GRAND-FLO BERHAD · GRAND-FLO BERHAD (607392-W) Annual Report 2015 1 Corporate information BoarD of...

GRAND-FLO BERHAD (607392-W)Annual Report 2015 1

Corporate information

BoarD of DireCtorStan Sri Datuk adzmi Bin abdul WahabIndependent Non-Executive Chairman

tan Bak HongGroup Managing Director / Group President

Cheng ping LiongExecutive Director

Yap Li LiExecutive Director

Wan Kok WengExecutive Director

Chuah Chew HaiExecutive Director tan Chuan HockNon-Independent Non-Executive Director

Cheong Kee YoongSenior Independent Non-Executive Director

Yu Chee SingIndependent Non-Executive Director

Yek Deiw SeeIndependent Non-Executive Director

Chan pik KhewAlternate Director to Wan Kok Weng

auDit CommitteeCheong Kee Yoong - ChairmanTan Chuan HockYu Chee SingYek Deiw See

nomination CommitteeCheong Kee Yoong - ChairmanTan Chuan HockYek Deiw See

remuneration CommitteeTan Chuan Hock - ChairmanYek Deiw SeeYu Chee Sing

CompanY SeCretarieSTea Sor Hua (MACS 01324)Yong Yen Ling (MAICSA 7044771)

auDitorSSJ Grant Thornton(Member of Grant ThorntonInternational Ltd)Chartered AccountantsLevel 11, Sheraton Imperial CourtJalan Sultan Ismail50250 Kuala Lumpur, Malaysia.Tel : 603-2692 4022Fax : 603-2691 5229

SHare regiStrarTricor Investor & Issuing House Services Sdn. Bhd.Unit 32-01, Level 32Tower A, Vertical Business SuiteAvenue 3, Bangsar SouthNo. 8, Jalan Kerinchi59200 Kuala Lumpur, Malaysia.Tel : 603-2783 9299Fax : 603-2783 9222

prinCipaL BanKerSUnited Overseas Bank (Malaysia) BerhadPublic Bank BerhadPublic Bank (Hong Kong) LimitedMalayan Banking BerhadAlliance Bank Malaysia BerhadOCBC Al-Amin Bank BerhadOCBC Bank (Malaysia) BerhadCIMB Bank Berhad

regiStereD offiCeThird Floor No. 79 (Room A)Jalan SS 21/60Damansara Utama47400 Petaling JayaSelangor Darul Ehsan, Malaysia.Tel : 603-7725 1777Fax : 603-7722 3668

BuSineSS HeaDquarterS3-5, Block D2, Jalan PJU 1/39Dataran Prima, 47301 Petaling JayaSelangor Darul Ehsan, Malaysia.Tel : 603-7880 2222Fax : 603-7880 3913Email : [email protected] : www.grand-flo.com

StoCK informationMain Market of Bursa Malaysia Securities Berhad

Bursa Malaysia : GRANFLO / 0056Bloomberg Code : GFLO MKReuters Code : GRFL.KL

2 GRAND-FLO BERHAD (607392-W)Annual Report 2015

Corporate profiLe

For over two decades, Grand-Flo Berhad (“Grand-Flo”) has been establishing successful data management and collaboration solutions for corporations ranging from Fast Moving Consumer Goods (FMCG) businesses to financial institutions, education organisations and even multinational establishments. We have been empowering businesses to manage and collaborate their data efficiently no matter where its origins or capacity frequencies.

Today, the Group has two core businesses:

EntErprisE Data CollECtion anD Collation systEm (EDCCs)

Our core business is in providing comprehensive EDCCS, or tracking solutions, to businesses across all industrial sectors. Our One Stop EDCCS Solution Centre takes care of all your retail data tracking and management needs, ranging from hardware, middleware, software to media and consumables such as barcode ribbons and labels.

Our home-grown ManageSuite application solution is also an emerging product in the market. A comprehensive range of precision tools, ManageSuite has proven to increase efficiency, harvest market intelligence and facilitate sales force mobility while minimizing potential errors to almost zero. Complemented with any barcode products, ManageSuite enable users to manage and track assets in warehouses, retail outlets and office buildings.

With ManageSuite, many businesses have experienced transformation in their operations that leads to unlocking the full potential of their business growth.

propErty DEvElopmEnt

In line with consistently enhancing shareholders’ value, Grand-Flo ventured into the property development sector in mid-2013 in partnership with notable industry players. The Group’s two main projects are located in Mainland Penang, capturing the high-growth opportunities in Northern Peninsular.

It is envisaged that this diverse earnings base would propel the Group’s growth momentum into the future.


Corporate StruCture

100%Grand-Flo Data Centrix

Sdn Bhd

50%Vietsun Technologies &

Investment JointStock Company

100%Grand-Flo Spritvest

Sdn Bhd

100%Grand-Flo Electronic

System Sdn Bhd

40%Sino Trading & Service

Corporation

100%Labels Network Sdn Bhd

14.12%Simat Labels Co. Ltd

80%Kopacklabels Press (PG)

Sdn Bhd

100%Kopacklabels Press Sdn Bhd

100%Kopacklabels (M)

Sdn Bhd

100%Grand-Flo Development

Sdn Bhd

100%Grand-Flo Capital

Sdn Bhd

50.0004%Innoceria Sdn Bhd

52%Jalur Bina Sdn Bhd

18.24%Simat Technologies

Public Company Limited

100%Grand-Flo (HK) Limited (fka CL Solutions (China) Ltd.

100%Guangzhou CLSolutions Ltd

100%Victor Group Ltd

100%Simat Telecom Company

Limited

100%CL Solutions Ltd

100%Simat Soft Co. Ltd

60%E-Tech IT Sdn Bhd

Malaysia Majority Stake

Minority StakeHong Kong, China

Thailand

Vietnam

Singapore

EDCCS: ENTERPRISE DATA COLLECTION & COLLATION SYSTEM LABELS PROPERTY DEVELOPMENT

85.88%


2011 2012 2013 2014 2015 2011 2012 2013 2014 2015

74,6

76

9,39

1

12,9

68

7,83

1

6,67

3

11,9

31

85,6

33

120,

523

87,6

91

89,6

03

REVENUE (RM’000) NET PROFIT (RM’000)

2011 2012 2013 2014 2015 2011 2012 2013 2014 2015

123,

527

101,

130

86,6

14

74,1

67

63,6

17

89,1

81

102,

666

126,

509 16

7,39

4

223,

708

TOTAL ASSETS (RM’000) SHAREHOLDERS’ EQUITY (RM’000)

2011 2012 2013 2014 2015 2011 2012 2013 2014 2015

1,90

3

3,25

0

3,25

9

4,53

0

2,41

60.6

1.0

1.0

1.0

0.5

DIVIDEND PER SHARE (SEN) DIVIDEND HISTORY

20.3%26.3% 25.1%

67.9%

20.2%

* Adjusted for corporate exercise undertaken^ Subject to shareholders’ approval

Dividend Payout (RM’000)Payout Ratio

2011 2012 2013 2014 2015 2011 2012 2013 2014 2015

74,6

76

9,39

1

12,9

68

7,83

1

6,67

3

11,9

31

85,6

33

120,

523

87,6

91

89,6

03

REVENUE (RM’000) NET PROFIT (RM’000)

2011 2012 2013 2014 2015 2011 2012 2013 2014 2015

123,

527

101,

130

86,6

14

74,1

67

63,6

17

89,1

81

102,

666

126,

509 16

7,39

4

223,

708

TOTAL ASSETS (RM’000) SHAREHOLDERS’ EQUITY (RM’000)

2011 2012 2013 2014 2015 2011 2012 2013 2014 2015

1,90

3

3,25

0

3,25

9

4,53

0

2,41

60.6

1.0

1.0

1.0

0.5

DIVIDEND PER SHARE (SEN) DIVIDEND HISTORY

20.3%26.3% 25.1%

67.9%

20.2%

* Adjusted for corporate exercise undertaken^ Subject to shareholders’ approval

Dividend Payout (RM’000)Payout Ratio

finanCiaL HigHLigHtS


finanCiaL HigHLigHtS(CONT’D)

Summarized Group ComprehenSive inCome

YEAr ENDED 31 DECEMBEr (rM’000)

2011 2012 2013 2014 2015

revenue 74,676 87,692 89,603 85,633 120,523

EBITDA^ 11,250 9,444 16,746 14,076 24,332

Operating Profit 9,125 6,911 13,564 10,569 21,018

Profit Before Tax 10,060 8,758 14,089 9,188 18,596

Profit After Tax 9,401 7,846 12,966 8,101 16,093

Net Profit 9,391 7,831 12,968 6,673 11,931

^ Earnings Before Interest, Tax, Depreciation and Amortisation

summarizED Group FinanCial position


2011 2012 2013 2014 2015

Non-Current Assets 53,204 63,447 77,404 77,788 76,951

Current Assets 35,977 39,219 49,105 89,606 146,757

Total Assets 89,181 102,666 126,509 167,394 223,708

Non-Current liabilities 5,194 6,028 11,273 14,687 8,158

Current Liabilities 20,078 22,164 27,835 49,207 69,271

Total Liabilities 25,272 28,192 39,108 63,894 77,429

Shareholders' Equity 63,617 74,167 86,614 101,130 123,527

Non-Controlling Interest 292 307 787 2,370 22,752

Total Equity and Liabilities 89,181 102,666 126,509 167,394 223,708

FinanCial analysis


2011 2012 2013 2014 2015

Turnover Growth 8.8% 17.4% 2.2% -4.4% 40.7%

Operating Profit Growth 14.3% -24.3% 96.3% -22.1% 98.9%

Profit Before Tax Growth 17.9% -12.9% 60.9% -34.8% 102.4%

Net Profit Growth 27.0% -16.6% 65.6% -48.5% 78.8%

Operating Profit Margin 12.2% 7.9% 15.1% 12.3% 17.4%

Profit Before Tax Margin 13.5% 10.0% 15.7% 10.7% 15.4%

Gearing (Net of Cash) 0.11 0.08 0.05 0.16 0.09

Cash and Cash Equivalents (rM'000) 5,150 6,256 14,432 11,153 13,687

return on Average Shareholders’ Equity (rOE)

16.5% 11.3% 16.0% 7.0% 10.6%

return on Average Total Assets (rOA) 11.4% 8.2% 11.3% 4.5% 6.1%


meSSage fromtHe CHairman

Dear shareholders,

The global market faced a tumultuous 2015, as major economies such as the United States of America and Europe struggled to find their footing, and weak data from China diminished confidence in global growth recovery. These fears were demonstrated by the volatility in international financial markets and drastic plunge in crude oil prices.

On the local front, the declining oil prices meant substantially lesser revenue for Malaysia as an oil-producing country, sparking anxiety over the state of the economy, and influencing to an extent the sharp depreciation of the Malaysian ringgit (MYr) against other major international currencies including the US Dollar (USD) and Singapore Dollar (SGD).

Moreover, the implementation of the Goods and Services Tax (GST) from April 2015 onwards dampened consumer spending further.

Amidst the intense challenges, Malaysia defended a 5.0% growth in Gross Domestic Product (GDP) in 2015, as compared to 6.0% recorded in the previous year.

That said, the local Information and Communications Technology (ICT) sector charted a commendable 14.2% growth in 2015, spurred by the increased usage of mobile devices, social media, cloud solutions, e-commerce and Big Data analytics.

The property industry, however, noted decelerated growth in 2015 as stringent loan requirements resulted in a downward trend of property transaction volume and sales value for the first time in several years.

Despite these trying circumstances, Grand-Flo Berhad (Grand-Flo or the Group) was able to capture the available opportunities in our existing market segments and remained prudent in our operations.

I am heartened that our relentless efforts allowed Grand-Flo to achieve record performance for the financial year ended 31 December 2015 (FY2015), with group net profit reaching an all-time high of rM11.9 million on revenue of rM120.5 million. This clearly validates our strategy of establishing a diversified earnings base to record sustainable growth.

Tan Sri Datuk Adzmi Bin Abdul WahabIndependent Non-Executive Chairman


FuturE outlook

The international economic and financial landscape is expected to remain challenging in 2016. Malaysia is anticipated to follow suit, with Bank Negara Malaysia estimating slower GDP expansion of between 4.0% to 4.5% in 2016.

Still, Grand-Flo is no stranger to economic fluctuations in our 27-year corporate history, and thus will continue to strengthen our position in the sectors we operate in.

For one thing, we believe that the ICT market still has room for expansion, particularly in the small and medium-sized enterprises (SME) segment. The Government’s allocation of rM200 million in Budget 2016 for SME Tech Transformation is a step in the right direction to encourage businesses to adopt ICT systems for greater efficiency, scalability and growth opportunities.

Also, the rising popularity of e-commerce in Malaysia is a strong catalyst for Grand-Flo, in light of our entrenched position and track record in empowering logistics players to automate and escalate their activities for better traceability and customer delivery.

The property sector, meanwhile, is expected to remain muted. Nonetheless, we believe that the Mainland Penang market still has ample room to grow in the long term, given the increasing population, accelerating infrastructure projects, and potential job creation through the upcoming economic developments. We will remain focused in delivering our projects within the stipulated time frame so as to build our reputation on the right footing.

Armed with these plans, we are positive that the Group would be able to perform satisfactorily in the financial year ending 31 December 2016 (FY2016).

aCknowlEDGEmEnts anD apprECiation

I would like to express my gratitude to the Board of Directors, key management, team members and all our loyal shareholders and customers that have been with us all these years allowing us to achieve another height of success.

I would also like to welcome Mr. Chuah Chew Hai, who was appointed to the Board on 25 May 2015 as an Executive Director. We are privileged to have his extensive experience of more than 20 years in the construction and property development industry which would be beneficial to the Group’s property development venture.

At this juncture, I would also like to express our heartfelt appreciation to Dato’ Loo Yoong Haw @ Vanchai Virochpokha for his contributions as an Independent and Non-Executive Director of Grand-Flo. Dato’ Loo stepped down from the Board on 25 May 2015 and we wish him all the best in his future endeavours.

tan sri Datuk adzmi Bin abdul wahabIndependent Non-Executive Chairman


managementDiSCuSSion & anaLYSiS

FinanCial pErFormanCE

Despite the challenges faced in the domestic and regional markets, I am pleased that Grand-Flo maintained our growth pace across both business segments in FY2015.

Notably, FY2015 group revenue charted a new height of rM120.5 million, jumping 40.7% from rM85.6 million a year ago.

The Group’s tracking solutions and labels business cumulatively contributed rM79.9 million, or two-thirds of FY2015 total revenue, on the back of 19.7% sales growth year-on-year from rM66.8 million previously.

The property segment contributed the remaining rM40.6 million, posting a quicker growth rate of 115.4% from rM18.8 million previously on steady progress billings.

The stronger topline as well as favourable mix within and across the business segments resulted in profit before tax doubling to rM18.6 million in FY2015, from rM9.2 million a year ago.

Correspondingly, Grand-Flo reported a tremendous 78.8% increase in net profit to a record-high of rM11.9 million in FY2015 from rM6.7 million previously. Basic earnings per share rose to 2.64 sen in FY2015 from 1.95 sen a year ago in line with strong bottomline growth.

Even so, despite Grand-Flo fortifying its strengths in the tracking solutions and property development segments, the Group’s balance sheet remained robust with improved net gearing of 0.1x in FY2015 compared to 0.2x in the previous year.

This was attributed to growing cash and cash equivalents to rM13.7 million in FY2015 from rM11.2 million previously. Also, the higher retained earnings and increased share capital enlarged our shareholders’ funds to rM123.5 million in FY2015 from rM101.1 million a year ago. The Group’s strategy to pare down borrowings to rM26.3 million in FY2015 from rM27.5 million previously resulted in leaner balance sheet, which places us in a good position to fund future business expansion plans.

DiviDEnD

The Board has proposed a first and final dividend of 0.5 sen per share in respect of FY2015, subject to shareholders’ approval at the upcoming Annual General Meeting.

This translates to a total dividend payout of rM2.4 million or 20.2% of the Group’s FY2015 net profit. This adheres to our policy of distributing a minimum 20% of net profit as dividends to reward our loyal shareholders.

tan Bak HongGroup Managing Director / Group President


analysis By BusinEss sEGmEnt

traCkinG solutions

Grand-Flo’s tracking solutions consist of two components: firstly the Enterprise Data Collection and Collation System (EDCCS) hardware and software from front-to-back-end, and secondly the barcode labels also known as consumables.

The EDCCS segment saw revenue improve by 27.7% to rM61.4 million in FY2015 compared to rM48.1 million a year ago. Domestic EDCCS sales climbed 19.8% to rM47.6 million on higher demand from SMEs requiring sales invoice generation capability to facilitate the GST claims. revenue from Hong Kong and China operations jumped 65.5% to rM13.8 million in FY2015 on larger orders from existing and new customers.

Sales of labels reduced to rM18.5 million in FY2015 from rM18.7 million previously on steady demand across retail and manufacturing sectors. Domestic revenue remained steady at rM18.5 million compared to rM18.7 million a year ago.

Going forward, we are optimistic that the outlook for our tracking solutions segment remains bright. For one thing, Grand-Flo would continue to serve the sustained demand from reputable clientele in the manufacturing, retail and fast-moving consumer goods sectors.

More excitingly, consumers’ escalating preference for e-commerce has given rise to the huge growth potential in the domestic tracking solutions space. This plays right into our advantage, as we would be in a favourable position to support the expanding operations of logistics players.

We will continue to look into securing more projects in Malaysia and Hong Kong & China to increase our presence and market share in the region.

It is worthwhile to note that the uptake of tracking solutions would also potentially increase the Group’s recurring income stream, derived from hardware and software maintenance as well as systems upgrade services. All these point towards reiterating Grand-Flo’s reputation as a full-service and integrated tracking solutions player in this market.

FiBrE optiC BusinEss

Simat Technologies Public Company Limited (Simat), the Group’s 18.7%-owned associate in Thailand, has been in the forefront of providing high speed fibre-optic broadband services under its own brand ‘Sinet’ since mid-2013. The year under review saw Sinet’s expansion to KhonKhan and Bangkok, effectively increasing Sinet’s service coverage to 4 locations in Thailand namely Chiang Mai, Korat, KhonKhan and Bangkok.

Simat is also partnering with Thailand’s largest mobile phone operator Advance Info Service Public Company Limited (or popularly known as AIS) to provide internet broadband services to its network of clientele.

This dual-pronged customer acquisition strategy boosted Simat’s subscriber base to 16,500 subscribers to date, with the 20,000 subscriber point well in sight.

The higher capital expenditure incurred from the expanded coverage and corresponding marketing campaigns resulted in the Group recording a loss in share of associate in FY2015 of rM1.2 million, as compared to rM0.8 million loss year-on-year. Still, we believe that Simat’s value proposition as the provider of best-in-market and high-quality broadband services would translate to greater shareholder returns in the long term.

Altogether, it is no easy feat remaining resilient in these challenging times, but we at Grand-Flo are encouraged by our milestones this year. We trust that these will become strong building blocks to steady our performance in the coming years, and create enduring value for our stakeholders.


analysis By BusinEss sEGmEnt

propErty DEvElopmEnt

The Group has two property development projects in Mainland Penang, namely ‘Vortex Business Park’ and ‘The Glades’, which are targeted to be completed in 2017. The unbilled sales as at 31 December 2015 amounted to rM49.4 million.

‘vortex Business park’

The Group has launched both phases of ‘Vortex Business Park’ in Batu Kawan, Mainland Penang, with total Gross Development Value (GDV) of rM220.0 million. The project consists of 60-units of 4-storey semi-detached shop offices and 52 units of 4-storey light industrial factories on an 8.4 hectare land.

Phase 1 has seen 71% of its units taken up since the launch, while Phase 2 remains at initial stages due to the softer property market sentiment. We are optimistic that the timely delivery of the first phase would play a significant role in encouraging take-up at the subsequent stages.

‘the Glades’

‘The Glades’ was launched in Bukit Mertajam in February 2015 with an estimated GDV of rM63.0 million consisting of 67 units of semi-detached and zero-lot bungalows on a 3.3 hectare land.

Even though the project was 20% taken up, reflecting the overall dampened property market, the management is optimistic that its full-facility lifestyle offering, affordability and strategic location are plus points for potential buyers. Therefore, the Group has decided to undertake the “build-and-sell” approach to shore up the confidence of existing and potential buyers.

Overall, we are committed to the growth of our property development segment, and would hope to explore further opportunities in the future.

managementDiSCuSSion & anaLYSiS


CaLenDar ofeventS

In keeping our competitive edge, Grand-Flo not only kept abreast of the latest technologies in tracking solutions by world-renowned principals, but also participated in various exhibitions to showcase how tracking solutions could effectively enhance the efficiency of various commercial sectors.

Big iT Technology Show (6 - 7 April 2015)

honeywell Technology UpdATeS (16 ocToBer 2015)

zeBrA Technology UpdATeS (16 AUgUST 2015)

oil And gAS ASiA(2 - 4 JUne 2015)


BoarD of DireCtorS

1 2

3

7

4

8

6

10

11

5

9

1. Tan Sri Datuk Adzmi bin Abdul Wahab - Independent Non-Executive Chairman2. Tan Bak Hong - Group Managing Director / Group President3. Cheng Ping Liong - Executive Director4. Yap Li Li - Executive Director5. Wan Kok Weng - Executive Director6. Chuah Chew Hai - Executive Director7. Tan Chuan Hock - Non-Independent Non-Executive Director8. Cheong Kee Yoong - Senior Independent Non-Executive Director9. Yu Chee Sing - Independent Non-Executive Director10. Yek Deiw See - Independent Non-Executive Director11. Chan Pik Khew - Alternate Director to Wan Kok Weng


tan sri Datuk aDzmi Bin aBDul wahaBIndependent Non-Executive Chairman

Tan Sri Datuk Adzmi bin Abdul Wahab, a Malaysian, aged 73, is the Independent Non-Executive Chairman of the Company and was appointed to the Board on 1 July 2010. Tan Sri Datuk Adzmi holds a Master in Business Administration from University of Southern California. He is the Chairman and Director of three other public companies, namely Magna Prima Berhad, Dataprep Holdings Berhad, Lebtech Berhad and LKL International Berhad, and some private companies involved in information technology, construction, property development, manufacturing, trading and tertiary education.

Tan Sri Datuk Adzmi was appointed as the longest serving Managing Director of Edaran Otomobil Nasional Berhad from November 1992 until May 2005. In 2003, he was conferred Malaysia CEO of the Year by American Express and Business Times and Most Pr Savvy CEO by Institute of Public relations Malaysia. He served in Proton Holdings Berhad from 1985 to 1992 and his last position there was a Director/Corporate General Manager, Administration and Finance Division. Prior to that, he was a Manager, Corporate Planning Division of HICOM Holdings Berhad from 1982 to 1985 and was involved in the development of heavy industries projects.

Tan Sri Datuk Adzmi served the Malaysian Administrative and Diplomatic Service in the following capacities from 1967 to 1982: Central Procurement and Contract Management in Ministry of Finance; Investment Promotion in Pahang Tenggara Development Authority, Public Enterprise Management in Implementation Coordination Unit (Prime Minister’s Department), and regional Planning in Klang Valley Planning Secretariat (Prime Minister’s Department).

tan Bak honGGroup Managing Director / Group President

Tan Bak Hong, a Malaysian, aged 53, is the Group Managing Director/Group President of the Company and was appointed to the Board on 1 December 2003. Mr. Tan graduated with a Bachelor in Engineering (Mechanical) from University of Malaya in 1988 and possesses more than 28 years of experience in the field of automation and tracking solutions business.

In 1989, Mr. Tan founded Grand-Flo Engineering Sdn Bhd (formerly known as Grand-Flo Engineering Supply & Service Sdn Bhd) (“GFE”), which was principally involved in fluid power and motion control business and distribution of hydraulic and pneumatic industrial products.

With foresight, Mr. Tan expanded the business and established its Auto-ID division within GFE in 1994. As envisaged, this division grew rapidly and Grand-Flo Electronic System Sdn Bhd was incorporated in 1996 and as planned, the business moved forward and developed its own in-house proprietary solutions to offer complete Auto-ID system solutions to further enhance its services and earnings base.

Mr. Tan is the key person responsible for the strategic planning, development and overall management of the Company and its subsidiaries (“the Group”). Under his leadership, the Group had achieved several milestones including its expansion into Thailand, Vietnam, Hong Kong and China. He was key in steering the Group in its expansion plans through organic growth, mergers and acquisitions and recently, inclusion of property development into the Group.

Mr. Tan currently sits on the board of several private limited companies and Simat Technologies Public Company Limited, a public company listed on the Stock Exchange of Thailand.

