation in various government tenders.

The Group intends to seize the shipbuilding and maintenance, repair and overhaul (“MRO”) opportunities from small to medium sized vessels in Malaysia by fulfilling the fleet modernisation and MRO requirements of maritime agencies of the Government of Malaysia, such as the MMEA the Marine Department, the Royal Malaysian Customs, the Eastern Sabah Security Command (“ESSCOM”) and the Royal Malaysian Navy (“RMN”).




(b) Slipway

During the year 2019, the Group commenced the construction of a 3,000 MT multiple-berth slipway capable of up slipping ships of up to 120 meters in length and is expected to be completed by end 2020. The facility will enable the Group to conduct SBSR activities for up to 3 ships simultaneously. The development of the slipway is part of the OPV project execution. This slipway will enable the erection and subsequent launching of the OPVs.

Upon completion of the OPV project, the slipway will enable the Group’s Pulau Indah Yard to undertake ship repair of larger ships of up to 2,500 MT displacement such as corvettes, offshore supply vessels, anchor handling tugs, support vessels and others.

(c) Licences

The Group also has the necessary licences required to undertake SBSR projects from all Malaysian Governmental agencies such as the Royal Malaysian Navy, MMEA, Royal Malaysian Police and others. With these licences, the Group looks forward to participating in all their upcoming tenders. In addition, the Group will be able to actively participate in commercial SBSR business, both domestic and international, once the multi-berth slipway is operational.

The licences of the Group can be categorised as Shipbuilding Class AA and Ship Repair Class C. Shipbuilding Class AA is for the building of all types of ships

with a displacement exceeding 600 MT, issued by the Ministry of Finance while Ship Repair Class C is for the repair of ships with a displacement below 400 MT, issued by the Ministry of Finance. This Ship Repair licence Class C will be upgraded to Class A with a displacement above 600 MT once the 3,000 MT multiple-berth slipway is ready.

(d) Oil and Gas Business

With the reinstatement of the PETRONAS licence in February 2020, the Group will also actively seek work opportunities with PETRONAS and other upstream

oil and gas companies, and take advantage of the strategic location of the Group’s Pulau Indah Yard for fabrication works and other oil and gas projects.

In addition the Group is exploring opportunities in oil and gas business beyond ASEAN countries particularly India and Middle East countries. With the securing of the AFCONS project during 2019, the Group is also exploring other scope of works with AFCONS and/or directly with ONGC. The Group’s track record in this job will enhance its chances in securing other future jobs.




FUTURE CHALLENGE

The acute shock from the COVID-19 pandemic is expected to plunge Malaysia’s economy into recession this year, with Bank Negara Malaysia (“BNM”) forecasting GDP at -2.0% to +0.5% in 2020, a notably wider range than in previous years. BNM attributes its forecast to significant uncertainty surrounding the containment of COVID-19 and recovery timeline. Accordingly, the Government of Malaysia is expected to defer major projects and non-essential expenditure, which may affect the maritime industry.

The less than positive developments in the oil and gas industry worldwide have caused some turmoil, bringing along with it a low for long crude prices. Furthermore, PETRONAS has announced major cuts in their capital expenditure and operating expenditure for the remaining year 2020.

PROJECT RISKS & MITIGATING FACTORS

The revenue derived from a specific project or work order for a contract can be impaired by a number of factors such as delays in accessing a site, work delays due to geotechnical conditions or variations at site, delay in delivery of materials and parts sourced from overseas, for which may not be within the Group’s control.

In order to address the risk of delays, the Group’s project management team conducts periodic reviews with the Group’s customers during the entire phase of a project/contract. The Group will also hold periodic progress meetings with the Group’s customers’ management to continuously manage the customers’ expectations, work progress and be proactive to address any anticipated issues that may arise.

MOVING FORWARD

The Scheme of Arrangement and the Proposed Regularisation Plan will enable the Group to substantially restructure the Group’s liabilities, so as to enable the Group to begin on a clean slate post restructuring.

Meanwhile, the Group is consolidating its plan to deepen its presence in the SBSR in Malaysia and Southeast Asia as maritime security issues push nations in Asean to fortify their maritime capabilities for commerce and national security.

With the effects of the COVID-19 pandemic and especially with the drastic drop in crude oil price to USD27 per barrel in late March 2020, oil producers in Malaysia and elsewhere continue on a cautious optimism mode. Should the crude oil prices stay low for long, the Group must remain flexible and consider all possible new revenue sources including further concerted efforts to deepen its involvement in the SBSR business.



SUSTAINABILITYSTATEMENT

The Company and its subsidiaries (“the Group”) recognises the growing importance of embedding sustainability culture and awareness in our business value. This statement outlines our strategic approach to sustainability. The Group’s sustainability practice focuses on sustainable business growth, environmental stewardship, and social responsibility.

With more than a decade of involvement in the oil and gas industry and is now progressively diversifying into the shipbuilding and ship repair, the Group has multiple stakeholders. These important and diverse range of stakeholders with different levels of influence or interest in the organisation play a critical role in our business. While the stakeholders are numerous, we as a Group value them individually as distinct and important to our long-term sustainability. The Group acknowledges that identifying relevant stakeholder is important and has designed a Stakeholder Engagement Process to engage with the various interest groups to unravel their expectations. At the end of the process, we strive to strike a balance between the material needs of the Group and the expectations of our stakeholders. A process that we at the Group have found useful to uncover the expectations of our stakeholders is depicted below:

Stakeholder Engagement

Stakeholders Method Of Engagement Stakeholders’ Concerns Our Response

Shareholdersand Investors

- Annual General Meeting- Extraordinary General Meeting- Corporate Website- Report

- Financial returns- Value of investment

- Financial performance- Announcement

Employees - Employee Performance Assessment- Training- Event- Drill- Health & Safety Committee

- Safety at workplace- Career development- Benefits employee social

and welfare care- Equal opportunity

- Career development- Rights and respect- Safe environment

Client - Client Feedback- Client Visit- Trade Exhibition

- Pricing- Delivery- Quality- Sustainability

- Reasonable pricing and reliability

- Quality and sustainable Processes

Suppliers - Supplier Meetings- Supplier Audits

- Cost efficiencies- Compliance to

sustainability matters- Quality product

- Reliability and quality- Retention- Collaboration opportunities

Government - Compliance with Government Legislative Framework

- Regulatory disclosure- Accountability- Access to premise and

Records

- Certifications- Compliance to regulations- Transparency

Communities - Meeting with Local Communities - Provision of jobs and internship to graduates

- Local employment- Environmental impacts

- Practical trainee- Job placement- Environmental

Responsibilities



Material Sustainability Statement – Economics

Sustainable Business Growth

The Group has always made sustainability an integral part of its business growth. In pursuing our business growth, we take into consideration both short-term and long-term issues that may affect our business model. We believe the business ecosystem is about creating synergies across the Group in terms of generating revenue, employment and developing vendors.

The Group is accredited with ISO 9001, ISO 14001 and OHSAS 18001 since April 2012. In April 2018, the Group successfully transited to the latest ISO 9001:2015 and ISO 14001:2015 version.

Material Sustainability Statement – Environment

The Group’s commitment towards environmental protection is demonstrated by employing responsible environmental practices through ensuring regulatory compliance, promoting environmental responsibility through the Group’s Health, Safety and Environment Policy and encouraging the development and use of environment friendly materials and technologies in our operational activities.

The Group believes in the importance of undertaking an assessment process to contribute to the resolution of global environmental issues which involves analysing latent opportunities and risks to the Group.

As one of the companies accredited with ISO 14001: 2015 certification for Environmental Management System, we are committed to pursuing, implementing and continuously improving our Environmental Management System by taking the proactive measures in improving environmental performances. At the Company’s subsidiaries namely THHE Fabricators Sdn. Bhd. and O&G Works Sdn. Bhd., we implement an operational control plan on waste management in accordance with the Environmental Quality (Scheduled Waste Regulation, 2005). All the common generated scheduled waste such as contaminated containers, spent lubricating oil and spent hydraulic oil from our yard are disposed to the waste facility managed by assigned contractor who is registered and licenced with Department of Environment (“DOE”).

The Group continues to encourage responsible practices in waste management to ensure the well-being of our daily operational activities, including the clients, suppliers, sub-contractors, visitors and the community at large. Besides being one of the key platforms in creating sustainability awareness among employees by implementing the life cycle perspective, it is also our commitment and contribution towards the environment for the benefit of future generation. Our approach to waste management covers the construction waste, municipal waste produced including domestic and hazardous waste.

Domestic wastes comprise of solid waste, compostable materials, recyclable materials and reusable materials. At our premises, the generated waste is segregated for recycling purposes in order to reduce the waste disposal to landfill and implement the life cycle process to ensure the sustainability of environment. In addition to deepening our commitment to the environment, the Group conducts all of our operations including production and sales with consideration for people, society, nature and the earth as a means of contributing to the building of a better society.

1. Waste

1.1 Below is the approximate amount of waste generated in our Pulau Indah yard

Waste Code

Waste Name Mt/Year

SW110 Broken/Damage Penda Flour Tube

0.010

SW305 Spent Lubricating Oil 0.230

SW306 Spent Hydraulic Oil 0.3000

SW408 Soil / Sorbent / Saw Dust Contaminated With Oil / Chemical

0.100

SW409 Containers Contaminated With Scheduled Wastes

0.500

SW410 Rags And Plastics Contaminated With Scheduled Wastes

0.050

SW417 Waste Of Paints 0.250

SW421 Mixture Of Scheduled Wastes

0.500

Non hazardous waste 12

Waste send to landfill for disposal

10



In line with this recognition, our Integrated Management System (“IMS”) policy focuses on our dedication to creating a positive and safe working environment for our employees. We have established a Health and Safety Committee comprising employee representatives from all levels, to assist the Group in continuously achieving high standards of OHS across every aspect of our business. In line with our IMS policy, various initiatives such as safety inspection of new machines, daily OHS procedures, promoting, campaign and safety trainings have been implemented and made compulsory in the Group.

All newly joined employees attended health and safety (“HSE”) induction training. The Group has always encourage its employees to continue learning and attend ongoing job related training. For the year 2019, 100% newly joined employees have attended the induction training program organised by HSE department. In accordance with the International Labour Organisation, occupational safety and health refers to the anticipation, recognition, evaluation and control of hazards arising in or from the workplace that could impair the health and well-being of workers.

Below is the occupational safety and health record for the Group in the year of 2019.

Description %

Percentage of workers undergoing safety and health training per annum (new employees)

100

No. of work related injuries per annum 0

Rate of work related injuries per annum:Lost Time Injury Frequency Rate (LTIFR)Total Recordable Case Frequency (TRCF)

00

No. of work related fatalities (includes employees and contractors)

0

Accident frequency rate 0

Severity rate:Lost Time Injury Severity Rate (LTISR) 0

No and percentage of workers undergoing health surveillance

100

2. Water

2.1 The total volume of water consumption for 2019 was 26,043 cubic metres.

2.2 The percentage of water recycled and reused was approximately 3% of 26,043 cubic metres, which is used for landscape maintenance.

3. Energy

Below is the breakdown of electricity and energy consumption for the year 2019:

Total Energy Consumed 971,120 kWh

Amount of reduction in energy consumption achieved as a result of conservation and efficiency initiatives

29,133 kWh or 3% reduction

Energy intensity :

kWh for every man-hour 1.048 kWh/MWh / man-hour a year

kWh for / square meter 38.27 kWh/MWh / M2

4. Compliance

The Group is pleased that for the year 2019, it is 100% in compliance with legislative requirements pursuant to environmental matters.

Material Sustainability Matters - Social We believe that the success of the Group is the result of the contribution of people – employees, shareholders, customers, vendors and the communities that we do business with. We believe that a business can only be successful if it conducts its business in a socially responsible manner.

Occupational Health and Safety

The Group is recognised for its commitment in maintaining high standards of occupational health and safety (“OHS”) through OHSAS 18001 Occupational Health and Safety Management System certification. By the first quarter of 2020, our OHSAS 18001 certification is planned to be transited to the ISO 45001:2018.



Brief description of HSE Committee

There are two distinguish HSE committees, one is for the Group and the other is for project related purposes. Below are HSE Committees organisation chart:

Employee Welfare

The Group recognise the importance of the well-being of its employees to the long-term success of the business. The Group’s Human Resource (“HR”) Policies provides guides, practices and procedures for hiring, employment, compensation and benefits as well as training and development of our employees. Employees have access to HR Policies in the Group’s portal. The HR Policies are reviewed frequently to ensure that the Policies are up to date and cater the current needs of the Group, employees and society. The HR Policies were last reviewed and revised in April 2018 and is currently being reviewed and updated.

The success of the Group lies with the well-being of its employees. Apart from complying with the statutory requirements in Malaysia including retirement (Employee Provident Fund), social security protection (SOCSO), Employee Insurance Scheme (EIS) benefits, the Group also provides Group Term Life Insurance (GTL), Group Personal Accident Insurance (GPA), Group Hospilization & Surgery (GHS) insurance and Medical Benefits – Out Patient to all full-time employees.

Oil and gas as well as ship building and ship repair industries require specialised talent given its niche status. It is the Group’s policy to hire the right talent for the Group’s businesses. For the period under review, the group had 111 employees, 24.33% of whom are women and the remaining 75.67% men.

Employee Development

The Group is committed to ensures the well-being of its employees by emplacing policies that reflect the nation’s labour standards. A trained and well informed workforce shall benefit not only the employees but also the Group.

The Group places great emphasis on professional development of its employees and as such it provides a multitude of opportunities to pursue technical, administrative and management programmes for all levels of its workforce. The list of trainings on page 26 are programmes undertaken by employees during the year under review.

CHAIRMAN

GENERAL MANAGER

EMPLOYER REPRESENTATIVE

HEADS OF DEPARTMENTS

EMPLOYEES

EMPLOYEEREPRESENTATIVE

ACT 514OCCUPATIONAL SAFETY AND HEALTH ACT 1994

PART V11 – SAFETY AND HEALTH ORGANIZATION SECTION 30- Establishment of HSE Committee at Workplace

ADVISOR

HEAD QHSE

SECRETARY

HEAD HSE OFFICER

GROUP HSE COMMITTEE

CHAIRMAN

PROJECT MANAGER

EMPLOYER REPRESENTATIVE

MANAGERIAL LEVEL EMPLOYEES

NON–EXECUTIVE EMPLOYEES

EMPLOYEEREPRESENTATIVE

ACT 514OCCUPATIONAL SAFETY AND HEALTH ACT 1994

PART V11 – SAFETY AND HEALTH ORGANIZATIONSECTION 30- Establishment of HSE Committee at Workplace

ADVISOR

HEAD QHSE

SECRETARY

HSE OFFICER

PROJECT HSE COMMITTEE



This training helps the participants to identify and understand the changes from OHSAS 18001:2007 to ISO 45001:2018, understand the method of conducting Risk and Opportunities assessment and HIRARC and design the whole OSH Management System from there.

Benefits of the programme:-

• Understand the requirements of ISO 45001:2018

• Understand the changes from OHSAS 18001:2007 to ISO 45001:2018

• Understand Pestle and Swot Analysis.

• Understand Risk and Opportunity Assessment and HIRARC

• Participants will also understand what to do next, in documentation, implementation of ISO 45001:2018.

ISO 45001 : 2018 Transition Training

Participants are able to provide thought leadership on tax reform and enhancing the tax system in Malaysia. Discuss the issues and challenges on tax disputes and ways to reduce and resolve them.

Participants can learn to leverage technology as part of the tax governance and controls to improve the tax function.

Able to gain practical knowledge on the implications of the tax and accounting reporting standards.

Learn and review the findings and outcomes of the recent tax cases and best practical solutions.

Keep abreast with the latest issues and crucial updates on transfer pricing.

Malaysia Tax Conference

The beneficial advantages of attending the workshop are as below:-

1. Participants are able to master the physical management of assets, whether the assets are localised or spatial assets, through efficient coding and tagging systems.

2. Maintain fixed assets registry – ensuring all assets are accounted for and managed through an efficient system of recording right from acquisition to disposal.

3. Optimise Asset Life Cycle Model/Asset Whole Life Model that helps to formulate appropriate maintenance strategies and expose the organization to asset risk analysis.

4. Understand financial perspective of asset management – looking at the cost of acquisition, time value of money and other commonly overlooked costs in managing assets throughout its productive life.

5. Take Charge of Situation audit and periodic inventory auditing to ensure physical controls exist and custodians take responsibility for the assets under their charge.

Fixed Asset Management& Tracking System

Summary of some of the training and development programmes attended by employees is as below:

The participants are able to acquire the following learning objectives;

1. Understanding the Concept of Environmental Quality Practice and organizational productivity.

2. Know the techniques and implementation of Quality Environment System effectively in the workplace.

3. Understand the methods and implementation of Quality Environment Practice System

Quality Environmental Management System: 5S implementation



1. Participants are able to describe scheduled waste management legal requirements, identify, classify and categorise scheduled wastes.

2. Capable in implementing effective practices in scheduled waste management.

3. Able to implement good management practices in scheduled waste management.

Certified Environmental Professional in Scheduled Waste Management

The mandatory accreditation programme (MAP) is designed to bring on-board new directors of public listed companies (PLCs) or directors of companies going for listing or directors of non-listed subsidiaries of PLCs.

Directors are able to play a critical role as stewards of companies that have raised funds from the public. How directors understand their roles and responsibilities will drive both their individual and collective performance which in turn, will impact the direction of their companies and their companies’ success or failure.

The directors are able to gain a comprehensive introduction to their roles, responsibilities and obligations under the Bursa Malaysia Securities Berhad Listing Requirements. The programme also explores the importance of setting the right tone at the top.

Mandatory Accreditation Programme (MAP For Directors)

In the Seminar, participants are able to impart comprehensive knowledge and understanding on occupational safety, health and security towards sustainability in high rise, complex structures and confined spaces.

Participants also can share knowledge by expertise and success stories relating to implementing and measuring the impact on business output.

Further enhancing awareness and preparedness towards best practices on occupational safety, health and security towards sustainability in high rise, complex structures and confined spaces.

Seminar On Occupational Safety & Health Towards Sustainability Agenda: High Rise

Complex Structures & Confined Space

The directive sets out that all Heads of Government - Linked Companies (GLCs), companies owned by Ministry and Government Agencies including the state government to establish an Integrity and Governance Unit (IGU) and subsequently carry out the four (4) core functions as stated in this directive. The role of the IGU is to foster the principle of abhorring corruption, abuse of power and malpractices in companies through four (4) core functions, namely:

a) Complain managementb) Detection and verificationc) Integrity enhancement; and d) Governance

Establishment of Integrity andGovernance Unit in Government - Linked

Companies. Conducted By MACC

Other trainings attended by employees are conferences on Human Resources Development Fund, Goods and Services Tax, Malaysian Institute of Accountants. Employees also attended various seminars which include seminars on Sales Tax, Safety and Health matters, Annual Report best practices and Marine Forum.

Community

The communities that reside where the Group’s activities are conducted are crucial to its business success. The community is the source of both social and human capital for the Group’s business. The Group donated cattles for Aidiladha Qurban at a mosque in Pulau Indah, Klang.



Workforce Management

2015

365

2016

121

Turnover Rate

66.85%

2017

95

2018

84

2019

111

Turnover Rate

21.49%Turnover Rate

11.58%Turnover Rate

-32.14%

Number of Staff by Category

Percentage of Employee Gender

2015 2016 2017 2018 2019

23.56% 25.62% 28.80% 27.38% 24.33%

76.44% 74.38% 71.20% 72.62% 75.67%

Female Male

2016 2017 2018 20192015

47

174

144

33

60

28 2944

22 2537

22 24

5037

365 121 95 84 111

Management Executive Non-Executive



Percentage of Job Type

Percentage of Employee By Group

Permanent Contract

2015

329 (90%)

36 (10%)

2016

17 (14%)

104 (86%)

2017

16 (14%)

79 (86%)

2018

68 (81%)

16 (19%)

2019

15 (13.51%)

96 (86.49%)

2017

20%

18.5

8%

17.5

2%

43%

1.03

%

2019

27%

36%

21%

15%

1%

2018

18%

48%

14%

19%

1%

2016

18.4

8%

48.7

3%

16.8

0%

15.1

8%

0.81

%

2015

35.8

9% 39.4

5%

16.1

7%

8.49

%

21-30 31-40 41-50 51-60 >61



LIST TRAINING FOR YEAR 2019

NO MONTH TRAINING DETAILS TRAINING DATE

1 January Perbadanan Produktiviti Malaysia 23-24 Jan 2019

2 January WH Skill Training 16-17 Jan 2019

3 February Lembaga Hasil Dalam Negeri Malaysia & Malaysian Employers Federation 27 Feb 2019

4 February Seminar On Sales Tax 2019 18 Feb 2019

5 February Seminar On Service Tax 2019 19 Feb 2019

6 February On Scene Commander Development 2019 12-14 Feb 2019

7 March ISO 45001:2018 Transition Meeting 13-14 Mar 2019

8 March Sistem Pengurusan Amalan Persekitaran Berkualiti: Pelaksanaan 5S 6-7 Mar 2019

9 March Fixed Asset Management & Tracking Systems 11-12 Mar 2019

10 March Understanding and interpretation of Noise Exposure Regulation 2019 & Audiometry

29 Mar 2019

11 April Malaysian Tax Conference 2019 3-4 Apr 2019

12 April Common Offences & Pitfalls to Avoid Under the Companies Act 2016 18 Apr 2019

13 April Organizing the Store, Warehouse & Managing Inventory Effectively 9-10 Apr 2018

14 April Seminar on Occupational Safety & Health Towards Sustainability Agenda: High Rise Complex Structures & Confined Space

23-24 Apr 2018

15 April Latihan Semula Penguji Gas Bertauliah Dan Penyelia Kemasukan Bagi Ruang Terkurung

17-18 Apr 2019

16 April HSE Statistic & Awareness (In-house) 10 Apr 2019

17 July Certified Invironmental Professional in Scheduled Waste Management 22-26 Jul 2019

18 July MFRS 15 Revenue Contract with Customer 23 Jul 2019

19 August Financing SDGs Malaysia Private Sector Role in Bridging the Gap From Goals To Action (Parliament)

11 Sept 2019

20 October Conference on Valuation of Intangible Assets 15 Oct 2019

21 October Malaysian Institute of Accountants (MIA) Conference 2019 22-23 Oct 2019

22 November Mandatory Accreditation Programme (MAP for Directors) 21-22 Nov 2019

23 November National Symposium on Marine Technology 2019 27 Nov 2019

24 November Human Resources Development Fund (HRDF) Conference & Exhibition 2019

25-27 Nov 2019

25 December Seminar KOD ISPS Klang 2019 18 Dec 2019


PERFORMANCEHIGHLIGHTS

Group CompanyDescription RM ’000 RM ’000

Profit for the year attributable to:

Owners of the Company 12,379 2,981

Non-controlling interests (2,467) -

Profit for the year 9,912 2,981

Description 2015 2016 2017 2018 2019

Revenue (RM’000) 100,500 17,775 5,397 2,585 57,556

Gross (loss)/profit (RM’000) (6,351) (18,532) (6,588) 479 43,384

Operating cost (RM’000) 85,707 404,857 140,995 779,558 37,721

Net (loss)/profit) (RM’000) (54,323) (439,640) (120,228) (139,904) 9,912

Net Tangible Asset (RM’000) 636,254 221,212 70,494 54,528 66,907

Net Tangible Asset per share (RM) 0.57 0.20 0.06 0.05 0.06

(Loss) Per Share/Earnings Per Share Basic (sen) (4.05) (32.63) (9.23) (0.23) 1.10


(RM’000)

800,000

600,000

400,000

200,000

0

(200,000)

(400,000)

(600,000)FY2018FY2017FY2016FY2015 FY2019

REVENUE, NET TANGIBLE ASSET, NET (LOSS)/PROFIT

Revenue NTA Net profit/(loss)

NET TANGIBLE ASSET PER SHARE AND NET (LOSS)/PROFIT

0.60

0.45

0.30

0.15

0

-0.10

-0.20

-0.30

-0.40

(RM)(RM’000)

500,000

375,000

250,000

125,000

0

(125,000)

(250,000)

(375,000)

(500,000)FY2018FY2017FY2016FY2015 FY2019

Net profit/(loss)NTA per share

(LOSS) PER SHARE/EARNINGS PER SHARE AND NET (LOSS)/PROFIT

40

30

20

10

0

(10)

(20)

(30)

(40)

(SEN)(RM’000)500,000

375,000

250,000

125,000

0

(125,000)

(250,000)

(375,000)

(500,000)FY2018FY2017FY2016FY2015 FY2019

Net profit/(loss)EPS basic

100,50017,775 5,397 2,585

57,556 9,91266,907

54,528

(139,904)

70,494

(120,228)

221,212

(439,640)

636,254

(54,523)

(54,523)

(54,523)

(4.05 sen)

(439,640)

(439,640)

(32.63 sen)

(120,228)

(120,228)

(9.23 sen)

0.06

0.20

0.57

(139,904)

(139,904)

(0.23 sen)

0.05

9,912

9,912

1.1 sen

0.06

PERFORMANCEHIGHLIGHTS


AUDIT COMMITTEEREPORT

1. COMPOSITION

ChairmanDato’ Haji Ghazali Bin AwangIndependent Non-Executive Director(Re-designated from member to Chairman on 15 August 2019)

MembersMr. Too Kok LengIndependent Non-Executive Director(Re-designated from Chairman to member on 15 August 2019)

Tuan Haji Mohd Khalid Bin MohamedNon-Independent Non-Executive Director(Appointed on 15 August 2019)

Dr. Ir. Samad Bin SolbaiIndependent Non-Executive Director(Resigned on 15 August 2019)

The Chairman of the Audit Committee is a member of Malaysian Institute of Accountants fulfilling the requisite qualifications under Paragraph 15.09(1)(c) of the Main Market Listing Requirements (“MMLR”) of Bursa Malaysia Securities Berhad (“Bursa Securities”).

2. TERMS OF REFERENCE

The Terms of Reference (“TOR”) of the Audit Committee sets out the authority, duties and responsibilities of the Audit Committee which are consistent with the requirements of the MMLR of Bursa Securities and Malaysian Code on Corporate Governance (“MCCG”).

A copy of the TOR is available for viewing under ‘Investors’ section of the Company’s website at www.thhe.com.my.

3. MEETINGS AND ATTENDANCES

The Audit Committee held a total of five (5) meetings during financial year ended 2019 (“FYE 2019”) and the details of attendance of each member of the Audit Committee during the financial year are as follows:-

Members Total no. of meetings held during tenure of office

Total no. of meetings attended

Dato’ Haji Ghazali Bin Awang 5 5

Mr. Too Kok Leng 5 5

Tuan Haji Mohd Khalid Bin Mohamed(Appointed on 15 August 2019)

2 1

Dr. Ir. Samad Bin Solbai(Resigned on 15 August 2019)

3 3



The lead audit partner of the External Auditors responsible for the Group had attended three (3) Audit Committee meetings held in FYE 2019.

The External Auditors were encouraged to raise with the Audit Committee any matters they considered important to bring to the attention of Audit Committee. For FYE 2019, two (2) private sessions were held between the Audit Committee and the External Auditors without the presence of the Management staff.

The Chief Executive Officer and General Manager of Finance of the Company were also invited to attend the Audit Committee meetings, to facilitate direct communications and to provide clarification on the financial reports.

All deliberations during the Audit Committee meetings were duly minuted. Minutes of the Audit Committee meetings were recorded and tabled for confirmation at every succeeding Audit Committee meeting, and subsequently presented to the Board for notation.

The Chairman of the Audit Committee presented the Audit Committee’s recommendations together with the respective rationale to the Board for approval of the Audited Financial Statements and the unaudited Quarterly Financial Results. As and when necessary, the Chairman of the Audit Committee would convey to the Board, matters of significant concern raised by the Internal and External Auditors.

4. SUMMARY OF WORKS

During the FYE 2019, the summary of works undertaken by the Audit Committee comprised the following:-

a) Overview of Financial Performance and Reporting

• Reviewed the unaudited quarterly financial results for the quarters ended 31 December 2018, 31 March 2019, 30 June 2019 and 30 September 2019 and recommended the same for the Board’s approval.

The above review is to ensure that the Group’s quarterly financial reporting and disclosures present a true and fair view of the Group’s financial position and performance and are in compliance with the applicable Malaysian Financial Reporting Standards (“MFRS”) and other legal and regulatory requirements as well as applicable disclosure provisions of the MMLR of Bursa Securities.

b) Overview of Annual Audited Financial Statements

• Reviewed the draft Audited Financial Statements of the Group for financial year ended 31 December 2018 (“FYE 2018”) with the External Auditors, prior to recommending the same to the Board for approval. The review was, inter-alia, to ensure compliance with:-

• requirements of the Companies Act 2016;• MMLR of Bursa Securities;• applicable approved accounting standards in Malaysia; and• other legal and regulatory requirements.

In the review of the Audited Financial Statements, the Audit Committee discussed with the Management and the External Auditors the accounting principles and standards that were applied and their judgement of the items that may affect the financial statements as well as issues and reservations arising from the statutory audits.



• Reviewed and examined the impairment assessment and the underlying assumptions adopted in arriving at the recoverable amounts. The MFRS 136 of Impairment of Assets was recommended and considered by the Audit Committee prior to recommending the same to the Board for approval.

c) Oversight of External Audit

• Reviewed the Audit Review Memorandum prepared by the External Auditors for FYE 2018, entailing mainly the overview of auditing developments, significant risks, areas of audit focus and internal control weaknesses of the Group;

• Received Audit Planning Memorandum prepared by the External Auditors for FYE 2019, covering matters in the audit report, significant risks and audit focus areas, internal controls, audit observations, other audit matters, materiality and analysis of audit misstatements and significant outstanding matters from the audit field works;

• Met two (2) times with the External Auditors without the presence of the Management staff;

• Reviewed the final report in relation to the Independent Auditors’ Report contained in the Audited Financial Statements for FYE 2019 with the External Auditors;

• Reviewed the effectiveness, suitability and independence of the External Auditors vide a formalised ‘Assessment on External Auditors’ and upon review and being satisfied with the results of the said assessment, the same was recommended to the Board for approval; and

• Reviewed and considered the statutory audit fees for FYE 2019 proposed by the External Auditors, and recommended the same to the Board for approval.

d) Oversight of Internal Audit Function

• Reviewed and considered the Internal Audit Plans and fees for the Group for FYE 2019 and financial year ending 31 December 2020 proposed by the Internal Auditors and approved for adoption of the same by the Group throughout FYE 2019;

• Reviewed the Internal Audit Reports for FYE 2018 and FYE 2019 and assessed the Internal Auditors’ findings and Management’s responses of mitigation plans and made the necessary highlights if so required, to the Board for notation; and

• Reviewed and monitored the implementation status of Management-agreed action plans arising from the Internal Audit Reports.

e) Other Matters

• Reviewed the Audit Committee Report and Statement on Risk Management and Internal Control to be incorporated in the Annual Report for FYE 2018;



5. SUITABILITY AND INDEPENDENCE OF EXTERNAL AUDITORS

During FYE 2019, the External Auditors were invited to attend Audit Committee Meetings to discuss their audit plan, audit findings and financial statements of the Company. The Audit Committee also met with the External Auditors additionally whenever it deemed necessary.

