Annual Report 2006 - MERGE ENERGY · Annual Report 2006 Annual Report 2006 ... Affin Bank Berhad...

(Company No. 420099-X)

No. 2 Jalan Apollo U5/190Bandar Pinggiran SubangSeksyen U5, 40150 Shah AlamSelangor Darul EhsanTel : 03-7847 2900Fax : 03-7845 5800 / 7845 3900E-mail : [email protected]

Annual R

eport 2006

Annual Report 2006MER

GE EN

ERG

Y BH

D.

(Com

pany No. 420099-X)

The cover design focuses on Merge Energy’srange of portfolio. It clearly illustrates theorganisation’s business. The backgroundsignifies the detailed and strategic planningand execution that lie behind each and everyproject. It is all about providing continuousquality products and services. The colourgreen signifies growth and refreshingchanges that will take the organisation togreater levels of success.

cover rationalefor MERGE ENERGY BHD. ANNUAL REPORT 2006

what’s

Corporate Information 2

Profile of Directors 3

Executive Chairman’s Statement 7

Financial Highlights 8

Corporate Structure 9

Statement on Corporate Governance 10

Directors’ Responsibility Statement 16

Audit Committee Report 17

Statement on Internal Control 22

Other Compliance Information 24

Financial Statements 25

List of Properties 70

Analysis of Shareholdings 72

Notice of Annual General Meeting 75

Statement Accompanying 77Notice of Annual General Meeting

Proxy Form

inside

9 corporate structure

7 executivechairman’sstatement

2 corporateinformation

2 MERGE ENERGY BHD. (420099-X) ANNUAL REPORT 2006

informationCORPORATE

BOARD OF DIRECTORS

Dato’ Muhammad Azaham bin Abdul WahabExecutive Chairman

Encik Yusof BadawiExecutive Director/Chief Executive Officer

Encik Maseri bin BasirahNon-Independent Non-Executive Director

Dr Mohd Soib bin MustakimNon-Independent Non-Executive Director

Mr Sheah Kok FahSenior Independent Non-Executive Director

Encik Abd Latiff bin AhmadIndependent Non-Executive Director

Encik Tahirruddin bin AhmadIndependent Non-Executive Director

AUDIT COMMITTEEChairmanMr Sheah Kok Fah

MembersEncik Yusof BadawiEncik Abd Latiff bin AhmadEncik Tahirruddin bin Ahmad

NOMINATION COMMITTEEChairmanMr Sheah Kok Fah

MembersDr Mohd Soib bin MustakimEncik Abd Latiff bin Ahmad

REMUNERATION COMMITTEEChairmanMr Sheah Kok Fah

MembersDr Mohd Soib bin MustakimEncik Abd Latiff bin Ahmad

COMPANY SECRETARYMs Yoong Wai Ling (MAICSA 7014031)

REGISTERED OFFICE AND BUSINESS ADDRESSNo. 2 Jalan Apollo U5/190Bandar Pinggiran SubangSeksyen U540150 Shah AlamSelangor Darul EhsanTel : 03-7847 2900Fax : 03-7845 5800 / 7845 3900E-mail : [email protected]

SHARE REGISTRARSymphony Share Registrars Sdn Bhd (378993-D)Level 26, Menara Multi-PurposeCapital SquareNo. 8 Jalan Munshi Abdullah50100 Kuala LumpurTel : 03-2721 2222Fax : 03-2721 2530 / 2721 2531

AUDITORSBDO Binder (AF 0206)12th Floor Menara Uni.Asia1008 Jalan Sultan Ismail50250 Kuala Lumpur

PRINCIPAL BANKERSAffin Bank Berhad (25046-T)Hong Leong Bank Berhad (97141-X)Citibank Berhad (297089-M)

STOCK EXCHANGE LISTINGBursa Malaysia Securities Berhad– Construction Sector, Main Board


directorsPROFILE OF

DATO’ MUHAMMAD AZAHAM BIN ABDUL WAHAB

Aged 66 Malaysian

Executive Chairman

Dato’ Muhammad Azaham was appointed to the Board

on 3 January 2003. He graduated from the University of

Malaya in 1966 and did a post-graduate course in Urban

Management and Planning at University of Westminster,

London. He specialises in organisational development,

quality management and leadership studies.

Dato’ Muhammad Azaham served in the Malaysian civil

service from 1966-1982 and acquired extensive

management experience in the middle and upper echelon

of management. Subsequently, he resigned and ventured

into business. He has more than 23 years of experience

in the construction and property development industry

and has served in listed and non-listed companies involved

in construction and property development.

As the General Manager of Syarikat Perumahan Pegawai

Kerajaan Sdn Bhd, Dato’ Muhammad Azaham was

instrumental in the development of housing projects in

Wilayah Persekutuan, Selangor, Pulau Pinang, Johor,

Negeri Sembilan and Pahang. He had served in a Second

Board construction and development company. As the

Executive Chairman and substantial shareholder, he is

the founder of Jalur Cahaya Sdn Bhd, a company involved

in water management and non-revenue water.

Dato’ Muhammad Azaham is active in consumer affairs

and has served as a member of the National Consumers

Consultative Council, Ministry of Trade and Industry. He

was active in the youth movement and was the President

of the Malaysian and Asian Youth Council. He was also

active in politics and has served in the Branch and Division

of UMNO and currently he is the Head of UMNO Cawangan

Pemancar in Pulau Pinang. He has co-authored a book

titled “The Malays – Par Excellence... Warts and All”,

published by Pelanduk Publications.


ENCIK MASERI BIN BASIRAH

Aged 45 Malaysian

Non-Independent Non-Executive Director

Encik Maseri was appointed to the Board on 18

November 2002. He holds a Certificate in Operation

and Basic Knowledge on Boiler from the Japan

Chamber of Commerce and Industry.

Since 1987, Encik Maseri has been actively involved

in the landscaping and construction sector.

Presently, he is the Managing Director of several

private organisations which have participated in

several landscaping and construction projects for

Lembaga Pembangunan Langkawi (LADA) and Majlis

Daerah Langkawi.

ENCIK YUSOF BADAWI

Aged 44 Malaysian

Executive Director/Chief Executive Officer

Encik Yusof was appointed to the Board on 2 May

2003. He graduated with a Bachelor of Science in

Engineering, major in Civil Engineering and minor in

Construction and Mathematics from Southern Illinois

University, United States of America.

Encik Yusof has 20 years of experience in the

construction industry at various levels including

senior/Board level. He has been actively involved

in numerous infrastructure, waterworks and

maintenance projects which had been successfully

implemented.

Encik Yusof is a member of the Audit Committee.

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MR SHEAH KOK FAH

Aged 42 Malaysian

Senior Independent Non-Executive Director

Mr Sheah was appointed to the Board on 16

November 2001. He holds a degree in LLB (Hons)

from the University of Malaya and was admitted to

the Bar in 1989.

Mr Sheah is an advocate and solicitor and has been

in legal practice since 1988. He has been the Partner

of Messrs Sheah, Tan and Rahman (formerly known

as Messrs Jeffrey Tan & Co. and subsequently as

Messrs Ooi, Sheah & Tan) since 1996. He has been

appointed as a Councillor to Majlis Perbandaran

Petaling Jaya for 2 years from 1998-2000.

Mr Sheah is the Chairman of the Audit Committee,

Remuneration Committee and Nomination

Committee.

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DR MOHD SOIB BIN MUSTAKIM

Aged 49 Malaysian

Non-Independent Non-Executive Director

Dr Mohd Soib was appointed to the Board on 18

November 2002. He graduated with a Bachelor of

Science in Colour Vibration Therapy and

Complimentary Medicines from the Open

International University.

Dr Mohd Soib has been a practit ioner in

complimentary medicines since 1996. He was a

training officer at the Rubber Industry Smallholders

Development Authority (RISDA) from 1981-1984

and at Kementerian Pertahanan Malaysia, Bahagian

Hal-Ehwal Bekas Perajurit from 1985-1995.

Dr Mohd Soib is a member of the Remuneration

Committee and Nomination Committee.


ENCIK ABD LATIFF BIN AHMADAged 49 MalaysianIndependent Non-Executive Director

Encik Abd Latiff was appointed to the Board on 16January 2003. He holds a degree in LLB (Hons) fromthe University of Malaya.

Encik Abd Latiff is an advocate and solicitor. He startedhis career in 1981 with the Rubber IndustrySmallholders Development Authority (RISDA) andthereafter with Dewan Bahasa dan Pustaka (DBP). In1988, he held the position of senior legal officer inEmployees Provident Fund (EPF) before joining theprivate practice.

Encik Abd Latiff is a member of the Audit Committee,Remuneration Committee and Nomination Committee.

ENCIK TAHIRRUDDIN BIN AHMADAged 53 MalaysianIndependent Non-Executive Director

Encik Tahirruddin was appointed to the Board on 14October 2005. He is a member of the MalaysianInstitute of Accountants and Fellow of Chartered andCertified Accountants of United Kingdom.

Encik Tahirruddin has 20 years of experience infinancial and accounting matters in the civil service,of which he started as an accountant with JabatanAkauntan Negara in 1976 and then as DeputyDirector of Audit and Accounts in the CooperativeDepartment of Malaysia. From 1979-1982, he wasthe State Treasurer with the Selangor State Treasurybefore he was seconded to RMN Dockyard in Lumut,Perak as its first Finance Manager. In 1983, hejoined Perak State Economic DevelopmentCorporation in Ipoh as the Head of Finance andAdministration. Subsequently, from 1989-1996, hejoined Permodalan Perak Berhad as its ManagingDirector, which was later restructured for Main Boardlisting as KUB Malaysia. Currently, he is managinghis own business.

Encik Tahirruddin is a member of the Audit Committee.

None of the Directors have:(a) any family relationship with any Directors and/

or substantial shareholders of the Company;(b) any conflict of interest with the Company; and(c) any conviction for offences (other than traffic

offences) within the past 10 years.

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FINANCIAL PERFORMANCE

The Group registered a revenue of RM90.28 million, a 437%increase over the preceding year of RM16.81 million. TheGroup has returned to the black with a profit after taxation ofRM4.99 million, compared to a loss after taxation of RM1.04million recorded in the preceding year. On the back of animproved profit, earnings per share rose to 7.45 sen in 2006compared with a loss per share of 1.55 sen in 2005.

The Group’s assets continue to grow with total net assetsvalued at RM10.52 million, an increase of 84% from RM5.71million in 2005.

The Group’s performance for the financial year under reviewimproved in tandem with higher revenue generated fromprojects secured and implemented.

INDUSTRY REVIEW

Bank Negara Malaysia reported that the country’s grossdomestic product (GDP) for 2006 is projected at 6%, whichis higher than the previous estimate of 5.5%. The good newsfrom the projections would be for the construction sector,which is expected to grow by 1% in 2006 as a result of morecivil works after 2 years of contraction.

The Ninth Malaysia Plan (9MP) has provided significantly largerallocations and given priority in areas such as sewerage, watersupply, flood mitigation, public transport and rural roadsupgrades to ensure adequate and sustainable water supply,water intakes and distribution systems, improve accessibilityto less developed areas and encourage Malaysians to usepublic transportation in order to alleviate traffic congestion.

DEAR SHAREHOLDERS,

ON BEHALF OF THE BOARD OF DIRECTORS, IT IS MY PLEASURE TO PRESENT THE ANNUAL REPORT AND THE AUDITEDFINANCIAL STATEMENTS OF MERGE ENERGY BHD. GROUP FOR THE FINANCIAL YEAR ENDED 31 JANUARY 2006.

PROSPECTS

The Group will continue its focus on the search of newconstruction projects and participate in suitable tenders.Strategic measures will be pursued for improving the Group’sconstruction margins to ensure that positive contribution tothe bottom line will continue to be a key feature in the Group’sbusiness stance. The generous allocation can further improvegrowth in revenue and profit through 2007 and 2008 andwe believe our previous track record and specialization willgive us opportunity under the 9MP.

APPRECIATION

On behalf of the Board, I would like to record our appreciationto Mr Hew Thin Chay who resigned during the financial year,for his invaluable services rendered during his tenure of service.I also wish to welcome Encik Tahirruddin bin Ahmad who wasappointed on 14 October 2005.

Our sincere appreciation also goes to our valued shareholders,business associates and financiers for their continuous supportand confidence in the Group.

I would also like to record the Group’s appreciation to theManagement and all employees for their commitment anddrive in contributing to the growth and achievement of theGroup. A special thanks to the members of the Board whocontinued to guide and encourage the Management and staffto persevere in our efforts to put the Group on a more soundfooting to meet the challenges ahead.

Dato’ Muhammad Azaham bin Abdul Wahab

Executive Chairman9 May 2006

STATEMENTchairman’sEXECUTIVE


REVENUE (RM’000) PROFIT/(LOSS) BEFORE TAXATION (RM’000)

AUDITED2001 2002 2003 2004 2005 2006RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Revenue 35,815 31,784 12,721 4,918 16,812 90,285Profit/(Loss) before taxation (20,321) (38,589) (25,921) (5,538) (1,033) 5,584Net Assets 77,033 38,812 12,289 6,750 5,712 10,524Net Assets Per Share (RM) 1.05 0.58 0.18 0.10 0.09 0.16

HIGHLIGHTSfinancial

NET ASSETS (RM’000)

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

-40,000

-35,000

-30,000

-25,000

-20,000

-15,000

-10,000

-5,000

0

5,000

10,000

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

NET ASSETS PER SHARE (RM)

0.0

0.2

0.4

0.6

0.8

1.0

1.2

2001 2002 2003 2004 2005 2006 2001 2002 2003 2004 2005 2006

2001 2002 2003 2004 2005 2006 2001 2002 2003 2004 2005 2006


STRUCTUREcorporate

Merge TradingSdn. Bhd.

Merge ReadymixSdn. Bhd.

Merge ConcreteTechnologies Sdn. Bhd.

CONSTRUCTION REALTY TRADING & MANUFACTURING

Mewah KotaSdn. Bhd.

Paramount VenturesSdn. Bhd.

Merge HighwayEngineering Sdn. Bhd.

Merge EnvironmentalEngineering Sdn. Bhd.

MERGE ENERGY BHD. (420099-X)

MEB RealtySdn. Bhd.

Merge PropertiesSdn. Bhd.