DireCtorS’ profiLe


ChEnG pinG lionGExecutive Director

Cheng Ping Liong, a Malaysian, aged 51, is an Executive Director of the Company and was appointed to the Board on 29 September 2006. He graduated with a Bachelor of Business Administration in Finance from University of Iowa, United States of America in 1988. His first employment was with rES Malaysia Sdn Bhd. where he held the position of Trainee Programmer from 1989 to 1990. In 1990, he was promoted to the position of an Analyst Programmer and this was followed by his ascension to the position of System Analyst in 1991. During the years 1992 to 1995, he took on the role of a Technical Manager in rES Malaysia Sdn Bhd. It was in 1995 when he, together with En. Othman bin Bakri jointly incorporated Grand-Flo Spritvest Sdn Bhd. He spearheads Grand-Flo Spritvest Sdn Bhd’s research & Development initiatives and plays a pivotal role in the conceptualisation of the enterprise data capture solution, namely Direct Store Delivery. He is actively involved in the formation of strategic alliances with business and technology partners for the company as well as formulating the company’s business strategies. In August 2007, Mr. Cheng was appointed the Chief Executive Officer of the integrated company between Grand-Flo Electronic System Sdn Bhd and Grand-Flo Spritvest Sdn Bhd. Mr. Cheng is also a director of several private limited companies.

yap li liExecutive Director

Yap Li Li, a Malaysian, aged 49, is an Executive Director of the Company and was appointed to the Board on 22 April 2009. Madam Yap obtained a Bachelor of Arts (Economics) Degree from University of Malaya in 1990. Upon graduation, she joined a distribution company in charge of marketing operations and later, moved on to join a well-established insurance company primarily for the role of agency development and management which encompassed sales achievements for her team.

In 1996, Madam Yap joined Grand-Flo Engineering Sdn Bhd (formerly known as Grand-Flo Engineering Supply and Service Sdn Bhd), primarily to streamline the operations of the hydraulic engineering business and also, to prepare the Group for further expansion into Auto-ID system as a new business division. Since then, she had been actively involved in the growth and rapid expansion of the Auto-ID business division. Madam Yap was later appointed as a director and later, attached to the corporate office of the Group. She had been instrumental in the Group’s strategic expansion and development plans including its mergers and acquisitions exercises. She possesses more than 20 years of experience in the roles of management, corporate planning and business expansion. Madam Yap currently sits on the board of several private limited companies.

wan kok wEnGExecutive Director

Wan Kok Weng, a Malaysian, aged 54, is an Executive Director of the Company and was appointed to the Board on 26 February 2008. Mr. Wan is the founder of Labels Network Sdn Bhd, which has since became the wholly owned subsidiary of the Company. He brings with him more than 30 years of experience in the labels manufacturing business. Prior to setting up Labels Network Sdn Bhd, Mr. Wan was a Sales Manager in General Labels & Labelling (M) Sdn Bhd from 1990 to 1995 and moved on to become an Executive Director from 1995 to 1997. Currently, he is the Managing Director of Labels Network Sdn Bhd.

Chuah ChEw haiExecutive Director

Chuah Chew Hai, a Malaysian, aged 53, is an Executive Director of the Company and was appointed to the Board on 25 May 2015. He has more than 20 years of experience in the construction and property development industry. Together with his spouse, Ms. Chong Poh Yoong, they founded Metrio group of companies in October 2002, which are principally involved in property development.

Prior to Metrio Group, Mr. Chuah was with ABT Construction Sdn Bhd from 1986 to 1988 as a quantity surveyor. He joined Wah Bee Construction Engineering Sdn Bhd in 1989 as a quantity surveyor.

From 1991 to 1992, Mr. Chuah was a Construction Manager in Oriental Max Sdn Bhd. He then joined Panther Construction from 1993 to 2002 as a partner where he was responsible for managing its operations and oversaw the tendering of projects, resource planning and costing.

His extensive experience and knowledge in construction and development industry has driven Metrio group of companies to become a leading property developer in the northern region of Peninsular Malaysia.

DireCtorS’ profiLe(CONT’D)


tan Chuan hoCkNon-Independent Non-Executive Director

Tan Chuan Hock, a Malaysian, aged 55, is a Non-Independent Non-Executive Director and was appointed to the Board on 2 October 2004. Mr. Tan is the Chairman of the remuneration Committee and a member of both the Audit Committee and Nomination Committee. He is the Executive Proprietor and also the Founder of Messrs. William C.H. Tan & Associates, a Chartered Accountants firm. Mr. Tan is a member of the Malaysian Institute of Accountants, Malaysian Institute of Taxation and is a Fellow Member of the Association of Chartered Certified Accountants (“ACCA”).

He has more than thirty years of experience particularly in financial reporting, auditing, taxation and planning, company secretarial as well as corporate management and advisory services.

He holds directorships in several limited companies. Presently, his directorships in other public companies includes Careplus Group Berhad, EITA resources Berhad and LKL International Berhad. He also sits on the Board of Simat Technologies Public Company Limited, a public company listed on the Stock Exchange of Thailand.

ChEonG kEE yoonGSenior Independent Non-Executive Director

Cheong Kee Yoong, a Malaysian, aged 48, is an Independent Non-Executive Director of the Company. Mr. Cheong was appointed to the Board on 30 June 2008 and subsequently appointed as Senior Independent Director of the Company on 24 April 2014. Currently he is the Chairman of both Audit Committee and Nomination Committee. Mr. Cheong is also the Chief Financial Officer of Southern Acids (M) Berhad, a company listed on the Main Market of Bursa Malaysia Securities Berhad.

A graduate of the Association of Certified Chartered Accountants (ACCA) and a Member of the Malaysian Institute of Accountants (MIA), he has more than 20 years of working experience particularly in corporate planning, fund raising, treasury management, investors relation activities, tax planning, financial management and risk management in various industries and mainly attached to the corporate office of public listed companies

yu ChEE sinG Independent Non-Executive Director

Yu Chee Sing, a Malaysian, aged 53, is an Independent Non-Executive Director of the Company and was appointed to the Board on 2 October 2004. He is a member of the Audit Committee and remuneration Committee of the Company. Mr. Yu obtained a Bachelor of Degree in Civil Engineering from University of Malaya in 1988, and has more than 25 years of experience in the construction and development industry. Upon graduation, he started his career as an Engineer in Design Deco Sdn Bhd. Subsequently, he joined Syarikat Murni Utara Sdn Bhd as a Project Manager in 1992. He left the company in 1995 and joined Lintasan Baru Sdn Bhd as a Project Coordinator. In 2001, he joined Dimensi Baru Sdn Bhd as a Project Director and had since accomplished many construction and development projects.

In 2007, Mr. Yu expanded his forte in property development and construction through his appointment as director of Delta Elegance Sdn Bhd, a property development company and was instrumental in the development of a housing estate located in Kuala Lumpur.

Mr. Yu is also a director of several private limited companies.

yEk DEiw sEE Independent Non-Executive Director

Yek Deiw See, a Malaysian, aged 53, is an Independent Non-Executive Director of the Company and was appointed to the Board on 29 December 2006. He is a member of the Audit Committee, Nomination Committee and remuneration Committee. He obtained a Bachelor Degree in Civil Engineering from University of Malaya in 1988. He has more than 20 years of experience in the management, marketing and business of building materials. Mr. Yek started his career with Panglobal Sistemaju Sdn Bhd to distribute and promote WANG computers. He later joined CMCM Perniagaan Sdn Bhd, a leading building materials trading firm in the region. In 1999, he jointly formed VGM Marketing Sdn Bhd, an established general building materials trading company, as an Executive Director. He is currently a director of several private limited companies.

DireCtorS’ profiLe (CONT’D)


Chan pik khEw Alternate Director to Mr. Wan Kok Weng

Chan Pik Khew, a Malaysian, aged 45, was appointed to the Board as an alternate director to Mr. Wan Kok Weng on 26 February 2008. Madam Chan has more than 20 years of experience in the labels industry. She was instrumental in securing sales for KopackLabels Press Sdn Bhd, a wholly owned subsidiary of Labels Network Sdn Bhd, which in turn is the wholly-owned subsidiary of the Company. Madam Chan started her career as a Sales Executive in General Labels & Labeling (M) Sdn Bhd in 1992. In 1995, she founded Kopack Enterprise and teamed up with Mr. Wan Kok Weng to co-found Labels Network Sdn Bhd. Together, they led Labels Network Sdn Bhd and its subsidiary into a dynamic, well-managed and reputable company in the labeling industry. Currently, Madam Chan is the Sales Director of Labels Network Sdn Bhd.

Notes:1. None of the directors have family relationship with other directors or major shareholders except of the following:-

a) Mr. Tan Bak Hong is the spouse of Madam Yap Li Li.b) Mr. Wan Kok Weng is the spouse of Madam Chan Pik Khew.c) Mr. Tan Bak Hong and Madam Yap Li Li who are the directors and shareholders of Grand-Flo Corporation Sdn Bhd, a major

shareholder of the Company.

2. None of the Directors have a personal interest in any business arrangement involving the Company except as disclosed in Note 44 of the Financial Statements on Page 100 of this Annual report.

3. None of the Directors have been convicted of any offences other than traffic offences, if any, in the past ten (10) years.

DireCtorS’ profiLe(CONT’D)


The Board of Directors (“Board”) of Grand-Flo Berhad (“Grand-Flo” or “Company”) is fully committed towards ensuring that the Company and its subsidiaries (“Group”) applies the principles and recommendations of the Malaysian Code of Corporate Governance 2012 (“Code”) throughout the financial year ended 31 December 2015.

This Corporate Governance Statement (“Statement”), which is made pursuant to Paragraph 15.25 of the Main Market Listing Requirements (“MMLR”) of Bursa Malaysia Securities Berhad (“Bursa Securities”), sets out the manner in which the Group has adopted the Code and the extent to which it has applied the Principles and Recommendations as set out in the Code throughout the financial year ended 31 December 2015.

PRINCIPLE 1 – ESTABLISH CLEAR ROLES AND RESPONSIBILITIES OF THE BOARD

Recommendation 1.1- The Board should establish clear functions reserved for the Board and those delegated to the management

The Board consists of ten (10) members, five (5) of whom are Non-Executive Directors (including the Chairman) whilst the remaining five (5) are Executive Directors. One (1) out of five (5) of the Non-Executive Directors is a Non-Independent Director whilst the balance of four (4) are Independent Non-Executive Directors. This composition fulfills the requirements mandated by the MMLR of Bursa Securities, which stipulates that at least two (2) Directors or one-third (1/3) of the Board, whichever is higher, must be Independent. The profile of each Director is set out in pages 13 to 16 of this Annual Report.

The size and composition of the Board is well balanced in its current constituted state to address any business challenges and to drive the business of the Group to greater heights. The Board comprises a mixture of Executive and Non-Executive Directors from diverse professional backgrounds with a wealth of experience, skills and expertise to meet the Group’s needs.

There is clear separation of functions between the Board and Management. The Board has a collective responsibility for the management of the Group. The Non-Executive Directors are responsible for bringing independent judgment and scrutiny to decisions taken by the Board and providing objective challenges to Management.

The Non-Executive Directors do not participate in the day-to-day management of the Group and do not engage in any business dealing or other relationship with the Group. This is to ensure that they are capable of exercising judgment objectively whilst acting in the best interest of the Group, its stakeholders and shareholders, including minority shareholders. To enhance accountability, the Board has specific functions reserved for the Board and those delegated to Management.

Recommendation 1.2- The Board should establish clear roles and responsibilities in discharging its fiduciary and leadership functions

The Board directs the Group’s risk assessment, strategic planning, succession planning and financial and operational management to ensure that obligations to shareholders and other stakeholders are understood and met. The Board provides the leadership necessary to enable the Group’s business objectives to be met within the framework of risk management and internal controls as described in this Statement.

Broadly, the Board assumes the following principal responsibilities in discharging its fiduciary and leadership functions:

• ReviewingandadoptingastrategicplanfortheGroup,includingaddressingtheGroup’sbusinessstrategiesonpromoting sustainability;

• OverseeingtheconductoftheGroup’sbusiness,andevaluatingwhetherornotitsbusinessesarebeingproperlymanaged;

• IdentifyingprincipalbusinessrisksfacedbytheGroupandensuringtheimplementationofappropriateinternalcontrols and mitigating measures to address such risks;

• EnsuringthatallcandidatesappointedtotheBoardareofsufficientcalibre,includinghavinginplaceaprocesstoprovide for the orderly succession of the members of the Board;

• Overseeing the development and implementation of an investor relations programme and stakeholdercommunications policy; and

• Reviewing the adequacy and integrity of the Group’s internal control andmanagement information systems,including systems for compliance with applicable laws, regulations, rules, directives and guidelines.

STATEMENT ON CORPORATE GOVERNANCE


In discharging its fiduciary duties, the Board has also delegated specific tasks to the Audit, Nomination and Remuneration Committees, all of which operate within respective defined terms of reference. These Committees have the authority to examine particular issues and report to the Board on their proceedings and deliberations together with its recommendations. However, the ultimate responsibility for the final decision on all matters lies with the Board.

The Audit Committee of the Company consists of the following members who are appointed by the Board:-

Name of Committee Members DesignationCheong Kee Yoong, Chairman Senior Independent Non-Executive DirectorYu Chee Sing, Member Independent Non-Executive DirectorYek Deiw See, Member Independent Non-Executive DirectorTan Chuan Hock, Member Non-Independent Non-Executive Director

The Audit Committee’s objectives are, among others, providing an additional assurance to the Board by giving an objective and independent review of financial, operational and administrative controls and procedures, establishing and maintaining internal controls and reinforce the independence of the Company’s External Auditors, thereby ensuring that the Auditors have free reign in the audit process.

A summary of the terms of reference of the Audit Committee and its activities carried out during the financial year ended 31 December 2015 are set forth in the Audit Committee Report on pages 29 to 31 of this Annual Report.

The Nomination Committee of the Company is responsible to oversee the selection and assessment of Directors. The Committee’s responsibilities include assessing and making recommendations to the Board who will thereon assess the shortlisted candidates and arrive at a decision on the appointment of the director. The members of the Nomination Committee and its roles and responsibilities are set out under Recommendation 2.2 below.

The Remuneration Committee is principally responsible for the development and review of the remuneration policy and packages of the Executive Directors and subsequently furnishes its recommendations to the Board for adoption. The members of the Remuneration Committee and its roles and responsibilities are set out under Recommendation 2.3 below.

There is a clear division of responsibilities between the Chairman and the Group Managing Director/Group President (“GMD/GP”) as well as specific parameters in which decisions are made in order to ensure independence.

The Board ensures that the Chairman is a non-executive member of the Board. The role of the Chairman and the GMD/GP are distinct and separate to ensure there is balance of power and authority. The Chairman is responsible for the leadership, effectiveness, conduct and governance of the Board while the GMD/GP has overall responsibility for the day-to-day management of the business and implementation of the Board’s policies and decisions. The GMD/GP is accountable to the Board for the overall organisation, management, and staffing of the Company and/or Group and for the procedures in financial and other matters, including conduct and discipline.

Recommendation 1.3- The Board should formalise ethical standards through a code of conduct and ensure its compliance

In discharging its responsibilities, the Board is guided by the code of ethics and principles contained in the Code. The Directors of the Company have a duty to declare immediately to the Board should they be interested in any transaction to be entered into directly or indirectly within the Group.

The Board acknowledges that misconduct such as violation of laws, rules, regulations, production fault, fraud, health and safety violations or corruption are usually known first by the people who work in or with the Group. An early warning system such as a whistleblowing policy and procedure can help the Group to detect wrongdoings and alert the Group to take corrective actions before a problem becomes a crisis. To address this concern, the Group has formalised a whistleblowing policy and procedure whereby any employee, supplier or third party may call, write an e-mail or mail on any non-compliance situation in the Group. The identity of the whistleblower is also safeguarded at all times. An employee who believes in good faith that it is his or her duty to report suspected misconduct and who discloses information is protected by the Group from coercion, retaliation or reprisal in connection with his or her cooperation. A whistleblowing system strengthens and supports good management and at the same time demonstrates accountability, provides good risk management and sound corporate governance practices. A copy of the Whistleblowing Policy is available at the Group’s website www.grand-flo.com.

STATEMENT ON CORPORATE GOVERNANCE(cONt’D)


Recommendation 1.4- The Board should ensure that the Company’s strategies promote sustainability

The Board is cognisant of the importance of business sustainability and, in conducting the Group’s business, the impact on the environment, social and governance is taken into consideration. The Group also embraces sustainability in its operations and throughout its value chain and in partnership with its stakeholders, including suppliers, customers and other organisations.

Recommendation 1.5- The Board should have procedures to allow its members to access to information and advice

From time to time, whenever the Board requires relevant information updates from any members of the Management team, the relevant member of the Management team is invited to attend meetings of the Board and to provide the Board with any such relevant information or updates.

The Board and the Board Committees receive timely and up-to-date information and the Company Secretaries ensure a balanced flow of information is disseminated for decisions to be made on an informed basis and for the effective discharge of the Board’s responsibilities.

All Directors have unrestricted access to the advice and services of the Company Secretaries to enable them to discharge their duties effectively. The Company Secretaries advise the Board on any updates relating to new statutory and regulatory requirements pertaining to the duties and responsibilities of Directors and their impact and implication to the Company and Directors in carrying out their fiduciary duties and responsibilities.

The Company Secretaries organise and attend all Board and Board Committee meetings and ensures meetings are properly convened; accurate and proper records of the proceedings and resolutions passed are maintained accordingly at the registered office of the Company; and produced for inspection, if required.

Recommendation 1.6- The Board should ensure it is supported by a suitably qualified and competent Company Secretary

The Board appoints the Company Secretaries, who play an important advisory role, and ensures that the Company Secretaries fullfill the functions for which they have been appointed. The Company Secretaries, who are qualified, experienced and competent, are the central source of information and advice to the Board and its Committees on issues relating to compliance with laws, rules, procedures and regulations affecting the Company.

The Board recognises that the Company Secretaries are suitably qualified and capable of carrying out their duties required. The Board is satisfied with the service and support rendered by the Company Secretaries to the Board in the discharge of their functions.

Recommendation 1.7- The Board should formalise, periodically review and make public its Board Charter

A Board Charter was formalised on 24 April 2013. The Board Charter is intended to identify the role, structure and processes related to key governance activities of the Board. It also serves as a reference point for Board activities. It is designed to provide guidance and clarity for Directors and Management with regard to the roles of the Board and its Committees, the role of the GMD/GP, the requirements of Directors in carrying out their roles and in discharging their duties towards the Company as well as the Board’s operating practices.

The Board has also adopted a Code of Ethics and Conduct which is incorporated in the Board Charter of the Company.

A copy of the Board Charter is available at the Group’s website www.grand-flo.com.



PRINCIPLE 2 – STRENGTHEN THE COMPOSITION OF THE BOARD

Recommendation 2.1- The Board should establish a Nominating Committee which should comprise exclusively of Non-Executive

Directors, a majority of whom must be independent

The Nomination Committee of the Company comprises the following members, all being Non-Executive Directors and majority of whom are Independent Directors with the Chairman being the Senior Independent Director identified by the Board:-

Name of Committee Members DesignationCheong Kee Yoong, Chairman Senior Independent Non-Executive DirectorYek Deiw See, Member Independent Non-Executive DirectorTan Chuan Hock, Member Non-Independent Non-Executive Director

The role of the Nomination Committee is to annually review the optimum size, required mix of skills, experience and other qualities of the Directors and to recommend new appointment, if any, to the Board.

Recommendation 2.2- The Nominating Committee should develop, maintain and review the criteria to be used in the recruitment

process and annual assessment of Directors

The Nomination Committee has developed certain criteria used in the recruitment process and annual assessment of Directors, including Independent Directors. Due consideration is given to the competencies, required mix of skills, expertise, experience and contribution that the proposed Director(s) shall bring to complement the Board.

The Nomination Committee meets as and when required. The Nomination Committee met once during the financial year under review.

During the meeting held in April 2015, the Nomination Committee had undertaken the following activities:

• Evaluatedthebalanceofskills,knowledgeandexperienceoftheBoard.Carriedouttheassessmentandratingofeach Director’s performances against the criteria as set out in the annual assessment form. The performance of Non-Executive Directors was also carefully considered, including whether he could devote sufficient time to their role.

• AssessedandrecommendedtotheBoardforapprovalonthere-electionofDirectorswhowereduetoretireatthe Twelfth Annual General Meeting pursuant to the Company’s Articles of Association.

• ReviewedandassessedtheindependenceoftheIndependentDirectorsoftheCompany.• EvaluatedtheindependenceofIndependentDirectorswhohaveservedinthesaidcapacityfornine(9)years.• Reviewedandconsideredthere-appointmentofTanSriDatukAdzmiBinAbdulWahabwhowasduetoretire

pursuant to Section 129(2) of the Companies Act, 1965.• Reviewed,evaluatedandconsideredtheappointmentofthenewDirector,Mr.ChuahChewHai,totheBoard.

The Nomination Committee also carried out an assessment on the effectiveness of the Board as a whole, the Committees of the Board and contribution of each individual Director. The assessment considered the contribution and performance of Directors on their competency, time commitment, integrity and experience in meeting the needs of the Group and suggestions to enhance Board effectiveness. The evaluation process involved a peer and self-review assessment, where Directors assessed their own and also their fellow Directors’ performance and was led by the Chairman of the Nomination Committee. The assessment and comments by all Directors were summarised and discussed at the Nomination Committee meeting and reported at a meeting of the Board by the Chairman of the Nomination Committee at the Board meeting held during the financial year ended 31 December 2015. All assessments and evaluations carried out by the Nomination Committee in the discharge of its functions were properly documented.

From the results of the assessment, which include the mix of skills and experience possessed by the Directors, the Board considers the recommendations on the re-election and re-appointment of Directors. In accordance with the Company’s Articles of Association, at least one-third (1/3) of the Directors are required to retire from office by rotation annually and shall be eligible for re-election at each Annual General Meeting. All Directors appointed by the Board shall also be subject to re-election by the shareholders at the Annual General Meeting following their appointment.



Directors over seventy (70) years of age will be required to submit themselves for re-appointment annually in accordance with Section 129 (6) of the Companies Act, 1965.

The Nomination Committee acknowledges the need for gender diversity for good governance practices and to enhance the efficient functioning of the Board. The Board currently has two (2) female Board Members which are represented by Ms. Yap Li Li and Ms. Chan Pik Khew (alternate Director).

In line with the Code and in view of the gained attention of boardroom diversity as an important element of a well-functioned organisation, the Board shall accord due consideration to inculcate diversity policy in the boardroom and workplace which encapsulates not only to gender, but also age and ethnicity.

Recommendation 2.3– The Board should establish formal and transparent remuneration policies and procedures to attract and retain

Directors

The Board had, through the Remuneration Committee, established formal and transparent remuneration policies and procedures to attract and retain Directors.

The Remuneration Committee comprises the following members, all of whom are Non-Executive Directors:-

Name of Committee Members DesignationTan Chuan Hock, Chairman Non-Independent Non-Executive DirectorYu Chee Sing, Member Independent Non-Executive DirectorYek Deiw See, Member Independent Non-Executive Director

The Remuneration Committee is principally responsible for the development and review of the remuneration policy and packages of the GMD/GP and Executive Directors including Board Members, where necessary, and subsequently furnishes their recommendations to the Board for adoption. The Remuneration Committee is also responsible to ensure that the remuneration package and benefits of the Board and the employees of the Group are benchmarked with industry standards in light of the Group’s performance in the industry.

The Board will determine the level of remuneration of Board Members, taking into consideration the recommendations of the Remuneration Committee for executive Board Members and/or the GMD/GP. The remuneration of the GMD/GP and Executive Directors are reward and performance based.

Non-Executive Directors of the Company will be paid a basic fee as ordinary remuneration based on their responsibilities in Committees and the Board, their attendance and/or special skills and expertise they bring to the Board. The fee shall be fixed in sum and not by a commission on or percentage of profits or turnover.

Each Director shall abstain from the deliberation and voting on matters pertaining to their own remuneration. The Board is of the view that the disclosure of remuneration by appropriate components and bands are sufficient to meet the objectives set out in the MMLR of Bursa Securities.