The External Auditors attended the Fifteenth Annual General Meeting of the Company held on 19 June 2019 and were available to answer shareholders’ queries on the conduct of the statutory audits and the preparation of the contents of the Audited Financial Statements.

The audit engagement partner of Messrs. Deloitte PLT (“Deloitte PLT”) had affirmed their independence and compliance with the relevant ethical requirements regarding independence throughout the audit of the Group and the Company, in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants and the By-laws (On Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants. Deloitte PLT also confirmed that they have not noted any fraud related incidents that rendered reporting to the Audit Committee.

The Audit Committee also conducted an annual assessment of the performance, suitability and independence of the External Auditors with emphasis on evaluation based on the competence, adequacy of experience and resources, quality of the audit performances, independence and objectivity of the External Auditors, reasonableness of audit fees and comparison of audit and non-audit fees rendered. The Audit Committee was satisfied with the performance, quality of communication, sufficiency and allocation of resources provided by Deloitte PLT. The Board has accepted the recommendation for the re-appointment of Deloitte PLT as External Auditors of the Group for the ensuing year in the upcoming Sixteenth Annual General Meeting of the Company.

6. INTERNAL AUDIT FUNCTION

The internal audit function of the Group is undertaken by co-sourced in-house audit personnel and an outsourced independent professional service provider, Afrizan & Associates PLT, to assist the Audit Committee as well as the Board in discharging their responsibilities by providing independent, objective assurance and advisory services that seek to add value and improve the Group’s operations. The Audit Committee acknowledges that an independent and adequately outsourced internal audit function is essential in obtaining the assurance it requires regarding the effectiveness and adequacy of the internal control systems of the Group.

The Internal Auditors performed their work in accordance with the principles of the international internal auditing standards, covering the conduct of the audit planning, execution, documentations, communication of findings and consultation with key stakeholders on the audit concerns. In order to ensure that the audit focus is on relevant and appropriate risk areas, the internal audit plan was developed in consultation with the Management taking into consideration the Group’s risk profile. The proposed internal audit plan was then be presented to the Audit Committee for deliberation and approval before the internal audit reviews were carried out.

The Audit Committee approved the risk-based internal audit plan of the Group. Upon completion of the audits, the Internal Auditors closely monitored the implementation progress of audit recommendations in order to ensure that all major risk and control concerns have been duly addressed by the Management.

The outsourced internal audit function is led by Datuk Mohd Afrizan Dato’ Husain as a Partner. He is a member of the Malaysian Institute of Accountant (MIA), Association of Chartered Certified Accountants (ACCA), Malaysian Institute of Certified Public Accountant (MICPA), CPA Australia, Certified Information Systems Auditor and Control Association (ISACA). The outsourced internal audit assignment is supported by an internal audit team with relevant qualifications and Associates who are members of the Institute of Internal Auditor Malaysia (IIAM).


The Internal Auditors report directly to the Audit Committee and undertake the internal audit of the Group’s operating sections and departments according to Internal Audit Plan in respect of FYE 2019 which was approved by the Audit Committee.

The internal audit function provides the Board with reasonable assurance of the effectiveness of the system of internal control in the Group.

Summary of Work of Internal Audit Function

During the FYE 2019, internal audit activities were carried out in accordance with the approved Internal Audit Plan. The Internal Auditors conducted the internal audit visits based on the approved Internal Audit Plan and any significant changes to the Internal Audit Plan will be referred to the Audit Committee for approval prior to the commencement of the internal audit.

During the financial year under review, the Internal Auditors carried out the internal audit review on the Group, covering the following areas:-

a) Health, Safety & Environment (“HSE”) Management

• Adequacy of Standard Operating Policies and Procedure;• Compliance with the Act and regularisations;• Effectiveness and efficiency of HSE Management; and• Reliability of Hazard, Risk Assessment and Risk Control Procedures

b) Follow-up review of Information Technology (“IT”) Management

• Adequacy of Standard Operating Policies and Procedures;• Effectiveness and Efficiency of IT Management; • Effectiveness and Efficiency of the Server Room; and• Effectiveness and Efficiency of the Back-up Procedures

The Internal Auditors communicated to the Audit Committee on the internal control design and implementation ratings of the Group based on the internal control system established by the Management in relation to the audit areas.

The Audit Committee was briefed on the audit findings which required follow-up actions by the Management with the recommended corrective actions, the status of implementation and targeted implementation timeframe. Areas of improvement and corrective actions were highlighted and monitored, to ensure that the corrective actions were taken within the required timeframe.

The total cost incurred for the outsourced internal audit function of the Group and in-house internal audit personnel in respect of the FYE 2019 amounted to RM71,831.10.



The Board of Directors of TH Heavy Engineering Berhad (“Board”) is committed towards upholding the principles and recommendations stipulated in the Malaysian Code on Corporate Governance (“MCCG”).

This Corporate Governance Overview Statement discloses and affirms the manner in which and the extent to which the Company and its subsidiaries (“Group”) have applied the principles and complied with the recommendations set out in the MCCG and governance standards prescribed in the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) (“MMLR”) throughout the financial year ended 31 December 2019 (“FYE 2019”).

The detailed explanation on the application of the corporate governance practices are reported under Corporate Governance Report which is available on the Company’s website at www.thhe.com.my.

PRINCIPLE A: BOARD LEADERSHIP AND EFFECTIVENESS

Roles of the Board

The Board’s pivotal role is to lead and establish the Group’s vision, strategic direction, key policies and framework, including the management of the succession planning process of the Group and the appointment of key Senior Management staff. In view thereof, the Board’s roles and responsibilities include but are not limited to the following:

• reviewing, monitoring and approving the overall strategies, direction and policies of the Group;• overseeing and evaluating the conduct and performance of the Group;• identifying principal risks and ensuring the implementation of an appropriate system to manage risks;• establishing succession planning and reviewing remuneration packages of Senior Management staff;• considering Management’s recommendations on key issues including acquisition, disposal, restructuring and

significant capital expenditure; and• reviewing the adequacy and the integrity of the management information and internal control systems of the

Company.

The Board is guided by the Board Charter, which clearly sets out the roles and responsibilities of the Board, and list of matters reserved for the Board’s attention, as well as board procedures and processes. The Board Charter of the Company is available for viewing on the Company’s website at www.thhe.com.my.

The Board will perform periodic review of the Board Charter to ensure it remains consistent with the Board’s objectives, current laws/regulations and good governance practices in compliance with the MCCG.

Roles of the Chairman and Chief Executive Officer

The roles of the Chairman and the Chief Executive Officer of the Company remain separate and distinct. The Chairman plays an important leadership within the Group and is responsible for:-

• Setting the agenda for meetings of the Board and focus on strategic direction and performance;• Maintaining on-going dialogue and relationship of trust with and between the Directors and Management;• Ensuring that clear and relevant information is provided to Directors in a timely manner; and• Ensuring sufficient time is allowed for the discussion of critical issues.

CORPORATE GOVERNANCEOVERVIEW STATEMENT


The Board delegates the authority and responsibility of managing the day-to-day affairs of the Group to the Chief Executive Officer, and through him and subject to his oversight, to other Senior Management staff. The Chief Executive Officer is responsible for the vision and strategic directions of the Group, as well as initiating innovative ideas to create competitive edge and development of business and corporate strategies. This is to ensure there is an appropriate balance of roles, responsibilities and accountability at the Board level.

The Independent Directors provide unbiased views and impartiality to the Board discussions and decision making and ensure that the interests of all shareholders are fairly represented at Board deliberations. An annual assessment is carried out on the Independent Directors by the Nomination Committee. The Board is satisfied with the level of commitment given by the Directors towards fulfilling their roles and responsibilities as Directors of the Company.

The Board has delegated certain functions to following Board Committees:

• Audit Committee;• Nomination Committee;• Remuneration Committee; and• Risk & Investment Committee.

The functions and terms of reference of the respective Committees, as well as the authority delegated by the Board to these Board Committees have been clearly defined by the Board. The Chairman of the respective Board Committees reports to the Board on the outcome of the Board Committee’s meetings and the minutes will be included in the Board Papers for the Board’s notation.

Composition of the Board Committees

(i) Audit Committee

The Audit Committee comprises three (3) Non-Executive Directors, a majority of whom are Independent Directors:-

Chairman : Dato’ Haji Ghazali Bin Awang (Independent Non-Executive Director) (Re-designated from member to Chairman on 15 August 2019)

Members : Mr. Too Kok Leng (Independent Non-Executive Director) (Re-designated from Chairman to member on 15 August 2019)

Tuan Haji Mohd Khalid Bin Mohamed (Non-Independent Non-Executive Director) (Appointed on 15 August 2019)

Dr. Ir. Samad Bin Solbai (Independent Non-Executive Director) (Resigned on 15 August 2019)

The principal objective of the Audit Committee is to assist the Board in discharging its statutory duties and responsibilities relating to financial reporting process and internal controls of the Group.

The terms of reference of the Audit Committee is available for viewing on the Company’s website at www.thhe.com.my.




(ii) Nomination Committee

The Nomination Committee comprises three (3) Non-Executive Directors, a majority of whom are Independent Directors:-

Chairman : Mr. Too Kok Leng (Independent Non-Executive Director) (Re-designated from member to Chairman on 15 August 2019) Members : Dato’ Indera Dr. Haji Md. Yusop Bin Omar (Independent Non-Executive Director) Encik Ahmad Al Farouk Bin Ahmad Kamal (Non-Independent Non-Executive Director) (Appointed on 15 August 2019) Dato’ Haji Ghazali Bin Awang (Independent Non-Executive Director) (Resigned on 15 August 2019)

The terms of reference of the Nomination Committee is available for viewing on the Company’s website at www.thhe.com.my.

The Nomination Committee is responsible for reviewing the Board’s structure, size and composition regularly, as well as making recommendations to the Board with regard to changes that are deemed necessary. It also recommends the appointment of Directors and members of Board Committees and reviews the required mix of skills, experience, competence and other qualities which a Director should bring to the Board.

The Nomination Committee also reviews the succession planning of the Board, as well as the training programmes for the Board. For this purpose, the Nomination Committee meets at least once a year or at such other times as the Chairman of the Nomination Committee decides.

The Nomination Committee is tasked to oversee the selection process and conduct assessment on Directors with the objective of securing the best composition to meet the diverse objectives of the Group. In its selection process, the Nomination Committee follows a set of criteria and expectations based upon the competencies, commitment, experience and integrity of the candidates. In the selection process, the Nomination Committee and the Board do not set any target on gender, ethnicity or age diversity but endeavour to include any member who will improve the Board’s overall compositional balance.

The Nomination Committee held three (3) meetings during the FYE 2019 with full attendance of all its members, to deliberate on the following matters:-

• Review of the terms of office and performance of the Audit Committee for FYE 2018.• Review of the effectiveness of the Board as a whole and the Committees of the Board for FYE 2018.• Review of the contribution and performance of each individual Director for FYE 2018.• Review of the composition of the Board.• Assessment of the independence of the Independent Directors.• Recommendation to the Board on the re-election of Directors who were subject to retirement at the Fifteenth

Annual General Meeting of the Company held in 2019 (“15th AGM”).


• Recommendation to the Board on the retention of an Independent Director who had served the Company for more than nine (9) years at the 15th AGM.

• Review of the profiles of the new Directors and recommending their appointment as Directors to the Board.• Review of the composition of Committees of the Board and proposed changes to the respective Board

Committees; and • Review of and consider the renewal of the employment contract of the Chief Executive Officer of the Company

and recommended the same to the Board for approval.

Following the annual review, the Nomination Committee agreed that the Board as a whole, the Board Committees and each individual Director had performed effectively throughout FYE 2019 and the overall composition of the Board is appropriate and well balanced in terms of size, mix of skills and experience. The Independent Directors had also fulfilled their independent role in corporate accountability through their objective participation in the Board deliberations during the Board meetings. In addition, the Nomination Committee obtained an annual declaration of independence from the Independent Directors confirming their independent status pursuant to the MMLR.

(iii) Remuneration Committee

The Remuneration Committee comprises three (3) Non-Executive Directors, a majority of whom are Independent Directors:-

Chairman : Dato’ Indera Dr. Haji Md. Yusop Bin Omar (Independent Non-Executive Director)

Members : Dr. Ir. Samad Bin Solbai (Independent Non-Executive Director) Encik Izad Shahadi Bin Mohd Sallehuddin (Non-Independent Non-Executive Director) (Appointed on 15 August 2019) Mr. Too Kok Leng (Independent Non-Executive Director) (Resigned on 15 August 2019)

During the financial year under review, the Remuneration Committee held two (2) meetings and deliberated on the following matters:-

• Review and recommendation of payment of Directors’ fees for the FYE 2018 to the Board for approval.• Review and recommendation of Directors’ benefits payable to the Directors.• Review of the remuneration package of the top five (5) Senior Management staff of the Company for the FYE

2019.• Overseeing of the overhead cost reduction and staff rationalisation exercise implemented by the Management.• Review of the remuneration package of the Chief Executive Officer of the Company.

The terms of reference of the Remuneration Committee is available for viewing on the Company’s website at www.thhe.com.my.



(iv) Risk & Investment Committee

The Risk & Investment Committee comprises three (3) Non-Executive Directors, a majority of whom are Independent Directors:-

Chairman : Dr. Ir. Samad Bin Solbai (Independent Non-Executive Director) Members : Mr. Too Kok Leng (Independent Non-Executive Director) Dato’ Indera Dr. Haji Md. Yusop Bin Omar (Independent Non-Executive Director)

The Risk & Investment Committee reviews risk management reports periodically, detailing the adequacy and overall effectiveness of risk management, its implementation by Management of any recommendation and confirms that appropriate actions have been taken.

Code of Conduct and Ethics

The Group’s Code of Ethics is set out in the Company’s Employee Handbook and available for viewing on the Company’s website at www.thhe.com.my. The provisions in the Code of Ethics ensure compliance with law and regulations and amongst others cites provisions on professional conduct, confidentiality, gifts and favours, as well as conflict of interests.

In relation to the amendments of the Malaysian Anti-Corruption Commission (MACC) Act 2009 (“MACC Act”), and in particular the new Section 17A of the MACC Act that introduces, amongst others, new corporate liability for companies, arising from corrupt acts committed by employees or persons associated with the company, the Company has taken proactive actions to ensure that it has the adequate procedures, policies and controls for the prevention of corrupt acts and practices. The corporate liability provision criminalises a Company based on illegal actions taken by the employee. Concurrently, the Code of Conducts and Whistleblowing Policy of the Company have been enhanced to demonstrate presence of adequate procedures to prevent such illegal actions taken by the employees.

Board Charter

The Board Charter provides guidance to the Board in the fulfilment of its roles, duties and responsibilities which are in line with the principles of good corporate governance.

The Board will review and make any necessary amendments to the Board Charter to ensure that it remains consistent with the Board’s objectives, current law and practices.

The Board Charter is available for viewing on the Company’s website at www.thhe.com.my.

Access to Information and Advice

The agenda for the Board Meetings is drawn upon consultation between the Chairman, Chief Executive Officer and the Company Secretaries. In order to allow the Directors to have appropriate review of the Board Papers, Board Papers are distributed to all Board Members at least three (3) working days prior to the Board Meeting.

A comprehensive Board Paper pack comprises objective, background of the subject matters, issues, risks, recommendation and other relevant information which will be made available to the Board in order for the Board to make an informed decision.



Company Secretaries

The Board is supported by two (2) suitably qualified and competent Company Secretaries, who are qualified to act as company secretary in accordance with Section 235 of the Companies Act 2016. The Company Secretaries constantly keep abreast with the evolving regulatory changes and developments in corporate governance through continuous training.

The Board is regularly updated by the Company Secretaries on new changes to the statutory and regulatory requirements and the resultant implications to the Company and the Board in discharging their duties and responsibilities.

The Company Secretaries attend Board and Board Committee meetings and ensure that the meetings are properly convened and deliberations are well captured and minuted. All Directors have access to the advice and services of the Company Secretaries in carrying out their duties.

STRENGTHEN COMPOSITION

Appointments of the Board and Re-election

Appointments to the Board is the responsibility of the Nomination Committee, who assesses and makes its recommendation to the Board on new appointments.

In accordance with the Constitution of the Company, all Directors appointed by the Board either to fill a casual vacancy or as an additional Director to the existing Board are subject to re-election by the shareholders at the Annual General Meeting (“AGM”) of the Company following their appointment. The Constitution also provides that at least one-third (1/3) of the Board shall retire from office at least once every three (3) years, and that the retiring Director shall retain office until the close of the AGM at which he retires.

Remuneration Policies and Procedures

The Remuneration Committee shall recommend to the Board the remuneration and entitlements of all Directors and the interested Director shall abstain from deliberation and voting on their own remuneration at the meetings of the Board, for recommendation to the shareholders for approval at the AGM of the Company.

The Board has in place a remuneration policy framework to reward the Directors and Senior Management staff based on accountability, fairness, and competitiveness, so as to ensure the remuneration packages of Directors and Senior Management staff are sufficiently attractive to draw in and to retain persons of high calibre.



Remuneration of Directors

The details of the Directors’ remuneration are as follows:-

Fees(RM)

Meeting Allowance(RM)

Board of Directors

i) Chairman 80,000 per annum 1,000 per meeting

ii) Non-Executive Directors 60,000 per annum 1,000 per meeting

Audit Committee, Nomination Committee,Remuneration Committee and Risk & Investment Committee

i) Chairman - 500 per meeting

ii) Members - 500 per meeting

Active Subsidiaries of the Company

i) Chairman 40,000 per annum 750 per meeting

ii) Members 30,000 per annum 750 per meeting

The details of the remuneration of the Directors who served during the FYE 2019 are as follows:-

Received from the Company

Fees(RM)

Meeting Allowance

(RM)Total(RM)

1) Encik Izad Shahadi Bin Mohd Sallehuddin (Appointed on 15 August 2019)* (Re-designated as Chairman on 13 September 2019)

28,876.71 2,500.00 31,376.71

2) Encik Ahmad Al Farouk Bin Ahmad Kamal (Appointed on 15 August 2019)*

22,849.32 2,500.00 25,349.32

3) Tuan Haji Mohd Khalid Bin Mohamed (Appointed on 15 August 2019)*

22,849.32 1,500.00 24,349.32

4) Dato’ Indera Dr. Haji Md. Yusop Bin Omar 60,000.00 10,500.00 70,500.00

5) Dato’ Haji Ghazali Bin Awang 60,000.00 9,000.00 69,000.00

6) Dr. Ir. Samad Bin Solbai 60,000.00 11,500.00 71,500.00

7) Mr. Too Kok Leng 60,000.00 13,500.00 73,500.00

TOTAL 314,575.35 51,000.00 365,575.35

* Fee calculated on pro-rated basis



Received on Group Basis

EntityFees(RM)

Meeting Allowance

(RM)Total(RM)

1) Encik Izad Shahadi Bin Mohd Sallehuddin (Appointed on 15 August 2019)* (Re-designated as Chairman on 13 September)

THHE 28,876.71 2,500.00 31,376.71

2) Encik Ahmad Al Farouk Bin Ahmad Kamal (Appointed on 15 August 2019)*

THHE 22,849.32 2,500.00 25,349.32

3) Tuan Haji Mohd Khalid Bin Mohamed (Appointed on 15 August 2019)*

THHETHF

31,972.61 1,500.00 33,472.61

4) Dato’ Indera Dr. Haji Md. Yusop Bin Omar THHE 60,000.00 10,500.00 70,500.00

5) Dato’ Haji Ghazali Bin Awang THHE 60,000.00 9,000.00 69,000.00

6) Dr. Ir. Samad Bin Solbai THHETHF

Chairman

100,000.00 21,000.00 121,000.00

7) Mr. Too Kok Leng THHETHF

90,000.00 19,500.00 109,500.00

TOTAL 393,698.64 66,500.00 460,198.64

* Fee calculated on pro-rated basis

The number of Directors whose total remuneration fall within the respective bands are as follows:-

Received from the Company

Range of Remuneration No. of Executive Directors No. of Non-Executive Directors

RM50,000 and below - 3

RM50,001 to RM100,000 - 4

RM100,001 to RM150,000 - -

Received on the Group Basis

Range of Remuneration No. of Executive Directors No. of Non-Executive Directors

RM50,000 and below - 3

RM50,001 to RM100,000 - 2

RM100,001 to RM150,000 - 2



Reinforce Independence

The Board comprises highly reputable and professional persons of calibre and credibility and who have the necessary skills and experience to bring an independent judgement. With their combined experience and knowledge, they provide sound advice and impartial judgement for the benefit of the Company, its shareholders and stakeholders.

The Chairman along with the members of the Board are entrusted with the task of developing, adopting and monitoring overall business strategies and policies. The Independent Non-Executive Directors also contribute to the formulation of policies, providing unbiased and independent views, advice and judgement. They also act to safeguard the interest of the minority shareholders in respect of decisions taken by the Board pertaining to undertaking of the various business initiatives.

The Board, through the Nomination Committee, assesses the independence of its Independent Directors annually, using the Board and Board Committee Effectiveness Assessment questionnaire. The assessment takes into account the individual Director’s ability to exercise independent judgement to enhance the Board’s accountability. The Independent Directors of the Company fulfilled the criteria of “Independence”. They act independently of Management and are not involved in any other relationship with the Group that may impair their independent judgment and decision making.

The Board is satisfied with the level of independence by all the Independent Non-Executive Directors and their ability to act in the best interests of the Company.

Tenure of Independent Directors

The Board is fully cognisant of Practice 4.2 of MCCG which recommends that the tenure of an independent Director should not exceed a cumulative term of nine (9) years. Upon completion of the nine (9) years, an independent Director may continue to serve on the Board subject to his re-designation as a non-independent Director. In the event such Director is to be retained as an independent Director, the Board must first justify and seek annual shareholders’ approval. If the Board continues to retain the independent Director after the twelfth (12th) year, annual shareholders’ approval must be sought through a two-tier voting process to retain the said Director as an independent Director.

Both Dr. Ir. Samad Bin Solbai and Dato’ Indera Dr. Haji Md. Yusop Bin Omar, were appointed as Independent Non-Executive Directors of the Company on 25 May 2012. Therefore, they would have on 25 May 2021, served the Board in that capacity for a cumulative term of nine (9) years. Accordingly, prior approval should be obtained from the shareholders before an Independent Director has reached the nine (9) years term limit.

Apart from that, Mr. Too Kok Leng presently has served on the Board as an Independent Non-Executive Director for a cumulative term of more than twelve (12) years. As described in the Guidance 4.2 of the MCCG, the Board should seek annual shareholders’ approval through a two-tier voting process.

The Nomination Committee had assessed the independence of Dr. Ir. Samad Bin Solbai, Dato’ Indera Dr. Haji Md. Yusop Bin Omar and Mr. Too Kok Leng, their ability and commitment towards the Company’s objectives and was of view that the length of their service on the Board does not in any way interfere with their exercise of independent judgment and ability to act in the best interests of the Company.

In view thereof, the Board recommends and supports their retention as Independent Non-Executive Directors of the Company, subject to shareholders’ approval at the forthcoming 16th AGM of the Company.



Positions of Chairman and Chief Executive Officer

In line with Practice 1.3 of MCCG, the roles of the Board Chairman and the Chief Executive Officer are held by two different individuals.

Encik Izad Shahadi Bin Mohd Sallehuddin, the Non-Independent Non-Executive Director was appointed as the Chairman of the Board on 13 September 2019 and is responsible for leadership, effectiveness and governance of the Board.

Whereas Encik Suhaimi Bin Badrul Jamil, the Chief Executive Officer of the Company is responsible for day-to-day management of the business and implementation of the Board’s policies and decisions.

Encik Suhaimi Bin Badrul Jamil has on 1 April 2020 tendered his resignation as Chief Executive Officer. His resignation is effective 1 July 2020.

Board Composition and Balance

The Company is led by the Board of Directors who is equipped with the relevant skills, knowledge and expertise in a wide range of related and unrelated industries.

The Board consists of seven (7) members whereby four (4) of them are Independent Non-Executive Directors and three (3) are Non-Independent Non-Executive Directors.

The number of Independent Directors complies with the MMLR of Bursa Securities, which states that at least three (3) members or one-third (1/3) of the Board shall be Independent Directors. They also fulfil the criteria of independence as defined in the MMLR of Bursa Securities.

The Independent Directors’ views carry significant weight in all Board deliberations and decision-making. All Independent Directors act independently of Management and do not participate in any business dealings. Neither are they involved in any other relationship with the Group that may impair their independent judgement and decision-making.

The Board believes that its current Board composition provides the appropriate balance in terms of skills, knowledge and experience to promote the interests of all shareholders and to govern the Group effectively. It also represents the ownership structure of the Company fairly, with appropriate representations of minority interests through the Independent Directors.

Gender, Ethnicity and Age Group Diversity Policies

The Board is cognisant of the recommendation of MCCG on gender diversity policies and targets and the measures taken to meet the targets. The Board does not have a specific policy on gender, ethnicity and age group for candidates to be appointed to the Board and does not have specific policy on setting target for female candidates in the workforce. Currently, there is no female member of the Board.

The Board believes that there is no detriment to the Company in not adopting a formal gender, ethnicity and age group diversity policy as the Company is committed to providing fair and equal opportunities and nurturing diversity within the Company. In identifying suitable candidates for appointment to the Board, the Nomination Committee will consider candidates based on the candidates’ competency, skills, character, time commitment, knowledge, experience and other qualities in meeting the needs of the Company and with due regard for the benefits of diversity on the Board.

Annual Assessment of Board Effectiveness

The Nomination Committee conducted an annual assessment of the Board’s effectiveness as a whole and the contribution of each individual Director in respect of the FYE 2019 using customised questionnaires to be completed by the Directors. The results of the self-assessment by Directors and the Board’s effectiveness as a whole as compiled by the Company Secretaries were tabled to the Nomination Committee and the Board for review.



The Board is satisfied with the results of the annual assessment and that the current size and composition of the Board is appropriate and well-balanced with the right mix of skills with the Board composition comprising individuals of high calibre, credibility and with the necessary skills and qualifications to enable the Board to discharge its responsibilities effectively.

FOSTER COMMITMENT

Time Commitment

Board meetings are held quarterly with additional meetings held when necessary. The Board met seven (7) times during FYE 2019. During these meetings, the Board reviewed, amongst others, the Group’s unaudited quarterly reports on consolidated financial results, reports and updates on the Group’s operations, minutes of meetings of Board Committees and any other strategic issues relating to the Group’s businesses. All proceedings at the Board meetings are minuted and recorded including the issues discussed and decisions arrived at.

In the interval between Board meetings, any matter requiring urgent Board decision and/or approvals will be sought via circular resolutions which are supported by all the relevant information and explanations required for an informed decision to be made.

The details of the attendance of each Director during FYE 2019 are as follows:-

No. Director DesignationMeeting

Attendance %

1) Encik Izad Shahadi Bin Mohd Sallehuddin (Appointed on 15 August 2019) (Re-designated as Chairman on 13 September 2019)

Chairman and Non-Independent Non-Executive Director

2/2 100

2) Encik Ahmad Al Farouk Bin Ahmad Kamal (Appointed on 15 August 2019)

Non-Independent Non-Executive Director 2/2 100

3) Tuan Haji Mohd Khalid Bin Mohamed (Appointed on 15 August 2019)

Non-Independent Non-Executive Director 1/2 50

4) Dato’ Haji Ghazali Bin Awang Independent Non-Executive Director 6/7 86

5) Dato’ Indera Dr. Haji Md. Yusop Bin Omar Independent Non-Executive Director 7/7 100

6) Dr. Ir. Samad Bin Solbai Independent Non-Executive Director 7/7 100

7) Mr. Too Kok Leng Independent Non-Executive Director 7/7 100

Directors’ Training

The Board fully supports Directors’ training needs so as to continuously equip themselves with skills and knowledge by keeping abreast with developments in the industry, economy and regulatory updates to effectively carry out their duties and responsibilities in the Company. Although there is no policy requiring Directors to attend a specific number of training sessions yearly, the Board via the Nomination Committee encourages the Directors to attend various relevant training programmes from time to time. All newly appointed Directors have completed the Mandatory Accreditation Programme as prescribed by Bursa Securities.

The Directors undergo training programmes and seminars from time to time and as and when necessary to update themselves with the relevant knowledge and skills in order to discharge their duties and responsibilities effectively.



The Directors also gain updates through the briefings by the Company Secretaries and the Internal and External Auditors during the quarterly meetings of the Company, as well as communications amongst other Directors of the Company. Wherever there is a need, the Board would call for an in-house briefing or talk in relation to new legislation or current developments in the regulatory and compliance requirement.

During FYE 2019, the Directors attended the following training programmes:-

No List of Training for 2019

1 Mandatory Accreditation Programme (MAP)

2 Corporate Liability Provision pursuant to Section 17A of the Malaysian Anti-Corruption Act 2019 (MACC)

3 Audit Oversight Board Conversation with Audit Committees

4 2019 TH Nominee Directors Training Programme

5 ESG Investment Talk 2019: Sustainability & Financial Rewards

6 Directors’ Conference by BIMB Holdings Bhd, Sustainability Workshop, latest trends, Corporate Liability

7 FIDE Elective programme: Anti Money Laundering/Counter Financing of Terrorism-Banking Sector, Iclif Learning

8 Training on Sustainability Reporting

PRINCIPLE B: EFFECTIVE AUDIT AND RISK MANAGEMENT

Audit Committee

The Audit Committee is established to provide independent oversight of the Company’s internal and external audit functions, financial reporting and internal control system, and to ensure checks and balances within the Company. The Chairman of the Audit Committee is not the Chairman of the Board.

The composition and summary of works of the Audit Committee are set out in the Audit Committee Report of this Annual Report.

Financial Reporting

The Board is aware of its responsibilities and the requirements to present a balanced and comprehensive assessment of the Group’s financial position, by means of the annual and quarterly reports and other published information. The Audit Committee assists the Board in scrutinising information for disclosure to ensure accuracy, adequacy and completeness. The quarterly results and annual financial statement are reviewed by the Audit Committee and then recommended to the Board for approval before releasing to the public.

The Statement of Responsibility by Directors in respect of the preparation of the annual audited financial statements is set out in this Annual Report.

Assessment of Suitability and Independence of External Auditors

The Audit Committee undertakes an annual assessment of the suitability and independence of the external auditors. The Audit Committee, having been satisfied with the external auditors’ performance in respect of FYE 2019, will recommend their re-appointment to the Board and seek the shareholders’ approval at the forthcoming Annual General Meeting.

The Company has established a professional and transparent relationship with the external auditors, and the external auditors are given access to books and records of the Company at all times.



Risk Management and Internal Control

The Board acknowledges its responsibility for the Group’s system of internal controls covering not only financial controls but also operational and compliance controls, as well as risk management. The Board is committed to implementing an effective risk management framework which will allow the Management to identify, evaluate and manage risks with defined risk profiles. In achieving this, the Board ensures that principal risks in the Group are identified, measured and managed with appropriate internal control system, and that the effectiveness, adequacy and integrity of the internal control system are reviewed on an on-going basis.

Through the internal audit function, the Board is able to obtain sufficient assurance of regular reviews and/or appraisals of the effectiveness of the system of internal controls of the Group.

The details of the risk management and internal control system, together with its framework of the Group are presented in the Statement on Risk Management and Internal Control of this Annual Report.