MEB DevelopmentSdn. Bhd.

Merge PropertiesManagement ServicesSdn. Bhd.

MEB ManagementSdn. Bhd.

The above companies are all wholly-ownedsubsidiaries of Merge Energy Bhd.


STATEMENT

governanceON CORPORATE

THE BOARD OF DIRECTORS recognises the

importance of good corporate governance

and is committed to ensure that the highest

standards of corporate governance are

practised throughout the Group, as set out

in the Malaysian Code on Corporate

Governance (“the Code”). The Board

continues to encourage professionalism,

integrity and good governance as the

corporate culture and way forward for the

Group to provide an environment for good

performance by its people and to provide

better returns to shareholders.

The Board is therefore pleased to report on how the Grouphas applied the principles and best practices for corporategovernance mentioned in the Code.

DIRECTORS

1. The Board

An effective Board leads and controls the Group. TheBoard is responsible for ensuring that shareholders’ valueand interests are protected and enhanced. The Board isthus responsible for the overall performance of the Groupand focuses mainly on strategies, financial and operationalperformance, critical business issues, resources andstandards of conduct.

The Directors are professionals from diverse backgroundswith a wide range of experience which enable them todirect and manage the business and affairs of the Groupwith broader perspectives.

2. Board Balance

The Board consists of seven (7) members, comprisingtwo (2) Executive Directors and five (5) Non-ExecutiveDirectors. Among the Non-Executive Directors, three (3)are Independent Non-Executive Directors which complieswith the Listing Requirements of Bursa MalaysiaSecurities Berhad.

The composition and number of Directors reflect the fairrepresentation of all shareholders’ interests andinvestment.


statementon corporategovernance

3. Supply of Information

To enable the Board to effectively discharge its dutiesand responsibilities, the Directors are given full, completeand unrestricted access to timely and accurateinformation. Prior to the meetings of the Board and BoardCommittees, the Directors are provided with the agendatogether with the relevant reports and papers which areissued in sufficient time. The reports include changes tothe Group’s corporate strategies, business plans andbudgets, operational and financial performance reportsand updates on statutory regulations and requirementsaffecting the Group.

In addition, there is a schedule of matters reservedspecifically for the Board’s decision, including the approvalof corporate plans and budgets, material acquisitionsand disposals of assets, major corporate exercises andchanges to the control structure of the Group.

Where necessary, the Directors may obtain independentprofessional advice whether as a full Board or in theirindividual capacity, in furtherance of their duties, at theCompany’s expense.

All Directors have access to the advice and services ofthe Company Secretary, who regularly updates them onthe latest developments in the legislations and regulatoryframework af fecting the Group as wel l as theimplementation of good corporate governance andcompliance practices in the Group.

4. Appointments to the Board

The identification and appointment of new Directorsundergo a process led by the Nomination Committeewhich reviews the required mix of skills, experience andother qualities of the Directors to ensure that the Boardis functioning effectively and efficiently.

5. Re-election

Article 105 of the Company’s Articles of Associationprovides that one-third of the Directors shall retire fromoffice at each Annual General Meeting and all Directorsshall retire from office at least once in every three (3)years but may offer themselves for re-election.

Article 112 of the Company’s Articles of Associationprovides that any person appointed as an additionalDirector shall hold office only until the next following AnnualGeneral Meeting and shall then be eligible for re-election.

The Directors who retire every year shall be those whohave been longest in office since their last election orappointment, but as between persons who becameDirectors on the same day, those to retire shall bedetermined by lot unless they otherwise agree amongthemselves.

6. Directors’ Training

In the year 2005, the Directors attended variousseminars and conferences on relevant areas to furtherenhance their skills and knowledge and to keep abreastwith the latest developments on laws and regulationsunder the Continuing Education Programme (CEP)organised by Bursa Malaysia Securities Berhad and otherorganisations/professional associations, of which theseminars and conferences are also accredited by BursaMalaysia Securities Berhad.

With the exception of Encik Tahirruddin bin Ahmad whowas appointed on 14 October 2005, all the otherDirectors had attended the CEP and obtained theminimum 48 points or 72 points by 31 December 2005,which is a requirement by Bursa Malaysia SecuritiesBerhad. Encik Tahirruddin bin Ahmad had attended theMandatory Accreditation Programme prescribed byBursa Malaysia Securities Berhad.



7. Board Meetings

The Board holds at least four (4) regularly scheduled meetings annually, with additional meetings convened when importantmatters demand immediate attention. Senior Management staff as well as professional advisers may be invited toattend the Board Meetings to provide the Board with their views and clarifications on issues raised by the Directors.

During the financial year ended 31 January 2006, four (4) Board Meetings were held at the Board Room of theCompany at No. 2 Jalan Apollo U5/190, Bandar Pinggiran Subang, Seksyen U5, 40150 Shah Alam, Selangor DarulEhsan and one (1) Board Meeting on 28 June 2005, was held at Putri Room, 1st Floor Kelab Golf Sultan Abdul AzizShah, No. 1 Rumah Kelab, Jalan Kelab Golf 13/6, 40100 Shah Alam, Selangor Darul Ehsan after the Eighth AnnualGeneral Meeting, which was also held on that day. The details of the meetings and attendance of each Director are setout below:

Date and Time of Board MeetingsFriday Monday Tuesday Tuesday Thursday

25.3.05 9.5.05 28.6.05 27.9.05 22.12.05Name of Director 5.30 p.m. 4.30 p.m. 1.50 p.m. 4.00 p.m. 4.00 p.m. %

Dato’ Muhammad Azahambin Abdul Wahab √ X √ √ √ 80

Yusof Badawi √ √ √ √ √ 100

Maseri bin Basirah √ √ √ √ √ 100

Dr Mohd Soib bin Mustakim √ √ √ √ √ 100

Sheah Kok Fah √ √ √ √ √ 100

Hew Thin Chay √ √ √ N/A* N/A* 100

Abd Latiff bin Ahmad √ √ √ √ √ 100

Tahirruddin bin Ahmad N/A** N/A** N/A** N/A** √ 100

Notes:√ : PresentX : Absent with apologies* : Not applicable, as Mr Hew Thin Chay resigned on 8 July 2005** : Not applicable, as Encik Tahirruddin bin Ahmad was appointed on 14 October 2005

In between Board Meetings, approvals on matters requiring the sanction of the Board are sought by way of circularresolutions enclosing all relevant information to enable the Board to make informed decisions.



8. Committees

The Board has delegated certain responsibilities andduties to the following Committees to assist the Board inthe efficient and effective discharge of its duties. TheseCommittees exercise transparency and full disclosure intheir proceedings.

(a) Audit CommitteeEstablished on 16 April 1999, the Audit Committeecomprises three (3) Independent Non-ExecutiveDirectors and one (1) Executive Director.

The Audit Committee Report is set out on pages 17to 21 of this Annual Report.

(b) Remuneration CommitteeEstabl ished on 27 September 2001, theresponsibilities of the Remuneration Committee are:• to recommend to the Board, the remuneration

of each Director in all its form, with the respectiveDirectors abstain from deliberating their ownremuneration; and

• to establish and review the remunerationpackages of each individual Executive Directorsuch that the levels of remuneration are sufficientto attract and retain the Directors needed to runthe Group successfully.

(c) Nomination CommitteeEstablished on 27 September 2001, the NominationCommittee is entrusted with the fol lowingresponsibilities:• recommend to the Board, candidates for all

directorships to be filled by the shareholders orthe Board;

• consider, in making recommendations, candidatesfor directorships proposed by the ExecutiveChairman or by any other senior executive or anyDirector or shareholder;

• recommend to the Board, Directors to fill theseats on Board Committees; and

• assess the effectiveness and balance of the Boardas a whole and the Committees of the Board.

During the financial year ended 31 January 2006,the Nomination Committee convened two (2) meetingsto propose:• the re-election of Directors retiring in accordance

with the Company’s Articles of Association at theEighth Annual General Meeting held on 28 June2005; and

• the appointment of Encik Tahirruddin bin Ahmadas a new member to the Board and AuditCommittee in place of Mr Hew Thin Chay.

(d) Executive CommitteeThe Executive Committee, which was established on19 December 2003, met ten (10) times during thefinancial year ended 31 January 2006. Minutes ofmeetings and resolutions passed by the ExecutiveCommittee were tabled at the Board Meeting fornotation.

The objectives of the Executive Committee are:• to attend and expedite all operational matters of

the Group to ensure speedy processing of anyissue which require immediate decisions;

• to improve business performance and decisionmaking;

• to provide assistance to the Board in fulfilling itsfiduciary responsibilities in the areas relating tothe Group’s accounting and managementcontrols, financial reporting, operational issues,human resources pol ic ies and companysecretarial matters and in safeguardingshareholders’ investment and the Group’s assets;

• to review and formulate policies and guidelinesfor the approval of the Board in order to ensuresmooth management and administration of theGroup and thereafter to implement the policiesand guidelines accordingly; and

• to evaluate and recommend investmentopportunities for the approval of the Board.


DIRECTORS’ REMUNERATION

1. Level and Make-up of Remuneration

The Group’s policy on Directors’ remuneration is to ensurethat the Directors are adequately remunerated for theservices they render.

The remuneration package of the Executive Directors isstructured to commensurate with corporate and individualperformance, experience and scope of responsibility.

Non-Executive Directors are paid annual fees, which willbe approved by the shareholders, and attendanceallowances to board and board committee meetings.

2. Procedures

The Remuneration Committee will deliberate and submitits recommendation to the Board for endorsement. TheDirectors play no part in deciding their own remunerationand shall abstain from discussing or voting on their ownremuneration. Directors’ fees are approved by theshareholders at Annual General Meetings.

3. Disclosure

The details of remuneration of the Directors during thefinancial year ended 31 January 2006 are as follows:

Non-Types of Executive ExecutiveRemuneration Directors Directors

RM RM

Fees – 56,758

Salaries, allowances and bonus 368,675 –

Defined contribution plans 27,742 –and other employee benefits

Total 396,417 56,758

Non-Bands of Executive ExecutiveRemuneration Directors Directors

RM50,000 and below – 6

RM150,001-RM200,000 1 –

RM200,001-RM250,000 1 –


SHAREHOLDERS

1. Dialogue between the Company and Investors

The Board acknowledges the need for shareholders tobe informed of all material business and developmentsconcerning the Group. In addit ion to variousannouncements made during the year, the timely releaseof financial results on a quarterly basis providesshareholders with an overview of the Group’s performanceand operations.

The Annual Reports, announcements, circulars toshareholders and financial results are pivotal means ofcommunication with shareholders.

The Annual General Meetings and Extraordinary GeneralMeetings provide the opportunities for interaction amongDirectors and shareholders. Issues pertaining to theAnnual Reports, circulars to shareholders andperformance and progress of the Group could be raisedand explained in these meetings.


2. Internal Control

The Board acknowledges its responsibility for establishinga sound system of internal control to safeguardshareholders’ investment and the Group’s assets. Whilethe internal control system is devised to cater forparticular needs of the Group and the risks to which it isexposed, such controls by their nature can only providereasonable assurance and not absolute assuranceagainst material misstatement, loss or fraud.

The Board recognizes that risks cannot be fully eliminated.As such, the systems, processes and procedures beingput in place are aimed at minimizing and managing them.Ongoing reviews are continuously carried out to ensurethe effectiveness, adequacy and integrity of the systemof internal control.

3. Relationship with the Auditors

Through the Audit Committee, the Group has establisheda transparent and appropriate relationship with itsexternal auditors in seeking their professional advicetowards ensuring compliance with the accountingstandards. The external auditors are invited to attendthe Audit Committee Meetings to brief the AuditCommittee on specific issues. During the AuditCommittee Meetings, they highlight observations madeduring the course of audit to the Audit Committeemembers.

COMPLIANCE WITH THE CODE

The Group has complied with all the best practices ofcorporate governance set out in Part 2 of the Code.

2. Annual General Meeting

At least twenty-one (21) days prior to the Annual GeneralMeeting, the Annual Report will be sent to theshareholders to inform them of the financial performanceand other corporate information relating to the Group.Each item of special business included in the notice ofthe Annual General Meeting will be accompanied by a fullexplanation of the effects of a proposed resolution tofacilitate full understanding and evaluation of the issuesinvolved.

During the Annual General Meeting, the Board presentsthe financial performance of the Group. Shareholdersare given the opportunity to seek and clarify any pertinentand relevant issues raised in the meeting in relation tothe operations and performance of the Group and toexchange views with the Board.

ACCOUNTABILITY AND AUDIT

1. Financial Reporting

The Group’s performance and prospects in the AnnualReport and financial results on a quarterly basis, preparedbased on appropriate accounting standards and policies,will be reviewed and deliberated by the Audit Committeeprior to recommendation for adoption by the Board.

The Board takes responsibility in ensuring that thefinancial statements reflect a true and fair view of thestate of affairs of the Company and the Group inaccordance with the Companies Act 1965, the applicableapproved accounting standards in Malaysia and the ListingRequirements of Bursa Malaysia Securities Berhad.



THE FINANCIAL STATEMENTS of the

Company and the Group have been drawn

up in accordance with the applicable approved

accounting standards in Malaysia and the

provisions of the Companies Act, 1965 so

as to give a true and fair presentation of the

state of affairs of the Company and the Group

as at the end of the financial year and of the

results and cash flows for the year then

ended.

DIRECTORS’responsibilitySTATEMENT

In preparing these financial statements, the Directors have:

• adopted appropriate accounting policies and consistentlyapplied and supported the policies by reasonable andprudent judgements and estimates;

• ensured that applicable accounting standards have beencomplied with; and

• prepared the financial statements on the going concernbasis as the Directors have a reasonable expectationthat the Group has adequate resources to continue inoperational existence for the foreseeable future.

The Directors are responsible for ensuring that the Companyand the Group keep proper accounting records for accuratedisclosure of the financial position.

The Directors also have the overall responsibilities to takeall steps as are reasonably open to them to safeguard theassets of the Group to prevent and detect fraud and otherirregularities.


auditCOMMITTEEREPORT

COMPOSITION

ChairmanMr Sheah Kok Fah – Senior Independent Non-Executive Director

MembersEncik Yusof Badawi – Executive Director/Chief Executive OfficerEncik Abd Latiff bin Ahmad – Independent Non-Executive DirectorEncik Tahirruddin bin Ahmad – Independent Non-Executive Director

MEETINGS

All Audit Committee members are provided with an agenda together with relevant reports and papers which are issued insufficient time prior to the Audit Committee Meeting to enable the members to review the reports and papers as well as toobtain further information or explanation.