Directors’ remuneration paid in the financial year ended 31 December 2015 in aggregate, with categorisation into appropriate components, distinguishing between Executive and Non-Executive Directors, is as follows:

DirectorsFees(RM)

Salaries & Benefits-in-

Kind(RM)

Bonuses(RM)

Total(RM)

Executive Directors - 1,878,823 232,400 2,111,223Non-Executive Directors 262,000 - - 262,000TOTAL 262,000 1,878,823 232,400 2,373,223



The number of Directors of the Company whose remuneration band falls within the following successive bands of RM50,000 is as follows:

Range of RemunerationExecutive Directors

Non-Executive Directors

RM50,000 and below 1 4RM50,001 – RM100,000 - 2RM200,001 – RM250,000 1 -RM250,001 – RM300,000 1 -RM350,001 – RM400,000 1 -RM550,001 – RM600,000 1 -RM650,001 – RM700,000 1 -

PRINCIPLE 3 – REINFORCE INDEPENDENCE OF THE BOARD

Recommendation 3.1– The Board should undertake an assessment of its Independent Directors annually

During the financial year under review, the Board had through the Nomination Committee of the Company, conducted an evaluation of the level of independence of the four (4) Independent Non-Executive Directors of the Company and the Board is satisfied that all Independent Directors have satisfactorily demonstrated that they are independent from the management and free from any business or other relationships with the Group that could materially affect or interfere with the exercise of objective, unfettered or independent judgment to act in the best interests of the Group.

The Nomination Committee will continue, on an annual basis, to assess the independence of the Independent Directors.

Recommendation 3.2– Tenure of Independent Director should not exceed a cumulative term of nine (9) years

The Code provides a limit of a cumulative term of nine (9) years on the tenure of an Independent Director. Upon completion of the nine (9) years, such Director may continue to serve on the Board subject to the Director’s re-designation as a Non-Independent Director.

The Board may nevertheless seek for shareholders’ approval in the event it retains a person as an Independent Director who has served in that capacity for more than nine (9) years and provide strong justification to the shareholders at a general meeting.

Recommendation 3.3- The Board must justify and seek for shareholders’ approval in the event it retains as Independent Director, a

person who has served in that capacity for more than nine (9) years.

As recommended by the Nomination Committee of the Company, the Board has proposed for shareholders’ approval at the forthcoming Annual General Meeting to retain Mr. Yu Chee Sing and Mr. Yew Deiw See, who have served as Independent Non-Executive Directors of the Company for a cumulative term of more than nine (9) years, to continue to act as Independent Non-Executive Directors of the Company based on the following justifications: i. They fulfilled the criteria under the definition of Independent Directors as stated in the MMLR of Bursa Securities

and therefore would be able to function as a check and balance and bring an element of objectivity to the Board.ii. They have vast experience in their respective industries which could provide the Board with a diverse set of

experience, expertise and independent judgment.iii. They devoted sufficient time and attention to their responsibilities as Independent Directors of the Company.iv. They understand the main drivers of the Group’s business in a detailed manner.v. They have actively participated in the Board discussion and each served as an effective Board member.vi. They have exercised due care during their tenure as Independent Directors of the Company and carried out their

duties in the best interest of the Company and shareholders of the Company.



The proposed resolutions, if passed by the shareholders of the Company at the forthcoming Annual General Meeting, would allow Mr. Yu Chee Sing to continue to serve as member of the Audit Committee and the Remuneration Committee whilst Mr. Yew Deiw See would continue to serve as member of the Audit Committee, Nomination Committee and the Remuneration Committee.

Recommendation 3.4– The positions of Chairman and Chief Executive Officer should be held by different individuals and the Chairman

must be a Non-Executive member of the Board

There is a clear division of responsibilities between the Chairman and the GMD/GP to engender accountability and facilitate the division of responsibility, such that no one individual has unfettered powers over decision making.

The Chairman, an Independent Non-Executive Director, is responsible for ensuring the adequacy and effectiveness of the Board’s governance process and acts as a facilitator at Board meetings to ensure that contributions by Directors are forthcoming on matters being deliberated and that no Board member dominates discussion. The GMD/GP, supported by the Management team, implements the Group’s policies and decisions as adopted by the Board, overseeing the operations as well as developing, coordinating and implementing business and corporate strategies.

The GMD/GP is responsible for the stewardship of the Group’s direction and the day-to-day management of the Group. The GMD/GP, together with the Management team, manages the business of the Group in a manner consistent with any specific plans, instructions and directions of the Board.

Recommendation 3.5– The Board must comprise a majority of Independent Directors where the Chairman of the Board is not an

Independent Director

The Board is chaired by an Independent Non-Executive Director. Therefore, the Company is not required to comply with the requirement as set out under Recommendation 3.5 of the Code.

The Board recognises the importance of independence and objectivity in its decision making process. Independent Non-Executive Directors are essential and play a vital role in protecting the rights of the minority shareholders and as such, none of the Independent Directors participate in the day-to-day management of the Company. This ensures that they are able to provide unbiased and independent views and judgements during evaluations of Management’s proposals and strategies.

PRINCIPLE 4 – FOSTER COMMITMENT OF DIRECTORS

Recommendation 4.1– The Board should set out expectations on time commitment for its members and protocols for accepting new

directorships

The Board schedules at least four (4) meetings in a year with the Board of Directors’ and Committees’ meetings scheduled well in advance to facilitate the Directors in planning ahead and to ensure that the dates of the Board and Board Committees meetings are booked in their respective schedules. Additional meetings are convened when urgent and important decisions need to be made between scheduled meetings.



During the financial year under review, five (5) Board meetings were held and details of Directors’ attendances are as follows:

Name of Directors Number of meetings attended

Tan Sri Datuk Adzmi bin Abdul Wahab 5 of 5Tan Bak Hong 5 of 5Yap Li Li 5 of 5Cheng Ping Liong 5 of 5Wan Kok Weng (Alternate: Chan Pik Khew) 5 of 5Tan Chuan Hock 5 of 5Cheong Kee Yoong 5 of 5Yu Chee Sing 5 of 5Yek Deiw See 5 of 5Chuah Chew Hai (Appointed on 25.5.2015) 2 of 2Dato’ Loo Yoong Haw @ Vanchai Virochpokha (Retired on 25.5.2015) 2 of 3

The Board had through the Nomination Committee, reviewed annually the time commitment of the Directors and ensures that they are able to carry out their responsibilities and contributions to the Board. It is also the Board’s policy for Directors to notify the Chairman before accepting any new directorship. Such notification is expected to include an indication of time that will be spent on the new appointment.

Overall, the Board is satisfied with the level of time commitment given by the Directors of the Company towards fulfilling their duties and responsibilities. This is evidenced by the attendance record of the Directors as set out herein above.

Recommendation 4.2– The Board should ensure its members have access to appropriate continuing education programmes

The Board acknowledges that continuous education is vital for the Board members to gain insight into the state of economy, technological advances, regulatory updates and management strategies to enhance the Board’s skills and knowledge in discharging its responsibilities.

Mr. Chuah Chew Hai, the newly appointed Executive Director, has attended and successfully completed the Mandatory Accreditation Programme (“MAP”) as required by Bursa Securities.

The Directors are encouraged to attend relevant seminars and training programmes to equip themselves with the knowledge to effectively discharge their duties as Directors. The Board will assess the training needs of the Directors and ensure Directors have access to continuing education programme.



Seminars, workshop and conference attended by the Directors during the financial year ended 31 December 2015 are as follows:

Directors Programmes attended

Tan Sri Datuk Adzmi bin Abdul Wahab

- Focus Group Session for Board of Directors on Strengthening Corporate Governance Disclosure Amongst the Listed Issuers

- Lead the Change : Getting Woman on Boards- Transactions by Directors & Practical Issues and Solutions- Board Chairman Series Part 2 : Leadership Excellence

Tan Bak Hong - CG Breakfast Series with Directors - The Board’s Response in Light of Rising Shareholder Engagements

- Advocacy Sessions - Management Discussion & Analysis for Chief Executive Officers and Chief Financial Officers

- CG Breakfast Series with Directors - How to maximise Internal AuditYap Li Li - CG Breakfast Series with Directors - The Board’s Response in Light of Rising Shareholder

Engagements- Advocacy Sessions - Management Discussion & Analysis for Chief Executive Officers and

Chief Financial Officers- CG Breakfast Series with Directors – How to maximise Internal Audit

Cheng Ping Liong - Advocacy Sessions - Management Discussion & Analysis for Chief Executive Officers and Chief Financial Officers

Chuah Chew Hai - Mandatory Accreditation Programme- Advocacy Sessions - Management Discussion & Analysis for Chief Executive Officers and

Chief Financial OfficersTan Chuan Hock - 2016 Budget SeminarCheong Kee Yoong - Citi Markets Economic Seminar

- CIMB 1H 2015 Economic & Market Update- Cash Flow Modelling for Project Evaluation & Project Finance- OCBC 2016 Global Economic Outlook Seminar

Yu Chee Sing - Advocacy Sessions - Management Discussion & Analysis for Chief Executive Officers and Chief Financial Officers

The Directors will continue to attend other relevant training programmes as appropriate to enhance their skills and knowledge.

PRINCIPLE 5 – UPHOLD INTEGRITY IN FINANCIAL REPORTING

Recommendation 5.1– The Audit Committee should ensure financial statements comply with applicable financial reporting standards

The Board aims to provide and present a clear, balanced and comprehensive assessment of the Group’s financial performance and prospects at the end of the financial year, primarily through the annual financial statements and quarterly results as well as the Message to Shareholders and review of the Group’s operations in the Annual Report. The Board relies on the external audit reports to ensure that the financial statements give a true and fair view of the state of affairs of the Group and the Company as at the end of the reporting period and of their results and cash flows for the period then ended.

In preparing the financial statements, the Directors ensure that accounting standards approved by the Malaysian Accounting Standards Board (“MASB”) in Malaysia and the provisions of the Companies Act, 1965 are complied with and reasonable and prudent judgments and estimates have been made. The Directors’ overall responsibilities also include taking such steps as are reasonably open to them to safeguard the assets of the Group and for the implementation and continued operation of adequate accounting and internal control systems for the prevention of fraud and other irregularities.



The Board is satisfied that to the best of its knowledge, it has met its obligation to present a balanced and understandable assessment of the Group’s position and prospects in the Directors’ Report and the Audited Financial Statements set out in this Annual Report. To assist in the discharge of its duties on financial reporting, the Board has established an Audit Committee, comprising wholly Non-Executive Directors, with Mr. Cheong Kee Yoong as the Chairman of the Audit Committee. The composition of the Audit Committee, including its roles and responsibilities, is set out in this Annual Report. One of the key responsibilities of the Audit Committee is to ensure that the financial statements of the Group and Company comply with applicable financial reporting standards in Malaysia. Such financial statements comprise of the quarterly financial report announced to Bursa Securities and the annual statutory financial statements. The Board’s obligation to establish formal and transparent arrangements in considering how it should apply financial reporting and internal controls, and maintaining an appropriate relationship with the Group’s External Auditors is met through the Audit Committee. The Audit Committee discusses with the External Auditors the nature and scope of the audit and reporting obligations before audit commences. The Audit Committee ensures that the Management provides timely response on any material queries raised by the External Auditors, in respect of the accounting records, financial accounts or system of internal controls.

Recommendation 5.2– The Audit Committee should have policies and procedures to assess the suitability and independence of

External Auditors

The Audit Committee is empowered by the Board to review any matters concerning the appointment and re-appointment, resignations or dismissals of External Auditors and review and evaluate factors relating to the independence of the External Auditors. The Audit Committee works closely with the External Auditors in establishing procedures in assessing the suitability and independence of the External Auditors, in confirming that they are, and have been, independent throughout the conduct of the audit engagement with the Group in accordance with the independence criteria set out by the International Federation of Accountants and the Malaysian Institute of Accountants. The terms of engagement for services provided by the External Auditors are reviewed by the Audit Committee prior to submission to the Board for approval.

PRINCIPLE 6 – RECOGNISE AND MANAGE RISKS OF THE GROUP

Recommendation 6.1– The Board should establish a sound framework to manage risks

In recognising the importance of risk management and internal controls, the Board has established a structured risk management framework to identify, evaluate, control, monitor and report the principal business risks faced by the Group on an on-going basis. The key features of the risk management framework are set out in the Statement on Risk Management and Internal Control included in this Annual Report.

The Board has established internal control policies and procedures which are monitored to ensure that such policies and procedures are implemented and effectively carried out by the Management team. The Group has in place an Information Technology Policy that outlines the processes that should be followed to create policies, best practices, standards and the use of the supporting information technologies. The Board is mindful of the legal implications if technology systems or information are misused in a manner which may be found to breach laws and regulations.

Guided by the Statement on Risk Management and Internal Control: Guidelines for Directors of Listed Issuers, the Board performs reviews on an annual basis covering not only financial, but operational and compliance controls and risk management systems, in all material aspects. The Board is provided with reasonable assurance from the various reports submitted by Management and the Audit Committee on risk management and internal control system. Details on the Statement on Risk Management and Internal Control are furnished in pages 32 and 33 of this Annual Report.

Recommendation 6.2– The Board should establish an internal audit function which reports directly to the Audit Committee

The internal audit function of the Group was outsourced to Qwest Corporate Consultants Sdn. Bhd. (“Qwest”), a business and risk management consulting firm to take charge of the Group’s internal audit function during the financial year. The Internal Auditors reports directly to the Audit Committee of the Company.



Qwest conducted independent reviews of the key activities within the Group’s operating units based on a detailed internal audit plan which has been approved by the Audit Committee. Qwest reported their findings on the Group’s internal control system quarterly and would report any incidence of non-compliance of the internal control system and any other matters that would have a material effect on the Group’s financial results and its going-concern assumptions. Qwest would also ensure that all non-compliance of internal control system and weaknesses in the system are rectified without delay.

During the financial year under review, the Board was satisfied that there were continuous efforts made by the Management to address and resolve areas with control weaknesses and that the control procedures were in place and were being followed.

PRINCIPLE 7 – ENSURE TIMELY AND HIGH QUALITY DISCLOSURE

Recommendation 7.1– The Board should ensure the Company has appropriate corporate disclosure policies and procedures

A Corporate Disclosure Policy has been formalised on 22 May 2014 to promote comprehensive, accurate and timely disclosures pertaining to the Company and the Group to regulators, shareholders and stakeholders.

The Group recognises the importance of prompt and timely dissemination of information to shareholders and investors in order for these stakeholders to be able to make informed investment decisions. The Board is of the view that information that is not released in a timely manner, albeit comprehensive and accurate, would be less relevant for such investment purposes.

Recommendation 7.2– The Board should encourage the Company to leverage on information technology for effective dissemination of

information

In addition to providing comprehensive insights into the Group’s financial performance, the Board also recognises the importance of communicating the Group’s business strategies, updates on the progress of the Group’s current business initiatives as well as its financial performance during these briefings. In order to disseminate timely information across all external communications, the Company has made available the Quarterly Reports and all other announcements made to Bursa Securities on the Company’s corporate website, www.grand-flo.com, where shareholders can access information under the ‘Investor Relations’ tab. With the progressive interest and heightened investor awareness on the greater need for accountability and transparency, the Board places great importance in maintaining active dialogue and effective communication with shareholders and investors to enable them to make informed investment decisions. As part of the Company’s commitment towards this objective, experienced Senior Management personnel are directly involved in the Company’s investor relations activities. With the active involvement of the Senior Management personnel, the investment community is assured of views and information on the Group that is appropriate, accurate and timely.

It has been the Company’s practice to respond to shareholders’ letters, telephone and e-mail enquiries. While the Company endeavours to provide as much information as possible to its shareholders and stakeholders, the Board is mindful of the legal and regulatory framework governing the release of material and price sensitive information.

An internal compliance framework exists to ensure the Company meets its obligations under the MMLR of Bursa Securities, including obligations relating to related party transactions and recurrent related party transactions. The Board, through its Audit Committee, reviews all related party transactions and conflict of interest situations, if any, on a quarterly basis. A Director who has an interest in a transaction must abstain from deliberation and voting on the relevant resolution, in respect of such transaction at the meeting of the Board and at the Annual General Meeting or Extraordinary General Meeting convened to consider the said matter. There are procedures established by the Group to ensure that all related party transactions are undertaken on an arm’s length basis and on normal commercial terms, consistent with the Group’s usual business practices and policies, which are generally not more favourable than those generally available to the public and other suppliers and are not detrimental to minority shareholders.



PRINCIPLE 8 – STRENGTHEN RELATIONSHIP BETWEEN THE COMPANY AND ITS SHAREHOLDERS

Recommendation 8.1– The Board should take reasonable steps to encourage shareholder participation at general meetings

The Board recognises the importance of maintaining transparency and accountability to the Company’s shareholders. The Board ensures that all the Company’s shareholders are treated equitably and the rights of all investors, including minority shareholders, are protected. The Board provides shareholders and investors with information on its business, financials and other key activities in the Annual Report of the Company, which contents are continuously enhanced to take into account the developments, amongst others, in corporate governance. The Board aims to provide and present a clear and comprehensive assessment of disclosures in the Annual Report to shareholders. In disclosing information in the Annual Report, the Board is guided by the principles set out in the MMLR of Bursa Securities. The Company sends out the Notice of the Annual General Meeting to shareholders at least twenty one (21) days before the meeting as required under the MMLR of Bursa Securities, in order to facilitate full understanding and evaluation of the issues involved. Where special business items appear in the Notice of the Annual General Meeting, a full explanation is provided to shareholders on the effect of the proposed resolution.

The Annual General Meeting is the principal opportunity for the Board to meet shareholders and for the Chairman to provide an overview of the Group’s progress and receive questions from shareholders.

At the Annual General Meeting, shareholders actively participate in discussing the resolutions proposed or on future developments of the Group’s operations in general. The Board, the Management team and the Company’s External Auditors, are present to answer questions raised and provide clarification as requested by shareholders.

Recommendation 8.2– The Board should encourage poll voting

All resolutions set out in the Notice of the Annual General Meeting are put to vote by show of hands. In future, the Company shall put to vote all resolutions at the Annual General Meeting by poll.

Recommendation 8.3– The Board should promote effective communication and proactive engagements with shareholders

The Company recognises the importance of being transparent and accountable to its stakeholders and as such, maintains an active and constructive communication policy that enables the Board to communicate effectively with investors, financial community and the public generally. The various channels of communications are through meetings with institutional shareholders and investment communities, quarterly announcements on financial results to Bursa Securities, relevant announcements and circulars, when necessary, the Annual and Extraordinary General Meetings and through the Company’s corporate website at www.grand-flo.com, from which shareholders and prospective investors can access corporate information, annual reports, press releases, financial information, company announcements and share prices of the Company.

STATEMENT BY THE BOARD ON CORPORATE GOVERNANCE STATEMENT

The Board has deliberated, reviewed and approved this Statement. The Board considers and is satisfied that to the best of its knowledge the Company has fulfilled its obligations under the Code, the relevant chapters of the MMLR of Bursa Securities on corporate governance and all applicable laws and regulations throughout the financial year ended 31 December 2015.

This statement is made in accordance with the resolution of the Board dated 20 April 2016.



AUDIT COMMITTEE REPORT

OBJECTIVES

The primary objective of the Audit Committee (“the Committee”) is to assist the Board of Directors (“the Board”) in discharging its statutory duties and responsibilities, among others, providing an additional assurance to the Board by giving an objective and independent review of financial, operational and administrative controls and procedures, establishing and maintaining internal controls and reinforce the independence of the Company’s External Auditors, thereby ensuring that the Auditors have free reign in the audit process.

COMPOSITION OF AUDIT COMMITTEE

The Committee comprises the following:

Chairman:Cheong Kee Yoong Senior Independent Non-Executive Director

Members:Tan Chuan Hock Non-Independent Non-Executive DirectorYu Chee Sing Independent Non-Executive DirectorYek Deiw See Independent Non-Executive Director

The Company has complied with Paragraph 15.09 of the Main Market Listing Requirements (“Listing Requirements”) of Bursa Malaysia Securities Berhad (“Bursa Securities”) which requires all members of the Audit Committee to be Non-Executive Directors with a majority of them being Independent Directors.

SUMMARY OF THE TERMS OF REFERENCE

i. Membership

The Committee shall be appointed by the Board from among its members and shall comprise not less than three (3) members, whereby all members must be Non-Executive Directors with a majority of them being Independent Directors.

At least one (1) member of the Committee must be a member of Malaysia Institute of Accountants or he must have at least three (3) years working experience and have passed the examinations specified in Part I of the 1st Schedule of the Accountants Act, 1967 or is a member of one of the associations of accountants specified in Part II of the said Schedule or a person who has fulfilled such other requirements as prescribed or approved by Bursa Securities.

No alternate director of the Board shall be appointed as a member of the Committee. In the event of any vacancy of Committee resulting in the non-compliance with the Listing Requirements of Bursa Securities, the Board shall appoint a new member within three (3) months.

ii. Meetings and Attendance

The Committee shall meet not less than four (4) times a year. Additional meetings may be called at any time if so requested by any Committee members, Management or the Internal and External Auditors. Other Board members, Senior Management, Internal and External Auditors may be invited to attend meetings.

The Company Secretary shall be the Secretary of the Committee. The Secretary shall ensure that all appointments of the Committee are properly made; the Committee members receive information and meeting papers in a timely manner to enable full and proper consideration to be given to issues deliberated; and ensure that the minutes are properly kept and produced for inspection if required.


AUDIT COMMITTEE REPORT(cONt’D)

iii. Functions

The functions of the Committee are as follows:

1. To consider the appointment of External Auditors, the audit fee and any questions of resignation or dismissal.

2. To review with the External Auditors:a) The audit plan, scope and nature of the audit of the Company and its subsidiaries (“Group”).b) Their evaluation and findings of the system of internal controls and the audit reports on the financial

statements.

3. To review the adequacy of the scope, function, competency and resources of internal audit and to ensure that it has the necessary authority to carry its work.

4. To review any appraisal or assessment of the performance of the internal audit functions.

5. To review the quality, adequacy and effectiveness of the Group’s internal control environment.

6. To review the findings of the Internal and External Auditors.

7. To review the quarterly and year end financial statements of the Company, focusing particularly on any changes in or implementation of major accounting policies and practices, significant adjustments arising from the audit, the going concern assumption and compliance with applicable approved accounting standards and other legal and regulatory requirements.

8. To review the related party transactions of the Group.

9. To review the External Auditors’ management letter and management’s response.

10. To review and verify the allocation of options pursuant to the Employees’ Share Option Scheme (“ESOS”) in compliance with the criteria as stipulated in the by-law of ESOS of the Company, if any.

11. Any other function that may be mutually agreed upon by the Committee and the Board which would be beneficial to the Company and ensure the effective discharge of the Committee’s duties and responsibilities.

Authority

The Committee is authorised by the Board to investigate any activity within its term of reference at the cost of the Company:

1. To secure full and unrestricted access to any information pertaining to the Group.

2. To communicate directly with the External and Internal Auditors and all employees of the Group.

3. To seek and obtain independent professional advice and to secure the attendance of outsiders with relevant experience and expertise as it considers necessary.

4. To convene meetings with the External and Internal Auditors or both excluding the attendance of other Directors and employees of the Company, whenever deemed necessary.


AUDIT COMMITTEE REPORT(cONt’D)

SUMMARY OF ACTIVITIES OF THE COMMITTEE DURING THE FINANCIAL YEAR ENDED 31 DECEMBER 2015

During the financial year under review, the Committee convened five (5) meetings and the attendance of Committee members at meetings is set out as follows:

Committee Members No. of Meetings Attended

Cheong Kee Yoong 5 of 5Tan Chuan Hock 5 of 5Yu Chee Sing 5 of 5 Yek Deiw See 5 of 5

The Committee had carried out the following activities during the five (5) meetings in discharging their duties and responsibilities:-

1. Reviewed the Company’s unaudited quarterly results and the annual audited financial results together with the relevant announcements thereon and ensured compliance with approved accounting standards and adherence to other legal regulatory requirements as well as making relevant recommendation to the Board for approval.

2. Reviewed with the External Auditors on the results and issues arising from their audit of the financial year end statements and their resolutions of such issues highlighted in their report to the Committee.

3. Reviewed with the Internal Auditors, the internal audit plan, work done and reports, for the internal audit function and considered the findings of internal audit investigations and management responses thereon, and ensure that appropriate actions were taken in addressing the issues reported by the Internal Auditors.

4. Reviewed the related party transactions and/or recurrent related party transactions that transpired within the Group to ensure that the transactions entered into were at arm’s length basis and on normal commercial terms.

5. Considered and recommended to the Board for approval the re-appointment and remuneration of the External Auditors.

6. Reviewed and approved the Corporate Governance Statement, Audit Committee Report and Statement on Risk Management and Internal Control for the inclusion in the Company’s Annual Report.

7. Reviewed and recommended to the Board for approval the Risk Management Framework and Risk Management Policy of the Group.

INTERNAL AUDIT FUNCTION

Internal audit function of the Group is outsourced to an independent professional services firm to carry out internal audit services for the Group. Internal audit reports are presented, together with Management’s response and proposed action plans to the Committee on a quarterly basis.