PRINCIPLE C: INTEGRITY IN CORPORATE REPORTING AND MEANINGFUL RELATIONSHIP WITH STAKEHOLDERS

Communication with Stakeholders

The Company recognises the importance of the corporate disclosure which emphasises on transparent, consistent and coherent communication with investment community and shareholders. The Company seeks to build relationship with its shareholders and potential investors by providing sufficient business, operations and financial information on the Group, to enable them to make informed investment decisions.

The Company is guided by the Corporate Disclosure Guide issued by Bursa Securities with the consultation of the Company Secretaries, advisers and/or other service providers.

The Company’s website incorporates an ‘Investor Relations’ section which provides all relevant information on the Company and it is accessible by the public.

Effective Communication and Proactive Engagement

The Group’s senior management views that continuous and frequent interaction with its shareholders and investors is one of the key components of good corporate governance. To be in line with this, the Group has diligently practised relevant and timely disclosure of material corporate developments as stipulated by disclosure requirements of MMLR of Bursa Securities.

Apart from official announcements through Bursa Securities’ website, the Group strives to ensure adequate and accurate corporate developments are conveyed to the general and investing public.

Conduct of General Meeting

The AGM is the principal forum for dialogue with individual shareholders and investors, gathering views and answering questions on all issues relevant to the Group’s business activities and prospects. The Board encourages full participation of shareholders at every General Meeting of the Company to raise questions on any item in the agenda or the Group’s operations in general.

The Company has adopted Practice 12.1 of MCGG in giving at least twenty-eights (28) days’ notice for its AGM. This allows shareholders sufficient time to make necessary arrangements to attend and participate in person or by proxies.



Poll Voting

Pursuant to Paragraph 8.29A of the MMLR of Bursa Securities, any resolution set out in the Notice of any General Meeting, or in any notice of resolution which may properly be moved and is intended to be moved at any General Meeting must be voted by poll. Hence, voting for all resolutions as set out in the notices of forthcoming and future General Meetings will be conducted as such and an independent scrutineer will be appointed to validate the votes cast at the General Meetings.

Key Focus Areas and Future Priorities

Moving forward, the Company will continue working towards achieving high standards of corporate governance. The Board has identified the following forward-looking action items that will help it to achieve its corporate governance objectives.

1) Bursa Securities has accorded the Company a deadline extension to 22 October 2020 for the submission of a regularisation plan on the Group’s PN17 condition. The Board is exploring options, including diversifying into new businesses outside the oil and gas fabrication works. The Board will release the requisite announcement to Bursa Malaysia when it secures a viable proposal to strengthen the financial position of the Group.

2) The Company has yet to adopt an integrated approach to reporting as the Board acknowledges that integrated reporting goes beyond a mere combination of financial statements and sustainability reporting into a single document. Having said this, producing the yearly Annual Report and its various statements is a coordinated effort between cross-functional departments in the Company. The Board may consider adopting integrated reporting in the near future.

Conclusion

The Board is satisfied that, it complies substantially with the Practices of the MCCG throughout FYE 2019.

This CG Overview Statement and the CG Report are made in accordance with the resolution passed by the Board Directors on 25 June 2020.



STATEMENT OFDIRECTORS’ RESPONSIBILITY

The Directors are required under the provisions of the Companies Act 2016 (“Act”) to prepare financial statements which includes the consolidated statement consisting of the consolidated statement of financial position and the consolidated statement of comprehensive income of the Company and its subsidiaries (“Group”) for each financial year, made out in accordance with the applicable approved accounting standards and the provisions of the Act. This is also in line with Paragraph 15.26 (a) of Main Market Listing Requirements of Bursa Malaysia Securities Berhad.

The Directors are required to take reasonable steps in ensuring that the consolidated financial statements give a true and fair view of the state of affairs of the Company and the Group as at the end of the financial year ended 31 December 2019.

In the preparation of the consolidated financial statements, the Directors have ensured that:

• appropriate accounting policies have been adopted and applied consistently;• the statements are supported by reasonable and prudent judgement and estimates;• a going concern basis has been adopted unless it is in appropriate to assume that the Group will continue its

business; and• all applicable accounting standards have been followed, subject to any material departures disclosed and explained

in the financial statements.

The Directors are required under the Act to ensure that the Company keeps accounting records which disclose with reasonable accuracy the financial position of the Company, and to cause such records to be kept in such manner as to enable them to be conveniently and properly audited.

This Statement on Directors’ Responsibility for preparing the financial statements was approved by the Board of Directors on 25 June 2020.

FOR PREPARING THE FINANCIAL STATEMENTS


ADDITIONAL COMPLIANCEINFORMATION

1. Audit and Non-Audit Services

The amount of audit and non-audit fees paid and payable to the External Auditors and their affiliates by the Company and its subsidiaries (“Group”) during the financial year ended 31 December 2019 (“FYE 2019”) are as below:

GroupRM

CompanyRM

Audit services rendered 225,000.00 107,500.00

Non-Audit services rendered

- Review of the Statement on Risk Management and Internal Control 5,000.00 5,000.00

- Taxation fee 51,000.00 9,000.00

- Fee for application to Ministry of Finance in respect to be exempted from the payment of Service Tax.

7,525.00 -

- Preparation of tax memo on Inland Revenue Board of Malaysia (“IRBM”) tax audit exercise.

11,130.00 -

Total: 299,655.00 121,500.00

2. Material Contracts involving the Interests of the Directors, Chief Executive or Major Shareholders

There was no material contract entered into by the Company or its subsidiaries involving the interests of the Directors, Chief Executive who is not a director or Major Shareholder in the FYE 2019.

3. Recurrent Related Party Transactions of a Revenue or Trading Nature

There were no material recurrent related party transactions of a revenue or trading nature during the FYE 2019 other than those disclosed in Note 30 to the Audited Consolidated Financial Statements of the Group. Those recurrent related party transactions did not exceed the threshold prescribed under Paragraph 10.09(1) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad.

4. Status of Utilisation of Proceeds

As of the date of this report, the gross proceeds from the JX Nippon Contract Novation of RM374 million were utilised in the following manner:

Proposed Actual Estimated utilisation utilisation VarianceDetails timeframe RM’mil RM’mil RM’mil %

Payment to Scheme Creditors* 1 month 352.8 323.3 29.5 8.4%

Estimated expenses^ 1 month 21.2 3.3 17.9 84.4%

Working capital 6 months - 35.3 (35.3) NA

374.0 361.9 12.1 3.2%


ADDITIONAL COMPLIANCEINFORMATION

* Amount owing to the Scheme Creditors is lower than the amount disclosed in the Circular, due to the following reasons:

(i) variation in the amount of disputed debt admitted under the proof of debt services exercise pursuant THHE Offshore Services Sdn. Bhd. (“THEOS”), a former subsidiary of the Company to the Schemes, which is currently under negotiation;

(ii) the amount owing to the Scheme Creditors of THEOS was settled through proceeds from liquidation of THEOS;

(iii) the final amount owing to the Scheme Creditors of O&G Works Sdn. Bhd., of RM8.8 million will be settled through THHE Fabricators Sdn. Bhd.’s scheme, hence not included in the above settlement schedule; and

(iv) lower exchange rate applied on foreign payables admitted under the proof of debt exercise pursuant to the Schemes

^ The proceeds were utilised for other purposes instead of the initial proposed utilisation for Goods and Services Tax (“GST”) cost of RM21.1 million. There was no payment for GST cost as GST was zero rated effective from 1 June 2018.

The utilisation of the proceeds as disclosed above should be read in conjunction with the Circular of the Company dated 29 January 2018.


STATEMENT ON RISK MANAGEMENTAND INTERNAL CONTROL

In accordance with Malaysian Code on Corporate Governance, the Board of Directors (“Board”) of TH Heavy Engineering Berhad is committed to maintaining a sound risk management framework and system of internal control in the Company and its subsidiaries (“Group”).

The Board is pleased to present its Statement on Risk Management and Internal Control of the Group for the financial year ended 31 December 2019 (“FYE 2019”) which is made pursuant to Paragraph 15.26(b) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad and guided by the Statement on Risk Management and Internal Control: Guidelines for Directors of Listed Issuers. This Statement outlines the nature and scope of risk management and internal control of the Group and covers all of the Group’s operation except for an associated company.

BOARD RESPONSIBILITY

The Board affirms its overall responsibility and is committed to maintaining a sound system of internal control to ensure its adequacy and integrity so as to safeguard shareholders’ investment and the Group’s asset. The Board and Management have implemented an internal control system designed to identify and manage the risks facing the Group in pursuit of its business objectives.

To facilitate its responsibilities, the Risk & Investment Committee (“RIC”) has been given the responsibility to identify and assess the principal risks faced by the Group and thereafter design, implement and monitor appropriate internal control to manage risks.

The current composition of the RIC is as follows:-

Name Membership Directorate

Dr. Ir. Samad Bin Solbai Chairman Independent Non-Executive Director

Mr. Too Kok Leng Member Independent Non-Executive Director

Dato’ Indera Dr. Haji Md. Yusop Bin Omar Member Independent Non-Executive Director

As there are limitations that are inherent in any internal control and risk management systems, the system put in place can only manage rather than eliminate risks that impact the achievement of the Group’s business objective. Accordingly, it can only provide reasonable but not absolute assurance against material misstatement or loss. The system of the internal control covers, inter alia, financial, operation and regulatory compliance controls.

During the financial year under review, there were no material losses incurred as a result of weakness in the internal control and the Board is satisfied that on-going process of quarterly reviewing, evaluating and monitoring the risk management framework and internal control systems are reasonably effective and adequate within the Group.



KEY FEATURES OF THE GROUP’S RISK MANAGEMENT FRAMEWORK

Risk Management Framework

The Group has implemented an Enterprise Risk Management (“ERM”) Framework to ensure proper management of risks that may impede the achievement of the Group’s goals and objectives. The Group’s risk assessment process is depicted as follows:

With ERM Framework in place, the Management-level Risk Committee (“MRC”) will report to the RIC and the RIC will in turn report to the Board on all major business risks faced by the Group and the adequacy of internal controls to manage risks. Members of the MRC mainly comprise top level management personnel including the Chief Executive Officer, General Manager of Legal and Secretarial Services, General Manager of Financial Services and heads of departments. The RIC will assist the Board in discharging its responsibilities in relation to risk management within the Group. Any significant changes in the business and the external environment which may result in significant risks will be reported accordingly.

The key aspects of the risk management process are:-

• Risk Owners and Risk Champions which mainly comprise heads of departments and project managers, who are accountable for all risks assumed under their respective subsidiaries, projects, and departments. They undertake to update their risk profiles from the previous update and incorporate any new risk, review the risk profiles, ratings and update the management action plans;

• RIC will identify and communicate to the Board on critical risks that the Group faces and management action plans to manage the risks;

Establishing the context

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• RIC will review risk management reports, overviewing the overall effectiveness of risk management, risk mitigation by management, and any recommendations and confirm that appropriate actions have been taken; and

• The stewardship of the Board will provide overall risk management oversight for the Group and determine its strategies and initiatives in managing the risks and mitigate potential losses.

Approval of Major Investment Decisions

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

KEY FEATURES OF INTERNAL CONTROL SYSTEM

Internal Audit Function

The Board acknowledges the importance of the internal audit function.

The internal audit function of the Group is undertaken by co-sourced in-house audit personnel and an outsourced independent professional service provider, Afrizan & Associates PLT (“Afrizan PLT”).

Afrizan PLT assists the Audit Committee in discharging their duties and to provide assurance to Management and the Board that all internal controls are in place, adequate, and functioning effectively within the acceptance limits and expectations.

The purpose, authority and responsibility of Afrizan PLT as well as the nature of assurance and consultancy activities provided to the Group are clearly expressed in their Letter of Engagement. Afrizan PLT is independent from the business operation and management of the Group and reports directly to the Audit Committee.

Afrizan PLT strives to provide the means for the Group to accomplish its control objectives by introducing a systematic and disciplined approach in evaluating and improving the effectiveness of risk management, internal control and control governance. During the FYE 2019, Afrizan PLT has tabled the internal audit plan covering two audit areas. The two audit areas were Health, Safety & Environment (“HSE”) management and follow-up review of Information Technology (“IT”) Management.

The key internal audit activities that add value to the Group can be summarised as follows:

1. Review the operational activities and verify that the principal objectives are aligned to the overall Group’s objectives.2. Identify all auditable activities and relevant risk factors and assesses their significance.3. Perform research and gather information that is accurate, factual and complete.4. Analyse and examine the effectiveness and efficiency of operations.5. Provide assurance on compliance with statutory requirements, laws, Group policies and guidelines.

Other Key Elements of Internal Control System

The other key elements of the Group’s system of internal control are as follows:




Clear and Structured Organisational Reporting Lines

The Group has a well-defined organisation structure that is aligned to its business requirements and also to ensure check and balance through segregation of duties. Clear reporting lines and authority limits set by the Board govern the approval process. All key strategic, business and investment plans are approved and monitored by the Board. Board papers, which include both financial and non-financial matters such as cash flow forecasts, business strategies, corporate exercises, and any other key matters are presented to the Board for deliberation and approval.

Management Systems, Policies and Procedures

The Group established Integrated Management System (IMS) to improve its management and operational efficiency. The IMS combines International Standards i.e. ISO 9001:2015 for Quality Management System, ISO 14001:2015 for environmental Management System and OHSAS 18001:2007 for the Occupational Health and Safety Management System. The IMS integrates all of an organisation’s systems and processes into one complete framework, enabling an organization to work as a single unit with unified objectives.

Written policies and procedures are established at all levels within the Group as part of the various management systems and customers’ requirements compliances. These policies and procedures are reviewed quarterly and updated as and when necessary. Briefings, trainings, awareness programs and campaign are continuously conducted to stakeholders such as employees, contractors and customers.

Strategic Business Planning, Budgeting and Reporting

The Group’s overall strategic business plan that maps out its objectives and business direction was presented by the Management to the Board for their deliberation and approval. The Management has provided the Board with quarterly updates on the corporate activities as well as the progress of work activities within the Group. The Management also reviewed with the Board, on a quarterly basis, issues covering, but not restricted to, strategy, performance, resources and standards of business conduct.

Assurance from Management

The Board has received assurance from the Chief Executive Officer that a review on the adequacy and effectiveness of the risk management practices and internal control system has been undertaken and the Group’s risk management and internal control system is operating adequately and effectively, in all material aspects, based on the risk management and internal control system of the Group.

Review of the Statement by External Auditors

The External Auditors have reviewed this Statement for inclusion in the Annual Report of the Group for the FYE 2019. Their review was performed in accordance with Audit and Assurance Practice Guide (AAPG) 3 (Revised) issued by Malaysian Institute of Accountant.

AAPG 3 (Revised) does not require the External Auditors to consider whether this Statement covers all risks and control, or to form an opinion on the adequacy and effectiveness of the Group’s risk management and internal control system including the assessment and opinion by the Directors and Management thereon. Based on their procedures performed, the External Auditors have reported to the Board that nothing has come to their attention that cause them to believe this Statement is inconsistent with their understanding of the process the Board has adopted in the review of the adequacy and integrity of the risk management and internal control system within the Group.

This Statement was approved by the Board on 25 June 2020.


044 Directors’ Report

049 Independent Auditors’ Report

053 Statements Of Financial Position

055 Statements Of Profit Or Loss And Other Comprehensive Income

056 Statements Of Changes In Equity

059 Statements Of Cash Flows

063 Notes To The Financial Statements

131 Statement By Directors

132 Statutory Declaration

DIRECTORS’ REPORTAND AUDITEDFINANCIAL STATEMENTS


The Directors of TH HEAVY ENGINEERING BERHAD hereby submit their report and the audited financial statements of the Group and of the Company for the financial year ended 31 December 2019.

PRINCIPAL ACTIVITIES

The Company is principally engaged in construction services, investment holding and provision of management services, whilst the principal activities and other information of the subsidiaries and associate are as stated in Notes 7 and 8 to the financial statements, respectively.

RESULTS OF OPERATIONS

The results of operations of the Group and the Company for the financial year are as follows:

Group Company

RM RM

Profit for the year attributable to:

Owners of the Company 12,378,753 2,981,258

Non-controlling interests (2,467,131) -

9,911,622 2,981,258

In the opinion of the Directors, the results of operations of the Group and of the Company during the financial year have not been substantially affected by any item, transaction or event of a material and unusual nature.

RESERVES AND PROVISIONS

There were no material transfers to or from reserves or provisions during the financial year other than those disclosed in the financial statements.

DIVIDEND

No dividend has been paid or declared by the Company since the end of the previous financial year. The Directors do not recommend the payment of any dividend in respect of the current financial year.

DIRECTORS’REPORTFOR THE YEAR ENDED 31 DECEMBER 2019


DIRECTORS OF THE COMPANY

The Directors of the Company in office during the financial year and during the period from the end of the financial year to the date of this report are: Izad Shahadi Bin Mohd Sallehuddin (Appointed on 15 August 2019) (Chairman)Ahmad Al Farouk Bin Ahmad Kamal (Appointed on 15 August 2019)Mohd Khalid Bin Mohamed (Appointed on 15 August 2019) *Dato’ Haji Ghazali Bin AwangDato’ Indera Dr. Haji Md Yusop Bin OmarDr. Samad Bin Solbai *Mr. Too Kok Leng *

* Directors of the Company and subsidiaries.

The names of the Directors of the subsidiaries of the Company since the beginning of the financial year are disclosed in Note 7 to the financial statements.

DIRECTORS’ INTERESTS IN SHARES

None of the Directors in office at the end of the financial year held shares or had beneficial interest in the shares of the Company or its related companies during or at the beginning and end of the financial year.

DIRECTORS’ BENEFITS

Since the end of the previous financial year, none of the Directors of the Company has received or become entitled to receive any benefits (other than benefits included in the aggregate amount of emoluments received or due and receivable by the Directors as disclosed in Note 21 to the financial statements or being fixed salary of a full-time employee of the Company) by reason of a contract made by the Company or a related corporation with any Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest.

During and at the end of the financial year, no arrangement subsisted to which the Company was a party whereby Directors of the Company might acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.

ISSUE OF SHARES AND DEBENTURES

During the financial year, the issued and paid-up ordinary share capital of the Company increased by RM6,627 by way of conversion of 26,506 Irredeemable Convertible Preference Shares-i (‘ICPS-i’) of RM0.25 each to ordinary shares of RM0.25 each.

In accordance with section 618 of Companies Act 2016, any amount standing to the credit of the share premium account has become part of the Company’s ordinary share capital. Accordingly, the Company transferred the share premium amounting to RM95,028,660 to the ordinary share capital account during the financial year as disclosed in Note 12 to the financial statements.

The new ordinary shares rank pari passu in all respects with the existing ordinary shares.

There were no debentures issued during the financial year.

DIRECTORS’REPORT


SHARE OPTIONS

No options have been granted by the Company to any parties during the financial year to take up unissued shares of the Company.

No shares have been issued during the financial year by virtue of the exercise of any option to take up unissued shares of the Company. As of the end of the financial year, there were no unissued shares of the Company under options.

OTHER STATUTORY INFORMATION

Before the financial statements of the Group and of the Company were made out, the directors took reasonable steps:

(a) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts, and had satisfied themselves that no known bad debts need to be written off and that adequate allowances had been made for doubtful debts; and

(b) to ensure that any current assets which were unlikely to be realised in the ordinary course of business including the value of current assets as shown in the accounting records of the Group and the Company had been written down to an amount which the current assets might be expected so to realise.

As at 31 December 2019, the current liabilities of the Group and of the Company had exceeded the current assets by RM316,621,948 and RM116,319,689 respectively mainly due to losses incurred in prior financial years. The current liabilities of the Group and the Company arose from trade and other payables and borrowings.

(i) On 28 April 2017, the Company announced that it has become an affected listed issuer pursuant to the amended Practice Note 17 (“PN17”) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Malaysia”). As an affected issuer, the Company is required to submit a Regularisation Plan to address the PN17 status within 12 months from 28 April 2017 to Bursa Malaysia for approval. The Company is currently in the process of formulating the Proposed Regularisation Plan for submission and subsequent to the end of the financial year, the Company had applied and was granted an extension of time by Bursa Malaysia up to 22 October 2020 to submit the Proposed Regularisation Plan to Bursa Malaysia and / or other relevant regulatory authorities.

The Proposed Regularisation Plan will mainly comprise the following (i) Proposed capital reconstruction exercise involving the conversion of the existing ICPS-i into ordinary shares, proposed issuance of new ICPS-i, and a capital reduction and amalgamation exercise for which the quantum has not been finalised; (ii) Proposed disposal of certain non-core assets and (iii) Proposed acquisition of a subsidiary.

On 13 March 2020, the Company had entered into a non-binding memorandum of understanding (“MOU”) with ICE Petroleum Ventures Sdn. Bhd. (“Vendor”) in relation to the acquisition of 12.9 million ordinary shares in ICE Petroleum Engineering Sdn. Bhd. (“ICE”), representing the entire equity interest in ICE by the Company from the Vendor (“Proposed acquisition”). ICE is principally engaged in mechanical engineering works and services, plant fabrication and installation for the oil, gas and petrochemical industries. Subject to the outcome of the due diligence exercises currently being undertaken, both parties irrevocably confirm and agree to enter into an agreement within 4 months from the date of the MOU or such other extended period to be mutually agreed in writing by the parties (“Term”) within 14 days prior to the expiry of the Term.

The MOU allows the Company and the Vendor to negotiate exclusively and outline the salient terms in relation to a share sale agreement to be entered into between the Company and the Vendor. The Proposed acquisition forms part of the Company’s proposed regularisation plan to regularise its financial condition in efforts to maintain its listing status on the Main Market of Bursa Malaysia.

DIRECTORS’REPORT


(ii) In 2017, the Company and its two subsidiaries, namely THHE Fabricators Sdn. Bhd. (“THFSB”) and O&G Works Sdn. Bhd. (“OGW”) (“Scheme Companies”) had each formulated a Scheme of Arrangement (“Scheme”) with their respective Scheme Creditors.

The respective Scheme Creditors approved the Company’s Scheme and that of THFSB and OGW (“Approved Scheme Companies”) at the Court Convened Creditors Meeting held in December 2017 and the same were subsequently approved by the High Court on 6 February 2018. Pursuant to the Approved Scheme Companies’ Schemes, the total debts due and owing to the Scheme Creditors will be reduced and settled by way of cash (“Cash Portion”), proposed issuance of new ICPS-i in the Company and term out of the existing facility. Any remaining amount owing to the Scheme Creditors after the aforesaid shall be waived completely. Accordingly, all pending litigation proceedings including all winding up petitions are to be withdrawn or terminated as the debts are deemed to have been compromised under the Schemes. The Approved Scheme Companies are currently in the process of implementing the Schemes and Cash Portion was substantially completed.

The ability of the Approved Scheme Companies to discharge their liabilities and obligations pursuant to the Schemes is dependent on the successful issuance of the new ICPS-i to the Scheme Creditors. Accordingly, the outcome and timing of the completion of the issuance of the new ICPS-i are currently in progress.

The combination of the conditions highlighted above indicate material uncertainties that may cast significant doubt over the ability of the Group and of the Company to continue as going concern. However, the financial statements of the Group and of the Company have been prepared on a going concern basis.

Other than stated at the preceding paragraphs, at the date of this report, the Directors are not aware of any circumstances:

(i) which would require the writing off of bad debts or render the amount of allowances for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent, or

(ii) which would render the values attributed to the current assets in the financial statements of the Group and of the Company misleading, or

(iii) which have arisen which would render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate, or

(iv) not otherwise dealt with in this report or the financial statements of the Group and of the Company that would render any amount stated in the financial statements misleading.

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

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

(ii) any contingent liability in respect of the Group or of the Company that has arisen since the end of the financial year.

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, other than certain contingent liabilities as disclosed in Note 29 to the financial statements which, in the opinion of the Directors, will or may substantially affect the ability of the Group and of the Company to meet their obligations as and when they fall due.

DIRECTORS’REPORT


In the opinion of the Directors, no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of operations of the Group and of the Company for the succeeding financial year other than as mentioned in Note 31 to the financial statements.

INDEMNITY AND INSURANCE FOR DIRECTORS AND OFFICERS

The Company maintains Directors’ and Officers’ liability insurance throughout the year, which provides appropriate insurance cover for the Directors and Officers of the Company.

There was no indemnity given to or insurance effected for auditors of the Company in accordance with Section 289 of the Companies Act 2016.

AUDITORS’ REMUNERATION

The amount paid as remuneration of the auditors for the financial year ended 31 December 2019 is as disclosed in Note 20 to the financial statements.

AUDITORS

The auditors, Messrs Deloitte PLT, have indicated their willingness to continue in office.

Signed on behalf of the Board of Directorsin accordance with a resolution of the Directors,

_____________________________________________ENCIK IZAD SHAHADI BIN MOHD SALLEHUDDIN

_____________________________________________DATO’ HAJI GHAZALI BIN AWANG

Kuala Lumpur,25 June 2020

DIRECTORS’REPORT


INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF TH HEAVY ENGINEERING BERHAD (INCORPORATED IN MALAYSIA)

Report on the Audit of the Financial Statements

Disclaimer of Opinion

We were engaged to audit the financial statements of TH HEAVY ENGINEERING BERHAD, which comprise the statements of financial position of the Group and of the Company as at 31 December 2019, and the statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows for the financial year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information, as set out on pages 65 to 136.

We do not express an opinion on the accompanying financial statements of the Group and of the Company. Because of the significance of the matters described in the Basis for Disclaimer of Opinion section of our report, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these financial statements.

Basis for Disclaimer of Opinion

As disclosed in Note 32 to the financial statements, certain matters stated therein were unresolved since the preceding financial years. These matters form the basis of our disclaimer of opinion and are enumerated below. Further, we were unable to determine whether adjustments to the opening accumulated losses might be necessary arising from the possible effects of these matters (individually or accumulatively) on the comparability of the current and prior financial year’s figures.

1. As disclosed in Note 2 to the financial statements, the financial statements of the Group and of the Company have been prepared on going concern basis. The application of the going concern basis assumes that the Group and the Company will be able to realise their assets and settle their liabilities in the normal course of business. In forming our disclaimer of opinion, we considered the following matters, amongst others:

1.1 As at 31 December 2019, the current liabilities of the Group and of the Company had exceeded the current assets by RM316.6 million and RM116.3 million respectively, mainly due to losses incurred in prior financial years. The current liabilities of the Group and the Company comprise trade and other payables and borrowings.

1.2 On 28 April 2017, the Company announced that it has become an affected listed issuer pursuant to the amended Practice Note 17 (“PN17”) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Malaysia”). As an affected listed issuer, the Company is required to submit a Regularisation Plan to address the PN17 status within 12 months from 28 April 2017 to Bursa Malaysia for approval. The Company is currently in the process of formulating the Proposed Regularisation Plan for submission and subsequent to the end of the financial year, the Company had applied and was granted an extension of time by Bursa Malaysia up to 22 October 2020 to submit the Proposed Regularisation Plan to Bursa Malaysia and / or other relevant regulatory authorities.

The Proposed Regularisation Plan will primarily comprise (i) Proposed capital reconstruction exercise involving the conversion of the existing Irredeemable Convertible Preference Shares-i (“ICPS-i”) into ordinary shares, proposed issuance of new ICPS-i, and a capital reduction and amalgamation exercise for which the quantum has not been finalised; (ii) Proposed disposal of certain non-core assets and (iii) Proposed acquisition of a business as disclosed in Note 31(b) to the financial statements.


1.3 In 2017, the Company and its two subsidiaries, namely THHE Fabricators Sdn. Bhd. (“THFSB”) and O&G Works Sdn. Bhd. (“OGW”) (“Scheme Companies”) had each formulated a Scheme of Arrangement (“Scheme”) with their respective Scheme Creditors.

The respective Scheme Creditors approved the Company’s Scheme and that of THFSB and OGW (“Approved Scheme Companies”) at the Court Convened Creditors Meeting held in December 2017 and the same were subsequently approved by the High Court on 6 February 2018. Pursuant to the Approved Scheme Companies’ Schemes, the total debts due and owing to the Scheme Creditors will be reduced and settled by way of cash (“Cash Portion”), proposed issuance of new ICPS-i in the Company and term out of the existing facility. Any remaining amount owing to the Scheme Creditors after the aforesaid shall be waived completely. Accordingly, all pending litigation proceedings including all winding up petitions are to be withdrawn or terminated as the debts are deemed to have been compromised under the Schemes. The Approved Scheme Companies are currently in the process of implementing the Schemes and Cash Portion was substantially completed.


Therefore, the going concern basis used in preparing the financial statements of the Group and of the Company is significantly dependent on:

i. approval being obtained from all the relevant parties on the Proposed Regularisation Plan;

ii. timely and successful implementation of the key components of the Proposed Regularisation Plan and the Schemes; and

iii. ability of the Group and the Company to achieve sustainable and viable operations so as to generate sufficient cash flows to enable them to meet their obligations as and when they fall due.

In the event the events above do not materialise, the Group and the Company may be unable to realise their assets and discharge their liabilities in the normal course of business. There are material uncertainties that may cast significant doubt over the ability of the Group and of the Company to continue as going concerns. In view of the significant uncertainties arising from the matters above, we are unable to obtain sufficient appropriate audit evidence to ascertain the appropriateness of the preparation of the financial statements of the Group and of the Company on a going concern basis.

2. As disclosed in Note 10.1 to the financial statements, amount due from a contract customer of RM38.7 million represents uncertified claims for costs incurred on the variation of works performed for a project. The Group has sought independent legal opinion and in addition engaged an independent consultant to verify the claims made in respect of the said variation of work in the prior years. The Group and the contract customer are currently in negotiation to reach an amicable settlement. However, at this juncture, we are unable to ascertain the recoverable amount from the settlement sum.

3. As disclosed in Note 7 to the financial statements, the investment in subsidiaries of the Company as at 31 December 2019 amounted to RM267.3 million. Whilst there was minor turnaround of the financial performance of the subsidiaries during the financial year, however, the said improvement is not sufficient to restore their financial position. Furthermore, due to the challenges faced in the current depressed market conditions, there are indicator of impairment in the carrying amount of the investment in subsidiaries. Accordingly, the recoverable amount of the investment in subsidiaries as at 31 December 2019 could not be reliably estimated at this stage as such values are dependent on the timely and successful implementation of the Proposed Regularisation Plan to restore their financial position.

INDEPENDENTAUDITORS’ REPORT


As a result, we were unable to ascertain whether the carrying amount of the Company’s investment in subsidiaries as at 31 December 2019 is fairly stated as the recoverable amounts have not been reliably assessed by the Company in accordance with MFRS 136: Impairment of Assets.

4. As disclosed in Note 10.2 to the financial statements, the amount due from subsidiaries as at 31 December 2019 amounted to RM48.0 million. Similar to para 3, whilst there was minor turnaround of the financial performance of the subsidiaries during the financial year, however, the said improvement is not sufficient to restore their financial position. Furthermore, due to the challenges faced in the current depressed market conditions, there are indicators of impairment on the amount due from the subsidiaries. Accordingly, the recoverable amount of the amount due from subsidiaries as at 31 December 2019 could not be reliably estimated as such values are dependent on the timely and successful implementation of the Proposed Regularisation Plan to restore their financial position.