Minutes of Audit Committee Meetings were tabled during Board Meetings for the Board’s notation and endorsement. Ateach Board Meeting, the Chairman of the Audit Committee reports and highlights to the Board, all findings discussed by theAudit Committee.

During the financial year ended 31 January 2006, five (5) Audit Committee Meetings were held. Details of attendance ofeach Audit Committee member are as follows:

Date and Time of Audit Committee MeetingsFriday Monday Tuesday Tuesday Thursday

Name of Audit 25.3.05 9.5.05 28.6.05 27.9.05 22.12.05Committee Member 3.00 p.m. 2.00 p.m. 11.18 a.m. 2.00 p.m. 2.00 p.m. %

Sheah Kok Fah √ √ √ √ √ 100

Yusof Badawi √ √ √ √ √ 100

Hew Thin Chay √ √ √ N/A* N/A* 100

Abd Latiff bin Ahmad √ √ √ √ √ 100

Tahirruddin bin Ahmad N/A** N/A** N/A** N/A** √ 100

Notes:√ : Present* : Not applicable, as Mr Hew Thin Chay resigned on 8 July 2005** : Not applicable, as Encik Tahirruddin bin Ahmad was appointed on 14 October 2005


TERMS OF REFERENCE

Composition

The Audit Committee shall be appointed by the Board fromamong their number and shall consist of not less than three(3) members.

The majority of the Audit Committee members must beIndependent Directors and at least one of the members mustbe a qualified accountant as prescribed by Bursa MalaysiaSecurities Berhad Listing Requirements. The Chairman ofthe Committee shall be appointed by the Board and shall bean Independent Director.

In the event of any vacancy in the Audit Committee resultingin the non-compliance of the above requirements, the vacancyshall be filled within three (3) months.

All members of the Audit Committee, including the Chairman,shall hold office only so long as they serve as Directors ofthe Company. Should any member of the Audit Committeecease to be a Director of the Company, his membership inthe Audit Committee would cease forthwith.

Meetings

The Audit Committee shall meet at least four (4) times ayear and such additional meetings as the Chairman shalldecide in order to fulfill its duties. The quorum for a meetingshall be two (2) members and the majority of memberspresent must be Independent Directors.

The Head of Finance and Accounts, the Head of InternalAudit and representative(s) of the external auditors shallnormally attend meetings. At least once a year the AuditCommittee shall meet with the external auditors.

The Company Secretary shall be the Secretary of the AuditCommittee.

Minutes of meetings shall be distributed to the Board. TheChairman shall report on each meeting to the Board.

Authority

The Audit Committee is authorised by the Board to investigateany activity within its terms of reference. It is authorised toseek any information it requires from any employee and allemployees are directed to co-operate with any request madeby the Audit Committee. In addition, it shall have unrestrictedaccess to both the internal and external auditors and to theSenior Management of the Group. The Audit Committee isalso authorised by the Board to obtain legal or otherprofessional advice where they consider it necessary to carryout their duties.

auditcommitteereport


Duties and Responsibilities

(1) To review the quarterly results and year end financialstatements, prior to the approval by the Board, focusingparticularly on:

(i) changes in or implementation of major accountingpolicy changes;

(ii) significant and unusual events;(iii) the going concern assumption;(iv) significant adjustments arising from the audit; and(v) compliance with accounting standards and other legal

requirements.

(2) To review with the external auditors, the following:

(i) the audit plan;(ii) the audit report;(iii) their evaluation of the system of internal controls;(iv) problems and reservations arising from their interim

and final audits, and any matter the external auditorsmay wish to discuss (in the absence of Managementwhere necessary);

(v) the assistance given by the Company’s officers tothe external auditors; and

(vi) the external auditors’ management letter andManagement’s response.

(3) To do the following in respect of internal audit functions:

(i) review the adequacy of the scope, functions andresources of the Internal Audit Department and thatit has the necessary authority to carry out its work;

(ii) review the internal audit programme, processes,the results of the internal audit programme,processes or investigation undertaken and whetheror not appropriate action is taken on therecommendations of the Internal Audit Department;and

(iii) consider the findings of internal investigations andManagement’s response.

(4) To consider any related party transaction and conflict ofinterest situation that may arise within the Company orthe Group including any transaction, procedure or courseof conduct that raises questions of management integrity.

(5) To review:

(i) any letter of resignation from the external auditorsof the Company;

(ii) whether there is a reason (supported by grounds)to believe that the Company’s external auditors arenot suitable for re-appointment;

(iii) any recommendation on the nomination of a personor persons as external auditors.

(6) To carry out other functions as may be agreed by theAudit Committee and the Board.



ACTIVITIES

During the financial year ended 31 January 2006, the AuditCommittee carried out the following activities:

1. Reviewed the audit plan of the external auditors on thescope of their audit including audit procedures,significant accounting and auditing issues, impact ofnew or proposed changes in accounting standards andregulatory requirements on the financial statements;

2. Reviewed the unaudited quarterly financial reportsbefore tabling to the Board for approval and release toBursa Malaysia Securities Berhad and the SecuritiesCommission;

3. Reviewed the audited financial statements of the Grouptogether with the external auditors prior to submissionto the Board for their consideration and approval;

4. Reviewed the audit findings by the external auditors;

5. Assessed the external auditors’ performance and auditfees prior to submission to the Board for their approval;

6. Reviewed the annual audit plan presented by the internalauditor;

7. Reviewed the internal audit reports which highlightedthe audit issues, recommendation and the Managementresponses and directed actions to be taken by theManagement to improve the system of internal control;


8. Followed up on corrective actions taken by theManagement on audit issues raised by the externalauditors and the internal auditor;

9. Reviewed the Statement on Internal Control and theAudit Committee Report before tabling to the Boardfor approval to be published in the Annual Report;

10. Reviewed the proposed amendments to the Terms ofReference of the Audit Committee;

11. Reported all pertinent issues to the Board.

INTERNAL AUDIT FUNCTION

The Group has established the Internal Audit Department tosupport the Audit Committee and the Board in reviewing theGroup’s system of internal control and governance processso as to provide assurance that such systems continue tooperate satisfactorily and effectively.

During the financial year ended 31 January 2006, theactivities of the Internal Audit Department included:

1. Prepared the annual audit plan based on risk approachmethod for deliberation by the Audit Committee;

2. Carried out audit work in liaison with the Managementfor optimisation of resources;

3. Made recommendations to improve the operations inthe Group;


4. Ascertained the extent of compliance with the Group’splans, policies, procedures and statutory requirements;

5. Ascertained the adequacy of controls for safeguardingthe Group’s assets from losses of all kinds;

6. Reviewing and appraising the soundness, adequacy andapplication of financial and other controls to promoteeffective control in the Group.

The Internal Audit Department undertakes internal auditfunctions based on the audit plan that is reviewed andapproved by the Audit Committee. The reports of the auditundertaken were presented to the Audit Committee andforwarded to the Management for attention and necessaryaction.

EMPLOYEE SHARE OPTION SCHEME

The Company did not have any Employee Share OptionScheme during the financial year.



CONTROL

statementON INTERNAL

RESPONSIBILITY

The Board acknowledges its responsibil ities and iscommitted to maintain a sound system of internalcontrol and ensure its adequacy and integrity so as tosafeguard shareholders’ investments and the Group’sassets. The Board and Management have implementedan internal control system designed to identify andmanage, rather than eliminate the risks facing the Groupin pursuit of its business objectives. This internal controlsystem, by its nature, can only provide reasonable andnot absolute assurance against material misstatement,loss or fraud.

INTERNAL CONTROL SYSTEM

The key elements of the Group’s internal control systemand assurance processes are described below.

Independent Audit Committee

The Audit Committee comprises a majority of Non-Executive Directors, who are also independent of theManagement. It has an overall responsibility to assistthe Board in fulfilling its responsibilities for the financialreporting process, the system of internal control, theaudit process and the Group’s process for monitoringcompliance with laws and regulations.

Internal Audit Department

The Internal Audit Department serves as a corporateresource in support of the Audit Committee to fulfill itsresponsibilities. It independently reviews the controlprocesses implemented by the Management and reportsthe f ind ings and recommendat ions to the Aud i tCommittee.

Risk Management

The Board has approved the adop t i on o f R i skManagement Policy and Framework to ensure theef fect ive implementation of the r isk managementsystem. There is an ongoing process during the yearfor identifying, assessing and reviewing key risks areasby the Management for communication to the Board.

Approval of Major Decisions

All major decisions require the final approval of theBoard and are only made after appropriate in-depthstudies have been conducted. Matters that require theBoard’s approval include business plans, awards ofmajor contracts, major investments and f inancialdecisions.


statementon internalcontrol

OTHER KEY ELEMENTS OF THE GROUP’S INTERNALCONTROL SYSTEM

The other key elements of the Group’s internal controlsystem are:

• A management structure with clear defined lines ofresponsibility and appropriate levels of delegation.

• Internal policies and control procedures are in placeto regulate financial and operating activities.

• The prov is ion o f regu lar and comprehens i veinformation to the Board covering the Group’sfinancial performance, key business indicators,business development issues and progress ofprojects.

• The provision of quarterly management accounts andreports to the Board for their review and approval.

• The reporting and review of operational, financialand compliance matters for all the businesses ofthe Group are discussed regularly at the ExecutiveCommittee (EXCO) Meetings which are attended byall Executive Directors and Senior Management ofthe Group. In addition, the EXCO also convenes, atthe request of its members to discuss and approvematters that required immediate decisions.

CONCLUSION

This Statement on Internal Control has been preparedin accordance with the Guidance for Directors of PublicListed Companies and the Listing Requirements of BursaMalaysia Securities Berhad.

The Board is of the view that the system of internalcontrol of the Group that has been put in place isadequate and effective. The Board will continue tofurther improve and enhance its system of internalcontrol and the work processes so that the Group’sobjectives can be met.

Th is statement is made in accordance with theresolution of the Board of Directors dated 9 May 2006.


1. Utilisation of Proceeds

The proceeds of RM1,000,000 from the disposal oftwo (2) properties held under Lot 000203, Geran No.5080 and Lot 000204, Geran No. 5081 in BandarAlor Setar, Daerah Kota Setar, Kedah Darul Aman on 3October 2005 were utilised for working capital.

2. Share Buybacks

The Company did not undertake any share buybackexercise during the financial year.

3. Options, Warrants or Convertible Securities

The Company has not issued any options, warrants orconvertible securities in the financial year.

4. American Depository Receipt (“ADR”) or GlobalDepository Receipt (“GDR”) Programme

The Company did not sponsor any ADR or GDRprogramme during the financial year.

5. Sanctions and/or Penalties

There were no sanctions and/or penalties imposed onthe Company and its subsidiaries, Directors orManagement by the relevant regulatory bodies.

6. Non-Audit Fees

For the financial year, the following non-audit fees willbe payable to BDO Binder, the external auditors andtheir affiliated companies:(i) Reviewing the Statement on Internal Control –

RM5,000(ii) Tax advisory services – RM15,300.

OTHERcomplianceINFORMATION

7. Variation in Results

The Group’s audited results for the financial year ended31 January 2006 did not vary by 10% or more fromthe unaudited results which were announced to BursaMalaysia Securities Berhad on 29 March 2006.

8. Profit Guarantee

The Company did not make any arrangement whichrequired profit guarantee during the financial year.

9. Material Contracts or Loans

There were no material contracts or loans entered intoby the Group during the financial year that involveDirectors’ or major shareholders’ interests.

10. Revaluation Policy on Landed Properties

The Group has not adopted a policy of regular revaluationon property, plant and equipment.

11. Recurrent Related Party Transactions

The Company did not enter into any significant recurrentrelated party transactions which require shareholders’mandate during the financial year.

statementsfinancial

Directors’ Report 26

Statement By Directors 31

Statutory Declaration 31

Report of the Auditors 32

Balance Sheets 33

Income Statements 35

Statements of Changes in Equity 36

Cash Flow Statements 37

Notes to the Financial Statements 39


REPORTdirectors’

The Directors hereby submit their report together with the audited financial statements of the Group and of the Company for thefinancial year ended 31 January 2006.

PRINCIPAL ACTIVITIES

The Company is principally engaged in investment holding. The principal activities of the subsidiary companies are set out in Note 7to the financial statements. There have been no significant changes in the nature of these activities during the financial year.

RESULTS

Group CompanyRM RM

Net profit/(loss) for the financial year 4,989,795 (5,640,314)

DIVIDENDS

No dividend has been paid or declared by the Company since the end of the previous financial year. The Directors do not recommendany payment of dividend in respect of the financial year ended 31 January 2006.

RESERVES AND PROVISIONS

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

ISSUE OF SHARES AND DEBENTURES

The Company has not issued any new shares or debentures during the financial year.


directors’report

DIRECTORS

The Directors who held office since the date of the last report are:

Dato’ Muhammad Azaham Bin Abdul WahabYusof BadawiMaseri Bin BasirahDr Mohd Soib Bin MustakimSheah Kok FahAbd Latiff Bin AhmadTahirruddin Bin Ahmad (Appointed on 14 October 2005)Hew Thin Chay (Resigned on 8 July 2005)

In accordance with Article 105 of the Company’s Articles of Association, Dato’ Muhammad Azaham Bin Abdul Wahab and Abd LatiffBin Ahmad retire from the Board by rotation at the forthcoming Annual General Meeting and, being eligible, offer themselves for re-election.

In accordance with Article 112 of the Company’s Articles of Association, Tahirruddin Bin Ahmad retires from the Board at theforthcoming Annual General Meeting and, being eligible, offers himself for re-election.