The Internal Auditors undertake internal audit functions based on the operational, compliance and risk based audit plan approved by the Committee. The risk-based audit plans covers the review of the key operational and financial activities including the efficacy of risk management practices, efficiency and effectiveness of operational controls and compliance with relevant laws and regulations. Scheduled audits are carried out on various subsidiaries of the Company in accordance to the approved Internal Audit Plan. A risk-based methodology is adopted to evaluate the adequacy and effectiveness of the risk management, financial, operational and governance processes.

The fee incurred during the financial year in relation to the internal audit function is RM32,000.00.

The internal audits conducted did not reveal any weakness which would result in material losses, contingencies or uncertainties that would require disclosure in the Annual Report.


INTRODUCTION

The Board of Directors of Grand-Flo Berhad (“Board”) is committed towards maintaining a sound system of internal control and risk management and is pleased to provide this Statement on Risk Management and Internal Control (the “Statement”) which outlines the scope and nature of internal controls and risk management of Grand-Flo Berhad and its subsidiaries (“the Group”) for the financial year ended 31 December 2015.

For the purpose of disclosure, this Statement is prepared pursuant to Paragraph 15.26(b) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad and is guided by the Statement on Risk Management & Internal Control: Guidelines for Directors of Listed Issuers.

BOARD OF DIRECTORS RESPONSIBILITY

The Board recognises that a sound system of internal control and risk management is an integral part of good corporate governance. The Board is committed and acknowledges its overall responsibility to maintain a sound system of internal control and risk management as well as for reviewing its adequacy and effectiveness to safeguard the shareholders’ investments and Group’s assets.

The Board and the Management team are responsible and accountable for the establishment of internal controls for the Group. The risk management and internal control systems and processes are subjected to regular evaluations on their adequacy and effectiveness by the Management team and the Audit Committee. This process has been in place for the financial year under review and up to the date of approval of this Statement for inclusion in the Annual Report of the Company.

The system of internal control and risk management covers not only financial controls but operational, risk and compliance controls as well. These systems are designed to manage, rather than eliminate, the risk of failure arising from non-achievement of the Group’s policies, goals and objectives. Such systems provide reasonable, rather than absolute, assurance against material misstatement or loss.

KEY ELEMENTS OF INTERNAL CONTROL

The key elements of the Group’s internal control system include:-• ClearlydefinedorganizationalstructurewithclearlinesofdelegationofresponsibilitytoCommitteesoftheBoard,

management and operating subsidiaries.• Experiencedandcompetentstaffareplacedinareasofresponsibilitytosupportandcontinuouslymonitorthe

effectiveness of the Group’s system of internal control.• RegularmeetingsareheldtodiscussontheoverallGroupandoperatingsubsidiaries’operationalmattersandto

resolve key operational, financial, human resource and other related issues.• TimelygenerationoffinancialandoperationsreportsforManagement’sreview.• Regularinternalauditreviewsarecarriedouttoidentifyanyareaofimprovement,besidescompliancewithinternal

practices, guidelines and objectives. The internal audits were performed in accordance with accepted auditing practices in reviewing effectiveness and efficiency of operations, reliability of financial reporting and compliance with applicable laws and regulations.

• The Audit Committee reviews the quarterly and annual financial statements and results announcements andrecommends to the Board for approval.

• BudgetisreviewedandapprovedbythemanagementofeachsubsidiarybeforeconsolidationintotheGroup’sbudget for the Board’s review.

• RegularvisitstooperatingsubsidiariesbymembersoftheBoardandseniormanagementwheneverappropriate.

INTERNAL AUDIT FUNCTION

In accordance with the Code, the Group in its efforts to provide adequate and effective internal control system had appointed an independent consulting firm to review the adequacy and effectiveness of its system of internal control. The independent consulting firm acts as internal auditor and reports directly to the Audit Committee.

STATEMENT ON RISK MANAGEMENTAND INTERNAL CONTROL


STATEMENT ON RISK MANAGEMENTAND INTERNAL CONTROL

(cONt’D)

The internal auditors develop its audit plan in accordance with accepted auditing practices in which addresses critical business processes, identified risks and internal control gaps, assessed the adequacy and effectiveness of the existing state of internal control of the Group and recommended possible improvements to the internal control process. This is to provide reasonable assurance that such systems continue to operate satisfactorily and effectively within the Group. The audit plan is presented to Audit Committee of the Company for approval.

Follow-up visits were also carried out to ensure weaknesses identified have been or are being addressed. Periodic audit reports and status reports on follow up management action plans were tabled to the Audit Committee for review on a quarterly basis for three quarters. For the financial year ended 31 December 2015, the total costs incurred for the outsourced internal audit function is RM32,000.00.

RISK MANAGEMENT FRAMEWORK

The Board has an ongoing process for identifying, evaluating and managing significant risks faced by the Group.

The process of identifying, evaluating and managing the significant risks are embedded in the various work processes and procedures in the Group. The Board and the Management team have put in place certain risk management guidelines, control measures and processes for the Group to identify, evaluate and manage the significant risks. This includes formal risk management policy and risk management framework which sets out the fundamentals of risk and risk management, roles and responsibilities of management and employees in managing risks and the process for identifying, evaluating and managing risks.

The Board has delegated tasks of monitoring the internal control and risk management systems to the Management team. The systems of internal control and risk management are subjected to regular evaluations on their adequacy and effectiveness by the Management team. Any significant risks and mitigating responses are communicated to the Board through the Audit Committee to ensure continuing relevance and compliance with current/applicable laws and regulations. The Audit Committee assists the Board to review the adequacy and effectiveness of the systems of internal control and risk management in the Group and ensures that appropriate methods and procedures are used to obtain the level of assurance required by the Board.

The Board is satisfied that, during the financial year under review and up to the date of approval of this Statement for inclusion in the Annual Report of the Company, there is an ongoing process of identifying, evaluating and managing significant risks faced by the Group.

The Board is of the view that the existing system of internal controls is sound and adequate to safeguard the Group’s operations and assets at the existing level of operations of the Group.

The Board has received assurance from the Group Managing Director/Group President and Financial Controller that the Group’s risk management and internal control systems are operating adequately and effectively, in all material aspects, based on the risk management and internal control system of the Group.

The Group’s system of internal control does not apply to associated companies where the Group does not have full management control over these entities. However, the Group’s interest is served through representatives of the Board of the respective associated companies.

The Board recognises that the development of risk management and internal control systems is an ongoing process. Therefore, the Board will continue to strengthen the systems of internal control and risk management.

REVIEW BY EXTERNAL AUDITORS

The External Auditors have reviewed this Statement on Internal Control and reported to the Board that nothing has come to their attention that causes them to believe that the Statement is inconsistent with their understanding of the process adopted by the Board in reviewing the adequacy and integrity of the Group internal control system.


ADDITIONAL COMPLIANCE INFORMATION

Share Buyback

During the financial year, the Company repurchased 2,419,200 of its issued ordinary shares and those shares are being held as treasury shares in accordance with Section 67A of the Companies Act, 1965.

Details of the shares bought back and retained as treasury shares by the Company during the financial year under review are set out as below:-

Month

No. of Shares Purchased and

Retained as Treasury

SharesHighest Price

(RM)Lowest Price

(RM)

Average Price Paid(RM)

Total Consideration

paid(RM)

January 2015 294,000 0.300 0.280 0.290 85,319.06February 2015 150,000 0.285 0.275 0.285 42,734.16March 2015 667,300 0.280 0.245 0.261 173,928.41April 2015 392,000 0.295 0.260 0.274 107,378.75June 2015 124,000 0.285 0.275 0.285 35,509.93July 2015 343,000 0.295 0.275 0.288 98,763.12August 2015 70,900 0.275 0.255 0.262 18,573.45September 2015 157,000 0.270 0.260 0.267 41,961.18October 2015 191,000 0.275 0.260 0.268 51,250.97November 2015 30,000 0.275 0.270 0.275 8,296.42

* Including brokerage, commission, clearing house fee and stamp duty. None of the treasury shares held was cancelled during the financial year under review.

Options, Warrants or Convertible Securities

The Company did not issue any warrants or convertible securities during the financial year under review.

During the financial year under review, 116,024,096 Warrants 2010/2015 were exercised into 116,024,096 new ordinary shares of RM0.10 each at an exercise price of RM0.12 each.

American Depository Receipt (“ADR”) or Global Depository Receipt (“GDR”) Program

The Company did not sponsor any ADR or GDR program during the financial year under review.

Imposition of Sanctions/penalties

There were no public sanctions and/or public penalties imposed on the Company and its subsidiaries (“Group”), directors or management by the relevant regulatory bodies during the financial year under review.

Non-Audit Fees

There was non-audit fee of RM14,000.00 for non-audit related work paid to the External Auditors by the Group for the financial year under review.


ADDITIONAL COMPLIANCE INFORMATION(cONt’D)

Variation in Results

There was no profit estimation, forecast or projection made or released by the Company during the financial year under review. There was no material variance in the audited results from the unaudited results announced for the financial year under review.

Profit Guarantee

There was a net shortfall of approximately RM4.4 million in the profit guarantee received by the Company for the financial year under review pursuant to the acquisition of Innoceria Sdn Bhd (“ISB”) in 2014.

Due to the unexpected longer gestation period in the development of business which was unforeseen at the onset and upon request from the vendors of ISB, the Company is in the process of seeking shareholders’ approval on the proposed extension of profit guarantee period till 31 December 2016 via an Extraordinary General Meeting to be convened at a date to be announced in due course.

Material Contracts Involving Directors’ and Major Shareholders’ Interests

During the financial year under review, there were no material contracts entered by the Group which involved Directors’ or major shareholders’ interests.

Utilisation of Proceeds from Corporate Exercise

There were no corporate exercise during the financial year under review.

Recurrent Related Party Transactions

At the Extraordinary General Meeting of the Company held on 25 August 2015, the Company had obtained shareholders’ mandate to allow the Company and its subsidiaries to enter into recurrent related party transactions (“RRPTs”) of a revenue or trading nature which are necessary for the day-to-day operations of the Group and in the ordinary course of business, with related parties.

The aforesaid mandate will lapse at the conclusion of the forthcoming Thirteenth AGM of the Company.


STATEMENT OF DIRECTORS’ RESPONSIBILITY

The Board of Directors of the Company is fully accountable to ensure that the financial statements are drawn up in accordance with Companies Act, 1965 (“Act”) and the applicable approved accounting standards prescribed by Malaysian Accounting Standards Board so as to give a true and fair view of the state of affairs of the Company and its subsidiaries (“the Group”) as at 31 December 2015 and of the results and cash flows of the Company and the Group for the financial year then ended.

In the preparation of the financial statements for the financial year ended 31 December 2015, the Directors have:-

a. applied relevant and appropriate accounting policies consistently and in accordance with applicable approved accounting standards;

b. made judgments and estimates that are prudent and reasonable; and

c. used the going concern basis for the preparation of the financial statements.

The Directors are responsible for ensuring that proper accounting records are kept in accordance with the Act. The Directors also have overall responsibility in taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

This statement is made in accordance with a resolution of the Board of Directors dated 20 April 2016.

FINANCIAL CONTENTS38 Directors’ Report

44 Statement by Directors and Statutory Declaration

45 Independent Auditors’ Report

47 Statements of Financial Position

49 Statements of Profit or Loss and Other Comprehensive Income

50 Statements of Changes in Equity

52 Statements of Cash Flows

55 Notes to the Financial Statements


DIRECTORS’ REPORT

The Directors have pleasure in submitting their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 December 2015.

PRINCIPAL ACTIVITIES

The principal activities of the Company are the provision of information technology solutions and investment holding. The principal activities of the subsidiaries and associates are disclosed in Note 5 and Note 6 to the financial statements respectively.

There have been no significant changes in the nature of these activities of the Company and its subsidiaries during the financial year.

FINANCIAL RESULTS

Group CompanyRM RM

Net profit for the financial year 16,092,592 7,687,280

Attributable to:-Owners of the company 11,930,661Non-controlling interest 4,161,931

16,092,592

DIVIDENDS

The amount of dividend paid and declared since the end of the last financial year was as follows:

RM

In respect of financial year ended 31 December 2014:Final tax exempt dividend of 1.0 sen per ordinary share, paid on 22 June 2015 4,800,756

The Board of Directors has proposed a first and final single tier dividend of 0.5 sen per ordinary share for the financial year ended 31 December 2015, amounting to approximately RM2,415,579 based on the total number of shares in issue as at 20 April 2016. The proposed dividend is subject to the approval of the shareholders of the Company at the forthcoming annual general meeting and the actual amount of dividend payable will depend on among others, the total number of ordinary shares in issue (excluding treasury shares) as at the entitlement date to be determined later. This proposed dividend is not reflected in the current year’s financial statements and if approved by the shareholders will be accounted for in shareholders’ equity as appropriation of retained earnings in the financial year ending 31 December 2016.

RESERVES AND PROVISIONS

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


DIRECTORS’ REPORT(cONt’D)

DIRECTOR

The Directors in office since the date of the last report are:

Tan Sri Datuk Adzmi Bin Abdul WahabTan Bak HongCheng Ping LiongYap Li LiWan Kok WengTan Chuan HockCheong Kee YoongYu Chee SingYek Deiw SeeChan Pik Khew (Alternate Director to Wan Kok Weng)Chuah Chew Hai (Appointed on 25 May 2015)Dato’ Loo Yoong Haw @ Vanchai Virochpokha (Retired on 25 May 2015)

DIRECTORS’ INTERESTS

According to the Register of Directors’ Shareholdings, the beneficial interest of those who were Directors at the end of the financial year in the shares and warrants of the Company were as follows:

Number of ordinary shares of RM0.10 each

The Company

Balance at1.1.2015 /

appointmentdate Bought

Conversion ofwarrants Sold

Balance at31.12.2015

Direct interests:-Tan Bak Hong 1,914,900 - 19,073,736 - 20,988,636Cheng Ping Liong 5,333,334 - 3,528,400 - 8,861,734Tan Chuan Hock 8,400,000 - 4,200,000 - 12,600,000Wan Kok Weng 11,983,470 - - - 11,983,470Chan Pik Khew 9,230,768 - - - 9,230,768Yap Li Li 1,000,000 322,000 - - 1,322,000Chuah Chew Hai 6,765,000 1,000,000 - - 7,765,000

Deemed interests:-Tan Bak Hong 1 69,170,652 322,000 5,691,200 - 75,183,852Yap Li Li 2 70,085,552 - 24,764,936 - 94,850,488Tan Chuan Hock 3 8,000,000 - 4,000,000 - 12,000,000Wan Kok Weng 4 9,230,768 - - - 9,230,768Chan Pik Khew 5 11,983,470 - - - 11,983,470Chuah Chew Hai 6 29,412,165 - - - 29,412,165

1 Deemed interested by virtue of his spouse, Ms. Yap Li Li’s interest in the Company and by virtue of his and Ms. Yap Li Li’s interests in Grand-Flo Corporation Sdn. Bhd.

2 Deemed interested by virtue of her spouse, Mr. Tan Bak Hong’s interest in the Company and by virtue of her and Mr. Tan Bak Hong’s interest in Grand-Flo Corporation Sdn. Bhd.

3 Deemed interested by virtue of his interest in AI Capital Sdn. Bhd.4 Deemed interested by virtue of his spouse, Ms. Chan Pik Khew’s interest in the Company5 Deemed interested by virtue of her spouse, Mr. Wan Kok Weng’s interest in the Company6 Deemed interested by virtue of his spouse, Ms. Chong Poh Yoong’s interest in the Company

By virtue of Mr. Tan Bak Hong’s and Ms. Yap Li Li’s interest in the shares of the Company, they are deemed to have interest in the subsidiaries under Section 6A of the Companies Act, 1965 to the extent that the Company has an interest.


DIRECTORS’ INTERESTS (CONT’D)

Number of warrants 2010/2015Balance at Conversion of Balance at

The Company 1.1.2015 Bought warrants Sold 31.12.2015

Direct interests:Tan Bak Hong 20,834,736 - (19,073,736) (1,761,000) -Cheng Ping Liong 3,528,400 - (3,528,400) - -Tan Chuan Hock 4,200,000 - (4,200,000) - -

Indirect interests:Tan Bak Hong 1 8,691,200 - (5,691,200) (3,000,000) -Yap Li Li 2 29,525,936 - (24,764,936) (4,761,000) -Tan Chuan Hock 3 4,000,000 - (4,000,000) - -

1 Deemed interested by virtue of his and his spouse, Ms. Yap Li Li’s interests in Grand-Flo Corporation Sdn. Bhd.2 Deemed interested by virtue of her spouse, Mr. Tan Bak Hong’s interest in the Company and by virtue of her and Mr.

Tan Bak Hong’s interest in Grand-Flo Corporation Sdn. Bhd.3 Deemed interested by virtue of his interest in AI Capital Sdn. Bhd.

Each Warrant 2010/2015 entitles the registered holder to subscribe for one ordinary share at the exercise price of RM0.12 each at any time within five years from the date of issue on 22 April 2010.

Other than as disclosed above, no other Directors in office at the end of the financial year held any interest in the shares of the Company or its related corporations during the financial year.

DIRECTORS’ BENEFITS

During and at the end of the financial year, no arrangements subsisted to which the Company is a party, with the object or objects of enabling the Directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

Since the end of the previous financial year, no Director has received or become entitled to receive any benefits (except as disclosed in Notes 38 and 44 to the financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest.

ISSUE OF SHARES AND DEBENTURES

During the financial year, the following ordinary shares of RM0.10 each were issued:

Date of issue Purpose of issue Number of shares Term of issue

5 January 2015 Conversion of warrants 399,200 Cash13 January 2015 Conversion of warrants 30,000 Cash27 January 2015 Conversion of warrants 165,000 Cash11 February 2015 Conversion of warrants 40,000 Cash18 February 2015 Conversion of warrants 467,900 Cash27 February 2015 Conversion of warrants 408,200 Cash5 March 2015 Conversion of warrants 530,800 Cash10 March 2015 Conversion of warrants 1,261,500 Cash12 March 2015 Conversion of warrants 2,898,000 Cash18 March 2015 Conversion of warrants 392,800 Cash23 March 2015 Conversion of warrants 7,434,600 Cash



ISSUE OF SHARES AND DEBENTURES (CONT’D)

During the financial year, the following ordinary shares of RM0.10 each were issued (cont’d):

Date of issue Purpose of issue Number of shares Term of issue

25 March 2015 Conversion of warrants 3,408,760 Cash30 March 2015 Conversion of warrants 16,587,200 Cash3 April 2015 Conversion of warrants 15,653,000 Cash9 April 2015 Conversion of warrants 485,400 Cash15 April 2015 Conversion of warrants 22,130,300 Cash16 April 2015 Conversion of warrants 16,576,636 Cash20 April 2015 Conversion of warrants 5,875,900 Cash23 April 2015 Conversion of warrants 20,678,500 Cash24 April 2015 Conversion of warrants 600,400 Cash

The new ordinary shares issued during the financial year ranked pari passu in all respect with the existing ordinary shares of the Company.

There were no debentures issued during the financial year.

TREASURY SHARES

The shareholders of the Company, by an ordinary resolution passed in an annual general meeting held on 25 May 2015, approved the Company’s plan to repurchase its own shares.

During the financial year, the Company repurchased 2,419,200 of its issued ordinary shares from the open market at an average price of RM0.27 per share. The total consideration paid for the repurchase including transaction costs was RM663,716. The shares repurchased are being held as treasury shares in accordance with Section 67A of the Companies Act, 1965.

Of the total 483,115,711 issued and fully paid ordinary shares as at 31 December 2015, 3,956,000 are held as treasury shares by the Company. As at 31 December 2015, the number of outstanding ordinary shares in issue after the setoff is therefore 479,159,711 ordinary shares of RM0.10 each.

WARRANTS 2010/2015

On 22 April 2010, the Company allotted and issued 67,912,455 new Warrants 2010/2015 at an issue price of RM0.02 each on the basis of 1 Warrant 2010/2015 for every 2 existing ordinary shares held in the Company on 30 March 2010 (“Rights Issue of Warrants”). Each Warrant 2010/2015 entitles the registered holder to subscribe for 1 new ordinary share in the Company at any time on or after 22 April 2010 to 21 April 2015, at an exercise price of RM0.25 in accordance with the Deed Poll. Any Warrant 2010/2015 not exercised by the date of maturity will lapse thereafter and cease to be valid for all purposes.

The ordinary shares issued from the exercise of Warrants 2010/2015 shall rank pari passu in all respects with the existing issue ordinary shares of the Company except that they shall not be entitled to any dividends, rights, allotments and/or other distributions declared, the entitlement date of which is prior to the date of allotment of the new shares arising from the exercise of Warrants 2010/2015.

The Warrants 2010/2015 are constituted by a Deed Poll dated 12 March 2010.

On 17 July 2012, a total of 67,582,355 Warrants 2010/2015 were issued pursuant to the Company’s bonus issue exercise. Accordingly, the exercise price has been revised downwards from RM0.25 to RM0.12 in accordance to the Deed Poll.

Pursuant to the terms and conditions as stipulated in the Deed Poll, the exercise period for the warrant holders to exercise the exercise rights had expired on 21 April 2015. The Warrants 2010/2015 whichever not exercise on the expiry date will be lapsed and became null and void. Accordingly, the Warrants 2010/2015 were removed from the Official List of Bursa Malaysia Securities Berhad with effect from 22 April 2015.



OTHER STATUTORY INFORMATION

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

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

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

At the date of this report, the Directors are not aware of any circumstances:

(a) which would render the amounts written off for bad debts or the amount of the provision for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent; or

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

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

(d) not otherwise dealt with in this report or the financial statements which would render any amount stated in the financial statements misleading.

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

(a) any charge on the assets of the Group and of the Company which has arisen since the end of the financial year which secures the liability of any other person; or

(b) any contingent liability of the Group and of the Company which has arisen since the end of the financial year.

In opinion of the Directors:

(a) no contingent liability or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which will or may affect the ability of the Group and the Company to meet their obligations as and when they fall due;

(b) the results of operations of the Group and of the Company during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature; and

(c) there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely to affect substantially the results of the operations of the Group and the Company for the financial year in which this report is made.

SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR

The significant events during the financial year are disclosed in Note 50 to the financial statements.

EVENT AFTER REPORTING PERIOD

The event after the reporting period is disclosed in Note 51 to the financial statements.



AUDITORS

The Auditors, Messrs SJ Grant Thornton have expressed their willingness to continue in office.

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

...................................................................... )TAN BAK HONG ) ) ) ) ) ) ) ) DIRECTORS ) ) ) ) ) ) )...................................................................... )CHENG PING LIONG )

Kuala Lumpur

20 April 2016



In the opinion of the Directors, the financial statements set out on pages 47 to 118 are drawn up in accordance with Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2015 and of their financial performance and cash flows for the financial year then ended.

In the opinion of the Directors, the information set out on page 119 to the financial statements had been compiled in accordance with the Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants, and presented based on the format prescribed by Bursa Malaysia Securities Berhad.

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

............................................................. ............................................................TAN BAK HONG CHENG PING LIONG

Kuala Lumpur

20 April 2016

STATUTORY DECLARATION

I, Tan Bak Hong, being the Director primarily responsible for the financial management of Grand-Flo Berhad, do solemnly and sincerely declare that to the best of my knowledge and belief, the financial statements set out on pages 47 to 118 and the financial information set out on page 119 are correct and I make this solemn declaration conscientiously believing the same to be true and by virtue of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by )the abovenamed at Kuala Lumpur in )the Federal Territory this day of )20 April 2016 ) ........................................................................ TAN BAK HONG

Before me:

Commissioner for OathsS. ARULSAMY (W.490)

STATEMENT BY DIRECTORS


INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF GRAND-FLO BERHAD

(Incorporated in Malaysia)Company No: 607392- W

Report on the Financial Statements

We have audited the financial statements of Grand-Flo Berhad, which comprise the statements of financial position of the Group and the Company as at 31 December 2015, and the statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the financial year then ended, and a summary of significant accounting policies and other explanatory information as set out on pages 47 to 118.

Directors’ Responsibility for the Financial Statements

The Directors are responsible for the preparation of financial statements so as to give a true and fair view in accordance with Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements give a true and fair view of the financial position of the Group and of the Company as of 31 December 2015 and of their financial performance and cash flows for the financial year then ended in accordance with Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia.

Report on Other Legal and Regulatory Requirements

In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following:

(a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.

(b) We have considered the accounts and the auditors’ reports of all the subsidiaries of which we have not acted as auditors, as disclosed in Note 5 to the financial statements.

(c) We are satisfied that the accounts of the subsidiaries that have been consolidated with the Company’s financial statements are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes.

(d) The auditors’ reports on the financial statements of the subsidiaries incorporated in Malaysia did not contain any

qualification or any adverse comment made under Section 174 (3) of the Act.


INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF GRAND-FLO BERHAD(Incorporated in Malaysia)Company No: 607392- W

(cONt’D)

Other Reporting Responsibilities

The supplementary information set out on page 119 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the financial statements. The Directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants (“MIA Guidance”) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad.

Other Matters

This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

SJ GRANT THORNTON LIAN TIAN KWEE(NO. AF: 0737) (NO: 2943/05/17(J))CHARTERED ACCOUNTANTS CHARTERED ACCOUNTANT Kuala Lumpur 20 April 2016


STATEMENTS OF FINANCIAL POSITIONAS AT 31 DECEMBER 2015

Group CompanyNote 2015 2014 2015 2014

RM RM RM RM

ASSETSNon-current assets

Property, plant and equipment 4 21,386,089 21,862,462 46,121 48,466 Investment in subsidiaries 5 - - 59,545,589 51,545,525 Investment in associates 6 13,844,808 14,005,964 5,265,943 5,412,424 Other investment 7 15,614 16,024 - - Development costs 8 2,155,780 2,325,959 2,155,780 2,325,959 Goodwill on consolidation 9 39,209,748 39,209,748 - - Deferred tax assets 10 339,000 367,898 339,000 339,000

Total non-current assets 76,951,039 77,788,055 67,352,433 59,671,374

Current assetsProperty development cost 11 56,927,928 34,113,304 - - Inventories 12 11,881,830 12,847,574 - - Accrued billings 13 5,508,180 44,563 - - Trade receivables 14 47,138,287 27,392,200 - - Other receivables 15 1,447,036 1,247,039 2,350 12,524 Amount due from directors 16 4,706,310 150,000 - - Amount due from subsidiaries 17 - - 19,563,122 11,493,579 Amount due from associates 18 107,052 35,239 363 328 Amount due from related parties 19 4,416,457 1,057,292 - - Tax recoverable 513,746 1,104,026 98,633 98,633 Dividend receivable 38,652 - - - Fixed deposits with licensed banks 20 2,507,201 952,600 162,745 - Cash and bank balances 21 11,564,296 10,662,017 368,279 1,554,323

Total current assets 146,756,975 89,605,854 20,195,492 13,159,387

Total assets 223,708,014 167,393,909 87,547,925 72,830,761

EQUITY AND LIABILITIESEQUITYEquity attributable to owners of the parent:

Share capital 22 48,311,571 36,709,161 48,311,571 36,709,161 Share application money 23 - 39,920 - 39,920 Share premium 22 14,538,275 11,369,843 14,538,275 11,369,843 Treasury shares 24 (1,098,173) (434,457) (1,098,173) (434,457)Warrant reserves 25 - 866,200 - 866,200 Other reserves 26 1,109,451 1,109,451 - - Foreign exchange fluctuation reserve 2,366,478 299,472 - - Revaluation reserve 27 6,160,852 6,160,852 - - Retained earnings 28 52,138,989 45,009,084 22,050,839 19,164,315

123,527,443 101,129,526 83,802,512 67,714,982 Non-controlling interest 22,751,871 2,370,004 - -

Total equity 146,279,314 103,499,530 83,802,512 67,714,982



RM RM RM RM

LIABILITIESNon-current liabilities

Finance lease liabilities 29 704,844 1,478,656 - - Term loans 30 6,104,064 11,135,918 - - Deferred tax liabilities 10 1,348,662 2,073,129 - -

Total non-current liabilities 8,157,570 14,687,703 - -

Current liabilitiesTrade payables 31 39,642,357 17,436,454 - - Other payables 32 5,787,501 16,648,821 2,543,438 5,115,779 Progress billings 13 1,226,619 - - - Amount due to a director 16 1,400,040 - - - Amount due to a subsidiary 33 - - 1,200,000 - Amount due to an associate 34 1,975 - 1,975 - Amount due to related parties 35 890,324 180,132 - - Finance lease liabilities 29 1,176,461 1,255,197 - - Borrowings 36 18,307,985 13,614,762 - - Tax payable 837,868 71,310 - -

Total current liabilities 69,271,130 49,206,676 3,745,413 5,115,779

Total liabilities 77,428,700 63,894,379 3,745,413 5,115,779

Total equity and liabilities 223,708,014 167,393,909 87,547,925 72,830,761

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

STATEMENTS OF FINANCIAL POSITIONAS AT 31 DECEMBER 2015(cONt’D)


STATEMENTS OF PROFIT OR LOSSAND OTHER COMPREHENSIVE INCOME

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015


RM RM RM RM

Revenue 37 120,522,612 85,633,336 9,319,284 3,950,080 Costs of sales (81,142,332) (63,098,253) (1,049,982) (1,261,740)

Gross profit 39,380,280 22,535,083 8,269,302 2,688,340 Other income 3,811,905 5,419,006 1,299,913 3,606,932 Administration expenses (18,300,671) (14,772,158) (1,723,140) (2,195,661)Distribution expenses (2,705,447) (2,561,715) (158,795) (111,236)Other expenses (1,168,495) (31,937) - - Finance costs (1,247,027) (632,571) - - Share of loss of equity-accounted associates (1,174,867) (767,781) - -

Profit before tax 38 18,595,678 9,187,927 7,687,280 3,988,375 Tax expense 39 (2,503,086) (1,086,950) - (1,169)

Net profit for the financial year 16,092,592 8,100,977 7,687,280 3,987,206

Other comprehensive income:Item that will not be reclassified

subsequently to profit or lossTax effect adjustment on revaluation of

freehold land and building that will not be reclassified to profit or loss - (180,828) - -

Item that will be reclassified subsequently to profit or loss

Exchange translation differences 2,067,006 231,986 - -

Total comprehensive income for the financial year 18,159,598 8,152,135 7,687,280 3,987,206

Profit for the financial year attributable to:Owners of the Company 11,930,661 6,672,998 7,687,280 3,987,206 Non-controlling interest 4,161,931 1,427,979 - -

16,092,592 8,100,977 7,687,280 3,987,206

Total comprehensive income attributable to:Owners of the Company 13,997,667 6,724,156 7,687,280 3,987,206 Non-controlling interest 4,161,931 1,427,979 - -

18,159,598 8,152,135 7,687,280 3,987,206

Earnings per share attributable to owners of the parent (sen):-

Earnings per share - Basic 40 2.64 1.95

- Diluted 40 - 1.62



STATEMENTS OF CHANGES IN EQUITYFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015

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STATEMENTS OF CHANGES IN EQUITYFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015

(cONt’D)


STATEMENTS OF CASH FLOWSFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015

Group Company2015 2014 2015 2014

RM RM RM RM

CASH FLOWS FROM OPERATING ACTIVITIESProfit before tax 18,595,678 9,187,927 7,687,280 3,988,375

Adjustments for:-Amortisation of development cost 1,049,982 1,261,740 1,049,982 1,261,740 Amortisation of other investment 410 410 - - Bad debts written off 841 3,939 - - Depreciation of property, plant and

equipment 2,264,088 2,245,396 8,995 7,817 Dividend income (38,652) - (5,000,000) (3,836,012)Gain on disposal of property, plant and

equipment (328,478) (58,942) - - Gain on disposal of associate (2,320,819) (4,588,922) (1,160,627) (3,472,063)Impairment loss on trade receivables - 41,891 - - Impairment loss on trade receivables no

longer required - (3,697) - - Interest income (257,441) (240,444) (98,072) (101,466)Inventories written off 117,516 - - - Inventories written down 1,041,894 1,226 - - Interest expense 1,247,027 632,571 - - Property, plant and equipment written off 8,244 22,126 - - Share of loss of equity-accounted

associates 1,174,867 767,781 - - Unrealised (gain)/loss on foreign

exchange (35,432) 1,516 - (33,403)Warrant reserves written off (10,266) - (10,266) -

Operating profit/(loss) before working capital changes 22,509,459 9,274,518 2,477,292 (2,185,012)

Changes in working capital:-Property development activities (22,814,624) (7,712,645) - - Inventories (193,666) (2,903,201) - (5,674)Receivables (19,646,925) (4,844,087) 10,174 (284,252)Payables 10,785,782 534,343 (2,572,341) - Subsidiaries - - (4,534,136) 14,873 Directors (4,706,310) (150,000) - - Related parties (2,798,973) (814,692) - - Progress billings/Accrued billings (4,236,998) (44,563) - -

Cash generated used in operations (21,102,255) (6,660,327) (4,619,011) (2,460,065)

Tax refund - 346 - - Tax paid (1,823,570) (2,438,379) - -

Net cash from/(used in) operating activities (22,925,825) (9,098,360) (4,619,011) (2,460,065)


STATEMENTS OF CASH FLOWSFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015

(cONt’D)


RM RM RM RM

CASH FLOWS FROM INVESTING ACTIVITIES(Repayment to)/Advances from

associates (69,838) 101,452 1,940 - Advance from a director 1,400,040 - - - Development costs incurred (879,803) (798,053) (879,803) (798,053)Dividend received from subsidiaries - - 5,000,000 3,836,012 Interest received 257,441 240,444 98,072 101,466 Proceeds from disposal of associate 1,307,108 5,222,107 1,307,108 5,222,107 Proceeds from disposal of property, plant

and equipment 768,380 65,583 - - Placement of fixed deposit (309,418) (20,060) - - Purchase of property, plant and

equipment A (1,743,677) (904,867) (6,650) (18,671)Subscriptions of the redeemable non-

convertible preference shares in a subsidiary - - (8,000,064) -

Subscriptions of the redeemable non-convertible preference shares in subsidiaries by non controlling interest 16,219,936 - - -

Acquisition of subsidiary, net of cash required - 602,178 - (2)

Conversion of warrant in associate - (2,050,697) - (2,050,697)Repayment to subsidiaries - - (2,335,407) (7,336,669)

Net cash generating from/(used in) investing activities 16,950,169 2,458,087 (4,814,804) (1,044,507)

CASH FLOWS FROM FINANCING ACTIVITIESInterest paid (1,891,909) (632,571) - - Net drawdown of term loans and short

term borrowings 977,898 7,463,156 - - Purchase of treasury shares (657,401) (355,091) (657,401) (355,091)Repayment of finance lease payables (1,226,496) (1,466,457) - - Dividend paid (4,800,756) (3,326,121) (4,800,756) (3,326,121)Proceeds from conversion of warrants 13,914,908 1,435,346 13,914,908 1,435,346 Share issuance expenses (6,315) (3,130) (6,315) (3,130)Share application money (39,920) 39,920 (39,920) 39,920

Net cash from/(used in) financing activities 6,270,009 3,155,052 8,410,516 (2,209,076)

Effect of foreign exchange translation 2,655,932 330,895 - -

CASH AND CASH EQUIVALENTSNet increase/(decrease) 2,950,285 (3,154,326) (1,023,299) (5,713,648)

As at beginning of the financial year:-As previously reported 10,491,601 13,790,764 1,554,323 7,267,971 Effect of foreign exchange translation (725,409) (144,837) - -

9,766,192 13,645,927 1,554,323 7,267,971

As at end of the financial year B 12,716,477 10,491,601 531,024 1,554,323


STATEMENTS OF CASH FLOWS (cONt’D)FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015

NOTES TO THE STATEMENTS OF CASH FLOWS

A. PURCHASE OF PROPERTY, PLANT AND EQUIPMENT

During the financial year, the Group and the Company acquired property, plant equipment with aggregate costs of RM2,117,625 and RM6,650 (2014: RM1,401,867 and RM18,671) respectively of which RM373,948 and RM Nil (2014: RM497,000 and RM Nil) respectively were financed by finance lease facilities respectively. Cash payments of RM1,743,677 and RM6,650 (2014: RM904,867 and RM18,671) for the Group and the Company respectively were made to purchase property, plant and equipment.

B. CASH AND CASH EQUIVALENTS

Cash and cash equivalents included in the statements of cash flows comprise the following:-

Group Company2015 2014 2015 2014

RM RM RM RM

Cash and bank balances 11,564,296 10,662,017 368,279 1,554,323 Fixed deposits with licensed banks 2,507,201 952,600 162,745 - Bank overdrafts (Note 36) (384,060) (461,474) - -

13,687,437 11,153,143 531,024 1,554,323 Less: Fixed deposits pledged with

licensed banks (Note 20) (970,960) (661,542) - -

12,716,477 10,491,601 531,024 1,554,323



NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2015

1. GENERAL INFORMATION

The Company is a public limited liability company, incorporated and domiciled in Malaysia and is listed on the Main Market of Bursa Malaysia Securities Berhad. The registered office of the Company is located at Third Floor, No. 79 (Room A), Jalan SS21/60, Damansara Utama, 47400 Petaling Jaya, Selangor Darul Ehsan. The principal place of business of the Company is located at No. 3-5, Block D2, Jalan PJU 1/39, Dataran Prima, 47301 Petaling Jaya, Selangor Darul Ehsan.

The principal activities of the Company are the provision of information technology solutions and investment holding. The principal activities of the subsidiaries and associates are disclosed in Note 5 and Note 6 to the financial statements respectively. There have been no significant changes in the nature of these activities of the Company and its subsidiaries during the financial year.

The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the Directors passed on 20 April 2016.

2. BASIS OF PREPARATION

2.1 Statement of Compliance

The financial statements of the Group and of the Company have been prepared in accordance with Financial Reporting Standards (“FRS”) issued by the Malaysian Accounting Standards Board (“MASB”) and the requirements of the Companies Act, 1965 in Malaysia.

2.2 Basis of Measurement

The financial statements of the Group and of the Company are prepared under the historical cost convention, except for certain properties and financial instruments that are measured at revalued amounts or fair values at the end of each reporting period as indicated in the summary of significant accounting policies.

Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible to by the Group.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial market takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.


NOTES TO THE FINANCIAL STATEMENTS31 DECEMBER 2015(cont’d)

2. BASIS OF PREPARATION (CONT’D)

2.2 Basis of Measurement (cont’d)

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to their fair value measurement as a whole:

- Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or liabilities.- Level 2 – Valuation techniques for which the lowest level input that is significant to their fair value

measurement is directly or indirectly observable.- Level 3 - Valuation techniques for which the lowest level input that is significant to their fair value

measurement is unobservable.

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to their fair value measurement as a whole) at the end of each reporting period.

2.3 Functional and Presentation Currency

The financial statements are presented in Ringgit Malaysia (“RM”) which is the Company’s functional currency and all values are rounded to the nearest RM except when otherwise stated.

2.4 Adoption of Amendments to FRSs and IC Interpretations (“IC Int”)

Except for the changes below, the Group and the Company have consistently applied the accounting policies set out in Note 3 to all periods presented in these financial statements.

At the beginning of the current financial year, the Group and the Company adopted amendments to FRSs and IC Int which are mandatory for the financial periods beginning on or after 1 January 2015.

Initial application of the amendments to the standards and IC Int did not have material impact to the financial statements. The nature and the impact of the amendments FRSs are described below:-

Amendments to FRS effective 1 July 2014

Amendments to FRS 119 Defined Benefit Plans: Employee Contributions

The amendments to FRS 119 clarify how an entity should account for contributions made by employees or third parties to defined benefit plans, based on whether those contributions are dependent on the number of years of service provided by the employee.

For contributions that are independent of the number of years of service the entity may either recognise the contributions as a reduction in the service cost in the period in which the related service is rendered, or to attribute them to the employees’ periods of service using the projected unit credit method; whereas for contributions that are dependent on the number of years of service the entity is required to attribute them to the employees’ periods of service.

Annual Improvements to FRSs 2010 – 2012 Cycle, including:

FRS 13 Fair Value Measurement

It clarifies in the Basis for Conclusion that short-term receivables and payables with no stated interest rates can be measured at invoice amounts when the effect of discounting is immaterial.

FRS 124 Related Party Disclosures

The amendment clarifies that a management entity (an entity that provides key management personnel services) is a related party subject to the related party disclosures. In addition, an entity that uses a management entity is required to disclose the expenses incurred for management services.


NOTES TO THE FINANCIAL STATEMENTS31 DECEMBER 2015

(cont’d)


2.4 Adoption of Amendments to FRSs and IC Interpretations (“IC Int”) (cont’d)

Initial application of the amendments to the standards and IC Int did not have material impact to the financial statements. The nature and the impact of the amendments FRSs are described below (cont’d):-

Annual Improvements to FRSs 2011 – 2013 Cycle, including:

FRS 13 Fair Value Measurement

The amendment clarifies that the portfolio exception in FRS 13 can be applied not only to the financial assets and financial liabilities, but also to other contracts within the scope of FRS 9 (or FRS 139, as applicable).

2.5 Standards Issued But Not Yet Effective

The Group and the Company have not applied the following new standards, amendments to standards that have been issued by the Malaysian Accounting Standards Board (“MASB”) but are not yet effective for the Group and the Company:

FRS and Amendments to FRSs effective 1 January 2016:

FRS 14 Regulatory Deferral AccountsAmendments to FRS 10 Consolidated Financial Statement, FRS 12 Disclosure of Interest in Other

Entities and FRS 128 Investments in Associates and Joint Ventures: Investment Entities-Applying the Consolidation Exception

Amendments to FRS 11 Joint Arrangements: Accounting for acquisitions of interests in joint operations

Amendments to FRS 101 Presentation of Financial Statements: Disclosure InitiativeAmendments to FRS 116 Property, Plant and Equipment and FRS 138 Intangible Assets: Clarification

of acceptable methods of depreciation and amortisationAmendments to FRS 127 Consolidated and Separate Financial Statements: Equity Method in Separate

Financial Statements

Annual Improvements to FRSs 2012-2014 Cycle, including the amendments to:

FRS 5 Non-current Assets Held for Sale and Discontinued Operations: Changes in methods of disposal

FRS 7 Financial Instruments – Disclosures: Servicing contractsFRS 7 Financial Instruments – Disclosures: Applicability of the amendments to FRS

7 to condensed interim financial statementsFRS 119 Employee Benefits: Discount rate – regional market issue FRS 134 Interim Financial Reporting: Disclosures of information “elsewhere in the

interim financial report”

FRS and Amendments to FRS effective 1 January 2018:

FRS 9 Financial Instruments IFRS 9 Issued by IASB in July 2014

FRS 5, 10, 11, 14 and 127 are not applicable to the Company’s operation.

FRS 5, 11 and 14 are not applicable to the Group’s operation.




2.5 Standard Issued But Not Yet Effective (cont’d)

The initial application of the above standards, amendments and interpretation are not expected to have any financial impacts to the financial statements, except for:

FRS 9 Financial Instruments

FRS 9 replaces FRS 139 Financial Instruments: Recognition and Measurement and all previous version of FRS 9. The new standard introduces extensive requirements and guidance for classification and measurement of financial assets and financial liabilities which fall under the scope of FRS 9, new “expected credit loss model” under the impairment of financial assets and greater flexibility has been allowed in hedge accounting transactions. Upon adoption of FRS 9, financial assets will be measured at either fair value or amortised cost. It is also expected that the Group’s investment in unquoted shares will be measured at fair value through other comprehensive income.

The adoption of FRS 9 will result in a change in accounting policy. The Group and the Company are currently examining the financial impact of adopting FRS 9.

Malaysian Financial Reporting Standards (MFRSs)

To converge with IFRSs in 2012, the MASB had on 19 November 2011, issued a new MASB approved accounting framework, the MFRSs, which are mandatory for annual financial periods beginning on or after 1 January 2014, with the exception of entities that are within the scope of MFRS 141, Agriculture and IC Interpretation 15, Agreements for Construction of Real Estate, including its parent, significant investor and venture (“Transitioning Entities”).

Transitioning term Entities will be allowed to defer adoption of the new MFRSs for an additional two years. Consequently, adoption of the MFRSs by Transitioning Entities will be mandatory for annual financial periods beginning on or after 1 January 2014. On 2 September 2014, the MASB has decided to allow Transitioning Entities to defer the adoption of the MFRS Framework to another two years and mandated for all companies for annual financial periods beginning on or after 1 January 2017. On 28 October 2015, the MASB issued notice entitled Amendment to the effective date and applicability of MFRSs’ entities shall comply with MFRSs for annual periods beginning on or after 1 January 2018.

The Group falls within the scope of definition of Transitioning Entities and has opted to defer the adoption of the new MFRS Framework. Accordingly, the Group has opted to defer the adoption of the new MFRS framework and will be required to prepare its first set of financial statements using the MFRS Framework for the financial year ending 31 December 2018.

In presenting its first MFRS financial statements, the Group will be required to restate the comparative financial statements to amounts reflecting the application of MFRS Framework. The majority of the adjustments required on transition will be made, retrospectively, against opening retained earnings.

The Group has not completed its quantification of the financial effects of the differences between FRS and accounting standards under the MFRS Framework and are in the process of accessing the financial effects of the differences. Accordingly, the consolidated financial performance and financial position as disclosed in these financial statements for the financial year ended 31 December 2015 could be different if prepared under the MFRS Framework.

The Group expects to be in a position to fully comply with the requirements of the MFRS Framework for the financial year ending 31 December 2018.



(cont’d)


2.6 Significant Accounting Estimates and Judgements

Estimates, assumptions concerning the future and judgements are made in the preparation of the financial statements. They affect the application of the Group’s accounting policies and reported amounts of assets, liabilities, income and expenses, and disclosures made. Estimates and underlying assumptions are assessed on an on-going basis and are based on experience and relevant factors, including expectations of future events that are believed to be reasonable under the circumstances. The actual results may differ from the judgements, estimates and assumptions made by management, and will seldom equal the estimated results.

2.6.1 Estimation Uncertainty

Information about significant judgements, estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, income and expenses are discussed below.

Revaluation of property, plant and equipment

The Group measures its land and buildings at revalued amount with changes in fair value being recognised in other comprehensive income. The Group engaged independent valuation specialists to determine fair values as at 31 December 2015.

The carrying amount of the land and buildings at the end of the reporting period, and the relevant revaluation bases, are disclosed in Note 4 to the financial statements.

Useful lives of depreciable assets

Management estimates the useful lives of the property, plant and equipment to be within 2 to 82 years and reviews the useful lives of depreciable assets at the end each of the reporting period. At 31 December 2015, management assesses that the useful lives represent the expected utility of the assets to the Group. Actual results, however, may vary due to change in the expected level of usage and technological developments, which resulting the adjustment to the Group’s assets.

The carrying amount of the Group’s property, plant and equipment at the end of the reporting period is disclosed in Note 4 to the financial statements.

Impairment of goodwill

Impairment loss is recognised for the amount by which the asset’s or cash-generating unit’s carrying amount exceeds its recoverable amount. To determine the recoverable amount, management estimates expected future cash flows from each cash-generating unit and determines a suitable interest rate in order to calculate the present value of those cash flows. In the process of measuring expected future cash flows, management makes assumptions about future operating results. These assumptions relate to future events and circumstances. The actual result may vary, and may cause significant adjustments to the Group’s assets within the next financial year.

Further details of the carrying values, key assumptions applied in the impairment assessment of goodwill and sensitivity analysis to changes in the assumptions are disclosed in Note 9 to the financial statements.

Impairment of property, plant and equipment and prepaid land lease payments

The Group carried out impairment tests where there are indications of impairment based on a variety of estimation including value-in-use of cash-generating unit to which the property, plant and equipment and the prepaid land lease payments are allocated. Estimating the value-in-use requires the Group to make an estimate of the expected future cash flows from cash-generating unit and also to choose a suitable discount rate in order to calculate present value of those cash flows.




2.6 Significant Accounting Estimates and Judgements (cont’d)

2.6.1 Estimation Uncertainty (cont’d)

Inventories

Inventories are measured at the lower of cost and net realisable value. In estimating net realisable values, management takes into account the most reliable evidence available at the times the estimates are made. The Group’s core business is subject to economical and technology changes which may cause selling prices to change rapidly, and the Group’s profit to change.

The carrying amount of the Group’s inventories at the end of the reporting period is disclosed in Note 12 to the financial statements.

Fair value of financial instruments

Management uses valuation techniques in measuring the fair value of financial instruments where active market quotes are not available. Details of the assumptions used are given in the notes regarding financial assets and liabilities. In applying the valuation techniques management makes maximum use of market inputs, and uses estimates and assumptions that are, as far as possible, consistent with observable data that market participants would use in pricing the instrument. Where applicable data is not observable, management uses its best estimate about the assumptions that market participants would make. These estimates may vary from the actual prices that would be achieved in an arm’s length transaction at the end of the reporting period.

Impairment of loans and receivables

The Group assesses at each reporting date whether there is any objective evidence that a financial asset is impaired. Factors such as probability of insolvency or significant financial difficulties of the receivables and default or significant delay in payments are considered in determining whether there is objective evidence of impairment.

Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics.