As a result, we were unable to ascertain whether the carrying amount of the amount due from subsidiaries as at 31 December 2019 is fairly stated as the recoverable amounts have not been reliably assessed by the Company in accordance with MFRS 9: Financial Instruments.

Independence and Other Ethical Responsibilities

We are independent of the Group and of the Company in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants (“By-Laws”) and the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (“IESBA Code”) and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code.

Responsibilities of the Directors for the Financial Statements

The Directors of the Group and of the Company are responsible for the preparation of financial statements of the Group and of the Company that give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia. The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of financial statements of the Group and of the Company that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements of the Group and of the Company, the Directors are responsible for assessing the Group and the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group and the Company or to cease operations, or have no realistic alternative but to do so.

Auditors’ Responsibilities for the Audit of the Financial Statements

Our responsibility is to conduct an audit of the Group and of the Company’s financial statements in accordance with approved standards on auditing in Malaysia and International Standards on Auditing and to issue an auditors’ report. However, because of the matters described in the Basis for Disclaimer of Opinion section of our report, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these financial statements.



Report on Other Legal and Regulatory Requirements

In accordance with the requirements of Section 266(3) of Companies Act 2016 in Malaysia, we also report that the audit reports of certain subsidiaries contained a disclaimer of opinion as disclosed in Note 7 to the financial statements.

Other Matter

This report is made solely to the members of the Company, as a body, in accordance with Section 266 of the Companies Act 2016 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

DELOITTE PLT (LLP0010145-LCA)Chartered Accountants (AF 0080)

SITI HAJAR BINTI OSMANPartner - 03061/04/2022 JChartered Accountant




STATEMENTS OF FINANCIAL POSITION AS AT 31 DECEMBER 2019

Group Company

Note 2019 2018 2019 2018

RM RM RM RM

ASSETS

Non-Current Assets

Property, plant and equipment 5 226,114,866 235,347,169 293,932 518,013

Intangible assets 6 - - - -

Investments in subsidiaries 7 - - 267,330,000 267,330,000

Investment in associate 8 56,112 244,856 - -

Deferred tax assets 15 1,875,978 1,875,978 - -

Total Non-Current Assets 228,046,956 237,468,003 267,623,932 267,848,013

Current Assets

Inventories 9 2,163 32,185 - -

Trade and other receivables 10 57,191,634 42,730,598 53,265,583 30,215,962

Tax recoverable 43,565 68,030 26,313 68,030

Prepaid expenses 873,621 251,846 558,606 96,746

Cash, bank balances and deposits 11 26,553,271 60,980,706 25,262,619 49,110,975

Total Current Assets 84,664,254 104,063,365 79,113,121 79,491,713

TOTAL ASSETS 312,711,210 341,531,368 346,737,053 347,339,726


Group Company

Note 2019 2018 2019 2018

RM RM RM RM

EQUITY AND LIABILITIES

Capital and Reserves

Ordinary shares 12 375,353,434 280,318,147 375,353,434 280,318,147

Irredeemable Convertible Preference Shares- (“ICPS-i”) 13 274,944,523 274,951,150 274,944,523 274,951,150

Reserves 14 (583,390,982) (500,741,075) (499,000,616) (406,953,214)

Total equity attributable to owners of the Company 66,906,975 54,528,222 151,297,341 148,316,083

Non-controlling interests 7.1 (195,488,869) (193,021,738) - -

Total (Capital Deficiency)/Equity (128,581,894) (138,493,516) 151,297,341 148,316,083

Non-Current Liabilities

Borrowings 16 40,006,902 55,083,371 6,902 76,924

Total Non-Current Liabilities 40,006,902 55,083,371 6,902 76,924

Current Liabilities

Trade and other payables 17 302,634,124 331,014,018 140,541,766 144,047,203

Borrowings 16 98,652,078 93,927,495 54,891,044 54,899,516

Total Current Liabilities 401,286,202 424,941,513 195,432,810 198,946,719

Total Liabilities 441,293,104 480,024,884 195,439,712 199,023,643

TOTAL EQUITY AND LIABILITIES 312,711,210 341,531,368 346,737,053 347,339,726

STATEMENTS OF FINANCIAL POSITION

The accompanying Notes form an integral part of the Financial Statements.



STATEMENTS OF PROFIT OR LOSSAND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2019

Group Company

Note 2019 2018 2019 2018

RM RM RM RM

Revenue 18 57,556,312 2,584,694 16,611,259 6,914,400

Cost of sales (14,172,605) (2,105,546) (9,960,591) -

Gross Profit 43,383,707 479,148 6,650,668 6,914,400

Other income 9,169,716 645,186,863 7,744,285 502,182,299

Administrative expenses (34,616,032) (29,972,903) (10,532,713) (11,331,390)

Other expenses (3,105,057) (749,585,119) (871,791) (995,121,245)

Results from operating activities 14,832,334 (133,892,011) 2,990,449 (497,355,936)

Finance costs 19 (4,606,816) (5,929,875) (9,191) (14,568)

Share of loss of equity-accounted

associate, net of tax 8 (188,744) (81,884) - -

Profit/(Loss) before tax 20 10,036,774 (139,903,770) 2,981,258 (497,370,504)

Tax expenses 22 (125,152) - - -

Profit/(Loss) for the year 9,911,622 (139,903,770) 2,981,258 (497,370,504)

Other comprehensive loss, net of taxItems that may be reclassified

subsequently to profit or loss

Currency translation differences - (13,400,165) - -

Total other comprehensive loss for the year, net of tax - (13,400,165) - -

Total comprehensive income/(loss) for the year 9,911,622 (153,303,935) 2,981,258 (497,370,504)

Profit/(Loss) attributable to:

Owners of the Company 12,378,753 (2,565,976) 2,981,258 (497,370,504)

Non-controlling interests 7.1 (2,467,131) (137,337,794) - -

Profit/(Loss) for the year 9,911,622 (139,903,770) 2,981,258 (497,370,504)

Total comprehensive income/(loss) attributable to:

Owners of the Company 12,378,753 (15,966,141) 2,981,258 (497,370,504)

Non-controlling interests (2,467,131) (137,337,794) - -

Total comprehensive income/(loss) for the year 9,911,622 (153,303,935) 2,981,258 (497,370,504)

Basic profit/(loss) per ordinary share (sen) 23 1.10 (0.23)

Diluted profit/(loss) per ordinary share (sen) 23 0.56 (0.12)


STATEMENTS OFCHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2019

Ord

inar

ysh

ares

Irre

deem

able

Con

vert

ible

Pref

eren

ce S

hare

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ity

hold

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of t

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Non

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ntro

lling

inte

rest

s

Tota

l Equ

ity/

(Cap

ital

defic

ienc

y)

Gro

upR

MR

MR

MR

MR

MR

MR

MR

MR

M

At 1

Jan

uary

201

828

0,30

9,47

227

4,95

9,82

595

,028

,660

57,1

40,5

79(4

4,10

1,60

5)(5

92,8

42,5

68)

70,4

94,3

63 (6

2,97

4,10

6)7,

520,

257

Oth

er c

ompr

ehen

sive

loss

- Fo

reig

n cu

rrenc

y

tra

nsla

tion

diffe

renc

es o

f

subs

idia

ry-

--

-(1

3,40

0,16

5)-

(13,

400,

165)

-(1

3,40

0,16

5)

- Lo

ss fo

r the

yea

r-

--

--

(2,5

65,9

76)

(2,5

65,9

76)

(137

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,794

)(1

39,9

03,7

70)

Tota

l com

preh

ensiv

e lo

ss

for t

he y

ear

--

--

(13,

400,

165)

(2,5

65,9

76)

(15,

966,

141)

(137

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,794

)(1

53,3

03,9

35)

Con

vers

ion

of IC

PS-i

(Not

e 13

)8,

675

(8,6

75)

--

--

--

-

Real

isatio

n of

reva

luat

ion

rese

rves

--

-(5

,318

,825

)-

5,31

8,82

5-

--

Cha

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in fu

nctio

nal

curre

ncy

--

--

6,68

1,15

1(6

,681

,151

)-

--

Dec

onso

lidat

ion

of a

su

bsid

iary

com

pany

--

--

--

-7,

290,

162

7,29

0,16

2

Tota

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w

ith o

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f the

Co

mpa

ny8,

675

(8,6

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-(5

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)6,

681,

151

(1,3

62,3

26)

-7,

290,

162

7,29

0,16

2

At 3

1 D

ecem

ber 2

018

280,

318,

147

274,

951,

150

95,0

28,6

6051

,821

,754

(50,

820,

619)

(596

,770

,870

)54

,528

,222

(193

,021

,738

)(1

38,4

93,5

16)


Ord

inar

ysh

ares

Irre

deem

able

Con

vert

ible

Pref

eren

ce S

hare

s-i

Shar

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mR

eval

uati

onre

serv

e

Cur

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ansl

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serv

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ccum

ulat

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sses

Att

ribu

tabl

eto

equ

ity

hold

ers

of t

heC

ompa

ny

Non

-co

ntro

lling

inte

rest

s

Tota

l Equ

ity/

(Cap

ital

defic

ienc

y)

Gro

upR

MR

MR

MR

MR

MR

MR

MR

MR

M

At 1

Jan

uary

201

928

0,31

8,14

727

4,95

1,15

095

,028

,660

51,8

21,7

54(5

0,82

0,61

9)(5

96,7

70,8

70)

54,5

28,2

22(1

93,0

21,7

38)

(138

,493

,516

)

Oth

er c

ompr

ehen

sive

loss

- Pr

ofit f

or th

e ye

ar-

--

--

12,3

78,7

5312

,378

,753

(2,4

67,1

31)

9,91

1,62

2

Tota

l com

preh

ensiv

e lo

ss

for t

he y

ear

--

--

-12

,378

,753

12,3

78,7

53(2

,467

,131

)9,

911,

622

Con

vers

ion

of IC

PS-i

(Not

e 13

)6,

627

(6,6

27)

--

--

--

-

Real

isatio

n of

reva

luat

ion

rese

rves

--

-(5

,318

,825

)-

5,31

8,82

5-

--

Tran

sfer t

o/(fr

om) i

n ac

cord

ance

with

Sec

tion

618(

2) o

f the

Com

pani

es

Act 2

016

(Not

e 12

)95

,028

,660

-(9

5,02

8,66

0)-

--

--

-

Tota

l tra

nsac

tions

w

ith o

wne

rs o

f the

Co

mpa

ny95

,035

,287

(6,6

27)

(95,

028,

660)

(5,3

18,8

25)

-5,

318,

825

--

-

At 3

1 D

ecem

ber 2

019

375,

353,

434

274,

944,

523

-46

,502

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(50,

820,

619)

(579

,073

,292

)66

,906

,975

(195

,488

,869

)(1

28,5

81,8

94)

STATEMENTS OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2019


STATEMENTS OF CHANGES IN EQUITY

Ordinaryshares

Irredeemableconvertiblepreference

shares-i

Nondistributable

reserve -Share

premium Accumulated

lossesTotal

equity

Company RM RM RM RM RM

At 1 January 2018 280,309,472 274,959,825 95,028,660 (4,611,370) 645,686,587

Conversion of ICPS-i (Note 13) 8,675 (8,675) - - -

Total comprehensive loss for the year - - - (497,370,504) (497,370,504)

At 31 December 2018/1 January 2019 280,318,147 274,951,150 95,028,660 (501,981,874) 148,316,083

Conversion of ICPS-i (Note 13) 6,627 (6,627) - - -

Transfer to ordinary shares in accordance with Section 618(2) of the Companies Act 2016 (Note 12) 95,028,660 - (95,028,660) - -

Total comprehensive income for the year - - - 2,981,258 2,981,258

At 31 December 2019 375,353,434 274,944,523 - (499,000,616) 151,297,341


FOR THE YEAR ENDED 31 DECEMBER 2019


STATEMENTS OFCASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2019

Group Company

2019 2018 2019 2018

RM RM RM RM

CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES

Profit/(Loss) before tax 10,036,774 (139,903,770) 2,981,258 (497,370,504)

Adjustments for:

Impairment loss on trade receivables 2,097,337 4,258,300 - -

Impairment loss on amount due from subsidiary - - - 956,966,561

Impairment loss on investment in subsidiaries - - - 26,036,700

Depreciation of property, plant and equipment 9,239,314 10,994,441 231,172 407,047

Impairment loss on property, plant and equipment - 711,517,891 - -

Property, plant and equipment written off 51,423 - 51,343 -

Waiver of debt arising from Scheme of Arrangement (4,884,112) (203,768,264) (5,162,320) (125,942,695)

Reversal of impairment loss on trade receivables (330,000) - - -

Gain on deconsolidation of a subsidiary - (16,911,374) - -

Gain on novation of JX Nippon Contract - (372,000,000) - (372,000,000)

Gain on disposal of property, plant and equipment - (998,821) - -

Finance costs 4,606,816 5,929,875 9,191 14,568

Finance income (1,069,777) (2,223,934) (735,898) (1,519,980)

Inventories written down to net realisable value - 152,877 - -

Allowance/(Reversal) for inventory obsolescence 54,755 (100,449) - -

Unrealised (gain)/loss on foreign exchange (net) (1,979,591) 12,952,509 (1,622,923) 8,718,836

Share of loss of associate 188,744 81,884 - -

Operating Profit/(Loss) Before Changes in Working Capital 18,011,684 9,981,165 (4,248,177) (4,689,467)

Changes in working capital:

Inventories (24,733) 230,012 - -

Trade and other receivables (16,228,373) (2,751,297) (23,049,621) (189,392,521)

Prepaid expenses (621,775) 100,473 (461,860) (42,571)

Trade and other payables (21,207,096) (165,849,724) 3,279,806 (106,370,907)

Net Cash Used In Operations (20,070,293) (158,289,371) (24,479,852) (300,495,466)

Tax refunded 68,450 463,635 68,450 463,635

Tax paid (169,137) (40,700) (26,733) (40,700)

Net Cash Used In Operating Activities (20,170,980) (157,866,436) (24,438,135) (300,072,531)


Group Company

Note 2019RM

2018RM

2019RM

2018RM

CASH FLOWS FROM INVESTING ACTIVITIES

Interest received 1,069,777 2,223,934 735,898 1,519,980

Net proceeds from novation of JX Nippon Contract - 372,000,000 - 372,000,000

Proceeds from disposal of property, plant and equipment - 1,359,999 - -

Acquisition of property, plant and equipment (58,434) - (58,434) -

Net Cash From Investing Activities 1,011,343 375,583,933 677,464 373,519,980

CASH FLOWS (USED IN)/FROM FINANCING ACTIVITIES

Interests paid 16 (4,915,912) (3,858,650) (9,191) (14,568)

Repayment of borrowings 16 (10,200,000) (158,962,505) - (24,571,408)

Repayment of finance lease liabilities 16 (151,886) (231,688) (78,494) (145,076)

Decrease in deposits pledged with licensed banks (2,827,328) 12,980,094 (4,638,899) 1,028

Net Cash Used In Financing Activities (18,095,126) (150,072,749) (4,726,584) (24,730,024)

NET (DECREASE) /INCREASE IN CASH AND CASH EQUIVALENTS (37,254,763) 67,644,748 (28,487,255) 48,717,425

Effect of translation of foreign currency - (10,997,738) - -

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 59,094,620 2,447,610 49,077,040 359,615

CASH AND CASH EQUIVALENTS AT END OF YEAR (i) 21,839,857 59,094,620 20,589,785 49,077,040

(i) Cash and cash equivalents

Cash and cash equivalents included in the statements of cash flows comprise the following statements of financial position amounts:

Group Company

Note 2019RM

2018RM

2019RM

2018RM

Cash and bank balances 11 15,870,437 17,965,679 14,589,785 16,177,040

Deposits placed with licensed banks 11 10,682,834 43,015,027 10,672,834 32,933,935

26,553,271 60,980,706 25,262,619 49,110,975

Less:

Deposits pledged with licensed banks 11 (4,713,414) (1,886,086) (4,672,834) (33,935)

21,839,857 59,094,620 20,589,785 49,077,040


STATEMENTS OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2019


NOTES TO THEFINANCIAL STATEMENTS

1. CORPORATE INFORMATION

The Company is a public limited liability company, incorporated and domiciled in Malaysia and listed on the Main Market of Bursa Malaysia Securities Berhad.

The Company is principally engaged in construction services, investment holding and provision of management services, whilst the principal activities of the subsidiaries and associate are as stated in Notes 7 and 8 respectively.

The consolidated financial statements of the Company as at and for the financial year ended 31 December 2019 comprise the Company and its subsidiaries (together referred to as the “Group” and individually referred to as “Group entities”) and the Group’s interest in an associate.

The registered office of the Company is located at Level 7, Menara Milenium, Jalan Damanlela, Pusat Bandar

Damansara, Damansara Heights, 50490 Kuala Lumpur.

The principal place of business of the Company is located at Level 26, Menara Bank Islam, No. 22 Jalan Perak, 50450 Kuala Lumpur.

These financial statements of the Group and of the Company were authorised by the Board of Directors for issuance on 25 June 2020.

2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS

The financial statements of the Group and of the Company have been prepared in accordance with Malaysian Financial Reporting Standards (“MFRSs”), International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia.

As at 31 December 2019, the current liabilities of the Group and of the Company had exceeded the current assets by RM316,621,948 and RM116,319,689 respectively mainly due to losses incurred in prior financial years. The current liabilities of the Group and of the Company arose from trade and other payables and borrowings.

• On 28 April 2017, the Company announced that it has become an affected listed issuer pursuant to the amended Practice Note 17 (“PN17”) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Malaysia”). As an affected listed issuer, the Company is required to submit a Regularisation Plan to address the PN17 status within 12 months from 28 April 2017 to Bursa Malaysia for approval. The Company is currently in the process of formulating the Proposed Regularisation Plan for submission and subsequent to the financial year, the Company had applied and was granted an extension of time by Bursa Malaysia up to 22 October 2020 to submit the Proposed Regularisation Plan to Bursa Malaysia and/or other relevant regulatory authorities.

The Proposed Regularisation Plan will mainly comprise the following (i) Proposed capital reconstruction exercise involving the conversion of the existing Irredeemable Convertible Preference Shares-i (“ICPS-i”) into ordinary shares, proposed issuance of new ICPS-i, and a capital reduction and amalgamation exercise for which the quantum has not been finalised; (ii) Proposed disposal of certain non-core assets and (iii) Proposed acquisition of a business.

NOTES TO THE FINANCIAL STATEMENTS


2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONTINUED)

On 13 March 2020, the Company had entered into a non-binding memorandum of understanding (“MOU”) with ICE Petroleum Ventures Sdn. Bhd. (“Vendor”) in relation to the acquisition of 12.9 million ordinary shares in ICE Petroleum Engineering Sdn. Bhd. (“ICE”), representing the entire equity interest in ICE by the Company from the Vendor (“Proposed acquisition”). ICE is principally engaged in mechanical engineering works and services, plant fabrication and installation for the oil, gas and petrochemical industries. Subject to the outcome of the due diligence exercises currently being undertaken, both parties irrevocably confirm and agree to enter into an agreement within 4 months from the date of the MOU or such other extended period to be mutually agreed in writing by the parties (“Term”) within 14 days prior to the expiry of the Term.


• In 2017, the Company and its two subsidiaries namely THHE Fabricators Sdn. Bhd. (“THFSB”) and O&G Works Sdn. Bhd. (“OGW”) (“Scheme Companies”) had each formulated a Scheme of Arrangement (“Scheme”) with their respective Scheme Creditors.

The respective Scheme Creditors approved the Company’s Scheme and that of THFSB and OGW (“Approved Scheme Companies”) at the Court Convened Creditors Meeting held in December 2017 and the same were subsequently approved by the High Court on 6 February 2018. Pursuant to the Approved Scheme Companies’ Schemes, the total debt due and owing to the Scheme Creditors will be reduced and settled by way of cash (“Cash Portion”), proposed issuance of new ICPS-i in the Company and term out of the existing facility. Any remaining amount owing to the Scheme Creditors after the aforesaid shall be waived completely. Accordingly, all pending litigation proceedings including all winding up petitions are to be withdrawn or terminated as the debts are deemed to have been compromised under the Schemes. The Approved Scheme Companies are currently in the process of implementing the Schemes and Cash Portion was substantially completed.


The Directors have concluded that the combination of the circumstances highlighted above indicate material uncertainties that may cast significant doubt over the ability of the Group and of the Company to continue as going concern and therefore, may be unable to realise their assets and discharge their liabilities in the normal course of business.

Should the going concern basis for the preparation of the financial statements be no longer appropriate, adjustments

will have to be made to restate the carrying value of the assets to their recoverable amounts and to provide for further liabilities which may arise.

The Company is currently in the process of formulating the Proposed Regularisation Plan to address the financial

condition of the Group and of the Company and believes that the Proposed Regularisation Plan once formulated and implemented, will enable the Group and the Company to generate sufficient cash flows to meet their obligations. For these reasons, the Directors are of the opinion that the Group and the Company will be able to continue in operational existence for the foreseeable future and to realise their assets and settle their liabilities in the ordinary course of business.




Therefore, the going concern basis used in preparing the financial statements of the Group and of the Company is significantly dependent on:

i. approval being obtained from all the relevant parties on the Proposed Regularisation Plan;

ii. timely and successful implementation of the key components of the Proposed Regularisation Plan and the Schemes; and

iii. ability of the Group and the Company to achieve sustainable and viable operations so as to generate sufficient cash flows to enable them to meet their obligations as and when they fall due.

Adoption of new and revised MFRSs

During the current financial year, the Group and the Company adopted a number of new and amendments to MFRSs and Issue Committee Interpretation (“IC Interpretation”) issued by the Malaysian Accounting Standards Board (“MASB”) that are effective for annual periods beginning on or after 1 January 2019 and relevant to their operations, as follows:

MFRS 16 Leases1

Amendments to MFRS 119 Employees Benefits: Plant Amendment, Curtailment or Settlement

IC Interpretation 23 Uncertainty over Income Tax Treatments

Amendments to MFRSs Annual Improvements to MFRSs 2015 - 2017 Cycle

The adoption of the above new and amendments to MFRSs and IC Interpretation did not have any material effect on the financial performance or position of the Group and the Company.

New Standards and Amendments to MFRSs in issue but not yet effective

At the date of authorisation for issue of these financial statements, the new Standards and Amendments to MFRSs that are relevant to the Group and the Company which were in issue but not yet effective and not early adopted by the Group and the Company are as listed below:

Amendments to MFRS 3 Definition of a Business1

Amendments to MFRS 101

and MFRS 108 Definition of Material1

Amendments to MFRS 9, MFRS 139 and MFRS 7

Interest Rate Benchmark Reform1

Amendments to MFRS 10 and MFRS 128

Sale or Contribution of Assets between on Investor and its Associate or Joint Venture2

MFRSs Amendments to References to the Conceptual Framework in MFRS Standards1

1 Effective for annual periods beginning on or after 1 January 2020, with earlier application permitted.2 Effective date has been deferred to a date to be announced by MASB




New Standards and Amendments to MFRSs in issue but not yet effective (continued)

The Directors anticipate that the abovementioned new Standards and Amendments to MFRSs will be adopted in the annual financial statements of the Group and of the Company when they become effective. The Group and the Company are currently assessing the impact of adoption of the above new Standards and Amendments to MFRSs.

3. SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting

The financial statements of the Group and of the Company have been prepared under the historical cost convention, unless otherwise indicated in the accounting policies stated below. Historical cost is generally based on the fair value of the consideration given in exchange for assets.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group and the Company take into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date.

Fair value for measurement and/or disclosure purposes in the consolidated financial statements is determined on such a basis, except for leasing transactions that are within the scope of MFRS 16 and measurements that have some similarities to fair value but are not fair value, such as net realisable value in MFRS 102 or value-in-use in MFRS 136.

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and

• Level 3 inputs are unobservable inputs for the asset or liability.

The principal accounting policies are set out below.

Basis of consolidation (i) Subsidiaries

Subsidiaries are entities, including structured entities, controlled by the Company. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.



3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Basis of consolidation (continued) (i) Subsidiaries (continued)

The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Potential voting rights are considered when assessing control only when such rights are substantive. The Group also considers it has de facto power over an investee when, despite not having the majority of voting rights, it has the current ability to direct the activities of the investee that significantly affect the investee’s return.

Investments in subsidiaries are measured in the Company’s statement of financial position at cost less any impairment losses, unless the investment is classified as held for sale or distribution. The cost of investments includes transaction costs.

(ii) Loss of control

Upon the loss of control of a subsidiary, the Group derecognises the assets and liabilities of the former subsidiary, any non-controlling interests and the other components of equity related to the former subsidiary from the consolidated statement of financial position. Any surplus or deficit arising on the loss of control is recognised in profit or loss.

If the Group retains any interest in the former subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently, it is accounted for as an equity accounted investee or as an available-for-sale financial asset depending on the level of influence retained.

(iii) Associates

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

Investments in associates are accounted for in the consolidated financial statements using the equity method less any impairment losses, unless it is classified as held for sale or distribution. The cost of the investment includes transaction costs. The consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income of the associates, after adjustments if any, to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases.

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

When the Group ceases to have significant influence over an associate, any retained interest in the former associate at the date when significant influence is lost is measured at fair value and this amount is regarded as the initial carrying amount of a financial asset. The difference between the fair value of any retained interest plus proceeds from the interest disposed of and the carrying amount of the investment at the date when equity method is discontinued is recognised in profit or loss.




Basis of consolidation (continued) (iii) Associates (continued)

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

Investments in associates are measured in the Company’s statement of financial position at cost less any impairment losses, unless the investment is classified as held for sale or distribution. The cost of investments includes transaction costs.

(iv) Non-controlling interests

Non-controlling interests at the end of the reporting period, being the equity in a subsidiary not attributable directly or indirectly to the equity holders of the Company, are presented in the consolidated statement of financial position and statement of changes in equity within equity, separately from equity attributable to the owners of the Company. Non-controlling interests in the results of the Group is presented in the consolidated statement of profit or loss and other comprehensive income as an allocation of the profit or loss and total comprehensive income for the year between non-controlling interests and owners of the Company.

Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance.

(v) Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.

Unrealised gains arising from transactions with equity accounted associates and joint ventures are eliminated against the investment to the extent of the Group’s interest in the investees. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. Revenue is recognised when a performance obligation in a contract with a customer is satisfied, i.e. when the “control” of the goods or services underlying the particular performance obligation is transferred to a customer.

A performance obligation is a promise to transfer distinct goods or services (or a series of distinct goods or services that are substantially the same and that have the same pattern of transfer) to the customer that is explicitly stated in the contract and implied in the Group’s customary business practices.




Revenue recognition (continued)

The control of the promised goods or services may be transferred over time or at a point in time. The control over the goods or services is transferred over time and revenue is recognised over time if:

(a) the customer simultaneously receives and consumes the benefits provided as the Group performs;

(b) the Group’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or

(c) the Group’s performance does not create an asset with an alternative use and the Group has an enforceable right to payment for performance completed to date.

Revenue for a performance obligation that is not satisfied over time is recognised at the point in time at which the customer obtains control of the promised goods or services. (i) Construction contracts

The fair value of revenue, which is based on the fixed price under the agreement have been allocated based on relative stand-alone selling price of the considerations for each of the separate performance obligations.

Revenue from construction contracts is recognised as and when the control of the asset is transferred to the customer and it is probable that the Group and Company will collect the consideration to which it will be entitled in exchange for the asset that will be transferred to the customer.

Control of the asset is transferred over time as the Group’s and Company’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced. Revenue is recognised over the period by reference to the progress towards complete satisfaction of that performance obligation. The Group and Company recognise revenue over time by using the output method, based on the measure of progress of the assets being transferred to the customers. Variations in contract work, claims and incentive payments are included to the extent that they have been agreed with the customer.

Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised only

to the extent of contract costs incurred that it is probable will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred.

When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately as provision for foreseeable loss.

(ii) Dividend income

Dividend income is recognised in profit or loss on the date that the Group’s or the Company’s right to receive payment is established, which in the case of quoted securities is the ex-dividend date.

(iii) Interest income

Interest income is recognised as it accrues using the effective interest method in profit or loss.




Foreign currencies

(i) Functional and presentation currency

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

(ii) Foreign currency transactions

In preparing the financial statements of the individual entities, transactions in currencies are recorded in the functional currencies using the exchange rates prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are translated at the rates prevailing at the end of the reporting period. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are included in profit or loss for the period. Monetary assets and liabilities denominated in foreign currencies at the end of the reporting period are retranslated to the functional currency at the exchange rate at that date. Non-monetary assets and liabilities denominated in foreign currencies are not retranslated at the end of the reporting period.

Property, plant and equipment

Items of property, plant and equipment are measured at cost/valuation less any accumulated depreciation and any accumulated impairment losses.

The Group revalues its long-term leasehold land and buildings and yard infrastructure every five (5) years and at shorter intervals whenever the fair value of the revalued assets is expected to differ materially from their carrying value. Additions subsequent to the date of revaluation are stated at cost until the next revaluation exercise.

Surpluses arising from revaluation are dealt with in the revaluation reserves account. Any deficit arising is offset against the revaluation reserves to the extent of a previous increase for the same property. In all other cases, a decrease in carrying amount is charged to profit or loss. When revalued assets are sold, the amounts included in the revaluation surplus reserve are transferred to retained earnings.

All items of property, plant and equipment are initially recorded at cost. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the period in which they are incurred.

Depreciation of property, plant and equipment is provided for on a straight-line basis to write-off the cost of each

asset to its residual value over its estimated useful life at the following annual rates:




Property, plant and equipment (continued)

Long-term leasehold land and buildings 50-99 yearsYard infrastructure 10 yearsPlant and machinery 3-17 yearsFurniture, fittings and equipment 10 yearsRenovation 10 yearsMotor vehicles 5 yearsComputers 3 years

Capital work-in-progress are not depreciated.

The estimated residual values, useful lives and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimates accounted for on a prospective basis.

An annual transfer from the revaluation reserve to retained earnings is made for the difference between the

depreciation based on the revalued carrying amount of the assets and the depreciation based on the assets original cost. Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to retained earnings.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. The difference between the net disposal proceeds, if any, and the net carrying amount is recognised in profit or loss and the revaluation surplus on that item is taken directly to retained earnings.

Leases

Accounting policies applied from 1 January 2019

The Group and the Company assess whether a contract is or contains a lease, at inception of the contract and recognises right-of-use assets and lease liabilities at commencement date.

The lease liability is initially measured at the present value of the lease payments, which comprise the fixed lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Group and the Company use their incremental borrowing rate.

The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.

The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses.

Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset at the commencement date and the Group applies MFRS 136 to determine whether a right-of-use asset is impaired.

Lease that is associated to short term leases and leases of low value assets is recognised as an operating expense in profit and loss on a straight-line basis over the terms of the lease. Short term leases are leases with a lease term of 12 months or less. Low value assets are those assets with value of less than RM10,000 each when purchase new.




Leases (continued)

Accounting policies applied until 31 December 2018

Leases, where the Group or the Company do not assume substantially all the risks and rewards of ownership are classified as operating leases and the leased assets are not recognised on the statements of financial position.

Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised in profit or loss as an integral part of the total lease expense, over the term of the lease. Contingent rentals are charged to profit or loss in the reporting period in which they are incurred.

Intangible assets

(i) Research and development

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in profit or loss as incurred.