DIRECTORS’ INTERESTS

The Directors holding office at the end of the financial year and their beneficial interests in the ordinary shares of the Company andits related corporations during the financial year ended 31 January 2006 as recorded in the Register of Directors’ Shareholdingskept by the Company under Section 134 of the Companies Act, 1965 were as follows:

—— Number of ordinary shares of RM1.00 each ——Balance Balance

as at as atShares in the Company 1.2.2005 Bought Sold 31.1.2006

Direct interests:

Maseri Bin Basirah 10,000,000 - - 10,000,000Dr Mohd Soib Bin Mustakim 8,000,000 - - 8,000,000

Indirect interests:

Dato’ Muhammad Azaham Bin Abdul Wahab 8,000,000 5,000,000 - 13,000,000Yusof Badawi 8,000,000 5,000,000 - 13,000,000


DIRECTORS’ INTERESTS (CONT’D)

By virtue of Section 6A of the Companies Act, 1965, Dato’ Muhammad Azaham Bin Abdul Wahab and Yusof Badawi are deemed tohave an interest in the shares of the subsidiary companies to the extend of the Company having an interest.

Other than as disclosed above, none of the other Directors who held office at the end of the financial year held any interest in theshares of the Company and its related corporations.

DIRECTORS’ BENEFITS

Since the end of the previous financial year, none of the Directors have received or become entitled to receive any benefits (other thanbenefits included in the aggregate amount of emoluments received or due and receivable by the Directors shown in the financialstatements) by reason of a contract made by the Company or a related corporation with the Director, or with a firm of which theDirector is a member, or with a company in which the Director has a substantial financial interest other than remuneration receivedby certain Director as director of the subsidiary company.

There were no arrangements during and at the end of the financial year, to which the Company is a party, which had the object ofenabling Directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or anyother body corporate.

OTHER STATUTORY INFORMATION REGARDING THE GROUP AND THE COMPANY:

(I) AS AT THE END OF THE FINANCIAL YEAR

(a) Before the income statements and balance sheets of the Group and of the Company were made out, the Directors tookreasonable steps:

(i) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of provision fordoubtful debts and have satisfied themselves that all known bad debts had been written off and that adequate provisionhad been made for doubtful debts; and

(ii) to ensure that any current assets which were unlikely to realise their book values in the ordinary course of business hadbeen written down to their estimated realisable values.

(b) In the opinion of the Directors, the results of the operations of the Group and of the Company during the financial year havenot been substantially affected by any item, transaction or event of a material and unusual nature.

directors’report


directors’report

OTHER STATUTORY INFORMATION REGARDING THE GROUP AND THE COMPANY (CONT’D) :

(II) FROM THE END OF THE FINANCIAL YEAR TO THE DATE OF THIS REPORT

(c) The Directors are not aware of any circumstances:

(i) which would render the amount written off for bad debts or the amount of the provision for doubtful debts in the financialstatements of the Group and of the Company inadequate to any material extent; or

(ii) which would render the values attributed to the current assets in the financial statements of the Group and of theCompany misleading; and

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

(d) In the opinion of the Directors:

(i) there has not arisen any item, transaction or event of a material and unusual nature likely to affect substantially theresults of the operations of the Group and of the Company for the financial year in which this report is made; and

(ii) no contingent or other liability has become enforceable, or is likely to become enforceable, within the period of twelvemonths after the end of the financial year which will or may affect the abilities of the Group and of the Company to meettheir obligations as and when they fall due.

(III) AS AT THE DATE OF THIS REPORT

(e) There are no charges on the assets of the Group and of the Company which have arisen since the end of the financial yearto secure the liabilities of any other person.

(f) There are no contingent liabilities of the Group and of the Company which have arisen since the end of the financial year.

(g) The Directors are not aware of any circumstances not otherwise dealt with in the report or financial statements which wouldrender any amount stated in the financial statements of the Group and of the Company misleading.


EVENT SUBSEQUENT TO THE BALANCE SHEET DATE

The event subsequent to the balance sheet date is disclosed in Note 36 to the financial statements.

AUDITORS

The auditors, BDO Binder, have expressed their willingness to continue in office.

Signed on behalf of the Board of Directors in accordance with a resolution of the Directors.

Dato’ Muhammad Azaham Bin Abdul Wahab Yusof BadawiDirector Director

Shah Alam9 May 2006

directors’report


BY DIRECTORSstatement

I, Dato’ Muhammad Azaham Bin Abdul Wahab, being the Director primarily responsible for the financial management of MergeEnergy Bhd., do solemnly and sincerely declare that the financial statements set out on pages 33 to 69 are, to the best of myknowledge and belief, correct and I make this solemn declaration conscientiously believing the same to be true and by virtue of theprovisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly )declared by the abovenamed at )Kuala Lumpur this 9 May 2006 )

) Dato’ Muhammad Azaham Bin Abdul Wahab

Before me:

P. SETHURAMAN (W-217)Pesuruhjaya Sumpah

Kuala Lumpur

DECLARATIONstatutory

In the opinion of the Directors, the financial statements set out on pages 33 to 69 have been drawn up in accordance with applicableapproved accounting standards in Malaysia so as to give a true and fair view of:

(i) the state of affairs of the Group and of the Company as at 31 January 2006 and of their results for the financial year then ended;and

(ii) the cash flows of the Group and of the Company for the financial year ended 31 January 2006.

On behalf of the Board,

Dato’ Muhammad Azaham Bin Abdul Wahab Yusof BadawiDirector Director

Shah Alam9 May 2006


THE AUDITORSreport ofTO THE MEMBERS OF MERGE ENERGY BHD.

We have audited the financial statements set out on pages 33 to 69.

These financial statements are the responsibility of the Company’s Directors.

It is our responsibility to form an independent opinion, based on our audit, on the financial statements and to report our opinion toyou, as a body, in accordance with Section 174 of the Companies Act, 1965 and for no other purpose. We do not assumeresponsibility towards any other person for the content of this report.

We conducted our audit in accordance with approved standards on auditing in Malaysia. These standards require that we plan andperform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. Anaudit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit alsoincludes assessing the accounting principles used and significant estimates made by the Directors, as well as evaluating the overallfinancial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion:

(a) the financial statements have been properly drawn up in accordance with applicable approved accounting standards in Malaysiaand the provisions of the Companies Act, 1965 so as to give a true and fair view of:

(i) the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statements of the Groupand of the Company; and

(ii) the state of affairs of the Group and of the Company as at 31 January 2006 and of their results and cash flows for thefinancial year then ended;

and

(b) the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiary companieshave been properly kept in accordance with the provisions of the said Act.

We are satisfied that the financial statements of the subsidiary companies that are consolidated with the Company’s financialstatements are in form and content appropriate and proper for the purposes of the preparation of the consolidated financialstatements and we have received satisfactory information and explanations required by us for those purposes.

The auditors’ reports on the financial statements of the subsidiary companies were not subject to any qualification and did not includeany comment made under Section 174(3) of the said Act.

BDO Binder Tan Lye ChongAF:0206 1972/08/07 (J)Chartered Accountants Partner

Kuala Lumpur9 May 2006


as at 31 January 2006

SHEETSbalance

Group Company2006 2005 2006 2005

NOTE RM RM RM RMASSETS EMPLOYED

PROPERTY, PLANT AND EQUIPMENT 6 7,755,961 9,253,486 1,747,608 1,716,653

INVESTMENT IN SUBSIDIARY COMPANIES 7 - - 24,198,645 24,198,645

INTEREST IN JOINT VENTURE 8 2,513,447 2,514,844 - -

INVESTMENT PROPERTIES 9 5,076,640 2,976,640 - -

CURRENT ASSETS

Amounts due from customers for contract works 10 13,472,337 1,916,985 - -Leasehold properties 11 - 2,100,000 - -Trade receivables 12 33,342,155 15,955,253 - -Other receivables, deposits and prepayments 13 372,465 709,666 62,597 64,842Amounts owing by subsidiary companies 14 - - 242,050 6,240,881Amount owing by joint venture 15 141,430 141,430 - -Cash and bank balances 1,102,611 1,211,300 32,530 41,727

48,430,998 22,034,634 337,177 6,347,450

LESS: CURRENT LIABILITIES

Trade payables 16 23,396,701 7,868,645 - -Other payables and accruals 17 12,046,468 2,645,739 397,744 307,903Amount owing to a subsidiary company 14 - - 167,139 -Provisions 18 6,770,000 6,770,000 - -Borrowings (interest bearing) 19 3,113,172 3,426,289 866,843 627,698Tax liabilities 1,769,289 1,331,252 941,157 1,036,396

47,095,630 22,041,925 2,372,883 1,971,997

NET CURRENT ASSETS/(LIABILITIES) 1,335,368 (7,291) (2,035,706) 4,375,453

16,681,416 14,737,679 23,910,547 30,290,751

The attached notes form an integral part of the financial statements.


Group Company2006 2005 2006 2005

NOTE RM RM RM RMFINANCED BY

SHARE CAPITAL 23 67,000,000 67,000,000 67,000,000 67,000,000

RESERVES 24 (56,476,338) (61,288,555) (43,560,369) (37,920,055)

SHAREHOLDERS’ EQUITY 10,523,662 5,711,445 23,439,631 29,079,945

NON-CURRENT LIABILITIESBorrowings (interest bearing) 19 6,157,754 9,026,234 470,916 1,210,806

16,681,416 14,737,679 23,910,547 30,290,751

balancesheets


as at 31 January 2006



Group Company2006 2005 2006 2005

NOTE RM RM RM RM

Revenue 25 90,284,631 16,812,087 - -

Cost of sales (79,670,528) (13,052,599) - -

Gross profit 10,614,103 3,759,488 - -

Other operating income 306,367 724,402 24,420 224,275

Administration and distribution costs (2,646,818) (2,685,002) (1,326,202) (1,293,365)

Other operating expenses (1,614,185) (1,605,178) (4,290,721) (2,836)

Profit/(Loss) from operations 6,659,467 193,710 (5,592,503) (1,071,926)

Finance costs (1,073,735) (1,224,786) (138,948) (180,960)

Share of losses in joint venture (1,397) (1,043) - -

Profit/(Loss) before tax 26 5,584,335 (1,032,119) (5,731,451) (1,252,886)

Tax (expense)/income- Company and subsidiary companies 27 (594,540) (6,680) 91,137 -

Net profit/(loss) for the financial year 4,989,795 (1,038,799) (5,640,314) (1,252,886)

Earnings/(Loss) per ordinary share (sen) 28 7.4 (1.6)

for the financial year ended 31 January 2006STATEMENTSincome


for the financial year ended 31 January 2006

CHANGES IN EQUITYstatements of


Share Share Revaluation Accumulatedcapital premium reserve losses Total

RM RM RM RM RMGroup

Balance as at 31 January 2004 67,000,000 7,712,508 314,056 (68,276,320) 6,750,244

Net loss for the financial year - - - (1,038,799) (1,038,799)

Balance as at 31 January 2005 67,000,000 7,712,508 314,056 (69,315,119) 5,711,445

Net profit for the financial year - - - 4,989,795 4,989,795

Impairment loss on revalued asset - - (177,578) - (177,578)

Realisation of revaluation reserve - - (136,478) 136,478 -

Balance as at 31 January 2006 67,000,000 7,712,508 - (64,188,846) 10,523,662

Company







for the financial year ended 31 January 2006

STATEMENTScash flow

Group Company2006 2005 2006 2005

RM RM RM RMCASH FLOWS FROM OPERATING ACTIVITIES

Profit/(Loss) before tax 5,584,335 (1,032,119) (5,731,451) (1,252,886)

Adjustments for:

Allowance for doubtful debts 756,665 1,534,651 4,190,833 -Allowance for doubtful debts no longer required - (51,568) (24,420) -Bad debts written off 83,568 4,750 - -Deposits written off 49,128 - - -Depreciation of property, plant and equipment 315,144 350,760 164,045 126,332Loss/(Gain) on disposal of property, plant and equipment 157,572 (144,982) - -Gain on disposal of investments in quoted shares - (212,535) - (208,857)Impairment loss on property, plant and equipment 43,511 - - -Interest expense 1,073,659 1,224,551 138,948 180,960Interest income (15,868) (47,442) - (15,318)Property, plant and equipment written off - 57,994 - 2,836Share of results in joint venture 1,397 1,043 - -

Operating profit/(loss) before working capital changes 8,049,111 1,685,103 (1,262,045) (1,166,933)

Increase in amounts due from customers for contract works (11,555,352) (1,275,067) - -Increase in trade receivables (18,044,398) (4,517,559) - -Decrease/(Increase) in other receivables, deposits and prepayments 105,336 (53,999) 2,245 (42,444)Increase in trade payables 15,528,056 4,968,755 - -Increase/(Decrease) in other payables and accruals 9,345,729 1,203,202 34,841 (24,484)

Cash generated from/(used in) operations 3,428,482 2,010,435 (1,224,959) (1,233,861)

Interest paid (824,099) (849,164) - (4,373)Tax paid (156,503) (593,607) (4,102) (105,448)

Net cash from/(used in) operating activities 2,447,880 567,664 (1,229,061) (1,343,682)



Group Company2006 2005 2006 2005

RM RM RM RMCASH FLOWS FROM INVESTING ACTIVITIES

Interest received 15,868 47,442 - 15,318Proceeds from disposal of investment in quoted shares - 4,790,555 - 4,774,077Proceeds from disposal of property, plant and equipment 1,000,000 122,340 - -Purchase of investments in quoted shares - (1,577,000) - (1,577,000)Purchase of property, plant and equipment (Note 30) (1,280) (36,106) - -

Net cash from investing activities 1,014,588 3,347,231 - 3,212,395

CASH FLOWS FROM FINANCING ACTIVITIES

Interest paid (249,560) (375,387) (138,948) (176,587)Advance from a subsidiary company - - 167,139 -Net repayments from/(Advances to) subsidiary companies - - 1,832,418 (1,388,616)Repayment of hire-purchase creditors (69,370) (132,093) (31,117) -Repayment of term loans (903,833) (1,728,363) (609,628) (422,894)

Net cash (used in)/from financing activities (1,222,763) (2,235,843) 1,219,864 (1,988,097)

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 2,239,705 1,679,052 (9,197) (119,384)

CASH AND CASH EQUIVALENTS AT BEGINNING OF FINANCIAL YEAR (7,802,931) (9,481,983) 41,727 161,111

CASH AND CASH EQUIVALENTS ATEND OF FINANCIAL YEAR (NOTE 31) (5,563,226) (7,802,931) 32,530 41,727


cash flowstatementsfor the financial year ended 31 January 2006


notes tothe financialstatements31 January 200631 January 2006

FINANCIAL STATEMENTSnotes to the

1. GENERAL INFORMATION

The Company is a public limited liability company, incorporated and domiciled in Malaysia.