The carrying amount of the Group’s loans and receivables at the reporting date is disclosed in Notes 14 and 15 to the financial statements.

Deferred tax assets

Deferred tax assets are recognised for all deductible temporary differences, unutilised tax losses, unabsorbed capital allowances and unused tax credits to the extent that it is probable that taxable profit will be available against which all the deductible temporary differences, unutilised tax losses and unabsorbed capital allowances can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies.

Assumptions about generation of future taxable profits depend on management’s estimates of future cash flows. These depend on estimates of future production and sales volume, operating costs, capital expenditure, dividends and other capital management transactions. Judgement is also required about application of income tax legislation. These judgements and assumptions are subject to risks and uncertainty, hence there is a possibility that changes in circumstances will alter expectations, which may impact the amount of deferred tax assets recognised in the Statement of Financial Position and the amount of unrecognised tax losses and unrecognised temporary differences.



(cont’d)


2.6 Significant Accounting Estimates and Judgements (cont’d)

2.6.1 Estimation Uncertainty (cont’d)

Deferred tax assets (cont’d)

The assessment of the probability of future taxable income in which deferred tax assets can be utilised is based on the Group’s latest approved budget forecast, which is adjusted for significant non-taxable income and expenses and specific limits to the use of any unused tax loss or credit. The tax rules in the numerous jurisdictions in which the Group operates are also carefully taken into consideration. If a positive forecast of taxable income indicates the probable use of a deferred tax asset, especially when it can be utilised without a time limit that deferred tax asset is usually recognised in full. The recognition of deferred tax assets that are subject to certain legal or economic limits or uncertainties is assessed individually by management based on specific facts and circumstances.

Development costs

Management monitors progress of internal research and development projects by using a project management system. Significant judgement is required in distinguishing research from the development phase. Development costs are recognised as an asset when all the criteria are met, whereas research costs are expensed as incurred.

To distinguish any research-type project phase from the development phase, it is the Group’s accounting policy to also require a detailed forecast of sales or cost savings expected to be generated by the intangible asset. The forecast is incorporated into the Group’s overall budget forecast as the capitalisation of development costs commences. This ensures that managerial accounting, impairment testing procedures and accounting for internally-generated intangible assets is based on the same data.

The Group’s management also monitors whether the recognition requirements for development costs continue to be met. This is necessary as the economic success of any product development is uncertain and may be subject to future technical problems after the time of recognition.

Property development revenue

The Group recognises property development revenue and expenses in the statement of profit or loss and other comprehensive income by using the stage of completion method. The stage of completion is determined by the proportion that property development costs incurred for work performed to date bear to the estimated total property development costs. Significant judgement is required in determining the stage of completion, the extent of the property development costs incurred, the estimated total property development revenue and costs, as well as the recoverability of the property development costs. In making the judgement, the Group evaluates based on past experience and by relying on the work of specialists.

The carrying amounts of assets and liabilities of the Group arising from property development activities are disclosed in Note 11 to the financial statements.

2.6.2 Significant Management Judgement

The following are significant management judgement in applying the accounting policies of the Group that have the most significant effect on the financial statements.

Leases

In applying the classification of leases in FRS 117, management considers some of its leases of leasehold land as finance lease arrangements. The lease transaction is not always conclusive, and management uses judgement in determining whether the lease is a finance lease arrangement that transfers substantially all the risks and rewards incidental to ownership, whether the lease term is for the major part of the economic life of the asset even if title is not transferred and others in accordance with FRS 117.



3. SIGNIFICANT ACCOUNTING POLICIES

The Group and the Company apply the significant accounting policies as summarised below, consistently throughout all periods presented in the financial statements.

3.1 Consolidation

3.1.1 Subsidiaries

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

Investment in subsidiaries is stated at cost less any impairment losses in the Company’s financial position, unless the investment is held for sale or distribution. The cost of investments includes transaction costs.

Upon the disposal of investment in a subsidiary, the difference between the net disposal proceeds and its carrying amount is included in profit or loss.

3.1.2 Basis of consolidation

The Group financial statements consolidate the audited financial statements of the Company and all of its subsidiaries, which have been prepared in accordance with the Group’s accounting policies. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group. The financial statements of the Company and its subsidiaries are all drawn up to the same reporting date.

All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between entities of the Group (profits or losses resulting from intragroup transactions that are recognised in asset, such as inventory and property, plant and equipment) are eliminated in full in preparing the consolidated financial statements. Intragroup losses may indicate an impairment that requires recognition in the consolidated financial statements. Temporary differences arising from the elimination of profits and losses resulting from intragroup transactions will be treated in accordance to Note 3.19 of the financial statements.

Subsidiaries are consolidated from the date on which control is transferred to the Group and are no longer consolidated from the date that control ceases.

Changes in the Company owners’ ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. In such circumstances, the carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interest is adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the parent.

3.1.3 Business combinations and goodwill

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the Group elects whether it measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition costs incurred are expensed and included in administrative expenses.



(cont’d)

3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

3.1 Consolidation (cont’d)

3.1.3 Business combinations and goodwill (cont’d)

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes in the fair value of the contingent consideration which is deemed to be an asset or liability will be recognised in accordance with FRS 139 either in profit or loss or as a change to other comprehensive income. If the contingent consideration is classified as equity, it will not be remeasured. Subsequent settlement is accounted for within equity. In instances where the contingent consideration does not fall within the scope of FRS 139, it is measured in accordance with the appropriate FRS.

Goodwill in initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.

3.1.4 Loss of control

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

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

3.1.5 Non-controlling interests

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

Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if that results in a deficit balance.




3.1 Consolidation (cont’d)

3.1.6 Associates

Associates are entities in which the Group has significant influence, but no control, over their financial and operating policies.

The Group’s investments in its associates are accounted for using the equity method. Under the equity method, investment in an associate is carried in the statement of financial position at cost plus post acquisition changes in the Group’s share of net assets of the associate since the acquisition date. Goodwill relating to the associate is included in the carrying amount of the investment and is neither amortised nor individually tested for impairment.

The share of the result of an associate is reflected in profit or loss. Any change in other comprehensive income of those investees is presented as part of the Group’s other comprehensive income. In addition, where there has been a change recognised directly in the equity of an associate, the Group recognises its share of any changes and discloses this, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate.

The aggregate of the Group’s share of profit or loss of an associate is shown on the face of the statement of profit or loss and other comprehensive income outside operating profit and represents profit or loss after tax and non-controlling interests in the subsidiaries of the associate.

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

The financial statements of the associates are prepared as of the same reporting period as the Company. Where necessary, adjustments are made to bring the accounting policies of the associates in line with those of the Group.

After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss on the Group’s investments in its associates. The Group determines at each end of the reporting period whether there is any objective evidence that the investments in the associates is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the associates and their carrying value, then recognises the amount in the “share of profit of investments accounted for using the equity method” in profit or loss.

Upon loss of significant influence over the associate, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss.

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

In the Company’s separate financial statements, investments in associates are stated at cost less impairment losses. On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is included in profit or loss.



(cont’d)


3.2 Foreign currency translation

The Group’s consolidated financial statements are presented in RM, which is also the parent company’s functional currency.

3.2.1 Foreign currency transactions and balances

Transactions in foreign currencies are initially recorded at the functional currency rates prevailing at the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency spot rate of exchange ruling at the reporting date.

All differences are taken to the profit or loss with the exception of all monetary items that forms part of a net investment in a foreign operation. These are recognised in other comprehensive income until the disposal of the net investment, at which time they are reclassified to profit or loss. Tax charges and credits attributable to exchange differences on those monetary items are also recorded in other comprehensive income.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising in translation of non-monetary items is recognised in line with the gain or loss of the item that gave rise to the translation difference (translation differences on items whose gain or loss is recognised in other comprehensive income or profit or loss is also recognised in other comprehensive income or profit or loss respectively).

3.2.2 Foreign operations

The assets and liabilities of operations denominated in functional currencies other than RM, including goodwill and fair value adjustments arising on acquisition, are translated to RM at exchange rates at the end of the reporting period, except for goodwill and fair value adjustments arising from business combination before 1 January 2011 which are treated as assets and liabilities of the Company. The income and expenses of foreign operations are translated to RM at exchange rates at the date of the transactions.

Foreign currency differences are recognised in other comprehensive income and accumulated in the foreign currency translation reserve in equity. However, if the operation is a non-wholly-owned subsidiary, then the relevant proportionate share of the translation difference is allocated to the non-controlling interests. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the foreign currency translation reserve related to that foreign operation is reclassified to profit or loss as part of the profit or loss on disposal.

When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation, the relevant proportion of the cumulative amount is reattributed to non-controlling interests. When the Group disposes of only part of its investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

In the consolidated financial statements, when settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form part of a net investment in a foreign operation and are recognised in other comprehensive income, and are presented in foreign currency translation reserve in equity.




3.3 Property, plant and equipment

Property, plant and equipment are initially stated at cost. The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.

All property, plant and equipment, except for land and building, are subsequently stated at cost less accumulated depreciation and less any impairment losses. When significant parts of property, plant and equipment are required to be replaced in intervals, the Group recognises such costs as individual assets with specific useful lives and depreciation, respectively. All other repair and maintenance costs are recognised in profit or loss as incurred.

Land is shown at fair values, based on valuations by external independent valuers, less subsequent accumulated depreciation on buildings and any accumulated impairment losses. Valuations are performed with sufficient regularity, usually every five years, to ensure that the carrying amount does not differ materially from the fair value of the land and buildings at the end of the reporting period.

As at the date of revaluation, accumulated depreciation, if any, is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Any revaluation surplus arising upon appraisal of land is recognised in other comprehensive income and credited to the ‘revaluation reserve’ in equity. To the extent that any revaluation decrease or impairment loss has previously been recognised in profit or loss, a revaluation increase is credited to profit or loss with the remaining part of the increase recognised in other comprehensive income. Downward revaluations of land are recognised upon appraisal or impairment testing, with the decrease being charged to other comprehensive income to the extent of any revaluation surplus in equity relating to this asset and any remaining decrease recognised in profit or loss. Any revaluation surplus remaining in equity on disposal of the asset is transferred to other comprehensive income.

Buildings that are leasehold property are also included in property, plant and equipment if they are held under a finance lease. Such assets are depreciated over their expected useful lives (determined by reference to comparable owned assets) or over the term of the lease, if shorter.

Depreciation is recognised on the straight line method in order to write off the cost or valuation of each asset over its estimated useful life. Freehold land with an infinite life is not depreciated. Leasehold land is amortised over the lease term of 82 years.

The principal annual depreciation rates used are as follows:-

Buildings 2%Computers 20% - 60%Renovation 8% - 20%Motor vehicles 20%Factory/office furniture and equipment 8% - 25%Plant and machinery 10%

Restoration cost relating to an item of the property, plant and equipment is capitalised only if such expenditure is expected to increase the future benefits from the existing property, plant and equipment beyond its previously assessed standard of performance.

The residual values, useful life and depreciation method are reviewed for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable, or at least annually to ensure that the amount, method and period of depreciation are consistent with previous estimates and expected pattern of consumption of future economic benefits embodied in the items of property, plant and equipment.

Property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Gains or losses on the disposal of property, plant and equipment are determined as the difference between the disposal proceeds and the carrying amount of the assets are recognised in profit or loss in the financial year in which the asset is derecognised.



(cont’d)


3.4 Property development costs

Development properties consists of land or such portions on which significant development work have been undertaken and are stated at cost and where applicable attributable profit less progress billings.

Cost includes land acquisition cost, professional fees, stamp duties, commissions, conversion fee, other levies, borrowing costs and development expenditure.

Accumulation of cost in property development projects does not cease even where the estimated future realisable revenues are lower than the carrying value of the projects.

However, an allowance is made for foreseeable losses.

When the outcome of a developments project cannot be estimated reliably, revenue is recognised only to the extent of development costs incurred that it is probable will be recoverable.

Profit is recognised on the development units sold, for which sales agreements have been concluded, using the percentage of completion of a physical proportion of the development works.

Where property is under development and agreement has been reached to sell such property when construction is complete, the Directors consider whether the contract comprises a contract to construct a property or a contract for the sale of a completed property.

Where a contract is judged to be for the construction of a property, revenue is recognised using the percentage of completion method as construction progresses.

Where the contract is judged to be for the sale of a completed property, revenue is recognised when the significant risks and rewards of ownership of the real estate have been transferred to the buyer. If, however, the legal terms of the contract are such that the construction represents the continuous transfer of work in progress to the purchaser, the percentage of completion method of revenue recognition is applied and revenue is recognised as work progresses. Continuous transfer of work in progress is applied when:

(a) The buyer controls the work in progress, typically when the land on which the development is taking place is owned by the final customer, and

(b) All significant risks and rewards of ownership of the work in progress in its present state are transferred to the buyer as construction progresses, typically when buyer cannot put the incomplete property back to the Company.

In such conditions, the percentage of work completed is measured based on the costs incurred up until the end of the reporting period as a proportion of total costs expected to be incurred.

Property development costs not recognised as an expense is recognised as an asset and is stated at the lower of costs and net realisable value.

The excess of revenue recognised in the profit or loss over billings to purchasers is classified as accrued billings and the excess of billings to purchasers over revenue recognised in the profit or loss is classified as progress billings.

3.5 Goodwill

Goodwill represents the excess of the cost of acquisition over the Group’s interest in the fair value of the identifiable assets, liabilities and contingent liabilities of a subsidiary, associate and jointly controlled entities at the date of acquisition.

Goodwill arising on the acquisition of subsidiaries is presented separately in the Consolidated Statement of Financial Position while goodwill arising on the acquisition of associate is included within the carrying amount of investment in associate.




3.5 Goodwill (cont’d)

Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying values may be impaired.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination.

A cash-generating unit (or group of cash-generating units) to which goodwill has been allocated is tested for impairment annually and, whenever there is an indication that the unit may be impaired, by comparing the carrying amount of the unit, including goodwill, with the recoverable amount of the unit. Where the recoverable amount of the cash-generating unit (or group of cash-generating units) is less than the carrying amount, an impairment loss is recognised in profit or loss. Impairment losses recognised for goodwill are not reversed in subsequent period.

An impairment loss recognised for goodwill should not be reversed in subsequent period. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Where goodwill forms part of a cash-generating unit (or group of cash-generating units) and part of the operations within that unit is disposed off, the goodwill associated with the operations disposed off is included in the carrying amount of the operations when determining the gain or loss on disposal of the operations. Goodwill disposed off in these circumstances is measured based on the relative fair values of the operations disposed off and portion of the cash-generating unit retained.

3.6 Leases

The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date, whether fulfilment of the arrangement is dependent on the use of a specific asset or asset or the arrangement conveys a right to use the asset, even if that right is not explicitly specific in an arrangement.

3.6.1 Finance lease

Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance lease. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments.

Minimum lease payments made under finance leases are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in the profit or loss. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed.

A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.

Leasehold land which in substance is a finance lease is classified as a property, plant and equipment.

3.6.2 Operating lease

Leases, where the Group or the Company does not assume substantially all the risks and rewards of ownership are classified as operating leases and, except for property interest held under operating lease, the leased assets are not recognised on the statement of financial position. Property interest held under an operating lease, which is held to earn rental income or for capital appreciation or both, is classified as investment property.



(cont’d)


3.6 Leases (cont’d)

3.6.2 Operating lease (cont’d)

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

3.7 Financial instruments

3.7.1 Initial recognition and measurement

Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument.

Financial assets and financial liabilities are measured initially at fair value plus transactions costs, except for financial assets and financial liabilities carried at fair value through profit or loss, which are measured initially at fair value. Financial assets and financial liabilities are measured subsequently as described below.

Embedded derivative is recognised separately from the host contract and accounted for as a derivative if, and only if, it is not closely related to the economic characteristics and risks of the host contract and the host contract is not categorised at fair value through profit or loss. The host contract, in the event an embedded derivative is recognised separately, is accounted for in accordance with policy applicable to the nature of the host contract.

3.7.2 Financial assets - categorisation and subsequent measurement

For the purpose of subsequent measurement, financial assets other than those designated and effective as hedging instruments are classified into the following categories upon initial recognition:

(a) financial assets at fair value through profit or loss;(b) held-to-maturity investments; (c) loans and receivables; and(d) available-for-sale financial assets.

The category determines subsequent measurement and whether any resulting income and expense is recognised in profit or loss or in other comprehensive income.

All financial assets except for those at fair value through profit or loss are subject to review for impairment at least at each end of the reporting period. Financial assets are impaired when there is any objective evidence that a financial asset or a Group of financial assets is impaired. Different criteria to determine impairment are applied for each category of financial assets.

A financial asset or part of it is derecognised when, and only when the contractual rights to the cash flows from the financial asset expire or the financial asset is transferred to another party without retaining control or substantially all risks and rewards of the asset. On derecognition of a financial asset, the difference between the carrying amount and the sum of the consideration received (including any new asset obtained less any new liability assumed) and any cumulative gain or loss that had been recognised in equity is recognised in the profit or loss.

As of reporting date, the Group and the Company carries only loans and receivables and available for sale financial assets on their statement of financial position.




3.7 Financial instruments (cont’d)

3.7.2 Financial assets - categorisation and subsequent measurement (cont’d)

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition, these are measured at amortised cost using the effective interest method, less provision for impairment. Discounting is omitted where the effect of discounting is immaterial. Gains or losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, and through the amortisation process. The Group’s cash and cash equivalents, trade and most other receivables fall into this category of financial instruments.

Loans and receivables are classified as current assets, except for those having maturity dates later than 12 months after the end of the reporting period which are classified as non-current.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are either designated to this category or do not qualify for inclusion in any of the other categories of financial assets. The Group’s available-for-sale financial assets include listed securities, debentures and the equity instruments.

Available-for-sale financial assets are measured at fair value subsequent to the initial recognition. Gains and losses are recognised in other comprehensive income and reported within the available-for-sale reserve within equity, except for impairment losses and foreign exchange differences on monetary assets, which are recognised in profit or loss. When the asset is disposed of or is determined to be impaired, the cumulative gain or loss recognised in other comprehensive income is reclassified from the equity reserve to profit or loss and presented as a reclassification adjustment within other comprehensive income.

Interest calculated using the effective interest method and dividends are recognised in profit or loss. Dividends on an available-for-sale equity are recognised in profit or loss when the Group’s and the Company’s right to receive payment is established.

Investment in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost less impairment loss.

Available-for-sale financial assets are classified as non-current assets unless they are expected to be realised within 12 months after the end of the reporting period.

3.7.3 Financial liabilities - categorisation and subsequent measurement

After the initial recognition, financial liabilities are classified as:

(a) financial liabilities at fair value through profit or loss;(b) other liabilities measure at amortised cost using the effective interest method; and (c) financial guarantee contracts.

A financial liability or a part of it is derecognised when, and only when, the obligation specified in the contract is discharged or cancelled or expires. On derecognition of a financial liability, the difference between the carrying amount of the financial liability extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.

As at the reporting date, the Group and the Company carries only other financial liabilities on their statement of financial position.



(cont’d)


3.7 Financial instruments (cont’d)

3.7.3 Financial liabilities - categorisation and subsequent measurement (cont’d)

Other liabilities measured at amortised cost

The Group’s other liabilities include borrowings, trade and other payables.

Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the end of the reporting period.

3.7.4 Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount reported in the statements of financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

3.7.5 Fair value of financial instruments

The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to quoted market process or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs.

For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques. Such techniques may include using recent arm’s length market transactions; reference to the current fair value of another instrument that is substantially the same; a discounted cash flow analysis or other valuation models.

An analysis of fair values of financial instruments and further details as how they are measured are provided in Notes 44 and 45 to the financial statements.

3.8 Impairment of assets

3.8.1 Non-financial assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU) fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.

The Group bases its impairment calculation on detailed budgets and forecast calculations which are prepared separately for each of the Company’s cash-generating units to which the individual assets are allocated. These budgets and forecast calculations are generally covering a period of three years. For longer periods, a long term growth rate is calculated and applied to project future cash flows after the third year.




3.8 Impairment of assets (cont’d)

3.8.1 Non-financial assets (cont’d)

Impairment losses of continuing operations, including impairment on inventories, are recognised in the profit or loss in those expense categories consistent with the function of the impaired asset, except for a property previously revalued where the revaluation was taken to other comprehensive income. In this case, the impairment is also recognised in other comprehensive income up to the amount of any previous revaluation.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s or cash-generating unit’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for asset in prior years. Such reversal is recognised in the profit or loss unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase.

Goodwill is tested for impairment annually as at the end of each reporting period, and when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each cash-generating unit (or group of cash-generating units) to which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than their carrying amount, an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods.

Intangible assets with indefinite useful lives are tested for impairment annually as at the end of each reporting period, either individually or at the cash-generating unit level, as appropriate and when circumstances indicate that the carrying value may be impaired.

3.8.2 Financial assets

The Group assesses at each reporting date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred “loss event”) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a Group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and where observable date indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Financial assets carried at amortised cost

For financial assets carried at amortised cost, the Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continue to be, recognised are not included in a collective assessment of impairment.



(cont’d)


3.8 Impairment of assets (cont’d)

3.8.2 Financial assets (cont’d)

Financial assets carried at amortised cost (cont’d)

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate.

The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the profit or loss. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income in the profit or loss. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Group. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to finance costs in the profit or loss.

Available-for-sale financial assets

For available-for-sale financial assets, the Group assesses at each reporting period whether there is objective evidence that an investment or a group of investment is impaired.

In the case of equity investments classified as available-for-sale, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. “Significant” is evaluated against the original cost of the investment and “prolonged” against the period in which the fair value has been below its original cost. Where there is evidence of impairment, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in the profit or loss - is removed from other comprehensive income and recognised in the profit or loss. Impairment losses on equity investments are not reversed through profit or loss; increases in their fair value after impairments are recognised directly in other comprehensive income.

In the case of debt instruments classified as available-for-sale, impairment is assessed based on the same criteria as financial assets carried at amortised cost. However, the amount recorded for impairment is the cumulative loss measured as the difference between the amortised cost and the current fair value, less any impairment loss on that investment previously recognised in profit or loss.

Future interest income continues to be accrued based on the reduced carrying amount of the asset, using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income. If, in a subsequent year, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in the profit or loss, the impairment loss is reversed through profit or loss.

3.9 Research and development expenditure

All research costs are recognised in profit or loss as incurred. Expenditure incurred on projects to develop new products is capitalised and deferred only when the Group or the Company can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete the project and the ability to measure reliably the expenditure during the development. Product development expenditure which do not meet these criteria are expensed off when incurred.




3.9 Research and development expenditure (cont’d)

Development costs, considered to have finite useful lives, are stated at cost less any impairment losses and are amortised using the straight-line basis over the commercial lives of the underlying products not exceeding five years. Impairment is assessed whenever there is an indication of impairment and the amortisation period and method are also reviewed at least once at each reporting date.

3.10 Inventories

Inventories other than inventory properties comprises raw materials, work-in-progress, finished goods are stated at the lower of cost and net realisable value.

Cost of raw material is determined on a weighted average basis. Cost of finished goods and work-in-progress include design cost, raw material, direct labour and an appropriate proportion of production overheads (based on normal operating capacity).

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

3.11 Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, bank balances, short term demand deposits, bank overdraft and highly liquid investments which are readily convertible to known amount of cash and which are subject to an insignificant risk of changes in value.

Bank overdrafts are shown in current liabilities in the statements of financial position.

For the purpose of the statements of financial position, cash and cash equivalents restricted to be used to settle a liability of 12 months or more after the reporting date are classified as non-current asset.

3.12 Equity, reserves and dividend payments

An equity instrument is any contract that evidences a residual interest in the assets of the Group and of the Company after deducting all of its liabilities. Ordinary shares are equity instruments.

Share capital represents the nominal value of shares that have been issued.

Share premium includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits.

The revaluation reserve within equity comprises gains and losses due to the revaluation of property, plant and equipment. Foreign currency translation differences arising on the translation of the Group’s foreign entities are included in the exchange translation reserve. Gains and losses on certain financial instruments are included in reserves for available-for-sale financial assets and cash-flow hedges respectively.

Retained earnings include all current and prior period retained profits.

Dividends on ordinary shares are accounted for in shareholder’s equity as an appropriation of retained earnings.

All transactions with owners of the parent are recorded separately within equity.

3.13 Treasury shares

When issued share of the Company are repurchased, the consideration paid, including directly attributable costs is presented as a change in equity. Repurchased shares that have not been cancelled are classified as treasury shares and presented as a deduction from equity. No gain or loss is recognised in profit or loss on the sale, reissuance or cancellation of treasury shares.



(cont’d)


3.13 Treasury shares (cont’d)

When treasury shares are distributed as share dividends, the cost of the treasury shares is applied in the reduction of the share premium account or distributable reserves, or both.