Expenditure on development activities, whereby the research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable and the Group intends to and has sufficient resources to complete development and to use or sell the asset.

The expenditure capitalised includes the cost of materials, direct labour and overheads costs that are directly attributable to preparing the asset for its intended use. For qualifying assets, borrowing costs are capitalised in accordance with the accounting policy on borrowing costs. Other development expenditure is recognised in profit or loss as incurred.

Capitalised development expenditure is measured at cost less any accumulated amortisation and any accumulated impairment losses.

(ii) Other intangible assets

Intangible assets, other than goodwill, that are acquired by the Group, which have finite useful lives, are measured at cost less any accumulated amortisation and any accumulated impairment losses.

(iii) Subsequent expenditure

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss as incurred.




Intangible assets (continued)

(iv) Amortisation

Intangible assets with indefinite useful lives are not amortised but are tested for impairment annually and whenever there is an indication that they may be impaired. Amortisation of other intangible assets is based on the cost of an asset less its residual value.

Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets from the date they are available for use.

The estimated useful lives for the current and comparative periods are as follows:

2019 2018

• License fees 3 years 3 years

• Development costs 20 years 20 years

Amortisation methods, useful lives and residual values are reviewed at the end of each reporting period and adjusted, if appropriate.

Inventories

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

The cost of inventories is measured based on the weighted average cost and includes expenditure incurred in acquiring the inventories and other costs incurred in bringing them to their existing location and condition.

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs necessary to make the sale.

Contract assets and contract liabilities

Contract assets and contract liabilities represents the amount due from and amount due to the contract customers, respectively. Contract asset is the right to consideration in exchange for goods or services transferred to the customers. If the Group and the Company perform, by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned consideration that is conditional. The Group’s and the Company’s contract assets are the excess of cumulative revenue earned over the billings to-date.

Where there is an objective evidence of impairment, the amount of impairment losses is determined by comparing the contract asset’s carrying amount and the present value of estimated future cash flows to be generated by the contract asset.

Contract asset is reclassified to trade receivables at the point at which invoices have been billed to customers.




Contract assets and contract liabilities (continued)

Contract liability is the obligation to transfer goods or services to customer for which the Group and the Company have received the consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Group and the Company transfer goods or services to the customer, a contract liability is recognised when the payment is made or the payment is due (whenever is earlier). The Group’s and the Company’s contract liability is the excess of the billings to-date over the cumulative revenue earned. Contract liabilities are recognised as revenue when the Group and the Company perform their obligation under the contract.

Impairment of Assets

The carrying amounts of tangible assets are reviewed at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.

For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or cash-generating units.

The recoverable amount of an asset or cash-generating unit is the greater of its value-in-use and its fair value less costs of disposal. In assessing value-in-use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash-generating unit.

An impairment loss is recognised in profit or loss if the carrying amount of an asset or its related cash-generating unit exceeds its estimated recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated to reduce the carrying amounts of the other assets in the cash-generating unit (or a group of cash-generating units) on a pro rata basis.

Impairment losses recognised in prior periods are assessed at the end of each reporting period for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount since the last impairment loss was recognised. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease and to the extent that the impairment loss is greater than the related revaluation surplus, the excess impairment loss is recognised in profit or loss.




Employee benefits

(i) Short-term employee benefits

Short-term employee benefits obligations in respect of salaries, annual bonuses, paid annual leave and sick leave are measured on an undiscounted basis and are expensed as the related service is provided.

(ii) Defined contribution plans

Defined contribution plans are post-employment benefit plans under which the Group and the Company pay fixed contributions into separate entities or funds and will have no legal or constructive obligation to pay further contributions, if any, if the funds do not hold sufficient assets to pay all employee benefits relating to employee services in the current and preceding financial years. Such contributions are recognised as an expense in profit or loss as incurred. As required by law, companies in Malaysia make such contributions to the Employees Provident Fund (“EPF”).

Provisions

Provisions are recognised when the Group and the Company have a present legal or constructive obligation as a result of past events, when it is probable that the Group and the Company will be required to settle the obligation, and when a reliable estimate of the amount of the obligation can be made.

Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. Where the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as finance cost.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

Income tax

Income tax expense for the year comprises current and deferred tax. Current tax is the expected amount of income taxes payable in respect of the taxable profits for the year and is measured using the tax rates that have been enacted or substantively enacted at the end of the reporting period.




Income tax (continued)

Deferred tax is provided for, on temporary differences at the end of the reporting period between the tax bases of assets and liabilities and their carrying amounts in the financial statements. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that sufficient future taxable profits will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised. Deferred tax is not recognised if the temporary difference arises from goodwill or from the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction, affects neither the accounting profit nor taxable profit.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient future taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realised or the liability settled, based on tax rates that have been enacted or substantively enacted at the end of the reporting period. Deferred tax (if any) is recognised in profit or loss except when it arises from a transaction which is recognised directly in equity, in which case the deferred tax is also charged or credited directly in equity.

Deferred tax assets and liabilities are offset when there is legally enforceable right to offset current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group and the Company intend to settle their current tax assets and liabilities on net basis.

Financial instruments

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

Where the purchase or sale of a financial asset is under a contract whose terms require delivery of the financial asset within the timeframe established by the market concerned, such financial assets are recognised and derecognised on trade date.

Financial instruments are initially measured at fair value, plus transaction costs, except for those financial assets classified as at fair value through profit or loss (“FVTPL”), which are initially measured at fair value.

Financial assets of the Group are classified as “financial assets at amortised cost”. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

(a) Effective Interest Method The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating

interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial assets, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

Income is recognised on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL.




Financial instruments (continued)

(b) Financial Assets at FVTPL

Financial assets that do not meet the criteria for amortised cost or “fair value through other comprehensive income” are measured at FVTPL. The Group may also irrevocably designate financial assets at FVTPL if doing so significantly reduces or eliminates a mismatch created by assets and liabilities being measured on different bases. Fair value changes is recognised in profit or loss in the period in which the changes arise.

(c) Financial Assets at Amortised Cost

Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and profit are measured at amortised cost. Profit income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains/(losses) together with foreign exchange gains and losses. Impairment losses are presented as separate line item in profit or loss.

(d) Impairment of Financial Assets

The Group and the Company recognise a credit loss allowance for expected credit losses (“ECL”) on financial instrument that are measured at amortised cost, trade receivables, other receivables, amount due from subsidiaries and contract assets, as well as on financial guarantee contracts. The amount of expected credit losses is updated at the end of each reporting period to reflect changes in credit risk since initial recognition of the respective financial instrument.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with

the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

Impairment based on expected credit loss (“ECL”) model

The Group and the Company assess on a forward-looking basis the ECL associated with its financial assets carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk.

ECL represents a probability-weighted estimate of the difference between present value of cash flows according to contract and present value of cash flows the Group and the Company expect to receive over the remaining life of the financial assets.




Financial instruments (continued)

(d) Impairment of Financial Assets (continued)

Impairment based on expected credit loss (“ECL”) model (continued)

The measurement of ECL reflects:

• An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;

• The time value of money; and• Reasonable and supportable information that is available without undue cost or effort as of the reporting

date about past events, current conditions and forecasts of future economic conditions.

Simplified approach for trade receivables

The Group and the Company apply the MFRS 9 simplified approach, which is to measure the loss allowance at an amount equal to lifetime ECL at initial recognition and throughout its life, for all trade receivables.

General 3 stage-approach for other receivables and amount due from subsidiaries and contract assets

As of the end of the each reporting period, the Group and the Company measure ECL through loss allowance at amount equal to 12 month-ECL if credit risk on a financial asset or a group of financial assets has not increased significantly since initial recognition. For all other financial assets and contract assets, a loss allowance at an amount equal to lifetime ECL is required.

(e) Derecognition of Financial Assets

The Group and the Company derecognise a financial asset only when the contractual rights to the cash flows from the asset expire, or when they transfer the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group and the Company neither transfer nor retain substantially all the risks and rewards of ownership and continue to control the transferred asset, the Group and the Company recognise their retained interest in the asset and an associated liability for amounts it may have to pay. If the Group and the Company retain substantially all the risks and rewards of ownership of a transferred financial asset, the Group and the Company continue to recognise the financial asset and also recognise a collateralised borrowing for the proceeds received.

Financial Liabilities and Equity Instruments issued by the Group

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement. (a) Equity Instruments

An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue cost.




Financial Liabilities and Equity Instruments issued by the Group (continued)

(b) Financial Liabilities

Financial liabilities are initially measured at fair value, net of transaction costs. It is subsequently measured at amortised cost using the effective interest method, with the interest expense recognised on an effective yield basis.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or (where appropriate) a shorter period to the net carrying amount on initial recognition.

(c) Financial Liabilities at FVTPL Financial liabilities are classified as FVTPL when the financial liability is either held for trading or it is designated

as at FVTPL.

A financial liability is classified as held for trading if:

• it has been incurred principally for the purpose of repurchasing it in the near term; or• on initial recognition it is part of a portfolio of identified financial instruments that the Group manages

together and has a recent actual pattern of short-term profit-taking; or• it is a derivative that is not designated and effective as a hedging instrument.

A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if:

• such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

• the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis.

Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement

recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability and is included in the ‘other gains and losses’ line item in the statements of profit or loss and other comprehensive income.

(d) Other Financial Liabilities Other financial liabilities, including borrowings, trade payables and other payables, are initially measured at

fair value, net of transaction costs.

Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.




Financial Liabilities and Equity Instruments issued by the Group (continued)

(d) Other Financial Liabilities (continued)

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

(e) Derecognition of Financial Liabilities

The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

Segment reporting

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. Operating segment results are reviewed regularly by the chief operating decision maker, which in this case is the Chief Executive Officer of the Group, to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available.

Contingent liabilities

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is not recognised in the statements of financial position and is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events, are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

Financial Guarantee Contracts

A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due.

Financial guarantee contracts are recognised initially as a liability at fair value, net of transaction costs. Subsequent to initial recognition, financial guarantee contracts are recognised as income in profit or loss over the period of the guarantee. If the debtor fails to make payment relating to financial guarantee contract when it is due and the Group, as the issuer, is required to reimburse the holder for the associated loss, the liability is measured at the higher of the best estimate of the expenditure required to settle the present obligation at the end of the reporting period and the amount initially recognised less cumulative amortisation.




Statements of Cash Flows

The Group and the Company adopt the indirect method in the preparation of the statements of cash flows.

Cash and cash equivalents consist of cash on hand, bank balances and deposits placed with licensed banks and highly liquid investments which have an insignificant risk of changes in fair value and are used by the Group and the Company in the management of their short-term commitments. For the purpose of the statement of cash flows, cash and cash equivalents are presented net of pledged deposits, if any.

4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

Judgement and estimates are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

(a) Critical judgements in applying the Group’s accounting policies

The management is of the opinion that there are no instances of application of critical judgements in applying the Group’s accounting policies which are expected to have a significant effect on the amounts recognised in the financial statements.

(b) Key sources of estimation uncertainty

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

(i) Revenue recognition on construction contract

As revenue from on-going construction contracts is recognised over time by using output method, the amount of revenue is recognised over the period by reference to the progress towards complete satisfaction of that performance obligation. This is based on the measure of progress of the assets being transferred to the customers. Significant judgement is required in determining the measure of progress, the extent of the construction costs incurred, the estimated total construction revenue and costs, as well as the recoverability of the construction project and contract cost. Construction revenue and costs estimates are reviewed and revised periodically as work progresses and as variation orders are approved.

(ii) Impairment loss on receivables

Impairment loss on receivables is determined using a combination of factors, including the overall quality and aging of receivables, continuing credit evaluation of the customers’ financial strength and collateral requirements from customers in certain circumstances. The Directors make impairment loss on receivables based on its best estimates at the end of the reporting period.

(iii) Impairment loss on amount due from contract customers

Amount due from contact customers represents unbilled costs incurred on variation of works performed for a project. Included in amount due from contract customers of the Group, is an amount of RM38,671,373 (2018: RM38,671,373) which represents uncertified claims for costs incurred on variation of works performed for a project. The Group had sought independent legal opinion and in addition engaged an independent consultant to verify the claims made in respect of the said variation of work in prior years. The Group and the contract customer are currently in negotiation to reach an amicable settlement.



4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (CONTINUED)

(b) Key sources of estimation uncertainty (continued)

(iv) Deferred tax assets

Deferred tax assets are recognised for all unused tax losses and unabsorbed capital allowances to the extent that it is probable that taxable profits will be available against which the unused tax losses and unabsorbed capital allowances can be utilised. Significant judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies.

(v) Impairment of property, plant and equipment The Group regularly reviews whether there are any indications of impairment and will recognise an

impairment loss if the carrying amount of an asset is lower than the recoverable amount which is the greater of its fair value less cost to sell or its value-in-use. In determining the fair value of the assets, the Group had engaged an independent professional valuer, which have appropriate qualifications and recent experience to determine the fair value as at 31 December 2019. Estimates and judgements are applied in determining the fair market value.

As at 31 December 2019, the Group had engaged an independent valuer to determine the recoverable amount of the capital work-in-progress of the Wharf Development. The recoverable amount of the Wharf Development is estimated based on depreciated cost method amounting to RM43,000,000 (as at to date) and RM50,000,000 (upon completion of the construction). Accordingly, there is no impairment loss being recognised during the year.

In 2018, the Group had engaged the independent valuer to determine the recoverable amount of the FPSO Layang Vessel. The recoverable amount of the FPSO Layang Vessel was determined based on the estimated scrap value less cost to sell as disclosed in Note 5.6. The shortfall between the carrying amount and recoverable amount led to an impairment loss of RM708,711,119 being recognised in prior year. On 6 February 2020, the Group had received a letter from the independent valuer, stating the value remained unchanged from the date of valuation till 31 December 2019. Accordingly, there is no impairment loss being recognised during the year.

(vi) Impairment of investment in subsidiaries and amount due from subsidiaries The Company assesses its investments in subsidiaries for impairment annually in accordance with

its accounting policy. Reviews are performed regularly if events indicate that this is necessary. The assessment of the net tangible assets of the subsidiaries affects the result of the impairment test. Costs of investments in subsidiaries which had an adverse turnaround for the financial performance in the prior year were impaired up to the net assets of the subsidiaries. The impairment made on investment in subsidiaries entails an impairment to be made to the amount due from a subsidiary. As disclosed in Note 7 and Note 10, the recoverable amount of the investment in subsidiaries and amount due from a subsidiary is dependent on the timely and successful implementation of the Proposed Regularisation Plan to restore its financial position.



5.

PR

OP

ER

TY, P

LAN

T A

ND

EQ

UIP

ME

NT

Long

-term

Leas

ehol

dla

nd a

ndbu

ildin

gs

Yard

infr

a-st

ruct

ure

Plan

t and

mac

hine

ry

Furn

iture

,fit

tings

and

equi

pmen

tRe

nova

tion

Mot

orve

hicl

esCo

mpu

ters

Capi

tal

wor

k-in

-pr

ogre

ssTo

tal

Gro

upRM

RMRM

RMRM

RMRM

RMRM

Cost

/Val

uatio

n

At 1

Jan

uary

201

813

8,30

0,00

021

,009

,050

74,7

87,6

942,

933,

771

1,62

6,82

41,

862,

038

8,54

5,89

51,

043,

782,

499

1,29

2,84

7,77

1

Disp

osal

s-

-(3

,926

,094

)-

--

--

(3,9

26,0

94)

Effe

ct o

f mov

emen

t in

exch

ange

rate

--

--

-4,

709

-(2

,403

,653

)(2

,398

,944

)

At 3

1 D

ecem

ber 2

018/

1 Ja

nuar

y 20

1913

8,30

0,00

021

,009

,050

70,8

61,6

002,

933,

771

1,62

6,82

41,

866,

747

8,54

5,89

51,

041,

378,

846

1,28

6,52

2,73

3

Addi

tions

--

-58

,434

--

--

58,4

34

Writ

ten

off

--

-(1

06,5

12)

--

(5,3

42,0

94)

-(5

,448

,606

)

At 3

1 D

ecem

ber 2

019

138,

300,

000

21,0

09,0

5070

,861

,600

2,88

5,69

31,

626,

824

1,86

6,74

73,

203,

801

1,04

1,37

8,84

61,

281,

132,

561

Acc

umul

ated

D

epre

ciat

ion

At 1

Jan

uary

201

82,

954,

208

16,9

56,1

3625

,548

,382

1,98

8,61

91,

334,

562

1,60

2,05

78,

419,

406

-58

,803

,370

Cha

rge

for t

he y

ear

2,95

4,20

82,

350,

543

4,97

4,53

826

8,74

010

1,85

921

8,58

712

5,96

6-

10,9

94,4

41

Disp

osal

--

(3,5

64,9

16)

--

--

-(3

,564

,916

)

Effe

ct o

f mov

emen

t in

exch

ange

rate

--

--

-3,

483

--

3,48

3

At 3

1 D

ecem

ber 2

018/

1 Ja

nuar

y 20

195,

908,

416

19,3

06,6

7926

,958

,004

2,25

7,35

91,

436,

421

1,82

4,12

78,

545,

372

-66

,236

,378

Cha

rge

for t

he y

ear

2,95

4,20

81,

419,

453

4,50

5,94

922

0,79

910

1,85

936

,658

388

-9,

239,

314

Writ

ten

off

--

-(5

5,17

6)-

-(5

,342

,007

)-

(5,3

97,1

83)

At 3

1 D

ecem

ber 2

019

8,86

2,62

420

,726

,132

31,4

63,9

532,

422,

982

1,53

8,28

01,

860,

785

3,20

3,75

3-

70,0

78,5

09



5.

PR

OP

ER

TY, P

LAN

T A

ND

EQ

UIP

ME

NT

(CO

NTI

NU

ED

)

Long

-term

Leas

ehol

dla

nd a

ndbu

ildin

gs

Yard

infr

a-st

ruct

ure

Plan

t and

mac

hine

ry

Furn

iture

,fit

tings

and

equi

pmen

tRe

nova

tion

Mot

orve

hicl

esCo

mpu

ters

Capi

tal

wor

k-in

-pr

ogre

ssTo

tal

Gro

upRM

RMRM

RMRM

RMRM

RMRM

Acc

umul

ated

Impa

irmen

t Lo

sses

At 1

Jan

uary

201

8-

-19

,321

,843

--

--

254,

099,

452

273,

421,

295

Addi

tion

--

2,74

6,77

2-

--

--

708,

771,

119

At 3

1 D

ecem

ber 2

018/

1 Ja

nuar

y 20

19-

-22

,068

,615

--

--

962,

870,

571

984,

939,

186

At 3

1 D

ecem

ber 2

019

--

22,0

68,6

15-

--

-96

2,87

0,57

198

4,93

9,18

6

Carr

ying

Am

ount

s

At 3

1 D

ecem

ber 2

018

132,

391,

584

1,70

2,37

121

,834

,981

676,

412

190,

403

42,6

2052

378

,508

,275

235,

347,

169

At 3

1 D

ecem

ber 2

019

129,

437,

376

282,

918

17,3

29,0

3246

2,71

188

,544

5,96

248

78,5

08,2

7522

6,11

4,86

6



5. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

Furniture,

fittings and Motor

equipment Renovation vehicles Computers Total

Company RM RM RM RM RM

Cost

At 31 December 2018/1 January 2019 1,266,872 1,626,824 1,045,894 515,880 4,455,470

Addition 58,434 - - - 58,434

Written off (106,512) - - (33,570) (140,082)

At 31December 2019 1,218,794 1,626,824 1,045,894 482,310 4,373,822

Accumulated Depreciation

At 1 January 2018 812,046 1,334,562 867,941 515,861 3,530,410

Charge for the year 127,237 101,859 177,951 - 407,047

At 31 December 2018/1 January 2019 939,283 1,436,421 1,045,892 515,861 3,937,457

Charge for the year 129,313 101,859 - - 231,172

Written off (55,176) - - (33,563) (88,739)

At 31 December 2019 1,013,420 1,538,280 1,045,892 482,298 4,079,890

Carrying Amounts

At 31 December 2018 327,589 190,403 2 19 518,013

At 31 December 2019 205,374 88,544 2 12 293,932

5.1 Security

As at 31 December 2019, capital work-in-progress of which include FPSO Layang Vessel with a carrying amount of RM40,385,000 (2018: RM40,385,000) is charged to a local bank for the Sukuk facilities granted to the Company (Note 16.1).

As at 31 December 2019, the long-term leasehold land and buildings with a carrying amount of RM129,437,376 (2018: RM132,391,584) are charged to a local bank for the Sukuk facilities granted to a subsidiary (Note 16.1).

As at 31 December 2019, plant and machinery with a carrying amount of RM12,165,628 (2018: RM15,332,919) is charged to a local bank for the Term Loan facilities granted to a subsidiary (Note 16.5).

5.2 Properties under the revaluation model The long-term leasehold land and buildings and yard infrastructure were revalued based on valuation carried

out on 31 December 2016 by Messrs. Irhamy & Co., an independent registered professional valuer using the open market valuation method.

Had the long-term leasehold land and buildings and yard infrastructure been carried under the cost model, their carrying amounts would have been RM59,348,992 (2018: RM60,846,183) and RM1 (2018: RM2,249,381) respectively.



5. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

5.3 Assets under finance lease agreements

Included in property, plant and equipment of the Group and of the Company are motor vehicles acquired under finance lease agreements with an aggregate carrying amount of RM5,962 (2018: RM42,620).

5.4 Capitalisation of finance costs

As at 31 December 2019, cumulative finance cost capitalised in capital work-in-progress amounted to RM73,566,427 (2018: RM73,566,427). The Group has ceased capitalising the financing cost since 2016.

5.5 Long-term leasehold land and buildings

The long-term leasehold land and buildings have an unexpired lease period of more than 50 years. 5.6 Impairment loss on property, plant and equipment

As at 31 December 2019, the Group has recognised accumulated impairment loss on capital-work-in-progress of RM984,939,186 (2018: RM984, 939,186). In 2018, the Group engaged an independent valuer to determine the recoverable amount of the FPSO Layang vessel as disclosed in Note 4(b)(iv). The Valuer’s Report states an indicative range of fair market value less cost of disposal between USD14 million to USD18 million (RM57.4 million to RM73.8 million equivalent); and estimated force sale value between USD9 million to USD12 million (RM36.9 million to RM49.2 million equivalent). On 6 February 2020, the Company received a letter from the independent valuer, stating the value remained unchanged from the date of valuation till 31 December 2019.

6. INTANGIBLE ASSETS

Licensefees

Developmentcosts Total

RM RM RM

Cost

At 1 January 2018/31 December 2018/1 January 2019/31 December 2019 108,665 521,604 630,269

Accumulated Amortisation

At 31 December 2018/1 January 2019/31 December 2019 108,665 92,467 201,132

Accumulated Impairment Loss

At 31 December 2018/1 January 2019/31 December 2019 - 429,137 429,137

Carrying Amounts

At 31 December 2018 - - -

At 31 December 2019 - - -



7. INVESTMENTS IN SUBSIDIARIES

Company

2019 2018

RM RM

Unquoted shares at cost 524,366,707 524,366,707

Less: Accumulated impairment losses (257,036,707) (257,036,707)

267,330,000 267,330,000

As at 31 December 2019, the Company has recognised accumulated impairment losses of RM257,036,707 (2018: RM257,036,707) in respect of the cost of investments in subsidiaries. Whilst there was minor turnaround of the financial performances of the subsidiaries during the year, however, the said improvement is not sufficient to restore their financial position. Furthermore, due to the challenges faced in the current depressed market condition, there are indications of impairment on the carrying amount of the investments in subsidiaries. Accordingly, the recoverable amounts of the investments in subsidiaries could not be reliably estimated at this stage as such values are dependent on the timely and successful implementation of the Proposed Regularisation Plan to restore their financial position.

Details of the subsidiaries are as follows:

Name ofentity

Name ofDirectors

Principal placeof business/Country of

incorporationPrincipalactivities

Effectiveownership

interest andvoting interest

2019 2018

% %

THHE Fabricators Sdn. Bhd. (“THFSB”) #

Dr Ir Samad bin SolbaiToo Kok LengSuhaimi bin Badrul Jamil

Malaysia Fabrication of offshore oil and gas related structure work as well as ship building and ship repair activities.

100 100

O&G Works Sdn. Bhd. #

Dr Ir Samad bin SolbaiSuhaimi bin Badrul JamilZainalabidin bin Ismail

Malaysia Manufacturing and maintenance of offshore cranes.

100 100

THHE Training Services Sdn. Bhd.

Suhaimi bin Badrul JamilZainalabidin bin Ismail

Malaysia Dormant 100 100

THHE Optima Sdn. Bhd.





7. INVESTMENTS IN SUBSIDIARIES (CONTINUED)

Name ofentity

Name ofDirectors

Principal placeof business/Country of

incorporationPrincipalactivities

Effectiveownership

interest andvoting interest

2019 2018

% %

Globe World Realty Sdn. Bhd.



Floatech (M) Sdn. Bhd.

Suhaimi bin Badrul JamilDato’ Haji Ghazali bin

Awang


Floatech (L) Ltd. (“FLL”) #

Nusral bin DanirToo Kok LengZahar Mohd Hashim bin

Zainuddin

Malaysia Ownership in a FPSO vessel^

80 80

THHE Offshore Services Sdn. Bhd. (“THEOS”) @

Dato’ Mohd Razip bin Mohammad

Anuar Bin AkkaChen Yoon Sung

Malaysia Provision of services such as maintenance at offshore workplace, hook-up and commissioning offshore punch list coordination

- -

# The auditors’ report on the financial statements of these subsidiaries contained a disclaimer or adverse opinion as there are multiple uncertainties that may cast significant doubt on the ability of these subsidiaries to continue as going concerns.

^ Floating Production, Storage and Offloading vessel.

@ On 9 April 2018, the High Court of Malaya at Kuala Lumpur ordered THEOS to be wound up with no order as to costs and the Official Receiver be appointed as provisional liquidator of THEOS.




7.1 Non-controlling interests in subsidiaries

The Group’s subsidiaries that have material non-controlling interests (“NCI”) are as follows:

THEOS FLL Total

RM RM RM

2019

NCI percentage of ownership interest and voting interest 30% 20% -

Carrying amount of NCI - (195,488,869) (195,488,869)

Loss allocated to NCI - (2,467,131) (2,467,131)

Summarised financial information before intra-group elimination

As at 31 December 2019

Non-current assets - 40,390,951 40,390,951

Current assets - 272,315 272,315

Current liabilities - (1,026,067,168) (1,026,067,168)

Net liabilities - (985,403,902) (985,403,902)

Year ended 31 December 2019

Loss and total comprehensive loss - (12,335,654) (12,335,654)


Cash flows from/(used in):

Operating activities - 29,720 29,720

Financing activities - (42,325) (42,325)

Net decrease in cash and cash equivalents - (12,605) (12,605)




7.1 Non-controlling interests in subsidiaries (continued)

The Group’s subsidiaries that have material non-controlling interests (“NCI”) are as follows (continued):

THEOS FLL Total

RM RM RM

2018

NCI percentage of ownership interest and voting interest 30% 20% -

Carrying amount of NCI - (193,021,738) (193,021,738)

Loss allocated to NCI (1,778,627) (135,559,167) (137,337,794)

Summarised financial information before intra-group elimination

As at 31 December 2018

Non-current assets - 40,426,660 40,426,660

Current assets - 284,920 284,920

Non-current liabilities - (6,179) (6,179)

Current liabilities - (1,013,773,650) (1,013,773,650)

Net liabilities - (973,068,249) (973,068,249)


Loss and total comprehensive loss (5,928,757) (677,795,840) (683,724,597)


Cash flows (used in)/from:

Operating activities - (18,544,159) (18,544,159)

Investing activities - 12,650,228 12,650,228

Financing activities - (37,284) (37,284)

Net decrease in cash and cash equivalents - (5,931,215) (5,931,215)




7.1 Non-controlling interests in subsidiaries (continued)

Deconsolidation of subsidiary company - THHE Offshore Services Sdn. Bhd.

On 9 April 2018, the High Court of Malaya at Kuala Lumpur had ordered THEOS, to be wound up. Consequently, THEOS ceased to be a subsidiary of the Company. The detail of the deconsolidation were as follows:

The Group

2018

RM

Cash and bank balances 396

Trade and other receivables 1,528,946

Other payables and accruals (25,730,878)

Net liabilities deconsolidated (24,201,536)

Non-controlling interests 7,290,162

Fair value on deconsolidation (16,911,374)

Add: Gain on deconsolidation (Note 20) 16,911,374

Net -

8. INVESTMENT IN ASSOCIATE

Group

2019 2018

RM RM

Unquoted shares, at cost 367,500 367,500

Share of post acquisition reserves (311,388) (122,644)

56,112 244,856

Details of the material associate is as follows:

Name of entity

Principal place of business/Country of

incorporation Principal activities

Effective ownership

interest and voting interest

2019 2018

% %

Held through THFSB

THHE Destini Sdn. Bhd. Malaysia To undertake the supply, delivery, testing and commissioning of Offshore Patrol Vessel project for Malaysia Maritime Enforcement Agency

49 49



8. INVESTMENT IN ASSOCIATE (CONTINUED)

The following table summarises the information of the associate, adjusted for any differences in accounting policies and reconciles the information to the carrying amount of the Group’s interest in the associate.

Group

2019 2018

RM RM

Summarised financial information as at 31 December

Non-current assets 39,249 44,259

Current assets 2,661,130 470,764

Current liabilities (2,590,222) (19,674)

Net assets 110,157 495,349

Year ended 31 December

Loss for the year and other comprehensive loss (385,192) (167,110)

Reconciliation of net assets to carrying amount as at 31 December

Group’s share of net assets 53,977 242,721

Goodwill 2,135 2,135

Carrying amount in the statements of financial position 56,112 244,856

Group’s share of results for the year ended 31 December

Group’s share of loss for the year and other comprehensive loss (188,744) (81,884) Other information

No dividend was received by the Group for the financial years ended 31 December 2019 and 2018. Contingent liabilities

There were no contingent liabilities incurred jointly with the other investors as at 31 December 2019 and 2018.

9. INVENTORIES

Group

Note 2019 2018

RM RM

Raw materials and consumables 2,163 32,185

Recognised in profit or loss:

Allowance/(Reversal) for inventories obsolescence 20 54,755 (100,449)

Inventories written down to net realisable value 20 - 152,877



10. TRADE AND OTHER RECEIVABLES

Group Company

Note 2019 2018 2019 2018

RM RM RM RM

Trade

Trade receivables 48,927,240 45,011,387 1,985,718 -

Less: Impairment losses 25.3 (44,607,537) (42,840,200) - -

4,319,703 2,171,187 1,985,718 -

Amount due from contract customers 10.1 49,101,864 38,671,373 3,191,541 -

53,421,567 40,842,560 5,177,259 -

Non-trade

Amount due from subsidiaries 10.2 - - 1,004,932,176 986,540,682

Less: Impairment losses 25.3 - - (956,967,260) (956,966,561)

- - 47,964,916 29,574,121

Amount due from associates 2,700,000 - - -

Other receivables 6,215,375 6,921,415 4,402,028 4,817,058

Less: Impairment losses 25.3 (5,344,341) (5,344,341) (4,402,028) (4,402,028)

871,034 1,577,074 - 415,030

Deposit to suppliers 12,392 28,944 7,000 1,000

Refundable deposits 186,641 282,020 116,408 225,811

3,770,067 1,888,038 48,088,324 30,215,962

57,191,634 42,730,598 53,265,583 30,215,962

10.1 Amount due from contract customers

Included in amount due from contract customers of the Group, is an amount of RM38,671,373 (2018: RM38,671,373) which represents uncertified claims for costs incurred on variation of works performed for a project. The Group has sought independent legal opinion and in addition engaged an independent consultant to verify the claims made in respect of the said variation of work in prior years. The Group and the contract customer are currently in negotiation to reach an amicable settlement.