The registered office and principal place of business of the Company are located at No. 2, Jalan Apollo U5/190, BandarPinggiran Subang, Seksyen U5, 40150 Shah Alam, Selangor Darul Ehsan.

The financial statements are presented in Ringgit Malaysia.

2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group’s overall financial risk management objective is to optimise value creation for shareholders as well as ensuring thatadequate financial resources are available for the development of the Group’s business whilst managing its risks. The Group’spolicy is not to engage in speculative transactions.

The Group operates within an established risk management framework and clearly defined guidelines that are regularly reviewedby the Board of Directors and does not trade in derivative financial instruments. Financial risk management is carried outthrough internal control systems and adherence to Group financial risk management policies.

The major areas of financial risks faced by the Group and the financial risk management policies in respect of the major areas areset out as follows:

Interest Rate Risk

The Group’s primary interest rate risk relates to interest bearing assets and debts. The investment in financial assets are notheld for speculative purpose but have been mostly placed in call and fixed deposits which yield better returns than cash at bank.The Group manages its interest rate exposure on its debts by maintaining a mixture of fixed and floating rate borrowings.

Credit Risk

The credit risk attributable to receivables is managed and monitored on an ongoing basis via Group Management reportingprocedures and internal credit review procedures.

Liquidity and Cash Flow Risk

The Group manages its debt maturity profile, operating cash flows and the availability of funding so as to ensure that all operating,investing and financing needs are met. As part of its overall prudent liquidity management, the Group strives to maintainsufficient levels of cash or cash convertible investments to meet its working capital commitments. In addition, the Group strivesto maintain available banking facilities at a reasonable level to meet its business needs.


notes tothe financialstatements31 January 2006

3. PRINCIPAL ACTIVITIES

The Company is principally engaged in investment holding. The principal activities of the subsidiary companies are set out in Note7 to the financial statements. There have been no significant changes in the nature of these activities during the financial year.

4. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS

The financial statements of the Group and of the Company have been prepared in accordance with applicable approved accountingstandards in Malaysia and the provisions of the Companies Act, 1965.

5. SIGNIFICANT ACCOUNTING POLICIES

5.1 Basis of accounting

The financial statements of the Group and of the Company have been prepared under the historical cost convention (asmodified by the revaluation of certain land and buildings) unless otherwise indicated in the significant accounting policies.

The preparation of financial statements in conformity with applicable approved accounting standards in Malaysia and theprovisions of the Companies Act, 1965 requires the Directors to make estimates and assumptions that affect the reportedamounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statementsand the reported amounts of revenues and expenses during the reporting period. Actual results could differ from thoseestimates.

5.2 Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and all its subsidiary companiesmade up to the end of the financial year using both merger and acquisition methods of accounting.

Inter-company transactions and balances are eliminated on consolidation and the consolidated financial statements reflectexternal transactions only.

Business combination which satisfy the criteria for the merger method of consolidation are accounted for using mergeraccounting principles. Where the cost of investment is greater than the nominal value of the shares acquired, the differenceis set off against retained profits. The results of subsidiary companies consolidated under this method are accounted for asif the companies had been merged throughout the current and previous financial years.

Where the acquisition method is adopted, the results of the subsidiary companies acquired are included in the consolidatedfinancial statements from the date of acquisition and up to the date of disposal. The difference between the aggregate costof investment in the subsidiary companies and their underlying fair value of net assets at the date of acquisition is treatedas goodwill or negative goodwill as appropriate.

Goodwill on consolidation is stated at cost less impairment losses, if any. Negative goodwill arising on consolidation is notrecognised as income and is presented as a separate item in the balance sheet.



5. SIGNIFICANT ACCOUNTING POLICIES (cont’d)

5.3 Property, plant and equipment and depreciation

Freehold land and buildings are stated at valuation less accumulated depreciation in respect of buildings and accumulatedimpairment losses, if any. All other property, plant and equipment are stated at cost less accumulated depreciation andaccumulated impairment losses, if any.

The freehold land and buildings are stated at their 1998 valuations which are based on valuations carried out by independentprofessional valuers. The Group has not adopted a policy of regular revaluation on property.

Upon disposal of an item of property, plant and equipment, the difference between the net disposal proceeds and the netcarrying amount is recognised in the income statement and the revaluation reserve related to those assets, if any, istransferred directly to retained profits.

Freehold land is not depreciated. Leasehold land held in excess of fifty (50) years is considered as long term lease. The longterm leasehold land is amortised over the terms of the respective lease period ranging from 94 to 99 years. Depreciationon other property, plant and equipment is calculated to write off their costs or valuation on a straight line basis over theirestimated useful lives. The principal annual depreciation rates are as follows:

Buildings 2%Plant and machinery 10% to 20%Motor vehicles 10% to 20%Furniture, fittings and office equipment 5% to 33%Office renovation 5%

5.4 Investments

(i) Subsidiary companies

A subsidiary company is a company in which the Group has power to exercise control over the financial and operatingpolicies so as to obtain benefits from its activities.

Investments in subsidiary companies which are eliminated on consolidation are stated at cost less impairment losses,if any.

(ii) Jointly controlled entity

Interest in joint venture is a jointly controlled entity over which there is contractually agreed sharing of control where twoor more parties must consent to all major strategic decisions.

Interest in joint venture is stated at cost less impairment losses, if any.

The Group’s interest in jointly controlled entity is accounted for in the consolidated financial statements using the equitymethod of accounting where the Group’s share of the post acquisition reserves and results of the jointly controlled entityis included in the consolidated financial statements.




5.5 Investment properties

The investment properties consist of land and buildings that are not substantially occupied for use by, or in the operationsof the Group and are held for their investment potential and rental income. The investment properties are not depreciatedand are stated at cost less impairment losses, if any.

Upon disposal of an investment property, the difference between the net disposal proceeds and the carrying amount isrecognised in the income statement.

5.6 Impairment of assets

The carrying amounts of the Group’s and Company’s assets, other than financial assets (except for investment in subsidiarycompanies and interest in joint venture) and amounts due from customers for contract works, are reviewed at eachbalance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’srecoverable amount is estimated and an impairment loss is recognised whenever the recoverable amount is less than thecarrying amount of the asset.

The impairment loss is recognised in the income statement immediately except for the impairment on a revalued assetwhere the impairment loss is recognised directly against the revaluation reserve account to the extent of the surpluscredited from the previous revaluation for the same asset with the excess of the impairment loss charged to the incomestatement.

All reversals of an impairment loss are recognised as income immediately in the income statement except for the reversalof an impairment loss on a revalued asset where the reversal of the impairment loss is treated as a revaluation increaseand credited to the revaluation reserve account of the same asset.

An impairment loss is reversed if there has been a change in estimates used to determine the recoverable amount.

An impairment loss is only reversed to the extent that the asset’s carrying amount does not exceed the carrying amountthat would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

5.7 Amounts due from/to customers for contract works

When contract costs incurred plus attributable profits or less foreseeable losses, if any, exceed progress billings, thebalance is shown as amounts due from customers for contract works. When progress billings exceed costs incurred plusattributable profits or less foreseeable losses, if any, the balance is shown as amounts due to customers for contractworks.

5.8 Leasehold properties

Long term leasehold land and buildings which are held with the intention for resale are stated at the lower of cost and netrealisable value.




5.9 Receivables

Receivables are carried at anticipated realisable value. Known bad debts are written off and specific allowance is made fordebts considered to be doubtful of collection.

5.10 Payables

Payables are stated at cost which is the fair value of the consideration to be paid in the future for goods and servicesreceived.

5.11 Provisions

Provisions are recognised when there is a present obligation, legal or constructive, as a result of a past event, when it isprobable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliableestimate can be made of the amount of the obligation.

5.12 Assets acquired under hire-purchase agreements

Assets acquired under hire-purchase arrangements which transfer substantially all the risks and rewards of ownership tothe Group and the Company are capitalised as property, plant and equipment and the corresponding obligations aretreated as liabilities. The property, plant and equipment capitalised are depreciated on the same basis as owned assets.

Finance charges are allocated to the income statement over the period of the agreements to give a constant periodic rateof charge on the remaining hire-purchase liabilities.

5.13 Revenue recognition

(i) Construction contracts

Revenue from construction contracts is recognised in the income statement based on stage of completion. The stageof completion of a construction contract is determined based on the proportion that contract costs incurred for workperformed to date bear to the estimated total cost of services to be performed.

When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs associatedwith the construction contract are recognised as revenue and expenses respectively by reference to the stage ofcompletion of the contract activity at the balance sheet date.

When the outcome of a construction contract cannot be estimated reliably, contract revenue are recognised only tothe extent of contract costs incurred that it is probable to be recoverable and contract costs are recognised asexpenses 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 anexpense immediately.




5.13 Revenue recognition (cont’d)

(ii) Rental income

Revenue from rental income is recognised in the income statement on accrual basis unless collectibility is in doubt.

(iii) Dividend income

Dividends are recognised when the shareholders’ right to receive payment is established.

5.14 Employee benefits

(i) Short term employee benefits

Wages, salaries, social security contributions, paid annual leave, paid sick leave and non-monetary benefits are recognisedas an expense in the financial year when employees have rendered their services to the Group.

Short term accumulating compensated absences such as paid annual leave are recognised as an expense whenservices are rendered by employees that increase their entitlement to future compensated absences. Short term non-accumulating compensated absences such as sick leave are recognised when the absences occur.

Bonuses are recognised as an expense when there is a present, legal or constructive obligation to make such payments,as a result of past events and when a reliable estimate can be made of the amount of the obligation.

(ii) Defined contribution plans

The Company and its subsidiary companies make contributions to a statutory provident fund. These contributions arerecognised as an expense in the financial year in which the employees render their services.

5.15 Income tax

Income tax in the financial statements for the financial year comprises current tax expense and deferred tax.

(i) Current tax expense

Current tax expense includes all domestic taxes which are based on taxable profits. Current tax expense also includesother taxes, such as real property gains taxes payable on disposal of properties.




5.15 Income tax (cont’d)

(ii) Deferred tax

Deferred tax, which includes deferred tax liabilities and assets, is provided for under the liability method at the currenttax rate in respect of all temporary differences between the carrying amount of an asset or liability in the balance sheetand its tax base including unused tax losses and capital allowances.

A deferred tax asset is recognised only to the extent that it is probable that taxable profit will be available against whichthe deductible temporary differences can be utilised. The carrying amount of a deferred tax asset is reviewed at eachbalance sheet date. If it is no longer probable that sufficient taxable profit will be available to allow the benefit of partor all of that deferred tax asset to be utilised, the carrying amount of the deferred tax asset will be reduced accordingly.When it becomes probable that sufficient taxable profit will be available, such reductions will be reversed to the extentof the taxable profit.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set-off current tax assetsagainst current tax liabilities and when the deferred tax assets and deferred tax liabilities relate to the same taxationauthority.

5.16 Cash and cash equivalents

Cash and cash equivalents include cash and bank balances, bank overdrafts, deposits and other short term, highly liquidinvestments which are readily convertible to cash and which are subject to insignificant risk of changes in value.

5.17 Segment information

The reporting segment information is in respect of business segments as the Group’s risks and rates of return are affectedpredominantly by differences in the services it provides. No segment information on the basis of geographical segments ispresented as the Group operates predominantly in Malaysia.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can beallocated on a reasonable basis.

Segment capital expenditure is the total cost incurred during the period to acquire segment assets that is expected to beused for more than one period.




5.18 Financial instruments recognised on the balance sheets

(i) Ordinary shares

Ordinary shares are recorded at the nominal value and proceeds in excess of the nominal value of shares issued, if any,are accounted for as share premium. Both ordinary shares and share premium are classified as equity. Cost incurreddirectly attributable to the issuance of shares are accounted for as a deduction from share premium. Otherwise, theyare charged to the income statement.

Dividends to shareholders are recognised in equity in the period in which they are declared.

(ii) Borrowings

Interest bearing borrowings are initially recorded at the gross amount of proceeds received.

(iii) Other financial instruments

The accounting policies for other financial instruments recognised on the balance sheets are disclosed in the individualpolicies associated with each item.