When treasury shares are reissued by resale, the difference between the sale consideration net of directly attributable costs and the carrying amount of the treasury shares is shown as a movement in equity.

3.14 Provisions

Provisions are recognised when there is a present obligation, legal or constructive, as a result of a past event, when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are not recognised for future operating losses.

Any reimbursement that the Group can be virtually certain to collect from a third party with respect to the obligation is recognised as separate asset. However, this asset may not exceed the amount of the related provision.

Provisions are reviewed at each end of the reporting period and adjusted to reflect the current best estimate.If it is no longer probable that an outflow of economic resources will be required to settle the obligation, the provision is reversed. Where the effect of the time of money is material, provisions are discounted using a current pre tax rate that reflects, where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

3.15 Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is necessary to complete and prepare the asset for its intended use or sale. Capitalisation of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are capitalised until the assets are substantially completed for their intended use or sale.

Other borrowing costs are expensed in the period in which they are incurred. Borrowing costs consist of interest and other costs that the Group and the Company incurred in connection with the borrowing of funds.

3.16 Interest-bearing borrowings

Interest-bearing borrowings are recorded at the amount of proceeds received, net of transaction costs incurred.

3.17 Employee benefits

3.17.1 Short term employee benefits

Wages, salaries, bonuses and social security contributions are recognised as an expense in the financial year in which the associated services are rendered by employees of the Group. Short term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences, and short term non-accumulating compensated absences such as sick leave are recognised when the absences occur.

A provision is made for the estimated liability for leave as a result of services rendered by employees up to the end of the reporting period.




3.17 Employee benefits (cont’d)

3.17.2 Defined contribution plans

Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into independent entities of funds and will have no legal or constructive obligation to pay further contribution if any of the funds do not hold sufficient assets to pay all employee benefits relating to employee services in the current and preceding financial years.

Such contributions are recognised as an expense in the profit or loss as incurred. As required by law, companies in Malaysia make such contributions to the Employees Provident Fund (“EPF”). Some of the Group’s foreign subsidiaries also make contributions to their respective countries’ statutory pension schemes.

3.18 Revenue

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of consideration received and receivables.

3.18.1 Sale of goods

Revenue from sale of goods is recognised upon delivery of products and customers’ acceptance and after eliminating sales within the Group.

3.18.2 Rendering of services

Revenue from maintenance services is recognised based on performance of services.

3.18.3 Management fee income

Management fees are recognised when the services are rendered.

3.18.4 Rental income

Rental income is recognised when the rent is due.

3.18.5 Dividend income

Dividend income is recognised when the right to receive payment is established.

3.18.6 Interest income

Interest income is recognised in profit or loss as it accrues, taking into account the effective yield on the asset.

3.18.7 Deferred revenue

Revenue invoiced where risks and ownership on sales of goods have not been transferred or services have not been rendered at reporting date is recognised as deferred revenue.

3.18.8 Property Development Revenue

Revenue is recognised on the percentage of completion method. The stage of completion for each project is measured by a certificate issued by an architect based on the physical completion of the work performed in proportion to the total development. Anticipated losses are recognised in full immediately in profit or loss.



(cont’d)


3.19 Tax expense

Tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss except to the extent that it relates to a business combination or items recognised directly in equity or other comprehensive income.

3.19.1 Current tax

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted by the end of the reporting period, and any adjustment to tax payable in respect of previous years.

Current tax is recognised in the statement of financial position as a liability (or an asset) to the extent that it is unpaid (or refundable).

3.19.2 Deferred tax

Deferred tax is recognised using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities in the statement of financial position and their tax bases. Deferred tax is not recognised for the temporary differences arising from the initial recognition of goodwill, the initial recognition of assets and liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the end of the reporting period.

The amount of deferred tax recognised is measured based on the expected manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the reporting date. The amount of deferred tax recognised is measured using the tax rates that would apply on sale of those assets at their carrying value at the reporting date unless the property is depreciable and is held with the objective to consume substantially all of the economic benefits embodied in the property over time, rather than through sale.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at the end of each reporting period and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Unutilised reinvestment allowance and investment tax allowance, being tax incentives that is not a tax base of an asset, is recognised as a deferred tax asset to the extent that it is probable that the future taxable profits will be available against the unutilised tax incentive can be utilised.

3.19.3 Goods and Services Tax

Goods and Services Tax (“GST”) is a consumption tax based on value-added concept. GST is imposed on goods and services at every production and distribution stage in the supply chain including importation of goods and services, at the applicable tax rate of 6%. Input GST that the Company paid on purchases of business inputs can be deducted from output GST.

Revenues, expenses and assets are recognised net of the amount of GST except:

(i) Where the GST incurred in a purchase of assets or services is not recoverable from the authority, in which case the GST is recognised as part of the cost of acquisition of the assets or as part of the expense item as applicable; and




3.19 Tax expense (cont’d)

3.19.3 Goods and Services Tax (cont’d)

(ii) Receivables and payables that are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statements of financial position.

3.20 Operating segments

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenue and expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating results are reviewed regularly by the chief operating decision maker to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available.

3.21 Contingencies

Where it is not probable that an inflow or an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the asset or the obligation is not recognised in the statements of financial position and is disclosed as a contingent asset or contingent liability, unless the probability of inflow or outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events, are also disclosed as contingent assets or contingent liabilities unless the probability of inflow or outflow of economic benefits is remote.

3.22 Related parties

A related party is a person or entity that is related to the Group. A related party transaction is a transfer of resources, services or obligations between the Group and its related party, regardless of whether a price is charged.

(a) A person or a close member of that person’s family is related to the Group if that person:

(i) has control or joint control over the Group;(ii) has significant influence over the Group; or(iii) is a member of the key management personnel of the Group.

(b) An entity is related to the Group if any of the following conditions applies:

(i) the entity and the Group are members of the same group.(ii) one entity is an associate or joint venture of the other entity.(iii) both entities are joint ventures of the same third party.(iv) one entity is a joint venture of a third entity and the other entity is an associate of the third

entity.(v) the entity is a post-employment benefit plan for the benefits of employees of either the Group

or an entity related to the Group.(vi) the entity is controlled or jointly-controlled by a person identified in (a) above.(vii) a person identified in (a)(i) above has significant influence over the Group or is a member of

the key management personnel of the entity.(viii) the entity, or any member of a group of which it is apart, provides key management personnel

services to the Group or to the parent of the Group.



(cont’d)

4.

PR

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1,51

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795,

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13,7

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s-

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914,

965

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84,9

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s-

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(715

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-(4

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581,

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1,71

3,83

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2,03

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

Company RenovationFurniture and

fittingsOffice

equipment TotalRM RM RM RM

CostAt 1 January 2014 20,170 11,687 22,956 54,813Additions - - 18,671 18,671

At 31 December 2014 20,170 11,687 41,627 73,484Additions - - 6,650 6,650

At 31 December 2015 20,170 11,687 48,277 80,134

Accumulated depreciationAt 1 January 2014 6,050 2,846 8,305 17,201Charge for the financial year 2,421 1,402 3,994 7,817

At 31 December 2014 8,471 4,248 12,299 25,018Charge for the financial year 2,420 1,403 5,172 8,995

At 31 December 2015 10,891 5,651 17,471 34,013

Net carrying amountAt 31 December 2015 9,279 6,036 30,806 46,121

At 31 December 2014 11,699 7,439 29,328 48,466

Revaluation of land and buildings

(i) Freehold and leasehold land, and buildings of the Group were revalued in the financial year 2015 by Raine & Horne International Zaki + Partners Sdn. Bhd., a registered valuer. The comparison method was adopted in arriving at the market value of the freehold and leasehold land, and buildings.

In estimating the fair value of the properties, the highest and best use of the properties is their current use. There has been no change to the valuation technique during the year. The revaluation surplus net of applicable deferred tax was credited to other comprehensive income and is shown in “Revaluation Reserve” under the equity.

Freehold and leasehold land, and buildings at valuation are categorised as Level 2 fair value.

Level 2 Fair Value

Level 2 fair value of freehold and leasehold land, buildings have been generally derived using the sales comparison approach. Sales price of comparable properties in close proximity are adjusted for differences in key attributes such as property size. The most significant input into this valuation approach is price per square foot of comparable properties.



(cont’d)

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

Revaluation of land and buildings (cont’d)

(ii) Had the following assets been stated at historical cost less accumulated depreciation, the net carrying amount would have been as follows:-

Group2015 2014

RM RM

Freehold land 672,401 672,401Leasehold land 910,580 922,153Buildings 956,925 1,979,724

(iii) Freehold, leasehold land and buildings of the Group have been pledged to licensed banks for banking facilities granted to the Group.

(iv) The net carrying amounts of property, plant and equipment under finance lease arrangements are as follows:-

Group2015 2014

RM RM

Plant and machinery 4,065,580 4,887,550Motor vehicles 804,253 824,210

5. INVESTMENT IN SUBSIDIARIES

Company2015 2014

RM RM

Unquoted shares, at cost- in Malaysia 49,054,493 41,054,429- outside Malaysia 10,491,098 10,491,098

59,545,591 51,545,527Less: Accumulated impairment loss (2) (2)

59,545,589 51,545,525

On 15 December 2015, the Company subscribed 8,000,064 Redeemable Non-Convertible Preference Shares of RM0.10 each at RM1.00 per share representing 50% interest in a subsidiary, Innoceria Sdn Bhd for a total cash consideration RM8,000,064.



5. INVESTMENT IN SUBSIDIARIES (CONT’D)

Details of the subsidiaries are as follows:-

Country of Equity interestCompanies incorporation 2015 2014 Principal activities

% %

Grand-Flo Electronic System Sdn. Bhd.

Malaysia 100 100 Supply and installation of Enterprise Data Collection and Collation System and hardware, information technology solutions, computer related accessories, integrating computer system and hardware

Grand-Flo Spritvest Sdn. Bhd. Malaysia 100 100 Provision of information technology solutions specialising in automated data collection processes and mobile computing

Grand-Flo Data Centrix Sdn. Bhd.

Malaysia 100 100 Research and development of software application

Grand-Flo Capital Sdn. Bhd. Malaysia 100 100 Investment holdingGrand-Flo Development

Sdn. Bhd.Malaysia 100 100 Dormant

Innoceria Sdn. Bhd. Malaysia 50 50 Property developmentLabels Network Sdn. Bhd. Malaysia 100 100 Investment holding and trading of price

marker system, equipment and paper rollsGrand-Flo (HK) Limited

(formerly known as CL Solutions (China) Limited) *

Hong Kong, China

100 100 Investment holding and provision of IT solutions and related services

Subsidiaries of Grand-Flo Capital Sdn. Bhd.Jalur Bina Sdn. Bhd. Malaysia 52 52 Property development

Subsidiaries of Labels Network Sdn. Bhd.Kopacklabels Press Sdn. Bhd. Malaysia 100 100 Adhesive labels and stickers printingKopacklabels (PG) Sdn. Bhd. Malaysia 80 80 Adhesive labels and stickers printingKopacklabels (M) Sdn. Bhd. Malaysia 100 100 Dormant

Subsidiaries of Grand-Flo (HK) Limited (formerly known as CL Solutions (China) Limited)CL Solutions Limited * Hong Kong,

China100 100 Provision of supply chain solutions and

related servicesVictor Group Limited * Hong Kong,

China100 100 Investment holding

Subsidiary of Victor Group LimitedGuangzhou CL Solutions

Limited *People’s

Republic of China

100 100 Provision of supply chain solutions and related services

* Not audited by SJ Grant Thornton



(cont’d)

6. INVESTMENT IN ASSOCIATES

Group Company2015 2014 2015 2014

RM RM RM RM

Quoted shares outside Malaysia, at cost 5,265,943 5,412,424 5,265,943 5,412,424Unquoted shares outside Malaysia, at

cost 1,264,530 1,264,530 - -

6,530,473 6,676,954 5,265,943 5,412,424Share of post-acquisition reserves 7,314,335 7,329,010 - -

13,844,808 14,005,964 5,265,943 5,412,424

Market value of quoted shares 34,691,880 31,988,060 34,691,880 31,988,060

Details of the associates are as follows:-

Country of Equity interestCompanies incorporation 2015 2014 Principal activities

% %

Simat Technologies Public Co., Ltd.*#

Thailand 18.24 19.91 Trading of computer hardware, software, network accessories and computer system development

Through Labels Network Sdn. Bhd.

Simat Label Co., Ltd. * Thailand 14.12 14.12 Adhesive labels and stickers printing

High Rich Trading & Services Corporation *

Vietnam 40.00 40.00 Wholesaler for barcode, productions and RFID, papers and related supplies

* Not audited by SJ Grant Thornton# The Group has 18.24% ownership in the equity interest of Simat Technologies Public Company Limited. However,

the Group has determined that it has significant influence because it has representatives on the board of Simat Technologies Public Company Limited.

The following table summarises the financial information of Group’s associate:-

2015 2014RM RM

Financial position as at 31 December Non-current assets 117,420,469 98,717,401Current-assets 61,969,196 59,028,926Non-current liabilities (23,699,326) (20,815,100)Current liabilities (66,353,893) (56,611,878)

Net assets 89,336,446 80,319,349



6. INVESTMENT IN ASSOCIATES (CONT’D)

The following table summarises the financial information of Group’s associate (cont’d):-

2015 2014RM RM

Summary of financial performance for the financial year ended 31 December Loss for the year (5,063,789) (3,175,569)

Included in the total comprehensive income is:Revenue 191,182,135 145,865,615

Reconciliation of net assets to carrying amount as at 31 DecemberGroup’s share of net assets/ carrying amount in the statements of

financial position 13,844,808 14,005,964

Group’s share of results for the financial year ended 31 December Group’s share of loss (1,174,867) (767,781)Group’s share of other comprehensive income - -

Group’s share of total comprehensive loss (1,174,867) (767,781)

7. OTHER INVESTMENT

Group2015 2014

RM RM

Golf club membershipCostAt 1 January / 31 December 20,500 20,500

Accumulated amortisationAt 1 January 4,476 4,066Amortisation for the financial year 410 410

At 31 December 4,886 4,476

Net carrying amount 15,614 16,024

8. DEVELOPMENT COSTS

Group and Company2015 2014

RM RM

CostAt 1 January 6,551,973 5,753,920Additions 879,803 798,053

At 31 December 7,431,776 6,551,973



(cont’d)

8. DEVELOPMENT COSTS (CONT’D)


RM RM

Accumulated amortisationAt beginning of the year 4,226,014 2,964,274Amortisation for the financial year 1,049,982 1,261,740

At end of the year 5,275,996 4,226,014

Net carrying amount 2,155,780 2,325,959

The development costs relate to the expenditure incurred for the development of “Warehouse Management Systems” Solutions and other software products of the Group and of the Company.

Included in development costs incurred during the financial year are as follows:-


RM RM

Salaries 671,092 649,097Contribution to defined contribution plan 85,878 77,877Social security contributions 3,888 3,815

9. GOODWILL ON CONSOLIDATION

Group2015 2014

RM RM

At 1 January 39,209,748 24,364,422Investment in subsidiary - 14,845,326

At 31 December 39,209,748 39,209,748

Impairment tests for goodwill

Goodwill has been allocated to the Group’s cash-generating units (“CGU”) identified according to the subsidiaries, as follows:-

Group2015 2014

Subsidiaries RM RM

Grand-Flo Spritvest Sdn. Bhd. and Grand-Flo Data Centrix Sdn. Bhd. 10,338,457 10,338,457Labels Network Sdn. Bhd. 4,636,472 4,636,472Kopacklabels Press Sdn. Bhd. 447,154 447,154Kopacklabels (PG) Sdn. Bhd. 678,598 678,598Grand-Flo (HK) Limited (formerly known an CL Solutions (China) Limited) 6,301,318 6,301,318CL Solutions Limited 45,723 45,723Jalur Bina Sdn. Bhd. 1,916,700 1,916,700Innoceria Sdn. Bhd. 14,845,326 14,845,326

39,209,748 39,209,748



9. GOODWILL ON CONSOLIDATION (CONT’D)

Impairment tests for goodwill (cont’d)

The recoverable amounts of the investment in the subsidiaries are based on its value in use and the recoverable amounts are higher than the carrying amount of the investment. Thus, there is no impairment loss recognised for the financial year ended 31 December 2015.

Key assumptions used in value-in-use calculations The recoverable amount of CGU is determined based on value-in-use calculations using cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated growth rate stated below. The growth rate does not exceed the average historical growth rate over the long term for the industry. The key assumptions used for value-in-use calculations are:-

Growth rate Gross margin Discount rate2015 2015 2014 2015 2014

% % % % %

Grand-Flo Spritvest Sdn. Bhd. and Grand-Flo Data Centrix Sdn. Bhd. 5 22 25 8 5

Labels Network Sdn. Bhd. 5 28 31 8 7Kopacklabels Press Sdn. Bhd. 5 8 7 8 7Kopacklabels (PG) Sdn. Bhd. 5 26 21 8 7Grand-Flo (HK) Limited (formerly known as CL

Solutions (China) Limited) and CL Solutions Limited 2 37 44 5 5Jalur Bina Sdn. Bhd. 5 21 21 8 6Innoceria Sdn. Bhd. 5 39 22 8 6

The following describes each key assumption on which management has based its cash flow projections to undertake impairment testing of goodwill:-

(a) Budgeted growth rate

The budgeted growth rate is determined based on the industry trends and past performances of the segments.

(b) Budgeted gross margin

The basis used to determine the value assigned to the budgeted gross margin is the average gross margin achieved in the year immediately before the budgeted year increased for expected efficiency improvements.

(c) Discount rate

The discount rate used is pre-tax and reflect specific risks relating to the relevant segments.

The Group believes that any reasonably possible changes in the above key assumptions applied are not likely to materially cause recoverable amount to be lower than its carrying amount.



(cont’d)

10. DEFERRED TAX ASSETS/(LIABILITIES)

Deferred tax assets

Group Company2015 2014 2015 2014

RM RM RM RM

At 1 January 367,898 339,000 339,000 339,000Recognised in profit or loss (Note 39) (28,898) 28,898 - -

At 31 December 339,000 367,898 339,000 339,000

Deferred tax assets comprise the following:-

Carrying amount of qualifying property, plant and equipment in excess of their tax base (11,000) (11,000) (11,000) (11,000)

Pioneer losses 245,000 245,000 245,000 245,000Unabsorbed tax losses 105,000 133,898 105,000 105,000

339,000 367,898 339,000 339,000

Deferred tax liabilities

Group2015 2014

RM RM

At 1 January (2,073,129) (2,107,506)Recognised in profit or loss (Note 39) 734,948 218,851Recognised in other comprehensive income - (180,828)Foreign exchange translation (10,481) (3,646)

At 31 December (1,348,662) (2,073,129)

Group2015 2014

RM RM

Deferred tax liabilities comprise the following:-Carrying amount of qualifying property, plant and equipment in excess of

their tax base (273,404) (958,373)Provisions (10,801) (40,685)Revaluation of property, plant and equipment (1,064,457) (1,074,071)

(1,348,662) (2,073,129)



10. DEFERRED TAX ASSETS/(LIABILITIES) (CONT’D)

Deferred tax assets have not been recognised in respect of the following items:-

Group Company2015 2014 2015 2014

RM RM RM RM

Carrying amount of qualifying property, plant and equipment in excess of their tax base 516,000 139,000 292,000 358,000

Pioneer losses (3,592,000) (2,692,000) (3,592,000) (2,692,000)Unabsorbed tax losses (1,653,700) (3,082,000) (1,067,000) (2,550,000)Unutilised capital allowances (474,400) (1,831,000) - (1,663,000)

(5,204,100) (7,466,000) (4,367,000) (6,547,000)

The deductible temporary differences, unabsorbed tax losses and unutilised capital allowances are available indefinitely for offset against future taxable profits of the Company and the subsidiaries in which those items arose. Deferred tax assets have not been recognised in respect of these items as they may not be used to offset taxable profits of the subsidiaries in the Group and they have arisen in the subsidiaries that have a recent history of losses.

11. PROPERTY DEVELOPMENT COST

Group2015 2014

RM RM

Freehold land, at costBalance brought forward 22,110,187 -Transfer from land held for property development - 13,017,487Addition through acquisition of subsidiary - 9,136,483Addition during the financial year - (43,783)

Balance carried forward 22,110,187 22,110,187

Development expenditure, at costBalance brought forward 26,690,005 -Transfer from land held for property development - 823,052Addition through acquisition of subsidiary - 2,898,538Addition during the financial year 48,739,430 22,968,415

Balance carried forward 75,429,435 26,690,005

97,539,622 48,800,192

Less: Cost recognised as expenseBalance brought forward (14,686,888) -Addition during the financial year (25,924,806) (14,686,888)

Balance carried forward (40,611,694) (14,686,888)

56,927,928 34,113,304

The freehold land held for property development is charged to a licensed bank to secure banking facilities granted to subsidiary.

Interest capitalised in land held for property development amounted to RM1,261,454(2014: RM627,694).



(cont’d)

12. INVENTORIES

Group2015 2014

RM RM

Raw materials 1,842,383 2,568,528Finished goods 10,039,447 10,279,046

At carrying amount 11,881,830 12,847,574

Group2015 2014

RM RM

Recognised in profit or loss:Inventories recognised as cost of sales 50,926,053 56,385,943Inventories written down 1,041,894 1,226Inventories written off 117,516 -

13. ACCRUED BILLINGS/(PROGRESS BILLINGS)

Group2015 2014

RM RM

Revenue regconised in profit or loss to-date 59,408,283 319,031Progress billings to-date (55,126,722) (274,468)

4,281,561 44,563

Group2015 2014

RM RM

Accrued billings 5,508,180 44,563Progress billings (1,226,619) -

4,281,561 44,563

14. TRADE RECEIVABLES

Group2015 2014

RM RM

Trade receivables 47,259,863 27,513,776Less: Allowance for impairment (121,576) (121,576)

Net trade receivables 47,138,287 27,392,200



14. TRADE RECEIVABLES (CONT’D)

Movement in allowance for impairment losses of trade receivables:-

Group2015 2014

RM RM

At 1 January 121,576 84,667Impairment loss recognised - 41,891Impairment loss reversed - (3,697)Impairment loss written off - (1,285)

At 31 December 121,576 121,576

The normal trade credit terms granted by the Group ranging from 30 to 120 (2014: 30 to 120) days. Other credit terms are assessed and approved on a case-by-case basis.

15. OTHER RECEIVABLES

Group Company2015 2014 2015 2014

RM RM RM RM

Advance payment to suppliers 10,350 6,950 - -Non-trade receivables 531,805 15,249 - 10,174Deposits 475,064 673,170 2,350 2,350Prepayments 429,817 551,670 - -

1,447,036 1,247,039 2,350 12,524

16. AMOUNT DUE FROM/(TO) DIRECTORS

The amount due from Directors arising from trade transactions are unsecured, interest free and have credit term of 14 (2014: 14) days. The amount due to Director are arising from non-trade transactions are unsecured, interest free and repayable upon demand.

17. AMOUNT DUE FROM SUBSIDIARIES

Company2015 2014

RM RM

Amount due from subsidiaries- Trade 4,664,609 -- Non-trade 14,898,513 11,493,579

19,563,122 11,493,579

The outstanding amounts which are trade in nature are unsecured, bear no interest and repayable on demand.

The outstanding amounts which are non-trade in nature are unsecured, bear no interest and repayable on demand except for RM880,627 (2014: RM Nil) which is interest bearing at rate 7.85% (2014: Nil) per annum.



(cont’d)

18. AMOUNT DUE FROM ASSOCIATES

Group Company2015 2014 2015 2014

RM RM RM RM

Amount due from associates 107,052 35,239 363 328

The outstanding amounts which are non-trade in nature are unsecured, bear no interest and repayable on demand.

19. AMOUNT DUE FROM RELATED PARTIES

Group2015 2014

RM RM

Amount due from related parties 4,416,457 1,057,292

Related parties refer to companies in which certain Directors have financial interest.

The outstanding balances are trade in nature are unsecured, bear no interest and with credit term of 30 days (2014: 30 days).

20. FIXED DEPOSITS WITH LICENSED BANKS

Group

The fixed deposits with licensed banks of RM970,960 (2014: RM661,542) of the Group have been pledged to licensed banks as security for banking facilities granted to the Group. The fixed deposits with licensed banks of RM17,351 (2014: RM16,965) of the Group have been pledged to Tenaga Nasional Berhad as security for the bank guarantee facility granted to the Group. The fixed deposits bear interest at rates ranging from 3.10% to 3.15% (2014: 3.10% to 3.15%) per annum.

Company

The fixed deposits bear interest at rates ranging from 3.00% to 3.50% (2014: Nil) per annum.