10.2 The amount due from subsidiaries are non-trade in nature, unsecured, interest-free and repayable on demand.

As at 31 December 2019, the Company has recognised accumulated impairment loss on the amount due from a subsidiary, amounting to RM956,966,561 (2018: RM956,966,561).

Whilst there was minor turnaround of the financial performances of the subsidiaries during the financial year, however, the said improvement is not sufficient to restore their financial position. Futhermore, due to the challenges faced in the current depressed market condition, there are indications of impairment on the amount due from subsidiaries. Accordingly, the recoverable amounts of the amount due from the subsidiaries could not be reliably estimated as such values are dependent on the timely and successful implementation of the Proposed Regularisation Plan to restore their financial position.



11. CASH, BANK BALANCES AND DEPOSITS

Group Company

2019 2018 2019 2018

RM RM RM RM

Cash and bank balances 15,870,437 17,965,679 14,589,785 16,177,040

Deposits placed with licensed banks 10,682,834 43,015,027 10,672,834 32,933,935

26,553,271 60,980,706 25,262,619 49,110,975

Included in the deposits placed with licensed banks of the Group and of the Company are RM4,713,414 (2018: RM1,886,086) and RM4,672,834 (2018: RM33,935) respectively which are pledged to local licensed banks for bank guarantee facilities granted to the Group and the Company.

12. ORDINARY SHARES

2019 2018

No. ofShares

’000 RM

No. ofShares

’000 RM

Group and Company

Issued and fully paid:

Ordinary shares:

At 1 January 1,121,273 280,318,147 1,121,238 280,309,472

Conversion of ICPS-i (Note 13) 27 6,627 35 8,675

Transfer from share

premium in accordance with Section 618(2) of Companies Act 2016 - 95,028,660 - -

At 31 December 1,121,300 375,353,434 1,121,273 280,318,147

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. The new ordinary shares rank pari passu in all respects with the then existing ordinary shares.

In accordance with section 618 of Companies Act 2016, any amount standing to the credit of the share premium account has become part of the Company’s ordinary share capital. The Company had twenty four (24) months upon the commencement of Companies Act 2016 on 31 January 2017 to utilise the credit in accordance with Section 618(2) of Companies Act 2016 on or before 30 January 2019 (24 months from commencement of Section 74 of Companies Act 2016). Accordingly, the Company transferred the share premium amounting to RM95,028,660 to the ordinary share during the financial year as disclosed in Note 14.



13. IRREDEEMABLE CONVERTIBLE PREFERENCE SHARES-i

2019 2018

No. ofShares

’000 RM

No. ofShares

’000 RM

Group and Company

Issued and fully paid:

ICPS-i:

At 1 January 1,099,804 274,951,150 1,099,839 274,959,825

Conversion of ICPS-i (Note 12) (27) (6,627) (35) (8,675)

At 31 December 1,099,777 274,944,523 1,099,804 274,951,150

The salient terms of the issuance of ICPS-i are set out below:

Date of Issuance : 8 September 2015

Par Value : RM0.25 per ICPS-i

Issue Price : RM0.25 per ICPS-i

Tenure : 5 years commencing from and inclusive of the date of issuance of ICPS-i.

Maturity Date : The day immediately preceding the 5th anniversary from the date of issuance of ICPS-i.

Dividend Rate : The Company shall (at the Company’s discretion and subject to the availability of distributable profits) pay out a targeted aggregate dividend rate of 20% calculated based on the nominal value of the ICPS-i, which shall be payable throughout the tenure of the ICPS-i as per the table below:

Year Targeted Dividend Rate

1 3.0%

2 3.5%

3 4.0%

4 4.5%

5 5.0%

Redemption : Not redeemable for cash. Conversion Rights : The ICPS-i shall be convertible, at the option of the ICPS-i holder, at any time during the

Conversion Period without the payment of additional consideration by the ICPS-i holder thereof, into such number of fully-paid ordinary shares of the Company at the Conversion Rate.

Conversion Period : The ICPS-i shall be converted at any time from the date of issue and up to the Maturity Date. Any remaining ICPS-i that are not converted by the Maturity Date shall be automatically converted into new ordinary shares without the payment of additional consideration by the ICPS-i holder, into such number of fully-paid ordinary shares of the Company at the Conversion Rate.



13. IRREDEEMABLE CONVERTIBLE PREFERENCE SHARES-i (CONTINUED)

Conversion Rate : 1 new ordinary share for 1 ICPS-i held.

14. RESERVES

Group Company

Note 2019 2018 2019 2018

RM RM RM RM

Non-Distributable:

Share premium (i) - 95,028,660 - 95,028,660

Revaluation reserve (ii) 46,502,929 51,821,754 - -

Translation reserve (iii) (50,820,619) (50,820,619) - -

(4,317,690) 96,029,795 - 95,028,660

Accumulated losses (579,073,292) (596,770,870) (499,000,616) (501,981,874)

(583,390,982) (500,741,075) (499,000,616) (406,953,214)

(i) Share premium

Share premium comprises the premium paid on subscription of shares in the Company over and above the par value of the shares.

In accordance with section 618 of Companies Act 2016, any amount standing to the credit of the share premium account has become part of the Company’s ordinary share capital. The Company had twenty four (24) months upon the commencement of Companies Act 2016 on 31 January 2017 to utilise the credit in accordance with Section 618(2) of Companies Act 2016 on or before 30 January 2019 (24 months from commencement of Section 74 of Companies Act 2016). Accordingly, the Company transferred the share premium amounting to RM95,028,660 to the ordinary share capital during the financial year as disclosed in Note 12.

(ii) Revaluation reserve

The revaluation reserve relates to the revaluation of the Group’s long-term leasehold land and buildings and yard infrastructure.

Group

2019 2018

RM RM

At 1 January 51,821,754 57,140,579

Realisation of revaluation reserve (5,318,825) (5,318,825)

At 31 December 46,502,929 51,821,754



14. RESERVES (CONTINUED)

(iii) Currency translation reserves

The translation reserve represents foreign exchange differences arising from the translation of the financial statements of a subsidiary company at the end of the reporting period. The movement in currency translation reserves are as follows:

Group

2019 2018

RM RM

At 1 January (50,820,619) (44,101,605)

Foreign currency translation differences of subsidiary - (13,400,165)

Change in functional currency - 6,681,151

At 31 December (50,820,619) (50,820,619)

In 2018, a change in the functional currency of a subsidiary under the Group had been made, as the subsidiary’s cash flows, cash flow management and financing were made in RM. As a result, the functional currency of RM had predominantly influenced the operations and cash flow of the subsidiary.

Accordingly, the exchange differences accumulated in the translation reserve that is attributable to the owners of the company will be reclassified to profit or loss upon the disposal of the said subsidiary.

15. DEFERRED TAX ASSETS

Recognised deferred tax assets

Deferred tax assets/(liabilities) of the Group and of the Company presented in the statements of financial position are in respect of the following tax effects:

Assets Liabilities Net

2019 2018 2019 2018 2019 2018

Group RM RM RM RM RM RM

Unused tax losses 21,600,000 21,600,000 - - 21,600,000 21,600,000

Revaluation of property, plant and equipment - - (19,724,022) (19,724,022) (19,724,022) (19,724,022)

Deferred tax assets/(liabilities) 21,600,000 21,600,000 (19,724,022) (19,724,022) 1,875,978 1,875,978

Set off of tax (19,724,022) (19,724,022) 19,724,022 19,724,022 - -

Net deferred tax assets 1,875,978 1,875,978 - - 1,875,978 1,875,978



15. DEFERRED TAX ASSETS (CONTINUED)

Movement in deferred tax assets/(liabilities) during the year:

At1.1.2018

Recognisedin profit

or lossRecognised

in equity

At 31.12.2018/

1.1.2019/31.12.2019

RM RM RM RM

Unused tax losses 21,600,000 - - 21,600,000

Revaluation of property, plant and equipment (19,724,022) - - (19,724,022)

1,875,978 - - 1,875,978 Unrecognised Deferred Tax Assets

As mentioned in Note 3, deferred tax assets are recognised for deductible temporary differences, unused tax losses and unabsorbed capital allowances to the extent that it is probable that future taxable profits will be available against which the deductible temporary differences, unused tax losses and unabsorbed capital allowances can be utilised. As at 31 December 2019, the estimated amount of deductible temporary differences, unused tax losses and unabsorbed capital allowances for which the tax effects have not been recognised in the financial statements due to uncertainty of their realisation is as follows:

Group Company

2019 2018 2019 2018

RM RM RM RM

Unused tax losses 461,812,356 487,891,171 6,845,300 4,985,616

Unabsorbed capital allowances 6,112,600 6,709,283 4,492,100 5,148,492

(Taxable)/Deductible temporary differences arising from:

Property, plant and equipment (61,668,100) (61,799,400) - -

Trade receivables 44,607,500 42,840,200 - -

Inventories 464,900 464,900 - -

Unrealised foreign exchanges (1,686,927) (90,900) (1,622,923) -

449,642,329 476,015,254 9,714,477 10,134,108

The availability of the unutilised tax losses and unabsorbed capital allowances for offsetting future taxable profits of the Company and of the subsidiary companies are subject to the agreement with the tax authorities.

Pursuant to guidelines issued by the Malaysian tax authorities in 2018, the Ministry of Finance have allowed companies to carry forward their unabsorbed capital allowance indefinitely until it is fully absorbed. However, with effect from year of assessment (“YA”) 2019, any unutilised business losses can only be carried forward for a maximum period of 7 consecutive years of assessment. Unutilised business losses accumulated up until YA2018 will be expired in YA2025. This can be utilised against income from the same business source for unabsorbed capital allowances and utilised against income from any business source for unutilised tax losses.



16. BORROWINGS

Group Company

Note 2019 2018 2019 2018

RM RM RM RM

Non-current

Sukuk - secured 16.1 40,000,000 55,000,000 - -

Finance lease liabilities - secured 16.2 6,902 83,371 6,902 76,924

40,006,902 55,083,371 6,902 76,924

Current

Sukuk - secured 16.1 59,200,000 54,200,000 44,200,000 44,200,000

Finance lease liabilities - secured 16.2 81,877 157,294 81,877 90,349

Revolving credit facilities - unsecured 16.3 13,999,917 13,999,917 - -

Bridging loan - secured 16.4 10,609,167 10,609,167 10,609,167 10,609,167

Term loans - secured 16.5 14,761,117 14,961,117 - -

98,652,078 93,927,495 54,891,044 54,899,516

138,658,980 149,010,866 54,897,946 54,976,440

16.1 Sukuk - secured

Group Company

2019 2018 2019 2018

RM RM RM RM

Current portion 59,200,000 54,200,000 44,200,000 44,200,000

Non-current portion 40,000,000 55,000,000 - -

99,200,000 109,200,000 44,200,000 44,200,000

As at 31 December 2019, the Group and the Company have Sukuk facilities of RM99,200,000 (2018: RM109,200,000) and RM44,200,000 (2018: RM44,200,000) respectively, which are secured by way of a mortgage over the capital work-in-progress of FPSO Layang vessel and the long-term leasehold land and buildings (see Note 5) and bear profit at rates ranging from 7.56% to 7.77% (2018: 7.56% to 7.77%) per annum.

The financial institution is a Scheme Creditor under the Scheme of Arrangement. Pursuant to the Scheme,

the total debts due and owing to the Scheme Creditors will be reduced and settled by way of cash (“Cash Portion”), proposed issuance of new ICPS-i in the Company and term out of the existing facility. Any remaining amount owing to the Scheme Creditors after the aforesaid shall be waived completely. Accordingly, all pending litigation proceedings including all winding up petitions are to be withdrawn or terminated as the debts are deemed to have been compromised under the Schemes. The Approved Scheme Companies are currently in the process of implementing the Schemes and Cash Portion was substantially completed.

The ability of the Group and the Company to discharge their liabilities and obligations to its financial institutions is dependent on the successful issuance of the new ICPS-i to the Scheme Creditor. Accordingly, the outcome and timing of the completion of the issuance of the new ICPS-i are currently uncertain.



16. BORROWINGS (CONTINUED)

16.1 Sukuk - secured (continued)

Loan covenants Pursuant to the Scheme, the Group and the Company would no longer require to meet the various financial

covenants including compliance with debt service cover ratio and debt to equity ratio.

16.2 Finance lease liabilities - secured

Group Company

2019 2018 2019 2018

RM RM RM RM

Future minimum lease payments 90,332 248,937 90,332 173,768

Less: Interest-in-suspense (1,553) (8,272) (1,553) (6,495)

Present value of minimum lease payments 88,779 240,665 88,779 167,273

Less than one year 81,877 157,294 81,877 90,349

Between one and five years 6,902 83,371 6,902 76,924

Present value of minimum lease payments 88,779 240,665 88,779 167,273

The average effective profit rate is 2.40% (2018: 2.40%) per annum. Profit rate is fixed at the inception of the lease.

16.3 Revolving credit facilities - unsecured

As at 31 December 2019, the Group has unsecured revolving credit facilities amounting to RM13,999,917 (2018: RM13,999,917) granted by a local financial institution which bear profit at rates ranging from 6.85% to 7.85% (2018: 6.85% to 7.85%.) per annum. The revolving credit facilities were secured by the Corporate Guarantee from the Company up to RM83.75 million.

The financial institution is a Scheme Creditor under the Scheme of Arrangement. Pursuant to the Scheme, the total debts due and owing to the Scheme Creditors will be reduced and settled by way of cash (“Cash Portion”), proposed issuance of new ICPS-i in the Company and term out of the existing facility. Any remaining amount owing to the Scheme Creditors after the aforesaid shall be waived completely. Accordingly, all pending litigation proceedings including all winding up petitions are to be withdrawn or terminated as the debts are deemed to have been compromised under the Schemes. The Approved Scheme Companies are currently in the process of implementing the Schemes and Cash Portion was substantially completed.

The ability of the Group to discharge its liabilities and obligations to its financial institution is dependent on the successful issuance of the new ICPS-i to the Scheme Creditors. Accordingly, the outcome and timing of the completion of the issuance of the new ICPS-i are currently uncertain.




16.4 Bridging loan - secured

As at 31 December 2019, the Company has a bridging loan facility of RM10,609,167 (2018: RM10,609,167) granted by a local financial institution which was utilised by a subsidiary company for part financing of the conversion works of the said subsidiary company’s FPSO Layang vessel. The said facility bear profit at 5.05% (2018: 5.05%) per annum and the finance cost incurred has been capitalised in property, plant and equipment of the subsidiary company. The said facility was secured by the following:

(a) Facility agreement for RM60,000,000 as principal Document; and(b) ICPS-i proceeds of RM62 million are to be placed in International Commodity Murabahah pledged to

the bank.

The financial institution is a Scheme Creditor under the Scheme of Arrangement. Pursuant to the Scheme, the total debts due and owing to the Scheme Creditors will be reduced and settled by way of cash (“Cash Portion”), proposed issuance of new ICPS-i in the Company and term out of the existing facility. Any remaining amount owing to the Scheme Creditors after the aforesaid shall be waived completely. Accordingly, all pending litigation proceedings including all winding up petitions are to be withdrawn or terminated as the debts are deemed to have been compromised under the Schemes. The Approved Scheme Companies are currently in the process of implementing the Schemes and Cash Portion was substantially completed.

The ability of the Company to discharge its liabilities and obligations to its financial institution is dependent on the successful issuance of the new ICPS-i to the Scheme Creditors. Accordingly, the outcome and timing of the completion of the issuance of the new ICPS-i are currently uncertain.

Loan covenants Pursuant to the Scheme, the Company would no longer require to meet the various financial covenants.

16.5 Term loans - secured

Group

2019 2018

RM RM

Secured term loans 14,761,117 14,961,117

Term loans of the Group which bear profit at rates ranging from 7.60% to 7.85% (2018: 7.60% to 7.85%) per annum, was secured by:

(a) Deed of agreement on the takaful coverage of certain plant and machinery;(b) Specific debenture over certain plant and machinery; and(c) Corporate guarantee by the Company.

The financial institution is a Scheme Creditor under the Scheme of Arrangement. Pursuant to the Scheme all the debts are deemed to have been compromised, where the total debt will be fully settled by way of disposal of some of the pledged assets and any shortfall will be covered by way of advances from the Company which includes cash settlement.




16.6 Reconciliation of liabilities arising from financing activities

The tables below detail cash flows changes in the Group’s liabilities arising from financing activities:

Group

2019 2018

RM RM

Borrowings 149,010,866 353,023,968

Accrued finance costs (Note 17) 11,060,985 8,989,760

Total Borrowings at the beginning of year 160,071,851 362,013,728

Repayment of:

- Finance Costs (4,900,537) (3,858,650)

- Principal (10,351,886) (159,194,193)

Waiver of debt - (44,818,909)

144,819,428 154,141,976

Non-Cash Changes

Accruals of finance costs (Note 19) 4,591,441 5,929,875

As at year end 149,410,869 160,071,851

The total borrowings of the Group as of the end of the reporting period comprised of the followings:

Group

2019 2018

RM RM

Borrowings (Note 16) 138,658,980 149,010,866

Accrued finance costs (Note 17) 10,751,889 11,060,985

149,410,869 160,071,851

The tables below detail cash flows changes in the Company’s liabilities arising from financing activities:

Company

2019 2018

RM RM

Total Borrowings at the beginning of year 54,976,440 42,135,895

Repayment of:

- Finance Costs (78,494) (24,716,484)

- Principal - 44,200,000

Waiver of debt - (6,642,971)

As at year end 54,897,946 54,976,440



17. TRADE AND OTHER PAYABLES

Group Company

Note(s) 2019 2018 2019 2018

RM RM RM RM

Trade

Trade payables 17.1&17.2 23,877,130 19,946,512 3,064,744 -

Non-trade

Other payables 17.1&17.3 242,842,299 286,530,048 133,330,877 139,752,012

Accrued expenses 25,162,806 13,476,473 4,146,145 4,295,191

Accrued finance cost (Note 16.6) 10,751,889 11,060,985 - -

278,756,994 311,067,506 137,477,022 144,047,203

302,634,124 331,014,018 140,541,766 144,047,203

17.1 Trade and other payables are Scheme Creditors under the Scheme of Arrangement. Pursuant to the Scheme, the total debts due and owing to the Scheme Creditors will be reduced and settled by way of cash (“Cash Portion”), proposed issuance of new ICPS-i in the Company and term out of the existing facility. Any remaining amount owing to the Scheme Creditors after the aforesaid shall be waived completely. Accordingly, all pending litigation proceedings including all winding up petitions are to be withdrawn or terminated as the debts are deemed to have been compromised under the Schemes. The Approved Scheme Companies are currently in the process of implementing the Schemes and Cash Portion was substantially completed.

The ability of the Group and of the Company to discharge their liabilities and obligations to their Scheme

Creditors are dependent on the successful issuance of the new ICPS-i to the Scheme Creditors. Accordingly, the outcome and timing of the completion of the issuance of the new ICPS-i are currently uncertain.

17.2 Included in the trade payables of the Group and of the Company are RM3,064,744 (2018: RMNil) which is arose from trade transactions, advances and payments on behalf, is unsecured, interest-free and repayable on demand, except for trade transactions which have a credit period of 35 days.

17.3 Included in other payables of the Group are the following:

Group

2019 2018

RM RM

Amount payable to contractors in relation to the conversion works of FPSO Layang vessel 103,136,365 110,559,029

Performance guarantee deposit received from the holding company of a joint venture partner 32,000,000 77,000,000

Advances received from a non-controlling interest 32,871,507 32,871,507



18. REVENUE

Group Company

2019 2018 2019 2018

RM RM RM RM

Construction services 57,486,642 2,526,079 10,348,487 -

Offshore crane works 69,670 58,615 - -

Management fee - - 6,262,772 6,914,400

57,556,312 2,584,694 16,611,259 6,914,400

Timing of revenue recognition:

- at point of time - - 6,262,772 6,914,400

- over time 57,556,312 2,584,694 10,348,487 -

57,556,312 2,584,694 16,611,259 6,914,400 19. FINANCE COSTS

Group Company

2019 2018 2019 2018

RM RM RM RM

Finance costs:

- term loans - 587,225 - -

- sukuk 4,591,441 5,171,248 - -

- finance lease 6,719 21,057 4,942 9,770

- others 8,656 150,345 4,249 4,798

4,606,816 5,929,875 9,191 14,568



20. PROFIT/(LOSS) BEFORE TAX

Profit/(Loss) before tax is arrived at after charging/(crediting):

Group Company

Note 2019 2018 2019 2018

RM RM RM RM

Auditors’ remuneration

- Statutory audit 225,000 225,000 107,500 107,500

- Other services 5,000 5,000 5,000 5,000

- Non-statutory - 100,000 - 61,000

Depreciation of property, plant and equipment 5 9,239,314 10,994,441 231,172 407,047

Impairment loss on property, plant and equipment 5 - 711,517,891 - -

Impairment loss on trade receivables 25.3 2,097,337 4,258,300 - -

Impairment loss on investment in subsidiaries 7 - - - 26,036,700

Impairment loss on amount due from subsidiary 10 - - - 956,966,561

Reversal of impairment loss on trade receivables 25.3 (330,000) - - -

Allowance/(Reversal) for inventories obsolescence 9 54,755 (100,449) - -

Personnel expenses including key management personnel:

- Salaries, wages and others 8,970,813 7,226,146 4,184,200 4,148,111

Contributions to EPF 960,339 1,550,327 477,793 481,705

Realised loss/(gain) on foreign exchange-net 22,548 (554,622) 23,036 (381,719)

Inventories written down to net realisable value 9 - 152,877 - -

Rental of office 467,690 482,397 467,690 395,738

Rental of photocopies and office equipment 114,235 160,778 114,235 112,919

Property, plant and equipment written off 5 51,423 - 51,343 -

Unrealised (gain)/loss on foreign exchange-net (1,979,591) 12,952,509 (1,622,923) 8,718,836

Waiver of debt arising from Scheme of Arrangement (4,884,112) (203,768,264) (5,162,320) (125,942,695)

Gain on deconsolidation of a subsidiary 7.1 - (16,911,374) - -

Gain on Novation of JX Nippon Contract - (372,000,000) - (372,000,000)

Gain on disposal of property, plant and equipment - (998,821) - -

Interest income from deposit placed in licensed banks (1,069,777) (2,223,934) (735,898) (1,519,980)

Rental income (186,495) (850,990) - -



21. KEY MANAGEMENT PERSONNEL COMPENSATION

Group Company

2019 2018 2019 2018

RM RM RM RM

Directors remuneration:

Fees 415,287 431,315 336,164 361,315

Other emoluments:

- Current year 80,500 62,500 65,000 59,500

- Overprovision in prior year (55,000) - (55,000) -

440,787 493,815 346,164 420,815

Other key management personnel:

- Salary and other emoluments 3,169,437 2,896,898 2,336,907 2,306,385

- Contributions to EPF 329,593 330,721 255,557 257,904

3,499,030 3,227,619 2,592,464 2,564,289

Estimated monetary value of benefit-in-kind 61,809 69,067 41,398 46,261

Other key management personnel comprise persons other than the Directors of the Company and its subsidiaries, having authority and responsibility for planning, directing and controlling the activities of the Group entities either directly or indirectly.



22. TAX EXPENSE

Group Company

2019 2018 2019 2018

RM RM RM RM

Current tax 75,775 - - -

Underprovision in prior years 49,377 - - -

Total income tax expense 125,152 - - -

A reconciliation of income tax expense to profit/(loss) before tax at the applicable statutory income tax rate to income tax expense at the effective tax rates of the Group and of the Company is as follows:

Group Company

2019 2018 2019 2018

RM RM RM RM

Profit/(Loss) before tax 10,036,774 (139,903,770) 2,981,258 (497,370,504)

Income tax expense/(credit) calculated using Malaysian tax rates of 24% (2018: 24%) 2,408,826 (33,576,905) 715,502 (119,368,921)

Tax effects of :

Non-taxable income (1,305,014) (119,506,247) (1,292,511) (119,506,247)

Non-deductible expenses 5,301,465 155,895,374 677,720 236,302,846

Deferred tax assets not recognised 567,603 4,155,674 - 2,572,322

Utilisation of previously unrecognised deferred tax assets (6,897,105) (6,967,896) (100,711) -

Underprovision in prior year 49,377 - - -

125,152 - - -



23. PROFIT/(LOSS) PER ORDINARY SHARE

Basic profit/(loss) per ordinary share

The calculation of basic profit/(loss) per ordinary share as at 31 December 2019 was based on the profit/(loss) attributable to ordinary shareholders of RM12,378,753 (2018: RM2,565,976) and the weighted average number of ordinary shares outstanding during the year of 1,121,298,906 (2018: 1,121,272,400).

Group

2019 2018

Unit Unit

Issued ordinary shares at beginning of year 1,121,272,400 1,121,237,700

Conversion of ICPS-i shares (Note 13) 1,888 34,700

Weighted average number of ordinary shares in issue 1,121,274,288 1,121,272,400

Basic profit/(loss) per ordinary share (sen) 1.10 (0.23)

Diluted profit/(loss) per ordinary share

The calculation of diluted profit/(loss) per ordinary share as at 31 December 2019 was based on profit/(loss) attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares, calculated as follows:

Group

2019 2018

Unit Unit

Weighted average number of ordinary shares in issue 2,221,077,000 2,221,042,300

Diluted profit/(loss) per ordinary share (sen) 0.56 (0.12)

24. OPERATING SEGMENTS

The Group has three (3) reportable segments, as described below, which are the Group’s strategic business units. The strategic business units offer different products and services, and are managed separately because they require different technology and marketing strategies. For each of the strategic business unit, the Chief Executive Officer (the chief operating decision maker) (“CEO”) reviews internal management reports at least on a quarterly basis. The following summary describes the operations of the Group’s reportable segments:

• Construction services with engineering, project management, procurement, construction, installation and commissioning capabilities.

• Offshore crane works• Others such as management services and transportation services

Performance is measured based on segment profit/(loss) before tax, finance costs, depreciation and amortisation, as included in the internal management reports that are reviewed by the CEO.



24. OPERATING SEGMENTS (CONTINUED)

Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries.

Segment assets The total of segment assets is measured based on all assets of a segment, as included in the internal management

reports that are reviewed by CEO. Segment total assets is used to measure the return of assets of each segment.

Segment liabilities The total of segment liabilities is measured based on all liabilities of a segment in the internal management report

that are reviewed by the CEO. Segment capital expenditure Segment capital expenditure is the total costs incurred during the year to acquire property, plant and equipment,

and intangible assets.

Geographical segment

There is no geographical segment information as the Group is predominantly operating in Malaysia.

Construction Offshore

Services crane works Others Elimination Total

Group RM RM RM RM RM

2019

Segment profit/(loss)

Total revenue 67,524,674 369,156 6,262,772 (16,600,290) 57,556,312

Total cost of sales (24,210,456) (299,667) - 10,337,518 (14,172,605)

Other income 1,080,444 79,581 8,085,872 (76,181) 9,169,716

Administrative expenses (15,242,608) (2,497,070) (23,215,308) 6,338,954 (34,616,032)

Other expenses (2,380,660) (21,350) (891,791) 188,744 (3,105,057)

Finance costs (4,595,533) (341) (10,942) - (4,606,816)

Share of loss of equity-accounted associate - - - (188,744) (188,744)

Tax expenses (125,152) - - - (125,152)

Profit/(Loss) for the year 22,050,709 (2,369,691) (9,769,397) - 9,911,622

Segment assets 246,090,349 2,339,707 387,418,340 (323,137,186) 312,711,210

Segment liabilities 209,044,012 13,555,107 1,225,488,051 (1,006,794,066) 441,293,104

Depreciation and amortisation 8,972,435 - 266,879 - 9,239,314



24. OPERATING SEGMENTS (CONTINUED)

Geographical segment (continued)

There is no geographical segment information as the Group is predominantly operating in Malaysia (continued).

Construction Offshore

Services crane works Others Elimination Total

Group RM RM RM RM RM

2018

Segment profit/(loss)

Total revenue 2,526,079 58,615 6,914,000 (6,914,000) 2,584,694

Total cost of sales (2,084,877) (20,669) - - (2,105,546)

Other income 77,168,904 9,629,618 502,182,299 56,206,042 645,186,863

Administrative expenses (18,612,617) (2,873,881) (16,251,794) 7,765,389 (29,972,903)

Other expenses (6,942,906) (11,623,254) (1,714,022,220) 983,003,261 (749,585,119)

Finance costs (5,876,008) (921) (52,946) - (5,929,875)

Share of loss of equity-accounted associate - - - (81,884) (81,884)

Tax expenses - - - - -

Profit/(Loss) for the year 46,178,575 (4,830,492) (1,221,230,661) 1,039,978,808 (139,903,770)

Segment assets 254,868,116 3,194,568 389,674,581 (306,205,897) 341,531,368

Segment liabilities 239,484,592 12,040,277 1,240,365,843 (1,011,865,828) 480,024,884

Depreciation and amortisation 10,270,706 281,002 442,733 - 10,994,441

Impairment of property, plant and equipment 2,157,981 588,791 708,771,119 - 711,517,891

Major customers

Revenue of approximately RM57,176,187 (2018: RM2,526,079) representing 99% (2018: 98%) of the Group’s revenue is derived from three (3) external customers (2018: two (2) external customers) from the following segments:

2019 2018

RM RM Segment

Customer A 45,000,000 - Construction services

Customer B 10,038,032 - Construction services

Customer C 2,138,155 2,397,287 Construction services

Customer D - 128,792 Construction services

57,176,187 2,526,079



25. FINANCIAL INSTRUMENTS

Significant accounting policies Details of the significant accounting policies and methods adopted (including the criteria for recognition, the bases

of measurement, and the bases for recognition of income and expenses) for each class of financial asset, financial liability and equity instrument are disclosed in Note 3.

25.1 Categories of financial instruments

Group

2019 2018

RM RM

Financial assets at amortised cost

Trade and other receivables 18,520,261 4,059,225

Cash, bank balances and deposits 26,553,271 60,980,706

38,705,090 65,039,931

Financial liabilities at amortised cost

Borrowings (138,658,980) (149,010,866)

Trade and other payables (302,634,124) (331,014,018)

(441,293,104) (480,024,884)

Company

2019 2018

RM RM

Financial assets at amortised cost

Trade and other receivables 53,265,583 30,215,962

Cash and cash equivalents 25,262,619 49,110,975

78,528,202 79,326,937

Financial liabilities at amortised cost

Borrowings (54,897,946) (54,976,440)

Trade and other payables (140,541,766) (144,047,203)

(195,439,712) (199,023,643)

25.2 Financial risk management The Group has exposure to the following risks from its use of financial instruments:

• Credit risk• Liquidity risk• Market risk



25. FINANCIAL INSTRUMENTS (CONTINUED)

25.3 Credit risk management

Credit risk is the risk of a financial loss to the Group and the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group’s exposure to credit risk arises principally from its receivables from customers. The Company’s exposure to credit risk arises principally from advances to subsidiaries.