6. PROPERTY, PLANT AND EQUIPMENT

Group Balance Balanceas at as at

1 February 31 January2006 2005 Additions Disposals 2006

RM RM RM RMCost unless otherwise stated

Freehold land and buildings- at valuation 3,260,000 - (1,610,000) 1,650,000Long term leasehold land and buildings 5,728,718 - - 5,728,718Plant and machinery 26,001 - - 26,001Motor vehicles 419,703 195,000 - 614,703Furniture, fittings and office equipment 854,328 1,280 - 855,608Office renovation 1,578,027 - - 1,578,027

11,866,777 196,280 (1,610,000) 10,453,057



6. PROPERTY, PLANT AND EQUIPMENT (CONT’D)

Balance Balanceas at Charge for as at

1 February the financial 31 January2005 year Disposals 2006

RM RM RM RMAccumulated depreciation

Freehold land and buildings- at valuation 255,680 26,720 (136,428) 145,972Long term leasehold land and buildings 396,222 55,020 - 451,242Plant and machinery 19,501 3,900 - 23,401Motor vehicles 237,547 99,895 - 337,442Furniture, fittings and office equipment 687,620 50,709 - 738,329Office renovation 413,721 78,900 - 492,621

2,010,291 315,144 (136,428) 2,189,007

Balance Impairment Balanceas at loss for the as at

1 February financial 31 January2005 year Disposal 2006

RM RM RM RMAccumulated impairment losses

Freehold land and building 603,000 221,089 (316,000) 508,089

Group Balance Balanceas at as at

1 February Written 31 January2005 2004 Additions Disposals off 2005

RM RM RM RM RMCost unless otherwise stated

Freehold land and buildings- at valuation 3,260,000 - - - 3,260,000Long term leasehold land and buildings 7,005,167 - (1,276,449) - 5,728,718Plant and machinery 26,001 - - - 26,001Motor vehicles 678,337 2,500 (218,014) (43,120) 419,703Furniture, fittings and office equipment 1,347,853 33,606 (50,701) (476,430) 854,328Office renovation 1,720,167 - (142,140) - 1,578,027

14,037,525 36,106 (1,687,304) (519,550) 11,866,777





1 February the financial Written 31 January2004 year Disposals off 2005

RM RM RM RM RMAccumulated depreciation

Freehold land and buildings- at valuation 223,720 31,960 - - 255,680Long term leasehold land and buildings 419,723 70,248 (93,749) - 396,222Plant and machinery 15,601 3,900 - - 19,501Motor vehicles 311,219 85,975 (116,534) (43,113) 237,547Furniture, fittings and office equipment 1,082,119 74,445 (50,501) (418,443) 687,620Office renovation 367,691 84,232 (38,202) - 413,721

2,420,073 350,760 (298,986) (461,556) 2,010,291

Balance Impairment Balanceas at loss for the as at

1 February financial 31 January2004 year 2005

RM RM RMAccumulated impairment losses

Freehold land and building 603,000 - 603,000

Group 2006 2005RM RM

Net book value

Freehold land and buildings- at valuation 995,939 2,401,320Long term leasehold land and buildings 5,277,476 5,332,496Plant and machinery 2,600 6,500Motor vehicles 277,261 182,156Furniture, fittings and office equipment 117,279 166,708Office renovation 1,085,406 1,164,306

7,755,961 9,253,486




Company Balance Balanceas at as at

1 February 31 January2006 2005 Addition 2006

RM RM RMCost

Furniture, fittings and office equipment 138,420 - 138,420Office renovation 2,244,456 - 2,244,456Motor vehicle - 195,000 195,000

2,382,876 195,000 2,577,876


1 February the financial 31 January2005 year 2006

RM RM RMAccumulated depreciation

Furniture, fittings and office equipment 81,019 12,822 93,841Office renovation 585,204 112,223 697,427Motor vehicle - 39,000 39,000

666,223 164,045 830,268

Company Balance Balanceas at as at

1 February Written 31 January2005 2004 Addition off 2005

RM RM RM RMCost

Furniture, fittings and office equipment 146,723 - (8,303) 138,420Office renovation 2,244,456 - - 2,244,456

2,391,179 - (8,303) 2,382,876





1 February the financial Written 31 January2004 year off 2005

RM RM RM RMAccumulated depreciation

Furniture, fittings and office equipment 72,376 14,110 (5,467) 81,019Office renovation 472,982 112,222 - 585,204

545,358 126,332 (5,467) 666,223

2006 2005Company RM RM

Net book value

Furniture, fittings and office equipment 44,579 57,401Office renovation 1,547,029 1,659,252Motor vehicle 156,000 -

1,747,608 1,716,653

(a) The freehold land and buildings of a subsidiary company were revalued on 1 February 1998 based on a valuation performedby independent professional valuers using the open market basis. The Group has not adopted a policy of regular revaluation.These revalued assets have been retained on the basis of their previous valuations in accordance with the transitionalprovisions of International Accounting Standard (“IAS”) No. 16 (Revised) - Property, Plant and Equipment applied by the Groupwhen the IAS was first adopted by the Malaysian Accounting Standards Board (“MASB”) in 1998. The above transitionalprovisions are available only on the first application of the MASB Approved Accounting Standard IAS 16 (Revised) which iseffective for periods ending on or after 1 September 1998. The transitional provisions will remain in force until and unless theGroup adopts a revaluation policy in place of a cost policy. When that happens, Financial Reporting Standard (“FRS”) 1162004

which supersedes IAS 16 (Revised), would require revaluations to be carried out at regular intervals.




Had the revalued assets been carried at cost less accumulated depreciation, the carrying amounts would have been asfollows:

Accumulated Net bookGroup Cost depreciation value

RM RM RM2006

Freehold land and buildings 1,275,169 318,792 956,377

Accumulated Net bookGroup Cost depreciation value

RM RM RM2005

Freehold land and buildings 2,519,295 579,439 1,939,856

(b) Included in the net book value of property, plant and equipment are motor vehicles with net book value of RM242,334 (2005:RM175,933) acquired under hire-purchase arrangements.

(c) The property, plant and equipment of certain subsidiary companies which have been charged to financial institutions forbanking facilities granted to the Group (Notes 20 and 22) are as follows:

Group2006 2005

RM RMAt net book value:Freehold land and buildings - 2,401,320Long term leasehold land and buildings 4,390,088 4,435,565

4,390,088 6,836,885

7. INVESTMENT IN SUBSIDIARY COMPANIES

Company2006 2005

RM RM

Unquoted shares, at cost 58,274,485 58,274,485Less: Impairment losses (34,075,840) (34,075,840)

24,198,645 24,198,645



7. INVESTMENT IN SUBSIDIARY COMPANIES (CONT’D)

The subsidiary companies, all of which are incorporated in Malaysia, are as follows:

Interest inequity held by

Name of Company the Company Principal activities2006 2005

Mewah Kota Sdn. Bhd. 100% 100% Contractor for various kinds of building,structural and engineering works

Merge Properties Management Services Sdn. Bhd. 100% 100% Inactive

Merge Properties Sdn. Bhd. 100% 100% Property investment

MEB Development Sdn. Bhd. 100% 100% Inactive

MEB Management Sdn. Bhd. 100% 100% Inactive

Merge Environmental Engineering Sdn. Bhd. 100% 100% Inactive

MEB Realty Sdn. Bhd. 100% 100% Property investment

Paramount Ventures Sdn. Bhd. 100% 100% Building and general construction

Merge Readymix Sdn. Bhd. 100% 100% Inactive

Merge Concrete Technologies Sdn. Bhd. 100% 100% Inactive

Merge Trading Sdn. Bhd. 100% 100% Inactive

Merge Highway Engineering Sdn. Bhd. 100% 100% Inactive

8. INTEREST IN JOINT VENTURE

Group2006 2005

RM RM

Cost of investment 2,530,489 2,530,489Share of results (17,042) (15,645)

2,513,447 2,514,844



8. INTEREST IN JOINT VENTURE (CONT’D)

The Group’s share of net assets of the joint venture is as follows:

Group2006 2005

RM RM

Development expenditure 1,701,398 1,650,225Current assets 875,111 911,899Current liabilities (63,062) (47,280)

Share of net assets of interest in joint venture 2,513,447 2,514,844

The details of the joint venture are as follows:

Interest inName of Joint Venture Joint Venture Principal activity

2006 2005

IJMP-MK JV 30% 30% Property development

9. INVESTMENT PROPERTIES

Group2006 2005

RM RM

Freehold land and buildings, at cost 4,066,468 4,066,468Less: Impairment losses (1,089,828) (1,089,828)

2,976,640 2,976,640Leasehold land and buildings, at cost 2,100,000 -

5,076,640 2,976,640

The freehold land and buildings of a subsidiary company with net book value of RM2,814,949 (2005: RM2,814,949) have beencharged to a licensed bank for credit facilities granted to the Company.

The Directors are of the opinion that the carrying value of the investment properties fairly reflects the current market value.



10. AMOUNTS DUE FROM CUSTOMERS FOR CONTRACT WORKS

Group2006 2005

RM RM

Contract costs incurred to date 110,896,882 34,954,843Add: Attributable profit 12,303,809 1,831,691

123,200,691 36,786,534Less: Progress billings (109,728,354) (34,869,549)

Amounts due from customers for contract works 13,472,337 1,916,985

11. LEASEHOLD PROPERTIES

Group

The leasehold properties in 2005 represent leasehold land and buildings which were acquired by means of settlement of debtsand were held with the intention for resale. During the financial year 2006, the leasehold properties have been reclassifield asinvestment properties.

12. TRADE RECEIVABLES

Group2006 2005

RM RM

Trade receivables 39,295,592 21,287,043Less: Allowance for doubtful debts, net of bad debts written off of Nil (2005: RM272,663) (5,953,437) (5,331,790)

33,342,155 15,955,253

Included in trade receivables of the Group is retention sum for contract works of RM1,351,454 (2005: RM1,101,036).

The credit terms offered by the Group in respect of trade receivables range from 30 to 120 days (2005: 30 to 60 days) fromdate of invoice.



13. OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS

Group Company2006 2005 2006 2005

RM RM RM RM

Other receivables 765,707 851,839 38,162 42,470Less: Allowance for doubtful debts (666,340) (531,322) - -

99,367 320,517 38,162 42,470Deposits 250,893 304,578 10,990 11,007Prepayments 22,205 84,571 13,445 11,365

372,465 709,666 62,597 64,842

14. AMOUNTS OWING BY/(TO) SUBSIDIARY COMPANIES

Company2006 2005

RM RM

Amounts owing by subsidiary companies 17,133,708 18,966,126Less: Allowance for doubtful debts (16,891,658) (12,725,245)

242,050 6,240,881

The amounts owing by/(to) subsidiary companies represent advances and payments on behalf which are unsecured, interest-free and have no fixed terms of repayment.

15. AMOUNT OWING BY JOINT VENTURE

The amount owing by joint venture represents payments made on behalf which is unsecured, interest-free and has no fixedterms of repayment.

16. TRADE PAYABLES

The credit terms available to the Group in respect of trade payables range from 30 to 120 days (2005: 30 to 60 days) fromdate of invoice.



17. OTHER PAYABLES AND ACCRUALS

Group Company2006 2005 2006 2005

RM RM RM RM

Other payables 1,395,830 879,523 237,537 144,038Accruals 10,517,508 1,651,090 148,957 152,615Rental deposits received 133,130 115,126 11,250 11,250

12,046,468 2,645,739 397,744 307,903

18. PROVISIONS

Group Company2006 2005 2006 2005

RM RM RM RM

Provision for loss on put option granted to a creditor

Balance as at 1 February 2005/2004 - 514,600 - 514,600Amount utilised during the financial year - (514,600) - (514,600)

Balance as at 31 January - - - -

Provision for liquidated and ascertained damages 6,770,000 6,770,000 - -

6,770,000 6,770,000 - -

The provision for liquidated and ascertained damages relates to charges imposed against the Group in the previous financialyears arising from delay in completing two projects on the stipulated dates.



19. BORROWINGS (INTEREST BEARING)

Group Company2006 2005 2006 2005

RM RM RM RMCurrent liabilities

Bank overdrafts - secured (Note 20) 2,101,837 2,450,231 - -Hire-purchase creditors (Note 21) 66,573 39,892 46,664 -Term loans - secured (Note 22) 944,762 936,166 820,179 627,698

3,113,172 3,426,289 866,843 627,698

Long term liabilitiesBank overdrafts - secured (Note 20) 4,564,000 6,564,000 - -Hire-purchase creditors (Note 21) 150,148 106,199 62,219 -Term loans - secured (Note 22) 1,443,606 2,356,035 408,697 1,210,806

6,157,754 9,026,234 470,916 1,210,806

Total borrowingsBank overdrafts - secured 6,665,837 9,014,231 - -Hire-purchase creditors 216,721 146,091 108,883 -Term loans - secured 2,388,368 3,292,201 1,228,876 1,838,504

9,270,926 12,452,523 1,337,759 1,838,504

20. BANK OVERDRAFTS - SECURED

The bank overdrafts of the Group are secured by:

(a) first fixed charges over properties at net book value of RM1,111,116 (2005: RM3,525,219) of its subsidiary company(Note 6);

(b) deed of assignments by way of equitable assignment of proceeds from contracts of a subsidiary company;

(c) debenture covering fixed and floating, present and future assets of a subsidiary company; and

(d) charge over quoted shares of third party.

The bank overdrafts of the Group are jointly and severally guaranteed by certain former Directors of the subsidiary company.



21. HIRE-PURCHASE CREDITORS

Group Company2006 2005 2006 2005

RM RM RM RMMinimum hire-purchase payments:- not later than one year 78,443 49,322 51,564 -- later than one year but not later than five years 176,266 107,529 68,752 -- later than five years 11,199 35,843 - -

265,908 192,694 120,316 -Less: Future interest charges (49,187) (46,603) (11,433) -

Present value of hire-purchase liabilities 216,721 146,091 108,883 -

Repayable as follows:

Current liabilities:- not later than one year 66,573 39,892 46,664 -

Long term liabilities:- later than one year but not later than five years 141,853 79,649 62,219 -- later than five years 8,295 26,550 - -

150,148 106,199 62,219 -

216,721 146,091 108,883 -

22. TERM LOANS - SECURED

Group Company2006 2005 2006 2005

RM RM RM RMRepayable as follows:

Current liabilities:- within one year 944,762 936,166 820,179 627,698

Long term liabilities:- not later than two years 469,169 915,491 408,697 800,000- later than two years but not later than five years 214,543 616,076 - 410,806- later than five years 759,894 824,468 - -

1,443,606 2,356,035 408,697 1,210,806

2,388,368 3,292,201 1,228,876 1,838,504



22. TERM LOANS - SECURED (CONT’D)

The repayment terms are as follows:

Group Company2006 2005 2006 2005

RM RM RM RM

(a) Term loans of RM751,000 with interest at funding rateplus 1.75% per annum, repayable by 240 monthlyinstalments of RM5,955 each commencing February 1997 528,187 554,457 - -

(b) Term loan of RM619,052 with interest at funding rateplus 1.75% per annum, repayable by 180 monthlyinstalments of RM6,054 each commencing March 2003 562,395 587,955 - -

(c) Term loan of RM500,000 with interest at funding rateplus 2.00% per annum, repayable by 120 monthlyinstalments of RM7,230 each commencing March 1997 68,910 143,739 - -

(d) Term loan of RM2,500,000 with interest at funding rateplus 2.50% per annum, repayable by 14 quarterlyinstalments ranging from RM100,000 to RM265,000each commencing March 2004 1,228,876 1,838,504 1,228,876 1,838,504

(e) Term loan of RM626,911 with interest at funding rateplus 2.00% per annum, repayable by 36 monthlyinstalments of RM19,463 each commencingSeptember 2003 - 167,546 - -

2,388,368 3,292,201 1,228,876 1,838,504

The term loans (a) and (b) are secured by first fixed charge over the long term leasehold land and buildings of a subsidiarycompany (Note 6) with net book value of RM1,480,030 (2005: RM1,497,058) and are jointly and severally guaranteed bycertain former Directors of the subsidiary company. The term loan (c) is secured by a corporate guarantee from a financialcorporation and is jointly and severally guaranteed by certain former Directors of the Company.