Receivables

Risk management objectives, policies and processes for managing the risk

The management has an informal credit policy in place and the exposure to credit risk is monitored on an ongoing basis.

Exposure to credit risk, credit quality and collateral

As at the end of the reporting period, the maximum exposure to credit risk arising from receivables is represented by the carrying amounts in the statements of financial position.

Management has taken reasonable steps to ensure that receivables that are neither past due nor impaired are stated at their realisable values. A significant portion of these receivables are regular customers that have been transacting with the Group. The Group uses ageing analysis to monitor the credit quality of the receivables. Any receivables having significant balances past due more than 90 days, which are deemed to have higher credit risk, are monitored individually.

The Group has no significant concentration of credit risk except for amount due from two (2) major customers

(2018: five (5) customers) which constitute approximately 96% (2018: 95%) of the total trade receivables.

Impairment losses

The ageing of trade receivables as at the end of the reporting period was:

Individual

Gross impairment Net

Group RM RM RM

2019

Not past due 2,153,521 - 2,153,521

Past due 1 - 30 days 64,164 - 64,164

Past due 31 - 120 days 546,886 - 546,886

Past due more than 120 days 46,162,669 (44,607,537) 1,555,132

48,927,240 (44,607,537) 4,319,703

2018

Not past due 1,812,023 (55,000) 1,757,023

Past due 1 - 30 days 212,102 (55,000) 157,102

Past due 31 - 120 days 295,411 (110,000) 185,411

Past due more than 120 days 42,691,851 (42,620,200) 71,651

45,011,387 (42,840,200) 2,171,187




25.3 Credit risk management (continued)

Receivables (continued)

Impairment losses (continued)

The movements in the allowance for impairment losses of trade receivables during the financial year were:

Group

2019 2018

RM RM

At beginning of year 42,840,200 38,581,900

Impairment loss on trade receivables (Note 20) 2,097,337 4,258,300

Reversal of impairment loss on trade receivables (Note 20) (330,000) -

At end of year 44,607,537 42,840,200

The ageing of other receivables as at the end of the reporting period was:

Individual

Gross impairment Net

Group RM RM RM

2019

Not past due - - -

Past due 1 - 30 days - - -

Past due 31 - 120 days - - -

Past due more than 120 days 6,215,375 (5,344,341) 871,034

6,215,375 (5,344,341) 871,034

2018

Not past due - - -

Past due 1 - 30 days - - -

Past due 31 - 120 days - - -

Past due more than 120 days 6,921,415 (5,344,341) 1,577,074

6,921,415 (5,344,341) 1,577,074

Company

Other receivables of RM4,402,028 (2018: RM4,402,028) was past due more than 120 days and an individual impairment of RM4,402,028 (2018: RM4,402,028) has been provided.

As at 31 December 2019, the Company has recognised accumulated impairment loss on the amount due from subsidiaries, amounting to RM956,966,561 (2018: RM956,966,561).




25.3 Credit risk management (continued)

Company (continued)

The movements in the impairment losses of other receivables during the financial year were:

Group Company

2019 2018 2019 2018

RM RM RM RM

At beginning and end of year 5,344,341 5,344,341 4,402,028 4,402,028

The allowance account in respect of trade receivables is used to record impairment losses. Unless the Group and the Company are satisfied that recovery of the amount is possible, the amount considered irrecoverable is written off against the trade receivables directly.

Contract assets

The management has credit policy in place and the exposure to credit risk is monitored on an ongoing basis. The Group and Company measures the loss allowance for contract assets at an amount equal to lifetime ECL, as required by MFRS 9. Impairment loss is measured based on expected credit loss model is based on assumptions on the risk of default and expected loss rates. The Group and the Company use judgment in making these assumption and selecting the inputs to the ECL based on past collection records, existing market conditions as well as forward looking estimates as of the end of the reporting period.

Inter-company advances


The Company provides advances to subsidiaries. The Company monitors the results of the subsidiaries regularly. The recoverability of the advances are dependent on successful issuance of the new ICPS-i to the Scheme Creditor.

Exposure to credit risk, credit quality and collateral

As at the end of the reporting period, the maximum exposure to credit risk is represented by their carrying amounts in the statements of financial position.

25.4 Liquidity risk management Liquidity risk is the risk that the Group and the Company will not be able to meet its financial obligations as

they fall. The Group and the Company exposure to liquidity risk arises principally from their various payables and borrowings.

As of 31 December 2019, the current liabilities of the Group and of the Company have exceeded the current assets by RM316,621,948 and RM116,319,689. The current liabilities of the Group as of 31 December 2019 arose mainly from trade and other payables totalling RM302,634,124 and borrowings totalling RM98,652,078, which comprise mainly Sukuk of RM59,200,000, bridging loan of RM10,609,167, short term loan of RM14,761,117 and revolving credits facilities of RM13,999,917.

The current liabilities of the Company as of 31 December 2019 arose mainly from trade and other payables totalling RM140,541,766 and borrowings totalling RM54,891,044, which comprise mainly Sukuk of RM44,200,000, bridging loan of RM10,609,167 and finance lease of RM81,877.




25.4 Liquidity risk management (continued)

The ability of the Group and of the Company to meet their obligations as and when its fall due is dependent on the following:

(i) successful issuance of the new ICPS-i to the Schemes Creditors. Accordingly, the outcome and timing of the completion of the issuance of the new ICPS-i are currently uncertain; and

(ii) the ability of the Group and the Company to achieve sustainable and viable operations with adequate cash flows generate from their operating activities.

Maturity analysis

The table below summarises the maturity profile of the Group’s and the Company’s financial liabilities as at the end of the reporting period based on undiscounted contractual payments:

GroupCarryingamount

Contractualprofit rate

Contractualcash flows

Under 1year

1 - 2years

2 - 5years

More than 5years

RM % RM RM RM RM RM

2019

Finance lease liabilities - secured 88,779 2.40 90,332 81,877 6,902 - -

Term loans - secured 14,761,117 7.60 - 7.85 14,761,117 14,761,117 - - -

Bridging loan- secured 10,609,167 5.05 10,609,167 10,609,167 - - -

Sukuk - secured 99,200,000 7.56 - 7.77 111,745,171 59,200,000 40,000,000 - -

Revolving credit - unsecured 13,999,917 6.85 - 7.85 13,999,917 13,999,917 - - -

Trade and other payables 302,634,124 - 302,634,124 302,634,124 - - -

Financial guarantee* - - - - - - -





Maturity analysis (continued)

GroupCarryingamount



Under 1year

1 - 2years

2 - 5years

More than 5years

RM % RM RM RM RM RM

2018


Term loans - secured 14,961,117 7.60 - 7.85 14,961,117 14,961,117 - - -


Sukuk - secured 109,200,000 7.56 - 7.77 123,009,805 61,107,079 18,703,175 43,199,551 -

Revolving credit - unsecured 13,999,917 6.85 - 7.85 13,999,917 13,999,917 - - -



CompanyCarryingamount



Under 1year

1 - 2years

2 - 5years

More than 5years

RM % RM RM RM RM RM

2019



Sukuk - secured 44,200,000 7.56 - 7.77 44,200,000 44,200,000 - - -







Maturity analysis (continued)

CompanyCarryingamount



Under 1year

1 - 2years

2 - 5years

More than 5years

RM % RM RM RM RM RM

2018



Sukuk - secured 44,200,000 7.56 - 7.77 44,200,000 44,200,000 - - -



* At the end of the reporting period, no events have arisen which may cause the financial guarantee provided by the Group and the Company to be called upon or claimed by any counterparty pursuant to the relevant contracts entered by the Group or the Company. Consequently, the amount included is RMNil.

25.5 Market risk management

Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates that will affect the Group’s financial position or cash flows.

25.5.1 Currency risk

The Group and the Company are exposed to foreign currency risk on sales and purchases that are denominated in a currency. The currency giving rise to this risk is primarily United States Dollar (“USD”).


The Group and the Company manage material foreign currency exposure as and when it arises by passing on the risk to vendors in the price negotiations.

Exposure to foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instruments will fluctuate due to changes in foreign exchange rates.




25.5 Market risk management (continued)

25.5.1 Currency risk (continued)

Exposure to foreign currency risk (continued)

The Group’s and the Company’s exposure to foreign currency risk arising from foreign balances as at the end of the reporting period is represented by the following carrying amounts:

Group Company

2019 2018 2019 2018

RM/USD RM/USD RM/USD RM/USD

Asset

Receivables 2,021,677 - 2,021,677 -

Liabilities

Payables 32,320,732 32,673,796 30,867,464 29,795,183

Sensitivity analysis on translation of foreign currency denominated liabilities and assets

The following table details the Group’s and the Company’s sensitivity to a 10% increase and decrease in the Ringgit Malaysia against the relevant foreign currencies. 10% is the sensitivity rate used when reporting foreign currencies risk internally to key management personnel and represents management’s assessment of the reasonably probable change in the foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjust their translation at the end of the reporting period for a 10% change in foreign currency rates. A positive number below indicates a loss in profit or loss where the Ringgit Malaysia strengthen against the relevant currencies. For a 10% change of the Ringgit Malaysia against the relevant currencies, there would be a comparable impact on profit or loss and the balances below would be negative.

Group Company

2019 2018 2019 2018

RM/USD RM/USD RM/USD RM/USD

Asset

Receivables 202,167 - 202,167 -

Liabilities

Payables 3,232,073 3,267,379 3,086,746 2,979,518





25.5.2 Interest rate risk

The Group’s and the Company’s variable rate borrowings are exposed to a risk of change in cash flows due to changes in interest rates.


The Group and the Company are exposed to interest rate risk when a financial instrument’s value will fluctuate as a result of changes in market interest rate.

Excess funds are placed with licensed banks for short-term periods during which the interest rates are fixed.

The Group’s and the Company’s interest-bearing financial liabilities are mainly revolving credit, term

loans, sukuk, bridging loans and finance lease liabilities. The Group and the Company adopt a policy of managing the interest rate risk through the use of fixed and floating rate debts.

Exposure to interest rate risk

The interest rate profile of the Group’s and of the Company’s significant interest-bearing financial instruments, based on carrying amounts as at the end of the reporting period was:

Group Company

2019 2018 2019 2018

RM RM RM RM

Fixed rate instruments

Deposits placed with licensed banks 10,682,834 43,015,027 10,672,834 32,933,935

Finance lease liabilities (88,779) (240,665) (88,779) (167,273)

Sukuk (99,200,000) (109,200,000) (44,200,000) (44,200,000)

Bridging loan (10,609,167) (10,609,167) (10,609,167) (10,609,167)

Revolving credit (13,999,917) (13,999,917) - -

(113,215,029) (91,034,722) (44,225,112) (22,042,505)

Floating rate instrument

Term loans (14,761,117) (14,961,117) - -

Fair value sensitivity analysis for fixed rate instruments

The Group and the Company do not account for any fixed rate financial assets and liabilities at fair value through profit or loss. Therefore, a change in interest rates at the end of the reporting period would not affect profit or loss.





25.5.2 Interest rate risk

Cash flow sensitivity analysis for variable rate instruments

A change of 50 basis points in interest rates and assuming that all other variables, remained constant at the end of the reporting period would not have material impact on the post-tax profit or loss of the Group.

25.6 Fair value information

The carrying amounts of cash and cash equivalents, short-term receivables and payables and short-term borrowings reasonably approximate their fair values due to the relatively short-term nature of these financial instruments.

The table below analyses financial instruments not carried at fair value for which fair value is disclosed, together with their fair values and carrying amounts shown in the statements of financial position.

GroupFair

valueCarryingamount

RM RM

2019

Financial liabilities

Sukuk - secured (59,200,000) (40,000,000)

Finance lease liabilities - secured (90,332) (88,779)

2018

Financial liabilities

Sukuk - secured (54,200,000) (55,000,000)


Company

2019

Financial liability


2018

Financial liability





25.6 Fair value information (continued)

Policy on transfer between levels

The fair value of an asset to be transferred between levels is determined as of the date of the event or change in circumstances that caused the transfer.

Level 1 fair value

Level 1 fair value is derived from quoted price (unadjusted) in active markets for identical financial assets or liabilities that the Group can assess at the measurement date.

Level 2 fair value

Level 2 fair value is estimated using inputs other than quoted prices included within Level 1 that are observable for the financial assets or liabilities, either directly or indirectly.

Non-derivative financial liabilities

Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the end of the reporting period. The market rate of interest is determined by reference to similar borrowing arrangements and lease agreements.

Transfer between Level 1 and Level 2 fair values

There has been no transfer between Level 1 and 2 fair values during the financial year (2018: No transfer in either directions).

Level 3 fair value Level 3 fair value is estimated using unobservable inputs for the financial assets or liabilities.

The valuation technique in determining the fair values disclosed in Level 3 for the financial instruments not carried at fair value ( sukuk-secured and finance lease liabilities) is discounted cash flow, using a rate based on the bank’s financing rate at the end of the reporting period.

Valuation processes applied by the Group for the Level 3 fair value The Group has an established control framework in respect to the measurement of fair value of financial

instruments. The Chief Financial Officer regularly reviews significant unobservable inputs and valuation adjustments.



26. CAPITAL MANAGEMENT

The Group’s and the Company’s objectives when managing capital are to maintain a strong capital base and safeguard the Group’s and the Company’s ability to continue as a going-concern, so as to maintain investor, creditor and market confidence and to sustain future development of the business.

There were no changes in the Group’s approach to capital management during the financial year.

The Company is required to comply with the disclosure and necessary capital requirement as prescribe in the Main Market Listing Requirements of Bursa Malaysia.

27. CAPITAL COMMITMENT

Group

2019 2018

RM RM

Property, plant and equipment

Authorised and contracted for 13,000,000 -

The capital commitment consist of costs to be incurred for the development of the slipway at the Group’s fabrication facility at Pulau Indah, Selangor.

28. MATERIAL LITIGATION

Save as disclosed below, the Group is not engaged in any material litigation, claims or arbitration, either as plaintiff or defendant, which has or will have a material effect on the financial position or the business, and the Directors are not aware of any proceedings, pending or threatened, against the Group and/or any of the Group’s subsidiaries or of any facts likely to give rise to any proceedings which might materially affect the position or business of the Group:

(a) Globalmariner Offshore Services Sdn. Bhd. vs TH Heavy Engineering Berhad & Floatech (L) Ltd. (Civil Suit: WA-22NCC-374-11/2016 was filed at Kuala Lumpur High Court) (“Suit 374”)

Globalmariner Offshore Services Sdn. Bhd. (“GMOS”) brought an action in the Kuala Lumpur High Court against the Company claiming that they are entitled to purchase THHE’s 80% shareholding in Floatech (L) Ltd for RM 1.00 on 31 October 2016 pursuant to their claim that THHE is insolvent due to several winding up petitions being presented against THHE at the Kuala Lumpur High Court by its creditors.

GMOS claims that according to the Shareholders Agreement and Share Sale Agreement entered into between GMOS and THHE, it is entitled to issue its Default Notice dated 20 July 2016 and Default Sale Notice dated 29 July 2016 and subsequently be entitled to the option of purchasing all of THHE’s shares in Floatech (L) Ltd.

On 23 May 2018, the Company filed its defence and counterclaim and served the same on GMOS, Zahar Mohd Hashim Zainuddin, Abdul Rahman Bin Mohamed Shariff, Nor Badli Munawir Bin Mohamad Alias Lafti, Globalmariner Offshore Services (L) Ltd and Dynac Sdn. Bhd.



28. MATERIAL LITIGATION (CONTINUED)

(a) Globalmariner Offshore Services Sdn. Bhd. vs TH Heavy Engineering Berhad & Floatech (L) Ltd. (Civil Suit: WA-22NCC-374-11/2016 was filed at Kuala Lumpur High Court) (“Suit 374”) (continued)

Both GMOS’s action and THHE’s counterclaim are currently fixed for full trial from April 2020 until January 2021. The THHE’s Solicitors, Izral Partnership, are of the opinion that the chances of a successful defence and proving the counterclaim are good.

(b) Drydocks World – Dubai LLC vs Floatech (L) Ltd. (Dubai Court of First Instance, Number 63346/2019)

Floatech (L) Limited (“Floatech”), a 80% owned subsidiary of the Company, had received a Writ of Summons filed by Drydocks World – Dubai LLC (“DWD”) on 23 April 2019 in the Dubai Courts of First Instance (“Dubai Court”). A copy was served via email to a third party on 29 April 2019.

On 21 January 2020, the Dubai Court rendered its judgement against Floatech. The court ruled that Floatech shall pay the sum of USD 6,250,000 equivalent to AED 22,937,500 to DWD without legal or agreeable interests or any other forms of fees that should be charged to the vessel till the date of 30 April 2020. Berthing charges shall be running after the said date.

Floatech does not expect to incur any additional losses arising from the Judgment; save for the legal fees that were incurred, as the amount ruled by the Dubai Court has been accrued for.

(c) THHE Fabricators Sdn. Bhd. vs Murphy Sarawak Oil Co. Ltd. (Arbitration Proceedings)

THHE Fabricators Sdn. Bhd. (“THFSB”) is claiming a sum of RM112,744,482.05 pursuant to a Change Order Proposal under the EPCC Contract with Murphy Sarawak Oil Company Limited (“Murphy”) made effective on 1 April 2013 (“EPCC Contract”) for additional costs incurred by THFSB. The parties are currently in negotiation to reach an amicable settlement.

(d) Globalmariner Offshore Services Sdn. Bhd. vs TH Heavy Engineering Berhad & Floatech (L) Ltd. (Suit No. WA-22NCVC-150-03/2020, Kuala Lumpur High Court)

The Company and its subsidiary, Floatech (L) Ltd had received a Writ of Summons and Statement of Claim by GMOS on 4 March 2020 at its registered office as detailed below:

GMOS is claiming from the Company and Floatech and 9 others, jointly and severally, the following:- i. RM74,800,000.00; ii. A declaration that the approval of the court obtained on 6 February 2018 for the Company’s Scheme

of Arrangement was by reason of fraud on the court allegedly committed by the Defendants or by the Company;

iii. An order that the order dated 6 February 2018 granting approval to the Company’s Scheme of Arrangement be set aside in its entirety and the consequential orders be given;

iv. An order that the novation of the JX Nippon Contract from the Company to Yinson Energy Sdn. Bhd. be set aside;

v. General damages to be assessed pursuant to the alleged Defendants’ fraudulent conduct as pleaded in the Statement of Claim;

vi. Punitive and/or exemplary damages against all the Defendants to be assessed pursuant to the respective defendants’ alleged fraudulent conduct as pleaded in the Statement of Claim;

vii. Aggravated damages to be assessed;viii. Interest of 5% per annum on the sum of RM74,800,000.00 from 18 February 2014 until the date of the

judgment herein.



28. MATERIAL LITIGATION (CONTINUED)

(d) Globalmariner Offshore Services Sdn. Bhd. vs TH Heavy Engineering Berhad & Floatech (L) Ltd. (Suit No. WA-22NCVC-150-03/2020, Kuala Lumpur High Court) (continued)

GMOS is claiming from the Company and Floatech and 9 others, jointly and severally, the following (continued):-

ix. Interest of 5% per annum on the judgment sum from the date of judgement until the date of full realisation of the judgment sum.

x. Costs. xi. Further and other relief as against either or all the Defendants which the Court deems fit and proper.

THHE has appointed a legal firm to action its behalf. As at 31 May 2020, THHE and Floatech’s application to strike out GMOS’s claim have been filed. The hearing for the striking out application is fixed on 1 October 2020. Upon consulting its solicitors, THHE and Floatech are of the view that they stand a fair chance of succeeding in their application to strike out GMOS’s claim.

29. CONTINGENCIES

Other than material litigations as disclosed in Note 28, contingent liabilities are as follows:

The Group

2019 2018

RM RM

Potential liabilities payables to various creditors 37,521,854 32,251,896

Bank guarantee pledged to local license bank 4,713,414 1,886,086

The Company

2019 2018

RM RM

Potential liabilities payables to various creditors 32,751,854 26,424,395

Bank guarantee pledged to local license bank 4,682,834 33,935

Pursuant to the Scheme, all claims and pending litigation proceedings are to be withdrawn or terminated as the debts are deemed to have been compromised. Should there be any disputes or differences that may arise between the Scheme Companies and the Scheme Creditors with regards to the claims which are unable to be settled amicably, shall be referred to and settled by arbitration. The award of the arbitrator shall be final and binding. The potential liabilities payables to various creditors was based on the claim made during the proof of debt exercise under the Scheme. None of these claims has been referred to arbitration.



30. RELATED PARTY TRANSACTIONS

Identity of related parties

For the purposes of these financial statements, parties are considered to be related to the Group or the Company if the Group or the Company has the ability, directly or indirectly, to control or jointly control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group or the Company and the party are subject to common control or common significant influence. Related parties may be individuals or other entities.

Related parties also include key management personnel defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group either directly or indirectly. The key management personnel include all the Directors of the Group, and certain members of senior management of the Group.

The Company has related party relationships with its subsidiaries and key management personnel (Notes 7 and 21).

Significant related party transactions

The significant related party transactions of the Company, other than key management personnel compensation which is disclosed in Note 21, are as follows:

Transaction amounts for theyear ended 31 December

2019 2018

RM RM

Subsidiaries

Management fees receivables 6,262,772 6,914,400

Project cost payable 9,960,591 -

Advances to subsidiaries, net 14,900,000 60,025,373

Significant related party balances related to the above transactions are disclosed in Note 10.

31. SIGNIFICANT AND SUBSEQUENT EVENTS

(a) On 13 June 2019, the Company had been awarded by Afcons Infrastructure Limited of India a sub-contract for the Fabrication of Piles (“Sub-Contract”) in relation to the Offshore Process Platform Project (CPP & LQUP) for the development of KG-DWN-98/2 NEP Block offshore India (“Project”).

Under the Sub-Contract, the Company is to undertake the fabrication of piles for offshore jackets in relation to the abovementioned Project which are to be located off the east coast of India. The total value of the Sub-Contract is approximately USD9.7 million (or approximately RM39.8 million).

(b) On 13 March 2020, the Company had entered into a non-binding memorandum of understanding (“MOU”) with ICE Petroleum Ventures Sdn. Bhd. (“Vendor”) in relation to the acquisition of 12.9 million ordinary shares in ICE Petroleum Engineering Sdn. Bhd. (“ICE”), representing the entire equity interest in ICE by the Company from the Vendor (“Proposed acquisition”). ICE is principally engaged in mechanical engineering works and services, plant fabrication and installation for the oil, gas and petrochemical industries. Subject to the outcome of the due diligence exercises currently being undertaken, both parties irrevocably confirm and agree to enter into an agreement within 4 months from the date of the MOU or such other extended period to be mutually agreed in writing by the parties (“Term”) within 14 days prior to the expiry of the Term.




31. SIGNIFICANT AND SUBSEQUENT EVENTS (CONTINUED)

(c) On 22 April 2020, the Company submitted an application for extension of time of 6 months from 23 April 2020 to 22 October 2020 for the Company to submit the regularisation plan (“EOT Application”) to Bursa Malaysia and/or other the relevant regulatory authorities.

(d) The Malaysian Government announced a nationwide Movement Control Order (“MCO”) which took effect between 18 March 2020 and 12 May 2020, to curb the spread of Coronavirus disease 2019 (“COVID-19”). In compliance with the MCO, the Group and Company had temporarily suspended their daily operations. The Group and Company had filed extension of time citing “force majeure” event to both of their main customers. On 7 June 2020, a Recovery MCO (“RMCO”) was announced effective starting 10 June 2020 to 31 August 2020. The RMCO allows the Group and the Company to resume their operations under strict controls and restrictions.

The continued existence of the COVID-19 pandemic may affect the Group and Company’s operations and those of third parties on which the Group and the Company relies and the impact of the COVID-19 pandemic is highly uncertain and subject to change. However, these effects would have a material impact on the Group’s and the Company’s liquidity, capital resources, operations and business and those of the third parties on which we rely.

32. BASIS FOR DISCLAIMER OF OPINION ON THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018

The extracts of disclaimer opinion in the financial statements for the financial year ended 31 December 2018 is as follows: (a) multiple uncertainties that cast significant doubt on the ability of the Company and the Group to continue as

a going concern;

(b) inability to ascertain the recoverability of an amount due from contract customers as 31 December 2018 of RM38,671,373;

(c) inability to ascertain the recoverability of investment in subsidiaries as 31 December 2018 of RM267,330,000; and

(d) inability to ascertain the recoverability of an amount due from subsidiaries as 31 December 2018 of RM29,574,121.


STATEMENT BY DIRECTORSPURSUANT TO SECTION 251(2) OF THE COMPANIES ACT 2016

In the opinion of the Directors, the accompanying financial statements are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as of 31 December 2019 and of their financial performance and cash flows for the financial year then ended.

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

________________________________________________ENCIK IZAD SHAHADI BIN MOHD SALLEHUDDIN

________________________________________________DATO’ HAJI GHAZALI BIN AWANG



STATUTORY DECLARATION PURSUANT TO SECTION 251(1)(B) OF THE COMPANIES ACT 2016

I, SUHAIMI BIN BADRUL JAMIL, the officer primarily responsible for the financial management of TH HEAVY ENGINEERING BERHAD, do solemnly and sincerely declare that the accompany financial statements are, to the best of my knowledge and belief, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by the above named SUHAIMI BIN BADRUL JAMIL at Kuala Lumpur in the Federal Territory on 25 June 2020.

____________________________________SUHAIMI BIN BADRUL JAMIL(MIA 6123)

Before me:

____________________________________COMMISSIONER FOR OATHS


LIST OFPROPERTIES

The property of the group as at 31 December 2019 is as follows:

Title/Location

Description and Existing Use

Land Area/Built-Up

Area

Approximate Age of

Building Tenure

Audited Net Book Value

at 31.12.2019Date of

Acquisition

Pulau Indah Integrated Fabrication Yard HS (D) 70909, PT No. 90866 Section 1, Mukim and District of Klang State of Selangor

Heavy Engineering/ Offshore Oil and Gas Fabrication Facility

56.79 acres

16 years Leasehold (99 years)

RM129,437,376 10-Aug-12


ANALYSIS OFSHAREHOLDINGSAS AT 1 JUNE 2020

Total number of issued shares : (a) 1,121,350,796 Ordinary Shares (b) 1,099,726,394 Islamic Irredeemable Convertible Preference Shares (“ICPS-i”) Number of shareholders : (a) 23,804 (Ordinary shares) (b) 313 (ICPS-i) Voting Rights : (a) One vote per ordinary share held (b) The ICPS-i does not carry any voting right except in circumstances set out in

the Company’s Constitution

(A) ORDINARY SHARES

ANALYSIS BY SIZE OF SHAREHOLDINGSas per the Record of Depositors

Size of Holdings No. of Holders % No. of Ordinary Shares %

1 - 99 5,905 24.81 424,281 0.04

100 - 1,000 7,797 32.76 2,703,443 0.24

1,001 - 10,000 4,985 20.94 26,902,422 2.40

10,001 - 100,000 4,038 16.96 154,219,041 13.75

100,001 - 56,067,538 * 1,078 4.53 602,939,502 53.77

56,067,539 and above ** 1 0.00 334,162,107 29.80

Total: 23,804 100.00 1,121,350,796 100.00

Notes:-* Less than 5% of issued shares** 5% and above of issued shares

DIRECTORS’ SHAREHOLDINGSin the Company (including number and percentage) based on the Register of Directors’ Shareholdings as at 1 June 2020

Name of DirectorsNo. of Ordinary Shares

Direct Interest % Indirect Interest %

Izad Shahadi Bin Mohd Sallehuddin - - - -

Ahmad Al Farouk Bin Ahmad Kamal - - - -

Tuan Haji Mohd Khalid Bin Mohamed - - - -

Dato’ Haji Ghazali Bin Awang 100,000 0.009 - -

Too Kok Leng - - - -

Dr. Ir. Samad Bin Solbai - - - -

Dato’ Indera Dr. Haji Md. Yusop Bin Omar - - - -


ANALYSIS OFSHAREHOLDINGS

AS AT 1 JUNE 2020

(A) ORDINARY SHARES (CONT’D)

SUBSTANTIAL SHAREHOLDERbased on the Register of Substantial Shareholders as at 1 June 2020

No. NameNo. of Ordinary Shares


1. Urusharta Jamaah Sdn. Bhd. 334,162,107 29.80 - -

SHAREHOLDINGS OF CHIEF EXECUTIVEof the Company (including number and percentage) as at 1 June 2020

Name of Chief ExecutiveNo. of Ordinary Shares


Suhaimi Bin Badrul Jamil 1,000 ^ - -

Remark:^ Negligible

TOP 30 SECURITIES ACCOUNT HOLDERS OF ORDINARY SHARESas per Record of Depositors as at 1 June 2020

No. Name No. of Ordinary Shares

%

1. Citigroup Nominees (Tempatan) Sdn. Bhd. - Urusharta Jamaah Sdn. Bhd.

334,162,107 29.80

2. Mohamed Faroz Bin Mohamed Jakel 27,698,000 2.47

3. Vertical Source Sdn. Bhd. 15,484,000 1.38

4. Yoong Ah Fong 10,437,000 0.93

5. Madhavankutty A/L Kumaran 8,660,000 0.77

6. Chin Chin Seong 6,747,000 0.60

7. Chen Boon Cheong 6,450,000 0.58

8. Yap Swee Sang 6,258,300 0.56

9. RHB Nominees (Tempatan) Sdn. Bhd.- Pledged Securities Account for Mohamed Faroz Bin Mohamed Jakel

6,000,000 0.54

10. TA Nominees (Tempatan) Sdn. Bhd.- Pledged Securities Account for Ong Eng Taik

6,000,000 0.54

11. HSBC Nominees (Asing) Sdn. Bhd.Exempt AN for Bank Julius Baer & Co. Ltd. (Singapore Bch)

5,800,000 0.52

12. Azman Shah Bin Khalidun 5,500,000 0.49



No. Name No. of Ordinary Shares

%

13. Kenanga Nominees (Tempatan) Sdn. Bhd.- Shamsulanuar Bin Salim

5,500,000 0.49

14. HLIB Nominees (Tempatan) Sdn. Bhd.- Pledged Securities Account for Siaw Kok Tong

5,000,000 0.45

15. HLIB Nominees (Tempatan) Sdn. Bhd.- Pledged Securities Account for Quek Kon Sean

5,000,000 0.45

16. Maybank Securities Nominees (Tempatan) Sdn. Bhd.- Pledged Securities Account for Zulkifli Bin Ismail

4,844,400 0.43

17. Pelaburan Mara Berhad 4,517,000 0.40

18. CIMB Group Nominees (Asing) Sdn. Bhd.- Exempt AN for DBS Bank Ltd.

4,490,000 0.40

19. Chai Moy Lan 4,380,000 0.39

20. Lim Keng Chuan 4,300,000 0.38

21. Mohamed Izani Bin Mohamed Jakel 4,300,000 0.38

22. See Hoon Yew 4,000,000 0.36

23. RHB Nominees (Tempatan) Sdn. Bhd.- Soo Chew Sheng

3,727,700 0.33

24. Muhammad Nasir Bin Hanifah 3,697,800 0.33

25. RHB Capital Nominees (Tempatan) Sdn. Bhd.- Baskaran A/L Govinda Nair

3,641,100 0.32

26. Kenanga Nominees (Tempatan) Sdn. Bhd.- Rakuten Trade Sdn. Bhd. for Wong Chen Hoong

3,624,000 0.32

27. Leong Mei Leng 3,500,000 0.31

28. Ng Chai Go 3,500,000 0.31

29. Ong Chong Tek 3,455,000 0.31

30. Marina Binti Abdul Latiff 3,444,000 0.31

Total: 514,117,407 45.85

(A) ORDINARY SHARES (CONT’D)

TOP 30 SECURITIES ACCOUNT HOLDERS OF ORDINARY SHARESas per Record of Depositors as at 1 June 2020 (cont’d)


ANALYSIS OFSHAREHOLDINGS

AS AT 1 JUNE 2020

(B) ICPS-i

ANALYSIS BY SIZE OF ICPS-i HOLDERSas per the Record of Depositors

Size of Holdings No. of Holders % No. of ICPS-i %

1 - 99 6 1.92 406 0.00

100 - 1,000 188 60.06 40,197 0.00

1,001 - 10,000 66 21.09 226,715 0.02

10,001 - 100,000 46 14.70 1,133,757 0.11

100,001 - 54,986,318 * 6 1.92 1,096,584 0.10

54,986,319 and above ** 1 0.31 1,097,228,735 99.77

Total: 313 100.00 1,099,726,394 100.00

Notes:-* Less than 5% of issued ICPS-i holdings** 5% and above of issued ICPS-i holdings

TOP 30 ICPS-i HOLDERSas per Record of Depositors as at 1 June 2020

No. Name No. of ICPS-i %

1. Citigroup Nominees (Tempatan) Sdn. Bhd.- Urusharta Jamaah Sdn. Bhd.

1,097,228,735 99.77

2. HLB Nominees (Asing) Sdn. Bhd.- Pledged Securities Account for Glory Link Management Limited

426,666 0.04

3. RHB Nominees (Asing) Sdn. Bhd.- Exempt AN for RHB Securities Singapore Pte. Ltd.

170,666 0.02

4. Lim Thiam Sang 165,920 0.02

5. Poh Siew Kuan 120,000 0.01

6. HLB Nominees (Tempatan) Sdn. Bhd.- Pledged Securities Account for Kee Boon Seng

106,666 0.01

7. Nigel Loh Kwong Weng 106,666 0.01

8. Chew Tatt Aik 74,133 0.01

9. Florence Wong Siew Mei 65,000 0.01

10. Syed Hamid Bin Haron Alhabshi 62,720 0.01

11. Malacca Equity Nominees (Tempatan) Sdn. Bhd.- Exempt AN for Phillip Capital Management Sdn. Bhd.

56,000 0.01

12. Rosli Bin Abu Bakar 54,400 0.00

13. Maybank Securities Nominees (Tempatan) Sdn. Bhd.- Pledged Securities Account for Azmil Khalili Bin Khalid

53,333 0.00



No. Name No. of ICPS-i %

14. AmSec Nominees (Tempatan) Sdn. Bhd.- Pledged Securities Account for Chew Chong Kheng

53,233 0.00

15. Tan Joa-Quim 45,866 0.00

16. Leo Jeok Kwi 44,800 0.00

17. Chew Tatt Aik 37,760 0.00

18. Ong Lea Ping 34,133 0.00

19. Ong Teng Hor 32,000 0.00

20. Liew Whai Hoe 25,000 0.00

21. Tan Jayne Qi 23,900 0.00

22. Hashim Bin Sharif 23,893 0.00

23. Yap Lai Ping 22,000 0.00

24. Sih Lai Peng 21,500 0.00

25. Leong Mun Siew 21,333 0.00

26. Liew Han Huei 20,000 0.00

27. Nik Hazamuddin Bin Nik Hasan 18,400 0.00

28. Hng Lee Moy 17,920 0.00

29. Chau Su Jin 16,000 0.00

30. Hisham Bin Abdul Rahim 16,000 0.00

Total: 1,099,164,643 99.92

(B) ICPS-i (CONT’D)

TOP 30 ICPS-i HOLDERSas per Record of Depositors as at 1 June 2020 (cont’d)


NOTICE OF 16TH

ANNUAL GENERAL MEETING

AGENDA

1. To receive the Audited Financial Statements for the financial year ended 31 December 2019 together with the Reports of the Directors and the Auditors thereon.

Please refer to Explanatory Note (A)

2. To approve the payment of Directors’ fees amounting to RM461,000 for the Non-Executive Directors of the Company and its subsidiaries in respect of the financial year ended 31 December 2019.

OrdinaryResolution 1

3. To approve the Directors’ benefits payable to the Directors of the Company and its subsidiaries with effect from a day after the Sixteenth Annual General Meeting until the next Annual General Meeting of the Company in year 2021.


4. To re-elect Dr. Ir. Samad Bin Solbai who is retiring pursuant to Clause 123 of the Company’s Constitution and being eligible, has offered himself for re-election.


5. To re-elect Dato’ Indera Dr. Haji Md Yusop Bin Omar who is retiring pursuant to Clause 123 of the Company’s Constitution and being eligible, has offered himself for re-election.


6. To re-elect Encik Izad Shahadi Bin Mohd Sallehuddin who is retiring pursuant to Clause 122 of the Company’s Constitution and being eligible, has offered himself for re-election.


7. To re-elect Encik Ahmad Al Farouk Bin Ahmad Kamal who is retiring pursuant to Clause 122 of the Company’s Constitution and being eligible, has offered himself for re-election.


8. To re-elect Tuan Haji Mohd Khalid Bin Mohamed who is retiring pursuant to Clause 122 of the Company’s Constitution and being eligible, has offered himself for re-election.


9. To re-appoint Messrs. Deloitte PLT as Auditors of the Company until the conclusion of the next AGM and to authorise the Directors to fix their remuneration.


NOTICE IS HEREBY GIVEN that the SIXTEENTH ANNUAL GENERAL MEETING of TH Heavy Engineering Berhad (“Company”) will be held at Platinum Ballroom, Level 2, Novotel Kuala Lumpur City Centre, 2 Jalan Kia Peng, 50450 Kuala Lumpur, Wilayah Persekutuan on Friday, 14 August 2020 at 10:00 a.m. for the following purposes:-


As Special Business

To consider and, if thought fit, to pass the following resolutions with or without any modification:-

10. AUTHORITY TO ISSUE SHARES PURSUANT TO THE COMPANIES ACT 2016 “THAT subject always to the Companies Act 2016 (“the Act”), the Constitution of the

Company and the approvals from Bursa Malaysia Securities Berhad (“Bursa Securities”) and any other relevant governmental and/or regulatory authorities, the Directors be and are hereby empowered pursuant to the Act, to issue and allot shares in the capital of the Company from time to time at such price and upon such terms and conditions, for such purposes and to such person or persons whomsoever the Directors may in their absolute discretion deem fit provided always that the aggregate number of shares issued pursuant to this Resolution does not exceed twenty per centum (20%) of the total number of issued shares (excluding treasury shares) of the Company for the time being (hereinafter referred to as the “20% General Mandate”) as empowered by Bursa Securities pursuant to Bursa Malaysia Berhad’s letter dated 16 April 2020 to grant additional temporary relief measures to listed issuers;

AND THAT the Directors be and are empowered to obtain the approval for the listing of and quotation for the additional shares so be issued pursuant to the 20% General Mandate on Bursa Securities AND be hereby authorised to do all such acts and things including executing all relevant documents as he/they may consider expedient or necessary to complete and give full effect to the 20% General Mandate;

AND FURTHER THAT such authority shall commence immediately upon the passing of this resolution and continue to be in force until the conclusion of the next Annual General Meeting of the Company.”


11. RETENTION OF DR. IR. SAMAD BIN SOLBAI AS AN INDEPENDENT NON-EXECUTIVE DIRECTOR


“THAT subject to passing of Ordinary Resolution 3, Dr. Ir. Samad Bin Solbai who would have served as an Independent Non-Executive Director of the Company for a cumulative term of nine (9) years from 25 May 2021 onwards, be and is hereby retained as an Independent Non-Executive Director of the Company pursuant to the Malaysian Code on Corporate Governance.”

12 RETENTION OF DATO’ INDERA DR. HAJI MD. YUSOP BIN OMAR AS AN INDEPENDENT NON-EXECUTIVE DIRECTOR

“THAT subject to passing of Ordinary Resolution 4, Dato’ Indera Dr. Haji Md. Yusop Bin Omar who would have served as an Independent Non-Executive Director of the Company for a cumulative term of nine (9) years from 25 May 2021 onwards, be and is hereby retained as an Independent Non-Executive Director of the Company pursuant to the Malaysian Code on Corporate Governance.”


NOTICE OF 16TH



13. RETENTION OF MR. TOO KOK LENG AS AN INDEPENDENT NON-EXECUTIVE DIRECTOR

“THAT Mr. Too Kok Leng who has served as an Independent Non-Executive Director of the Company for a cumulative term of more than twelve (12) years, be and is hereby retained as an Independent Non-Executive Director of the Company pursuant to the Malaysian Code on Corporate Governance.”


14. To transact any other business of which due notice shall have been given.

BY ORDER OF THE BOARD

CHUA SIEW CHUAN (SSM PC No. 201908002648 | MAICSA 0777689)TAN LEY THENG (SSM PC No. 201908001685 | MAICSA 7030358)Company Secretaries

Kuala Lumpur30 June 2020

EXPLANATORY NOTE A:-

Audited Financial Statements for the financial year ended 31 December 2019

This Agenda item is meant for discussion only, as the provision of Section 340(1)(a) of the Companies Act 2016 does not require a formal approval for the Audited Financial Statements from the shareholders. Therefore, this Agenda item is not put forward for voting.

EXPLANATORY NOTES TO ORDINARY AND SPECIAL BUSINESS:-

(1) Ordinary Resolution 1 - Payment of Directors’ Fees

The proposed payment of Directors’ fees to the Non-Executive Directors of the Company and its subsidiaries in respect of the financial year ended 31 December 2019 shall be up to RM461,000 only, comprises the following:-

Entity Chairman Non-Executive Directors

The Company RM80,000 per annum

RM60,000 per person per annum

Active Subsidiaries RM40,000per annum

RM30,000Per person per annum

* The above proposed fees remain unchanged as per financial year ended 31 December 2018.

NOTICE OF 16TH



(2) Ordinary Resolution 2 - Approval of Directors’ Benefits

The Company wishes to seek its shareholders’ approval on the Directors’ benefits payable to the Non-Executive Directors of the Company and its subsidiaries with effect from a day after the Sixteenth Annual General Meeting (“AGM”) until the next AGM of the Company in year 2021 (“Period”). The Directors’ benefits payable for the Period comprise solely meeting allowance, which will only be accorded based on actual attendance of meetings by the Directors:-

Benefits Fees (RM)

The Company

Board Meeting Allowance- Chairman- Directors

1,000 per meeting1,000 per meeting

Board Sub-Committees’ Meeting Allowance - Chairman- Directors

500 per meeting500 per meeting

Active Subsidiaries

Board Meeting Allowance 750 per meeting

*The above proposed fees remain unchanged as per financial year ended 31 December 2018.

(3) Ordinary Resolution 9 - Authority to Issue Shares

The Company wishes to renew the mandate on the authority to issue shares pursuant to the Act at the Sixteenth (“16th”) AGM of the Company (hereinafter referred to as the “General Mandate”).

The Company had been granted a general mandate by its shareholders at the last AGM of the Company held on 19 June 2019 (hereinafter referred to as the “Previous Mandate”).

As part of the initiative from Bursa Securities to aid and facilitate listed issuers in sustaining their business or easing their compliance with Bursa Securities’ rules, amid the unprecedented uncertainty surrounding the recovery of the COVID-19 outbreak and Movement Control Order imposed by the Government, Bursa Securities has via its letter dated 16 April 2020 granted several additional relief measures to listed issuers, amongst others, listed issuers are allowed to seek a higher general mandate under Paragraph 6.03 of Main Market Listing Requirements of not more than 20% of the total number of issued shares (excluding treasury shares) for issue of new securities (“20% General Mandate”).

This 20% General Mandate may be utilised by listed issuer to issue new securities until 31 December 2021 and thereafter, the 10% general mandate will be reinstated.

The Board believes that the Company requires a flexible and readily available method of raising capital, to allow the Company to capture suitable prospective investment opportunities in a timely manner.

The Board, having considered the current economic climate arising from the global COVID-19 pandemic and future financial needs of the Group to sustain the business, is of the opinion that this 20% General Mandate is in the best interests of the Company and its shareholders, on the following basis:-

• the proposed 20% General Mandate would provide the Company and its subsidiaries with financial flexibility to raise capital expeditiously for its operations, future expansion and business development;

NOTICE OF 16TH



• the proposed 20% General Mandate would allow the Company to raise equity capital promptly rather than the more costly and time-consuming process by obtaining shareholders’ approval in a general meeting should the need for capital arise;

• other financing alternatives such as debt financing may incur interest burden to the Company and its subsidiaries; and

• the proposed 20% General Mandate provides the Company with the capability to capture any capital raising and/or prospective investment opportunities if and when they are identified.

This 20% General Mandate, if passed, will provide flexibility for the Company and empower the Directors of the Company to issue and allot shares at any time to such persons in their absolute discretion. This authority unless revoked or varied by the Company in general meeting, will expire at the next AGM. The proceeds raised from the 20% General Mandate will provide flexibility to the Company for any possible fund-raising activities, including but not limited to further placing of shares, for purpose of funding future investment project(s), working capital and/ or acquisitions.

(4) Ordinary Resolutions 10 and 11 - Retention of Independent Non-Executive Directors

Both Dr. Ir. Samad Bin Solbai and Dato’ Indera Dr. Haji Md. Yusop Bin Omar were appointed as Independent Non-Executive Directors of the Company on 25 May 2012. Therefore, they would have on 25 May 2021, served the Board in that capacity for a cumulative term of nine (9) years.

In accordance with the Malaysian Code on Corporate Governance, prior approval should be obtained from the shareholders at the 16th AGM, to enable Dr. Ir. Samad Bin Solbai and Dato’ Indera Dr. Haji Md. Yusop Bin Omar to continue in office as Independent Non-Executive Directors before they reach the nine (9) years term limit on 25 May 2021.

The Board via the Nomination Committee, after having assessed of the independence of Dr. Ir. Samad Bin Solbai and Dato’ Indera Dr. Haji Md. Yusop Bin Omar, regards them to be independent. The Board, therefore, recommends that they should be retained as Independent Non-Executive Directors of the Company based on the following justifications:-

• They have fulfilled the criteria under the definition of an Independent Director pursuant to the Main Market Listing Requirements of Bursa Securities;

• They are able to exercise independent judgement and act in the best interests of the Company;

• There is no potential conflict of interest that they could have with the Company and/or its subsidiaries; and

• There are significant advantages to be gained from a long-serving Independent Director as they have many years of experience with incumbent knowledge of the Company and the Group’s activities and corporate history, and have provided invaluable contributions to the Board in their roles as Independent Non-Executive Directors.

(5) Ordinary Resolution 12 - Retention of Independent Non-Executive Director

Mr. Too Kok Leng was appointed as an Independent Non-Executive Director of the Company on 28 January 2008 and therefore, has served in that capacity for a cumulative term of more than twelve (12) years.

NOTICE OF 16TH



The Board of Directors, via the Nomination Committee, after having assessed the independence of Mr. Too Kok Leng, regards him to be independent based amongst others, the following justifications and recommends that Mr. Too Kok Leng be retained as Independent Non-Executive Director subject to the approval from the shareholders of the Company through a two-tier voting process as described in the Guidance to Practice 4.2 of the Malaysian Code on Corporate Governance:-

• He has fulfilled the criteria under the definition of an Independent Director pursuant to the Main Market Listing Requirements of Bursa Securities;

• He is able to exercise independent judgement and act in the best interests of the Company;

• There is no potential conflict of interest that he could have with the Company and/or its subsidiaries; and

• There are significant advantages to be gained from a long-serving Independent Director as he has many years of experience with incumbent knowledge of the Company and the Group’s activities and corporate history, and has provided invaluable contributions to the Board in his role as an Independent Non-Executive Director.

Notes:-

(1) In respect of deposited securities, only members whose names appear in the Record of Depositors on 7 August 2020 shall be eligible to attend the Meeting.

(2) A member entitled to attend and vote at the Meeting, shall be entitled to appoint more than one (1) proxy to attend, participate, speak and vote at the same Meeting. Where a member appoints more than one (1) proxy to attend and vote at the Meeting, he or she specifies the proportion of his or her shareholdings to be represented by each proxy, failing which the appointment shall be invalid.

(3) A proxy needs not be a member of the Company. There shall be no restriction as to the qualification of the proxy. A proxy appointed to attend and vote at the Meeting of the Company shall have the same rights as the members to attend, participate, speak and vote at the Meeting and upon appointment a proxy shall be deemed to confer authority to demand or join in demanding a poll.

(4) Where a member of the company is an authorised nominee as defined under the Securities Industry (Central Depository) Act 1991, it may appoint at least one (1) proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.

(5) Where a member of the Company is an exempt authorised nominee which holds Deposited Securities in the Company for multiple beneficial owners in one (1) securities account (“omnibus account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds.

(6) The instrument appointing a proxy shall be in writing under the hand of the member or his / her attorney duly authorised in writing or, if the member is a corporation, either under the corporation’s seal or under the hand of an officer or attorney duly authorised.

(7) The instrument appointing a proxy shall be deposited at the office of the Company’s Share Registrar at Securities Services (Holdings) Sdn. Bhd., Level 7, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, Damansara Heights, 50490 Kuala Lumpur, Wilayah Persekutuan, not less than forty-eight (48) hours before the time appointed for holding the Meeting or at any adjournment thereof.

NOTICE OF 16TH


STATEMENT ACCOMPANYINGNOTICE OF ANNUAL GENERAL MEETING(PURSUANT TO PARAGRAPH 8.27(2) OF THE MAIN MARKET LISTING REQUIREMENTSOF BURSA MALAYSIA SECURITIES BERHAD)

There were no Directors standing for election at the forthcoming Sixteenth Annual General Meeting of the Company.

INFORMATION ON AGM

1. Date, Time and Venue of AGM

Date : Friday, 14 August 2020 Time : 10:00 a.m. Venue : Platinum Ballroom, Level 2, Novotel Kuala Lumpur City Centre, 2 Jalan Kia Peng, 50450 Kuala Lumpur, Wilayah

Persekutuan

2. Entitlement to Attend

In respect of deposited securities, only members whose names appear in the Record of Depositors on 7 August 2020 (General Meeting Record of Depositors) shall be eligible to attend the Meeting.

3. Lodgement of Proxy Form of AGM

If you are unable to attend the AGM and wish to appoint a proxy to vote on your behalf, you may deposit your Proxy Form at the Share Registrar’s office of the Company, Securities Services (Holdings) Sdn. Bhd. at Level 7, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, Damansara Heights, 50490 Kuala Lumpur, Malaysia in accordance with the notes and instructions printed therein, not later than forty-eight (48) hours before the AGM i.e. latest by Wednesday, 12 August 2020 at 10:00 a.m.

4. No Door Gift and Food

No door gift and food will be provided.

GUIDANCE FOR ATTENDANCE OF AGM

In view of the COVID-19 outbreak, your safety remains our utmost priority. The 16th AGM of the Company will be conducted in accordance with the General Standard Operating Procedures to Government and Private Sector (“General SOP”) issued by the Malaysian National Security Council on 25 June 2020 and Guidance Note and FAQs on the Conduct of General Meetings for Listed Issuers issued by the Securities Commission Malaysia on 18 April 2020 and subsequently revised on 24 June 2020 (“SC Guidance Note & FAQs”).

The Company would be implementing the following in holding its AGM:-

1. Prior Registration of Attendance

Shareholders who wish to attend the AGM in person are required to register ahead of the Meeting and provide the following details by email to [email protected], by 7 August 2020 before the AGM:-

a) Company name b) Full name c) Identity card no./Passport no. d) CDS account number e) Mobile phone number

After verification of your registration against the Record of Depositors as at 7 August 2020, the Company’s Share Registrar will send you an e-mail on or after 12 August 2020 to approve or reject your registration to attend physically at the Meeting Venue.

This is to allow the Company to make the necessary arrangement at the AGM day including in relation to the logistics.

2. General SOP and Precautionary Measures at the AGM

Pursuant to SC Guidance Note & FAQs, the Company will implement the following precautionary measures to minimise possible COVID-19 transmission at the AGM. Shareholders, proxies and other attendees attending the AGM are expected to comply with all the General SOP issued by the Malaysian National Security Council and precautionary measures. Anyone who declines to adhere to any of the measures or cooperate with the Company’s staff will be denied entry to the AGM venue:-

ADMINISTRATIVE GUIDE FOR SHAREHOLDERS/PROXIES ATTENDINGTHE SIXTEENTH ANNUAL GENERAL MEETING (“AGM”)


a. Attendees must follow instructions of the coordinator at the health screening counter at the entrance to conduct body temperature check and fill a Health Declaration Form.

b. Attendees with body temperature of over 37.5 Celsius or show symptoms of respiratory illness such as coughing and sneezing will be declined entry into the meeting venue.

c. Patients under Investigation (PUI) and Persons under Surveillance (PUS) are PROHIBITED from attending the AGM.d. Attendees must maintain good self-hygiene and sanitise their hands at the entrance.e. Attendees must observe social distancing of at least 1 meter at any queue according to the marked spot.f. Attendees MUST wear a face mask at all times at the AGM.g. In addition to the attendance registration for the Company’s records, attendees must also register with MySejahtera

(QR code scanning), or manual registration for those who does not own a smartphone, to facilitate contact tracing, if required.

h. Attendees must take seat following the marked spot of 1 meter apart.i. Attendees must always practise social distancing in the lift, washroom and meeting venue.j. Attendees are PROHIBITED from gathering outside of the meeting venue BEFORE or AFTER the AGM.

Alternatively, instead of attending, shareholders may appoint the Chairman as their proxy to cast their votes.

Important Notes

This Administrative Guide has taken into account the latest measures to-date to deal with the COVID-19 situation announced and/or implemented in Malaysia which affect the holding or conduct of general meetings. The Company will closely monitor the situation and reserves the right to take further measures or short-notice arrangements as and when appropriate in order to minimise any risk to the AGM. Any material developments will be announced on the Bursa Malaysia Securities Berhad and members are advised to check the Company’s announcement(s) made via Bursa Malaysia Securities Berhad regularly for updates on the AGM and/or material developments.

3. Submission of Questions prior to AGM

Shareholders are encouraged to submit questions ahead of the AGM and email your questions to Pn. Megawati Binti Mohd Isa ([email protected]) / Pn. Puvaneswary Nallatambi ([email protected]), latest by Wednesday, 12 August 2020 at 10:00 a.m.

The Company will endeavour to answer your questions at the AGM if time permits or by email after the AGM. A written record of the questions and answers would be published in the key summary matters of the AGM (to be uploaded by the Company in its corporate website in due course).

The AGM proceedings will focus on the proposed resolutions with the view to minimising crowd gathering time in an enclosed environment.

4. Registration

a. Please read the signage to ascertain the registration counter to register yourself for the AGM and join the queue accordingly.

b. Please produce your original identity card (“IC”) / passport to the Share Registrar for verification. Please make sure you collect your IC / passport thereafter.

c. After the verification, you are required to write your name and mobile contact no. and sign on the attendance list placed at the registration counter.

d. NO person will be allowed to register on behalf of another person even with the original IC / passport of that other person.

ENQUIRY

If you have any enquiries prior to the AGM, please contact the following persons during office hours:-

Share Registrar Securities Services (Holdings) Sdn. Bhd. Mr. Wong Piang Yoong / Mr. Jerry Tan Hor Seng / Pn. NorhasliliwatiSenior Manager / Manager / Senior AssociateTel no. : +603-2084 9168 / 2084 9165 / 2084 9163Fax no. : +603-2094 9940 / 2095 0292 Email : [email protected] / [email protected] / [email protected]

TH Heavy Engineering BerhadTuan Haji Zainalabidin Bin Ismail / Pn. Megawati Binti Mohd IsaTel no. : +603-2787 9000Fax no. : +603-2787 9001Email : [email protected] / [email protected]


Number of shares held

CDS account no.

FORM OF PROXY*I/We, *Company No./NRIC No./Passport No. (full name as per NRIC/Passport/Certificate of Incorporation in capital letters)

of (full address)

being a member of TH HEAVY ENGINEERING BERHAD hereby appoint (full name as per NRIC/Passport in capital letters)

*NRIC No./Passport No. *and/or failing *him/her, (full name as per NRIC/Passport in capital letters)

*NRIC No./Passport No. or failing *him/her the Chairman of the Meeting as *my/our proxy, to vote for *me/us on *my/our behalf at the 16th Annual General Meeting (“AGM”) of the Company to be held at Platinum Ballroom, Level 2, Novotel Kuala Lumpur City Centre, 2 Jalan Kia Peng, 50450 Kuala Lumpur, Wilayah Persekutuan on Friday, 14 August 2020 at 10:00 a.m. and at any adjournment thereof, on the following resolutions referred to in the Notice of 16th AGM.

*My/Our proxy(ies) *is/are to vote as indicated below:-

NO. ORDINARY RESOLUTIONS FOR AGAINST

1 To approve the Directors’ fees for the financial year ended 31 December 2019

2 To approve the benefits payable to the Directors of the Company and its subsidiaries with effect from a day after the 16th AGM until the next AGM of the Company in year 2021

3 To re-elect Dr. Ir. Samad Bin Solbai as Director

4 To re-elect Dato’ Indera Dr. Haji Md. Yusop Bin Omar as Director

5 To re-elect Encik Izad Shahadi Bin Mohd Sallehuddin as Director

6 To re-elect Encik Ahmad Al Farouk Bin Ahmad Kamal as Director

7 To re-elect Tuan Haji Mohd Khalid Bin Mohamed as Director

8 To re-appoint Messrs. Deloitte PLT as Auditors of the Company until the conclusion of the next AGM and to authorise the Directors to fix their remuneration

9 Authority to Issue Shares pursuant to the Companies Act 2016

10 Retention of Dr. Ir. Samad Bin Solbai as an Independent Non-Executive Director

11 Retention of Dato’ Indera Dr. Haji Md. Yusop Bin Omar as an Independent Non-Executive Director

12 Retention of Mr. Too Kok Leng as an Independent Non-Executive Director

(Please indicate with an “X” in the appropriate box against each Resolution how you wish your vote to be cast. If no specific direction as to how the proxy shall vote, the proxy shall vote as he/she thinks fit or, at his/her discretion, abstain from voting)

* Strike out whichever not applicable

Signed this day of , 2020

Signature(s)/Common Seal of Member(s)

For appointment of two (2) proxies, percentage of shareholdings to be represented by the proxies

No. of shares Percentage

Proxy 1

Proxy 2

Total 100%

Notes:

(1) In respect of deposited securities, only members whose names appear in the Record of Depositors on 7 August 2020 shall be eligible to attend the Meeting.

(2) A member entitled to attend and vote at the Meeting, shall be entitled to appoint more than one (1) proxy to attend, participate, speak and vote at the same Meeting. Where a member appoints more than one (1) proxy to attend and vote at the Meeting, he or she specifies the proportion of his or her shareholdings to be represented by each proxy, failing which the appointment shall be invalid.

(3) A proxy needs not be a member of the Company. There shall be no restriction as to the qualification of the proxy. A proxy appointed to attend and vote at the Meeting of the Company shall have the same rights as the members to attend, participate, speak and vote at the Meeting and upon appointment a proxy shall be deemed to confer authority to demand or join in demanding a poll.

(4) Where a member of the company is an authorised nominee as defined under the Securities Industry (Central Depository) Act 1991, it may appoint at least one (1) proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.

(5) Where a member of the Company is an exempt authorised nominee which holds Deposited Securities in the Company for multiple beneficial owners in one (1) securities account (“omnibus account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds.

(6) The instrument appointing a proxy shall be in writing under the hand of the member or his / her attorney duly authorised in writing or, if the member is a corporation, either under the corporation’s seal or under the hand of an officer or attorney duly authorised.

(7) The instrument appointing a proxy shall be deposited at the office of the Company’s Share Registrar at Securities Services (Holdings) Sdn. Bhd., Level 7, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, Damansara Heights, 50490 Kuala Lumpur, Wilayah Persekutuan, not less than forty-eight (48) hours before the time appointed for holding the Meeting or at any adjournment thereof.

To: The Share Registrar

TH HEAVY ENGINEERING BERHAD [200301032354 (634775-D)]

c/o Securities Services (Holdings) Sdn. Bhd. Level 7, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, Damansara Heights, 50490 Kuala Lumpur, Wilayah Persekutuan

Attn to: Mr. Wong Piang Yoong

AFFIXSTAMP

Date: 30 June 2020

Dear Shareholders,

It is with pleasure to invite you to TH Heavy Engineering Berhad’s [“Company”] 16th Annual General Meeting [“16th AGM”], which will be held as follows:

Date : Friday, 14 August 2020Time : 10.00 a.m.Venue : Platinum Ballroom, Level 2, Novotel Kuala Lumpur City Centre, 2 Jalan Kia Peng, 50450 Kuala Lumpur, Wilayah Persekutuan

Please join us in practising environmental sustainability by downloading the following documents from our Company’s website at http://www.thhe.com.my/ or scan QR Code below:

1. Annual Report 20192. Notice of 16th AGM, Administrative Guide and Form of Proxy

If you wish to receive a printed copy of the documents listed above, kindly submit your request by completing the Documents Requisition Form below and send it to our Share Registrar, Securities Services (Holdings) Sdn. Bhd., either by post or email the scanned copy to [email protected].

Alternatively, you may log on to our Share Registrar’s website according to the steps below:

Step 1 - Please visit https://www.sshsb.com.my/new/requestarep.aspxStep 2 - Please type our Company’s name and complete the online request formStep 3 - Please click the “send” button to submit your request

The requested documents will be sent to you by ordinary post within four (4) market days from the date of receipt of your request.

For further assistance, kindly write to our Share Registrar’s representative, Mr. Wong Piang Yoong or Pn. Norhasliliwati at [email protected] or [email protected], respectively.

Documents Requisition Form

The Share RegistrarSecurities Services (Holdings) Sdn. Bhd.

Level 7, Menara Milenium, Jalan DamanlelaPusat Bandar Damansara, Damansara Heights50490 Kuala LumpurTelephone No. : (603) 2084 9168 / (603) 2084 9163Facsimile No. : (603) 2094 9940 / (603) 2095 0292

I / We wish to request a printed copy of the TH Heavy Engineering Berhad’s Annual Report 2019 to be sent to me / us at the address stated below:

Full Name : _____________________________________________

Contact No. : _____________________________________________

CDS Account No. : _____________________________________________

Address : _____________________________________________

_____________________________________________

_____________________________________________ ______________________________ Signature of Shareholder

Scan here

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www.thhe.com.my

Level 26, Menara Bank Islam, No. 22, Jalan Perak, 50450 Kuala Lumpur.

TEL: (+603) 2787 9000 FAX: (+603) 2787 9001