Term loan (d) is secured by a first fixed charge over the long term leasehold land and buildings and investment properties of twosubsidiary companies (Note 6 and 9) with net book value of RM3,714,420 (2005: RM3,722,252) and a charge over quotedshares of third party.

Term loan (e) is secured by a first fixed charge over the long term leasehold land and buildings of a subsidiary company (Note 6)with net book value of RM899,471 (2005: RM907,303). During the financial year, the Group has fully settled the term loanand is currently in the process of discharging the charge.



23. SHARE CAPITAL

Group and Company2006 2005

RM RMAuthorised:

100,000,000 ordinary shares of RM1.00 each 100,000,000 100,000,000

Issued and fully paid:

67,000,000 ordinary shares of RM1.00 each 67,000,000 67,000,000

24. RESERVES

Group Company2006 2005 2006 2005

RM RM RM RM

Non-distributable

Share premium 7,712,508 7,712,508 7,712,508 7,712,508Revaluation reserve - 314,056 - -Accumulated losses (64,188,846) (69,315,119) (51,272,877) (45,632,563)

(56,476,338) (61,288,555) (43,560,369) (37,920,055)

25. REVENUE

Group Company2006 2005 2006 2005

RM RM RM RM

Contract works 90,252,331 16,751,089 - -Rental income 32,300 60,998 - -

90,284,631 16,812,087 - -



26. PROFIT/(LOSS) BEFORE TAX

Group Company2006 2005 2006 2005

RM RM RM RM

Profit/(Loss) before tax is stated after charging:

Allowance for doubtful debts 756,665 1,534,651 4,190,833 -Auditors’ remuneration:- current year

- statutory 41,000 39,400 17,000 17,000- non-statutory 5,000 5,000 5,000 5,000

- under provision in prior years- statutory - 2,900 - 5,000

Bad debts written off 83,568 4,750 - -Deposits written off 49,128 - - -Depreciation of property, plant and equipment 315,144 350,760 164,045 126,332Directors’ remuneration:- fees 56,758 71,613 56,758 71,613- other emoluments 396,417 380,426 187,500 180,000Impairment loss on property, plant and equipment 43,511 - - -Interest expense on:- bank overdrafts 665,099 803,010 - -- hire-purchase 12,116 28,119 3,267 -- term loans 237,444 347,268 135,681 176,587- others 159,000 46,154 - 4,373Loss on disposal of property, plant and equipment 157,572 - - -Property, plant and equipment written off - 57,994 - 2,836Rental of premises - - 50,400 81,900Tax penalty 518,911 - 99,888 -

And crediting:

Allowance for doubtful debts no longer required - 51,568 24,420 -Gain on disposal of property, plant and equipment - 144,982 - -Gain on disposal of investment in quoted shares - 212,535 - 208,857Interest income on:- fixed deposits 2,191 33,922 - 15,318- others 13,677 13,520 - -Rental income 321,700 276,048 - -

Contract cost of the Group recognised as an expense during the financial year amounted to RM79,639,256 (2005:RM12,966,979).



27. TAX EXPENSE/(INCOME)

Group Company2006 2005 2006 2005

RM RM RM RM

Current tax expense based on profit for the financial year 4,134 - - -Under provision of real property gains tax in prior years - 6,680 - -Under/(Over) provision of tax expense in prior year 590,406 - (91,137) -

594,540 6,680 (91,137) -

The numerical reconciliation between the applicable tax rate and the average effective tax rate of the Group and of the Companyare as follows:

Group Company2006 2005 2006 2005

% % % %

Applicable tax rate 28.0 (28.0) (28.0) (28.0)

Tax effect in respect of:Non-allowable expenses 14.1 46.1 28.0 28.0Income not subject to tax - (3.8) - -Unutilised tax losses and capital allowances not recognised - 35.1 - -Utilisation of previously unrecognised tax losses and capital allowances (42.0) (49.4) - -

0.1 - - -Under/(Over) provision of tax expense in prior years 10.6 - (1.6) -Under provision of real property gains tax in prior years - 0.6 - -

Average effective tax rate 10.7 0.6 (1.6) -

Tax savings of the Group are as follows:2006 2005

RM RM

Arising from utilisation of previously unrecognised tax losses and capital allowances 2,345,000 509,000

Subject to the agreement of Inland Revenue Board, the Group has unutilised tax losses and unabsorbed capital allowance ofapproximately RM71,429,000 (2005: RM79,880,000) and RM3,919,000 (2005: RM3,873,000) respectively which areavailable for set-off against future taxable profit.



28. EARNINGS/(LOSS) PER ORDINARY SHARE

The earnings/(loss) per ordinary share for the financial year has been calculated based on the consolidated net profit for thefinancial year of RM4,989,795 (2005: net loss of RM1,038,799) and the number of ordinary shares in issue of 67,000,000(2005: 67,000,000).

29. DEFERRED TAX ASSETS

The amount of temporary differences for which no deferred tax assets have been recognised in the balance sheet are asfollows:

Group2006 2005

RM RM

Unabsorbed capital allowances 3,919,000 3,873,000Unutilised tax losses 71,429,000 79,880,000

75,348,000 83,753,000

Deferred tax assets have not been recognised in respect of these items as it is not probable that taxable profit will be availableagainst which the deductible temporary differences can be utilised.

30. PURCHASE OF PROPERTY, PLANT AND EQUIPMENT

Group Company2006 2005 2006 2005

RM RM RM RM

Purchase of property, plant and equipment (Note 6) 196,280 36,106 195,000 -Financed by hire-purchase arrangement (140,000) - (140,000) -Amount owing to supplier of property, plant and equipment (55,000) - (55,000) -

Cash payments on purchase of property, plant and equipment 1,280 36,106 - -



31. CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprise the following balance sheet amounts:

Group Company2006 2005 2006 2005

RM RM RM RM

Cash and bank balances 1,102,611 1,211,300 32,530 41,727Bank overdrafts (Note 20) (6,665,837) (9,014,231) - -

(5,563,226) (7,802,931) 32,530 41,727

32. SEGMENT REPORTING

The Group’s operations comprise the following business segments:

Investment holding : Investment holding

Construction : Construction of building and structural and engineering works

Property investment : Investment in properties

Others : Inactive companies

2006 Investment Propertyholding Construction investment Others Elimination Consolidation

RM RM RM RM RM RMRevenueExternal sales - 90,252,331 32,300 - - 90,284,631Inter-segment sales - - 204,000 - (204,000) -

- 90,252,331 236,300 - (204,000) 90,284,631

Segment results (external) (1,284,811) 8,191,481 (80,004) (167,199) - 6,659,467Finance cost (1,073,735)Share of results in joint venture - (1,397) - - - (1,397)

Profit before tax 5,584,335Tax expense (594,540)

Net profit for the financial year 4,989,795



32. SEGMENT REPORTING (CONT’D)


RM RM RM RM RM RMOther informationSegment assets 1,333,957 53,588,253 6,340,359 1,030 - 61,263,599Interest in joint venture - 2,513,447 - - - 2,513,447

Total assets 63,777,046

Segment liabilities 397,744 41,603,749 64,010 147,666 - 42,213,169Unallocated liabilities 11,040,215

Total liabilities 53,253,384

Capital expenditure 195,000 1,280 - - - 196,280Depreciation 127,164 151,728 36,252 - - 315,144Non-cash expenses other

than depreciation - 925,499 16,500 148,444 - 1,090,443


RM RM RM RM RM RMRevenueExternal sales - 16,751,089 60,998 - - 16,812,087Inter-segment sales - - 204,000 - (204,000) -

- 16,751,089 264,998 - (204,000) 16,812,087

Segment results (external) (930,645) 1,101,253 4,102 19,000 - 193,710Finance cost (1,224,786)Share of results in joint venture - (1,043) - - - (1,043)

Loss before tax (1,032,119)Tax expense (6,680)

Net loss for the financial year (1,038,799)



32. SEGMENT REPORTING (CONT’D)


RM RM RM RM RM RMOther informationSegment assets 1,309,365 26,370,460 6,399,175 185,760 - 34,264,760Interest in joint venture - 2,514,844 - - - 2,514,844

Total assets 36,779,604

Segment liabilities 307,903 16,775,194 64,497 136,790 - 17,284,384Unallocated liabilities 13,783,775

Total liabilities 31,068,159

Capital expenditure - 36,106 - - - 36,106Depreciation 89,452 204,496 55,995 817 - 350,760Non-cash expenses

other than depreciation 2,836 1,581,443 8,500 4,616 - 1,597,395

No reporting by geographical segment is presented as the Group operates predominantly in Malaysia.

Inter-segment pricing is determined under terms and conditions not materially different from transactions with unrelatedparties.

33. FINANCIAL INSTRUMENTS

(a) Interest rate risk

The effective interest rates of the financial assets and liabilities of the Group and the Company are as follows:

Group Company2006 2005 2006 2005

% % % %

Bank overdrafts 8.00 - 8.80 8.00 - 8.50 - -Term loans 7.75 - 8.75 7.75 - 8.50 8.50 - 8.75 8.50



33. FINANCIAL INSTRUMENTS (CONT’D)

(b) Credit risk

The Group’s historical experience in collection of trade receivables fall within the recorded allowances. Due to thesefactors, the Directors believe that no additional credit risk beyond amounts allowed for doubtful debts is inherent in theGroup’s trade receivables.

The Group has no major concentration of credit risk that may arise from the exposure of a single receivable or a group ofreceivables.

(c) Fair values

The carrying amounts of the financial instruments of the Group and the Company as at balance sheet date approximatetheir fair values except as set out below:

Group CompanyCarrying Fair Carrying Fairamount value amount value

RM RM RM RMAs at 31 January 2006

Amounts owing by subsidiary companies - - 242,050 *Amount owing to a subsidiary company - - (167,139) *

As at 31 January 2005

Amounts owing by subsidiary companies - - 6,240,881 *

* It is not practical to estimate the fair value of amounts owing by/(to) subsidiary companies due principally to the lackof fixed repayment terms. However, the Company does not anticipate the carrying amounts recorded at the balancesheet date to be significantly different from the values that would eventually be received or settled.

The following methods and assumptions are used to determine the fair values of the following classes of financial instruments:

(i) Cash and cash equivalents, Trade/Other Receivables/Payables and Amounts Due from Customers on ContractWorks.

The carrying amounts of these financial assets and liabilities maturing within 12 months approximate their fair valuesdue to the relatively short term maturity of these financial instruments.

(ii) Borrowings

The fair values of the borrowings are estimated by discounting future cash flows at the current market rate availablefor similar borrowings.



34. SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES

In the normal course of business, the Group undertakes transactions with certain of its related parties listed below. Set outbelow are the significant related party transactions for the financial year. The related party transactions described below werecarried out on terms and conditions not materially different from those obtainable in transactions with unrelated parties.

Group Company2006 2005 2006 2005

RM RM RM RM

Directors’ remuneration:- bonus 14,747 - 7,500 -- fees 56,758 71,613 56,758 71,613- salaries and allowances 353,928 353,928 180,000 180,000- defined contribution plans 27,175 26,088 - -- other employee benefits 567 410 - -

The number of Directors of the Company whose aggregate of remuneration received from the Company and its subsidiarycompanies during the financial year and falling within the respective bands are as follows:

2006 2005

Executive DirectorsRM150,001 - RM200,000 1 1RM200,001 - RM250,000 1 1

Non-Executive DirectorsRM50,000 and below 6 7

The relationship between the Group and the related parties are as follows:

Identities of related parties Relationship with the Group

Dato’ Muhammad Azaham Bin Abdul Wahab }Yusof Badawi }Maseri Bin Basirah }Dr Mohd Soib Bin Mustakim } DirectorsSheah Kok Fah }Abd Latiff Bin Ahmad }Tahirruddin Bin Ahmad }

Hew Thin Chay } Former Director



35. CONTINGENT LIABILITIES - UNSECURED

Company2006 2005

RM RM

Corporate guarantees given to licensed banks for banking and credit facilities granted to subsidiary companies 6,665,837 9,776,881

36. EVENT SUBSEQUENT TO THE BALANCE SHEET DATE

On 16 March 2006, a subsidiary company, Paramount Ventures Sdn. Bhd. has disposed of an investment property with bookvalue of RM700,000 for settlement of debt and resulted in a loss of RM44,033.

37. NUMBER OF EMPLOYEES AND STAFF COSTS

Group Company2006 2005 2006 2005

Number of employees, including Executive Directors, at the end of the financial year 36 26 10 10

Total staff costs recognised in the income statements are as follows:

Group Company2006 2005 2006 2005

RM RM RM RM

Staff costs 1,950,290 1,547,174 775,501 711,255

Included in staff costs are contributions to defined contribution retirement plan amounting to RM188,989 (2005: RM142,171)and RM61,447 (2005: RM55,241) for the Group and the Company respectively.

38. AUTHORISATION FOR ISSUE OF FINANCIAL STATEMENTS

These financial statements were authorised for issue by the Board of Directors on 9 May 2006.


LIST OFpropertiesAs at 31 January 2006

Land Area Net Book Date ofTenure (Built-Up Value as at Acquisition/

Description (Age of Area) 31.1.2006 Date of LastLocation (Existing Use) Building) sq. ft. RM Valuation *

Lot 000201 (GN 5078) 4-storey Freehold 2,185 523,631 1.2.1998 *Bandar Alor Setar shop house (21 years) (8,689)Daerah Kota Setar (rented/vacant)Kedah Darul Aman

Lot 000202 (GN 5079) 4-storey Freehold 2,110 472,309 1.2.1998 *Bandar Alor Setar shop house (21 years) (8,480)Daerah Kota Setar (rented/vacant)Kedah Darul Aman

H.S. (D) 512/96 to 522/96, 17 units of Freehold 28,795 2,976,640 13.1.1997Lots 715 to 725, 2-storey (7 1/2 years) (36,788)H.S. (D) 524/96 to 526/96, shop houseLots 727 to 729, (rented/vacant)H.S. (D) 544/96 to 546/96,Lots 747 to 749,Sek 41, Mukim KulimDaerah KulimKedah Darul Aman

Lot 444, P.T. 31009 and 2 1/2 - storey Leasehold 18,238 689,202 27.2.1995Title No. H.S. (D) 91884 semi-detached Expiring on (5,400)Mukim Sungai Buloh factory (office) 7.12.2093Daerah Petaling (8 years)Selangor Darul Ehsan

Lot 449, P.T. 31018 and 2 1/2 - storey Leasehold 17,668 790,828 31.10.1996Title No. H.S. (D) 91893 semi-detached Expiring on (5,400)Mukim Sungai Buloh factory (office) 7.12.2093Daerah Petaling (8 years)Selangor Darul Ehsan

Lot 416, P.T. 31094 and 3-storey Leasehold 23,153 1,111,115 30.12.1994Title No. H.S. (D) 91969 detached factory Expiring on (10,240)Mukim Sungai Buloh (rented) 7.12.2093Daerah Petaling (8 years)Selangor Darul Ehsan


Land Area Net Book Date ofTenure (Built-Up Value as at Acquisition/

Description (Age of Area) 31.1.2006 Date of LastLocation (Existing Use) Building) sq. ft. RM Valuation *

Lot 097(C), P.T. 37998 and 2-storey Leasehold 7,280 887,389 7.6.2000Title No. H.S. (D) 138849 shop office Expiring on (3,610)Mukim Sungai Buloh (rented) 16.7.2099Daerah Petaling (6 years)Selangor Darul Ehsan

Lot 043(E), P.T. 31508 and 3-storey Leasehold 2,516 899,471 23.4.2001Title No. H.S. (M) 9741 shop office Expiring on (8,916)Mukim Sungai Buloh (vacant) 25.1.2095Daerah Petaling (7 years)Selangor Darul Ehsan

Lot 071(E), P.T. 31479 and 3-storey Leasehold 2,516 899,471 23.4.2001Title No. H.S. (M) 9713 shop office Expiring on (8,916)Mukim Sungai Buloh (vacant) 25.1.2095Daerah Petaling (7 years)Selangor Darul Ehsan

Lot 079, P.T. 33576 and 4-storey Leasehold 1,760 700,000 9.10.2002Title No. H.S. (D) 104307 shop office Expiring on (7,040)Mukim Sungai Buloh (rented/vacant) 25.9.2095Daerah Petaling (1 1/2 years)Selangor Darul Ehsan



list ofpropertiesAs at 31 January 2006


Authorised share capital : RM100,000,000Issued and paid-up share capital : RM67,000,000Class of shares : OrdinaryNominal value : RM1.00 per shareVoting rights : 1 vote per share

DIRECTORS’ SHAREHOLDINGS

Direct Interest Indirect InterestName of Director No. of Shares % No. of Shares %

Dato’ Muhammad Azaham bin Abdul Wahab* - - 13,000,000 19.40Yusof Badawi* - - 13,000,000 19.40Maseri bin Basirah 10,000,000 14.93 - -Dr Mohd Soib bin Mustakim 8,000,000 11.94 - -Sheah Kok Fah - - - -Abd Latiff bin Ahmad - - - -Tahirruddin bin Ahmad - - - -

SUBSTANTIAL SHAREHOLDERS

Direct Interest Indirect InterestName of Shareholder No. of Shares % No. of Shares %

Desa Binapuri Sdn Bhd 13,000,000 19.40 - -Dato’ Muhammad Azaham bin Abdul Wahab* - - 13,000,000 19.40Yusof Badawi* - - 13,000,000 19.40Jumat bin Salihen 10,015,000 14.95 - -Maseri bin Basirah 10,000,000 14.93 - -Dr Mohd Soib bin Mustakim 8,000,000 11.94 - -

* Deemed interest by virtue of 50% equity interest in Desa Binapuri Sdn Bhd.

SHAREHOLDINGSanalysis ofAs at 28 April 2006


analysis ofshareholdingsAs at 28 April 2006

DISTRIBUTION OF SHAREHOLDINGS

Size of Holdings No. of Holders % No. of Shares %

1 – 99 5 0.38 114 0.00100 – 1,000 509 38.62 495,200 0.741,001 – 10,000 636 48.25 2,612,390 3.9010,001 – 100,000 138 10.47 4,333,299 6.47100,001 – 3,349,999 (Less than 5% of issued shares) 26 1.97 24,558,997 36.663,350,000 and above (5% and above of issued shares) 4 0.30 35,000,000 52.24

Total 1,318 100.00 67,000,000 100.00

30 LARGEST SHAREHOLDERS

No. Name of Shareholders No. of Shares %

1 Maseri bin Basirah 10,000,000 14.932 Desa Binapuri Sdn Bhd 10,000,000 14.933 Mohd Soib bin Mustakim 8,000,000 11.944 Bumiputra-Commerce Nominees (Tempatan) Sdn Bhd

[P/S for Jumat bin Salihen] 7,000,000 10.455 Zon bin Abdul Hamid 3,032,000 4.536 Jumat bin Salihen 3,015,000 4.507 Bumiputra-Commerce Nominees (Tempatan) Sdn Bhd

[P/S for Desa Binapuri Sdn Bhd] 3,000,000 4.488 Mohmad Damahuri bin Mohmad Tahir 2,723,000 4.069 Hamdan bin Mohamed 2,690,100 4.02

10 Zahidan bin Abdullah 1,500,000 2.2411 Hiap Huat Realty Sdn Bhd 1,472,997 2.2012 Solarcom Sdn Bhd 1,300,000 1.9413 Amsec Nominees (Tempatan) Sdn Bhd

[P/S for Kwek Keng Yong] 701,000 1.0514 RHB Capital Nominees (Tempatan) Sdn Bhd

[P/S for Ho Kim Shing] 607,700 0.91


30 LARGEST SHAREHOLDERS (CONT’D)

No. Name of Shareholders No. of Shares %

15 Tan Lean Choo 539,598 0.8116 Wong Kam You 480,100 0.7217 Kuala Lumpur City Nominees (Tempatan) Sdn Bhd

[P/S for Southern Consolidated Projects Sdn Bhd] 470,800 0.7018 RHB Capital Nominees (Tempatan) Sdn Bhd

[P/S for Kwek Keng Yong] 350,000 0.5219 Tan Huat Sheng 323,758 0.4820 Mayban Nominees (Tempatan) Sdn Bhd

[P/S for Wong Wing Kheong] 311,300 0.4621 Goh Beng Ee 300,000 0.4522 Lim Ah Gek @ Lim Chor Kheng 291,382 0.4323 Ang Swee Pian @ Ang Swee Yong 237,423 0.3524 Tan Hoi Chon 215,839 0.3225 Kenanga Nominees (Tempatan) Sdn Bhd

[P/S for Kwek Keng Yong] 200,000 0.3026 Amsec Nominees (Tempatan) Sdn Bhd

[P/S for Lee Heng Choong] 194,000 0.2927 Amsec Nominees (Tempatan) Sdn Bhd

[P/S for Chin Boo Ying] 180,000 0.2728 Jothesvaran a/l K Nadarajah 150,000 0.2229 Amsec Nominees (Tempatan) Sdn Bhd

[P/S for Sabbir Husain bin Akbarali] 150,000 0.2230 Ang Seng Chew @ Ong Seng Chew 123,000 0.18

Note: P/S means pledged securities account

analysis ofshareholdingsAs at 28 April 2006


AGENDA

Oridinary Business

1. To receive the Audited Financial Statements for thefinancial year ended 31 January 2006 together with theReports of the Directors and Auditors thereon.

Resolution 1

2. To approve the payment of Directors’ fees for the financialyear ended 31 January 2006. Resolution 2

3. To re-elect the following Directors retiring pursuant toArticle 105 of the Company’s Articles of Association:

(a) Dato’ Muhammad Azaham bin Abdul WahabResolution 3

(b) Encik Abd Latiff bin Ahmad. Resolution 4

4. To re-elect Encik Tahirruddin bin Ahmad, who retirespursuant to Article 112 of the Company’s Articles ofAssociation. Resolution 5

5. To re-appoint Messrs BDO Binder as Auditors and toauthorise the Directors to fix their remuneration.

Resolution 6

ANNUAL GENERALMEETING

notice of

NOTICE IS HEREBY GIVEN THAT the Ninth Annual General Meeting of Merge Energy Bhd.

will be held at the Board Room of Merge Energy Bhd., No. 2 Jalan Apollo U5/190, Bandar

Pinggiran Subang, Seksyen U5, 40150 Shah Alam, Selangor Darul Ehsan on Tuesday,

27 June 2006 at 10.30 a.m. for the following purposes:

Special BusinessTo consider and if thought fit, pass the following resolution:

6. Ordinary ResolutionAuthority to Issue Shares

“THAT pursuant to Section 132D of the Companies Act,1965, the Directors be and are hereby empowered toissue shares in the Company at any time until theconclusion of the next Annual General Meeting or untilthe expiration of the period within which the next AnnualGeneral Meeting is required by law to be held, whicheveris earlier and upon such terms and conditions and forsuch purposes as the Directors may in their absolutediscretion deem fit, provided that the aggregate numberof shares issued pursuant to this resolution does notexceed 10% of the issued share capital of the Companyfor the time being AND THAT the Directors be and arehereby also empowered to obtain the approval for thelisting of and quotation for the additional shares so issuedon Bursa Malaysia Securities Berhad.”

Resolution 7

7. To transact any other business of which due notice shallhave been given.

By Order of the Board

Yoong Wai Ling (MAICSA 7014031)Company Secretary

Shah Alam, Selangor Darul Ehsan31 May 2006


Notes:

1. A member entitled to attend and vote at the Meetingis entitled to appoint a proxy to attend and vote in hisstead. Where a member appoints more than one (1)proxy, the appointment shall be invalid unless hespecif ies the proportions of his holdings to berepresented by each proxy. A proxy need not be amember of the Company.

2. The instrument appointing a proxy shall be in writingunder the hand of the appointer or his attorney dulyauthorised in writ ing or if such appointer is acorporation, under its Common Seal or the hand of itsattorney.

3. The instrument appointing a proxy must be depositedat the registered office of the Company at No. 2 JalanApollo U5/190, Bandar Pinggiran Subang, SeksyenU5, 40150 Shah Alam, Selangor Darul Ehsan not lessthan forty-eight (48) hours before the time appointedfor holding the Meeting or any adjournment thereof.

notice ofannual generalmeeting

4. Explanatory Notes on Resolution 7The proposed resolution, if passed, is to authorise theDirectors to allot up to 10% of the issued share capitalfor such purposes as the Directors consider would bein the best interests of the Company. This authoritywill, unless revoked or varied by the Company in ageneral meeting, expire at the conclusion of the nextAnnual General Meeting or will subsist until theexpiration of the period within which the next AnnualGeneral Meeting is required by law to be held,whichever is earlier.


1. Name of Directors Retiring Pursuant to Article 105 ofthe Company’s Articles of Association and Standing forRe-election

• Dato’ Muhammad Azaham bin Abdul Wahab• Encik Abd Latiff bin Ahmad

2. Name of Director Retiring Pursuant to Article 112 ofthe Company’s Articles of Association and Standing forRe-election

• Encik Tahirruddin bin Ahmad

3. Venue, Date and Time of the Ninth Annual GeneralMeeting

Venue : The Board Room of Merge Energy Bhd.,No. 2 Jalan Apollo U5/190, Bandar PinggiranSubang, Seksyen U5, 40150 Shah AlamSelangor Darul Ehsan

Date : Tuesday, 27 June 2006

Time : 10.30 a.m.

statement accompanyingNOTICE OF ANNUALGENERAL MEETING

4. Details of Directors Standing for Re-election

The details of the Directors standing for re-election arepresented in the Profile of Directors on pages 3 and 6 ofthis Annual Report. Their securities holdings in theCompany are set out in the Analysis of Shareholdings onpage 72 of this Annual Report.

5. Details of Attendance at Board of Directors’ Meetings

The details of attendance of each Director at Board ofDirectors’ Meetings are disclosed in the Statement onCorporate Governance on page 12 of this Annual Report.

This page is intentionally left blank

Notes:

1. A member entitled to attend and vote at the Meeting is entitled toappoint a proxy to attend and vote in his stead. Where a memberappoints more than one (1) proxy, the appointment shall be invalidunless he specifies the proportions of his holdings to be representedby each proxy. A proxy need not be a member of the Company.

2. The instrument appointing a proxy shall be in writing under thehand of the appointer or his attorney duly authorised in writing or ifsuch appointer is a corporation, under its Common Seal or thehand of its attorney.

3. The instrument appointing a proxy must be deposited at theregistered office of the Company at No. 2 Jalan Apollo U5/190,Bandar Pinggiran Subang, Seksyen U5, 40150 Shah Alam, SelangorDarul Ehsan not less than forty-eight (48) hours before the timeappointed for holding the Meeting or any adjournment thereof.

FORMproxy

I/We

of

being a member/members of MERGE ENERGY BHD., hereby appoint

of

or failing him/her/them, the Chairman of the Meeting as my/our proxy(ies) to vote for me/us on my/our behalf at the NinthAnnual General Meeting of the Company to be held at the Board Room of Merge Energy Bhd., No. 2 Jalan Apollo U5/190,Bandar Pinggiran Subang, Seksyen U5, 40150 Shah Alam, Selangor Darul Ehsan on Tuesday, 27 June 2006 at 10.30 a.m.and at any adjournment thereof.

NO. RESOLUTIONS FOR AGAINST

1 To receive the Audited Financial Statements for the financial year ended 31 January2006 together with the Reports of the Directors and Auditors thereon.

2 To approve the payment of Directors’ fees for the financial year ended 31 January2006.

3 To re-elect Dato’ Muhammad Azaham bin Abdul Wahab as Director of the Company.

4 To re-elect Encik Abd Latiff bin Ahmad as Director of the Company.

5 To re-elect Encik Tahirruddin bin Ahmad as Director of the Company.

6 To re-appoint Messrs BDO Binder as Auditors and to authorise the Directors to fixtheir remuneration.

7 Ordinary ResolutionAuthority to Issue Shares.

Please indicate with an “X” how you wish to cast your votes. In the absence of specific directions, the proxy(ies) will vote orabstain as he/she/they think(s) fit.

Dated this ___________ day of _______________ 2006

Signature/Common Seal of Shareholder(s)

NO. OF SHARES HELD

The Company SecretaryMERGE ENERGY BHD. (420099-X)

No. 2 Jalan Apollo U5/190

Bandar Pinggiran Subang, Seksyen U5

40150 Shah Alam

Selangor Darul Ehsan

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