21. CASH AND BANK BALANCES

Group Company2015 2014 2015 2014

RM RM RM RM

Cash held under Housing Development Account 367,007 11,150 - -

Cash at bank 11,197,289 10,650,867 368,279 1,554,323

11,564,296 10,662,017 368,279 1,554,323

Included in the cash at bank of the Company held under Housing Development Account pursuant to Housing Development (Control and Licensing) Act, 1966 and are restricted from use in other operations.



22. SHARE CAPITAL AND SHARE PREMIUM

Group and Company Number of ordinary

shares of RM0.10 each Amount2015 2014 2015 2014

RM RM

Authorised:-At 1 January 1,000,000,000 500,000,000 100,000,000 50,000,000Created during the financial year - 500,000,000 - 50,000,000

At 31 December 1,000,000,000 1,000,000,000 100,000,000 100,000,000

Number of ordinary shares of RM0.10 each Amount

Share capital Share capital Share premium TotalRM RM RM

Issued and fully paid:-At 1 January 2014 325,785,150 32,578,515 3,819,265 36,397,780Conversion of warrant to ordinary shares 11,894,700 1,189,470 491,754 1,681,224Issuance of shares 29,411,765 2,941,176 7,058,824 10,000,000

At 31 December 2014 367,091,615 36,709,161 11,369,843 48,079,004

Conversion of warrant to ordinary shares 116,024,096 11,602,410 3,168,432 14,770,842

At 31 December 2015 483,115,711 48,311,571 14,538,275 62,849,846

23. SHARE APPLICATION MONEY

Share application money refers to the amount received from warrant holder for conversion of 399,200 warrant to ordinary shares of RM0.10 each per share on 24 December 2014, 26 December 2014 and 29 December 2014.

The conversion of warrant transactions only completed on 5 January 2015.

24. TREASURY SHARES

The shareholders of the Company, by an ordinary resolution passed in an annual general meeting held on 25 May 2015, approved the Company’s plan to repurchase its own shares.

During the financial year, the Company repurchased 2,419,200 of its issued ordinary shares from the open market at an average price of RM0.27 per share. The total consideration paid for the repurchase including transaction costs was RM663,716. The shares repurchased are being held as treasury shares in accordance with Section 67A of the Companies Act, 1965.

Of the total 483,115,711 issued and fully paid ordinary shares as at 31 December 2015, 3,956,000 are held as treasury shares by the Company. As at 31 December 2015, the number of outstanding ordinary shares in issue after the setoff is therefore 479,159,711 ordinary shares of RM0.10 each.



(cont’d)

25. WARRANT RESERVES

On 22 April 2010, the Company allotted and issued 67,912,455 new Warrants 2010/2015 at an issue price of RM0.02 each on the basis of 1 Warrant 2010/2015 for every 2 existing ordinary shares held in the Company on 30 March 2010 (“Rights Issue of Warrants”). Each Warrant 2010/2015 entitles the registered holder to subscribe for 1 new ordinary share in the Company at any time on or after 22 April 2010 to 21 April 2015, at an exercise price of RM0.25 in accordance with the Deed Poll. Any Warrant 2010/2015 not exercised by the date of maturity will lapse thereafter and cease to be valid for all purposes.

On 17 July 2012, a total of 67,582,355 Warrants 2010/2015 were issued pursuant to the Company’s bonus issue exercise. Accordingly, the exercise price has been revised downwards from RM0.25 to RM0.12 in accordance to the Deed Poll.

Pursuant to the terms and conditions as stipulated in the Deed Poll, the exercise period for the warrant holders to exercise the exercise rights had expired on 21 April 2015. The Warrants 2010/2015 whichever not exercise on the expiry date will be lapsed and became null and void. Accordingly, the Warrants 2010/2015 were removed from the Official List of Bursa Malaysia Securities Berhad with effect from 22 April 2015.

26. OTHER RESERVES

Group2015 2014

RM RM

Non-distributable:-

Capital reserve 990,796 990,796Legal reserve 118,655 118,655

1,109,451 1,109,451

Capital reserve represents share dividend received from a foreign associate.

Legal reserve represents net profit of foreign associate set aside.

27. REVALUATION RESERVE

Group2015 2014

RM RM

Arising from revaluation of:-- freehold land and buildings 3,738,076 3,738,076- leasehold land and buildings 2,422,776 2,422,776

6,160,852 6,160,852

The revaluation reserve was in respect of the revaluation surplus of freehold and leasehold land, and building, net of deferred tax and is not available for distribution as dividends.

28. RETAINED EARNINGS

The entire retained earnings as at 31 December 2015 of the Company is available for distribution as dividend under the single tier system without incurring additional tax liabilities.



29. FINANCE LEASE LIABILITIES

Group2015 2014

RM RM

Minimum lease paymentsNot later than 1 year 1,252,764 1,391,384Later than 1 year but not later than 5 years 735,245 1,545,403

1,988,009 2,936,787Less: Future finance charges (106,704) (202,934)

1,881,305 2,733,853

Present value of finance lease liabilitiesNot later than 1 year 1,176,461 1,255,197Later than 1 year but not later than 5 years 704,844 1,478,656

1,881,305 2,733,853

The Group’s finance lease liabilities interests are charged at rates ranging from 2.35% to 3.70% (2014: 2.35% to 3.70%) per annum.

30. TERM LOANS

Group2015 2014

RM RM

The term loans are repayable through monthly installments as follows:-Not later than 1 year (Note 36) 12,446,925 7,224,288Later than 1 year but not later than 5 years 6,044,296 10,938,067Later than 5 years 59,768 197,851

6,104,064 11,135,918

18,550,989 18,360,206

The effective annual interest rates and the securities of the term loans are as disclosed in Note 36 to the financial statements.

31. TRADE PAYABLES

Group2015 2014

RM RM

Trade payables 33,212,759 17,124,019Retention sums on contract 6,429,598 312,435

39,642,357 17,436,454

The normal trade credit terms for trade payables granted to the Group ranging from 30 to 120 (2014: 30 to 120) days and for retention sum is 6 to 18 months (2014: 6 to 18 months) upon completion of projects.



(cont’d)

32. OTHER PAYABLES

Group Company2015 2014 2015 2014

RM RM RM RM

Non-trade payables 3,607,076 14,891,087 2,313,081 5,016,098Accruals of expense 1,553,533 1,231,565 230,357 99,681Deferred revenue 426,052 356,083 - -Deposits received 200,840 170,086 - -

5,787,501 16,648,821 2,543,438 5,115,779

33. AMOUNT DUE TO A SUBSIDIARY

The outstanding amount which is non-trade in nature is unsecured, repayable on demand and interest bearing at rate 7.85% (2014: RM Nil) per annum.

34. AMOUNT DUE TO AN ASSOCIATE

The outstanding amount which is non-trade in nature is unsecured, bears no interest and repayable on demand.

35. AMOUNT DUE TO RELATED PARTIES

Related parties refer to companies in which certain Directors have financial interest.

The outstanding balances are trade in nature with credit term of 30 (2014: 30) days.

36. BORROWINGS

Group2015 2014

RM RM

Secured:Bankers’ acceptance 5,477,000 5,929,000Bank overdrafts 384,060 461,474Term loans (Note 30) 12,446,925 7,224,288

18,307,985 13,614,762

The effective annual interest rates at the reporting date for borrowings are as follows:-

2015 2014% %

Bankers’ acceptance 3.95 – 5.85 3.44 – 5.93Bank overdrafts 7.00 – 7.25 7.00 – 7.85Term loans 5.25 – 8.10 5.10 – 8.10



36. BORROWINGS (CONT’D)

The bank borrowings are secured by way of:-

(a) legal charge over certain property, plant and equipment of the Group;(b) legal charge over leasehold property of the Group;(c) legal charge over freehold property of the Group;(d) a pledge on the fixed deposits of the Group;(e) joint and several guarantee by certain Directors of the Group; (f) guarantee by the Company;(g) facilities agreement;(h) memorandum of deposit for pledge of entire paid out ordinary share of certain subsidiaries;(i) dividends attributable to certain subsidiaries’ shares pledged by way of revocable and irrevocable Letter of

Undertaking; and(j) Credit Guarantee Corporation (M) Bhd’s guarantee under the Portfolio Guarantee Scheme of up to

RM2,100,000 being 70% of the principal limit of the facility of RM3,000,000.

37. REVENUE

Group Company2015 2014 2015 2014

RM RM RM RM

Dividend income from subsidiaries - - 5,000,000 3,836,012Sale of goods 69,925,753 58,191,588 4,319,284 114,068Maintenance income 10,026,447 8,603,877 - -Property development 40,570,412 18,837,871 - -

120,522,612 85,633,336 9,319,284 3,950,080

38. PROFIT BEFORE TAX

Profit before tax has been determined after charging/(crediting), amongst others, the following items:-

Group Company2015 2014 2015 2014

RM RM RM RM

Auditors’ remuneration- auditors of the Company 124,500 82,000 16,000 15,000- other auditors 62,296 67,058 - -Amortisation of:- development costs 1,049,982 1,261,740 1,049,982 1,261,740- other investment 410 410 - -Bad debts written off 841 3,939 - -Depreciation of property, plant and

equipment 2,264,088 2,245,396 8,995 7,817Directors’ remuneration- fees 262,000 240,000 226,000 240,000- other emoluments 2,111,223 2,043,443 859,940 852,163Dividend income (38,652) - - -Gain on disposal of property, plant and

equipment (328,478) (58,942) - -Gain on disposal of associate’s shares (2,320,819) (4,588,922) (1,160,627) (3,472,063)



(cont’d)

38. PROFIT BEFORE TAX (CONT’D)

Profit before tax has been determined after charging/(crediting), amongst others, the following items (cont’d):-

Group Company2015 2014 2015 2014

RM RM RM RM

Impairment loss on trade receivables - 41,891 - -Interest expense- bankers’ acceptance 345,259 262,485 - -- finance lease 148,532 214,760 - -- overdraft 35,452 38,980 - -- term loans 123,551 116,346 - -- late payment interest 594,233 - - -Interest income (257,441) (240,444) (98,072) (101,466)Inventories written off 117,516 - - -Inventories written down 1,041,894 1,226 - -Property, plant and equipment written off 8,244 22,126 - -Realised (gain)/loss on foreign exchange (31,795) 95,362 (30,948) 7,716Rental expense 1,003,691 605,601 9,000 9,200Rental income (423,400) (277,000) - -Impairment loss on trade receivable no

longer required - (3,697) - -Unrealised(gain)/loss on foreign exchange (35,432) 1,516 - (33,403)Warrant reserves written off (10,266) - (10,266) -

39. TAX EXPENSE

Group Company2015 2014 2015 2014

RM RM RM RM

Current year provision- Malaysian income tax 2,993,464 1,238,076 - -- Overseas taxation 233,123 152,521 - -(Over)/Underprovision in prior year (17,451) (55,898) - 1,169Transferred to:- (Note 10)- Deferred tax assets 28,898 (28,898) - -- Deferred tax liabilities (734,948) (218,851) - -

(706,050) (247,749) - -

2,503,086 1,086,950 - 1,169

Malaysian income tax is calculated at the statutory tax rate of 25% of the estimated assessable profits for the current financial year. Taxation for other jurisdictions is calculated at the tax rates prevailing in the respective jurisdictions.



39. TAX EXPENSE (CONT’D)

Pioneer losses, unabsorbed tax losses and unutilised capital allowances carried forward, subject to the agreement of the Inland Revenue Board are as follows:-

Group Company2015 2014 2015 2014

RM RM RM RM

Pioneer losses (4,613,000) (3,713,000) (4,613,000) (3,713,000)Unabsorbed tax losses (2,092,000) (3,716,000) (1,505,000) (2,988,000)Unutilised capital allowances (474,000) (1,831,000) - (1,663,000)

(7,179,000) (9,260,000) (6,118,000) (8,364,000)

A reconciliation of income tax expense applicable to profit before tax at the statutory tax rate to income tax expense at the effective tax rate of the Group and of the Company are as follows:-

Group Company2015 2014 2015 2014

RM RM RM RM

Profit before tax 18,595,678 9,187,927 7,687,280 3,988,375

Income tax at rate of 25% 4,648,919 2,296,982 1,921,820 997,094

Tax effect in respect of:-Effect of different tax rates in overseas

subsidiaries (100,912) (63,624) - -Expenses not deductible for tax purposes 1,867,443 1,527,266 171,962 322,161Income not subject to income tax (1,652,713) (1,638,138) (1,570,782) (1,621,255)Deferred tax assets not recognised during

the year (542,856) 403,330 (523,000) 302,000Utilisation of the capital allowance (374,127) (319,516) - -Pioneer income not subject to tax (1,008,892) (1,113,920) - -Overprovision of tax expense in prior years (17,451) (55,898) - 1,169(Over)/Underprovision deferred tax in prior

year (316,325) 50,468 - -

Total tax expense 2,503,086 1,086,950 - 1,169 40. EARNINGS PER SHARE

(a) Basic

Basic earnings per share is calculated by dividing profit for the year attributable to owners of the parent with the weighted average number of ordinary shares in issue during the financial year (excluding treasury shares held by the Company).



(cont’d)

40. EARNINGS PER SHARE (CONT’D)

(a) Basic (cont’d)

Group2015 2014

Profit for the financial year attributable to owners of the parent (RM) 11,930,661 6,672,998

Weighted average number of ordinary shares in issue 451,634,226 341,495,932

Basic earnings per share (sen) 2.64 1.95

The weighted average number of additional shares pursuant to conversion of warrant during the financial year was 84,542,608 (2014: 4,913,035).

(b) Diluted

For the purpose of calculating diluted earnings per share, profit for the year attributable to owners of the parent and weighted average number of ordinary shares in issue during the financial year have been adjusted for dilutive effects of all potential ordinary shares.

Group2015 2014

Profit for the financial year attributable to owners of the parent (RM) - 6,672,998

Weighted average number of ordinary shares in issueWeighted average number of ordinary shares in issue (basic) - 341,971,656Effect of conversion of warrants - 70,230,426

Weighted average number of ordinary shares in issue (diluted) - 412,202,082

Diluted earnings per share (sen) - 1.62

There are no diluted earnings per share because the Company does not have any convertible financial instruments as at the end of the financial year.

41. DIVIDENDS


RM RM

In respect of financial year ended 31 December 2014:Final tax exempt dividend of 1.0 per sen ordinary share 4,800,756 -

In respect of financial year ended 31 December 2013:Final tax exempt dividend of 1.0 per sen ordinary share - 3,326,121

The Board of Directors has proposed a first and final single tier dividend of 0.5 sen per share for the financial year ended 31 December 2015, amounting to approximately RM2,415,579 based on the total number of shares in issue as at 20 April 2016. The proposed dividend is subject to the approval of the shareholders of the Company at the forthcoming annual general meeting and the actual amount of dividend payable will depend on among others, the total number of ordinary shares in issue (excluding treasury shares) as at the entitlement date to be determined later. This proposed dividend is not reflected in the current year’s financial statements and if approved by the shareholders will be accounted for in shareholders’ equity as appropriation of retained earnings in the financial year ending 31 December 2016.



42. EMPLOYEE BENEFITS EXPENSE

Group Company2015 2014 2015 2014

RM RM RM RM

Wages and salaries and allowances 10,831,369 9,568,536 120,085 124,865Social security contributions 90,511 90,572 988 946Contributions to defined contribution plan 976,133 832,143 16,156 14,544Other benefits 233,484 241,212 27,393 11,100

12,131,497 10,732,463 164,622 151,455

43. CONTINGENT LIABILITIES

Company2015 2014

RM RM

Unsecured:-Guarantees given to financial institutions in respect of facilities granted

to subsidiaries 22,570,193 9,608,076

Following the adoption of FRS 139, the Company did not recognise the unexpired financial guarantees issued by the Company as financial liabilities as the financial guarantees granted are the pre-condition for getting credit facilities by the subsidiaries rather than in exchange for reducing interest rate.

44. SIGNIFICANT RELATED PARTY DISCLOSURE

(a) Significant related party transactions during the financial year are as follows:-

Group Company2015 2014 2015 2014

RM RM RM RM

Dividend received from subsidiaries - - 5,000,000 3,836,012Sales to subsidiaries - - 4,319,284 114,068Sales to Directors 4,706,310 353,000 - -Sales to a company which the

Directors have interest 4,649,533 359,340 - -

The remunerations of Directors during the financial year are as follows:-

Group Company2015 2014 2015 2014

RM RM RM RM

Salaries and bonus 1,900,783 1,934,753 769,500 767,973Fees 262,000 240,000 226,000 240,000Allowances 210,440 108,690 90,440 108,690

2,373,223 2,283,443 1,085,940 1,116,633

(b) The Group and the Company have no other members of key management personnel apart from the Board of Directors.



(cont’d)

45. OPERATING SEGMENT

Business SegmentsEDCCS* Labels Properties Eliminations Total

2015 RM RM RM RM RM

Revenue Sales to external customers 61,423,755 18,528,445 40,570,412 - 120,522,612Inter-segment revenue i 17,412,384 6,939,426 - (24,351,810) -

Total revenue 78,836,139 25,467,871 40,570,412 (24,351,810) 120,522,612

ResultsInterest income 232,273 - 25,168 - 257,441Finance cost 360,011 292,783 594,233 - 1,247,027Dividend income 5,000,000 38,652 - (5,000,000) 38,652Depreciation and amortisation 1,595,702 1,718,778 - - 3,314,480Share of (loss)/profit equity-

accounted associates (1,721,960) 547,093 - - (1,174,867)Income tax expense 137,583 (447,094) 2,812,597 - 2,503,086Other non-cash income ii (92,586) (228,024) - (1,160,192) (1,480,802)Segment profit iii 11,685,313 1,153,333 8,262,874 (5,008,928) 16,092,592

Assets Segment assets 142,674,563 24,431,871 111,487,116 (71,700,715) 206,892,835Investment in associates iv 5,265,943 1,264,530 - 7,314,335 13,844,808Additions to non-current assets v 849,124 1,268,501 - - 2,117,625Deferred tax assets 339,000 - - - 339,000Tax recoverable 390,010 110,690 13,046 - 513,746

Consolidated assets 149,518,640 27,075,592 111,500,162 (64,386,380) 223,708,014

LiabilitiesSegment liabilities 38,337,446 9,646,920 98,473,101 (71,215,297) 75,242,170Deferred tax liabilities 351,185 997,477 - - 1,348,662Tax payable 68,531 20,592 748,745 - 837,868

Consolidated liabilities 38,757,162 10,664,989 99,221,846 (71,215,297) 77,428,700

2014

Revenue Sales to external customer 48,099,993 18,695,472 18,837,871 - 85,633,336Inter-segment revenue i 14,430,290 7,019,144 - (21,449,434) -

Total revenue 62,530,283 25,714,616 18,837,871 (21,449,434) 85,633,336



45. OPERATING SEGMENT (CONT’D)

Business Segments (cont’d)EDCCS* Labels Properties Eliminations Total

2014 (cont’d) RM RM RM RM RM

ResultsInterest income 239,814 - 630 - 240,444Finance cost 286,759 326,378 19,434 - 632,571Dividend income 3,836,012 - - (3,836,012) -Depreciation and amortisation 1,818,255 1,689,291 - - 3,507,546Share of (loss)/profit equity-

accounted associates (1,145,792) 378,011 - - (767,781)Income tax expense 185,772 (29,883) 931,061 - 1,086,950Other non-cash income ii (3,444,649) (20,871) - (1,116,859) (4,582,379)Segment profit iii 8,300,584 435,986 2,803,103 (3,438,696) 8,100,977

Assets Segment assets 123,370,697 50,362,715 25,652,008 (48,871,266) 150,514,154Investment in associates iv 5,412,424 1,264,530 - 7,329,010 14,005,964Additions to non-current assets v 133,436 1,268,431 - - 1,401,867Deferred tax assets 339,000 - 28,898 - 367,898Tax recoverable 407,566 459,735 236,725 - 1,104,026

Consolidated assets 129,663,123 53,355,411 25,917,631 (41,542,256) 167,393,909

Liabilities Segment liabilities 35,612,350 8,960,526 49,339,969 (32,162,905) 61,749,940Deferred tax liabilities 412,538 1,660,591 - - 2,073,129Tax payable 32,066 39,244 - - 71,310

Consolidated liabilities 36,056,954 10,660,361 49,339,969 (32,162,905) 63,894,379

* Enterprise Data Collection and Collation System

Segment assets/liabilities

Nature of adjustments and eliminations to arrive at amounts reported in the consolidated financial statements:

i. Inter-segment revenues are eliminated on consolidation. ii. Other non-cash expenses/(income) consist of the following items:

2015 2014RM RM

Impairment loss on receivables - 41,891Impairment loss on receivables no longer required - (3,697)Property, plant and equipment written off 8,244 22,126Inventories written down 1,041,894 1,226Inventories written off 117,516 -Bad debts written off 841 3,939Gain on disposal of property, plant and equipment (328,478) (58,942)Gain on disposal of associate’s shares (2,320,819) (4,588,922)

(1,480,802) (4,582,379)



(cont’d)


Business Segments (cont’d)

Segment assets/liabilities (cont’d)

iii. The following items are added to/(deducted from) segment profit to arrive at “Net profit for the financial year” presented in the consolidated statement of profit or loss and other comprehensive income:

2015 2014RM RM

Segment profit 18,410,397 8,812,273Interest income 257,441 240,444Finance costs (1,247,027) (632,571)Share of results of equity-accounted associates 1,174,867 767,781Tax expense (2,503,086) (1,086,950)

Net profit for the financial year 16,092,592 8,100,977

iv. The following items are added to segment assets to arrive at total assets reported in the consolidated statement of financial position:

2015 2014RM RM

Investment in associates 13,844,808 14,005,964

v. Additions to non-current assets consist of:

2015 2014RM RM

Property, plant and equipment 2,117,625 1,401,867

Geographical Segments

Geographical segments Business activitiesMalaysia Mainly consists of supply and installation of Enterprise Data Collection and

Collation Systems and hardware, information technology solutions, computer related accessories, integrating computer system and hardware, trading of price marker system, equipment and paper rolls, information technology solutions specialising in automated data collection processes, mobile computing.

Hong Kong and China Mainly consists of provision of supply chain solutions and related services.

The Group’s revenue and non-current assets information based on geographical location are as follows:-

Revenue Non-current assets2015 2014 2015 2014

RM RM RM RM

Malaysia # 106,697,265 77,278,055 75,972,455 76,770,305Hong Kong and China 13,825,347 8,355,281 623,970 633,828

120,522,612 85,633,336 76,596,425 77,404,133




Geographical Segments (cont’d)

Non-current assets information presented below consist of the following items as presented in the consolidated statement of financial position:

2015 2014RM RM

Property, plant and equipment 21,386,089 21,862,462Investment in associates 13,844,808 14,005,964Development cost 2,155,780 2,325,959Goodwill on consolidation 39,209,748 39,209,748

76,596,425 77,404,133

# Company’s home country

Major customers

The Group does not have any revenue from a single external customer which represents 10% or more of the Group’s revenue.

46. CATEGORIES OF FINANCIAL INSTRUMENTS The table below provides an analysis of financial instruments categorised as follows:-

(i) Loans and receivables (L&R); (ii) Available-for-sale financial assets (AFS); and(iii) Other liabilities measured at amortised cost (AC)

Carrying amount L&R AFS AC

Group RM RM RM RM

2015

Financial assetsOther investment (Note 7) 15,614 - 15,614 -Accrued billings (Note 13) 5,508,180 5,508,180 - -Trade and other receivables

(Notes 14 &15) 48,155,506 48,155,506 - -Amount due from directors (Note 16) 4,706,310 4,706,310 - -Amount due from associates (Note 18) 107,052 107,052 - -Amount due from related parties (Note 19) 4,416,457 4,416,457 - -Dividend receivable 38,652 38,652 - -Fixed deposits with licensed banks

(Note 20) 2,507,201 2,507,201 - -Cash and bank balances (Note 21) 11,564,296 11,564,296 - -

77,019,268 77,003,654 15,614 -



(cont’d)

46. CATEGORIES OF FINANCIAL INSTRUMENTS (CONT’D)

The table below provides an analysis of financial instruments categorised as follows (cont’d):-


Group RM RM RM RM

2015 (cont’d)

Financial liabilitiesAmount due to a director (Note 16) 1,400,040 - - 1,400,040Amount due to an associate (Note 34) 1,975 - - 1,975Amount due to related parties (Note 35) 890,324 - - 890,324Finance lease liabilities (Note 29) 1,881,305 - - 1,881,305Loans and borrowings (Notes 30 & 36) 24,412,049 - - 24,412,049Progress billings (Note 13) 1,226,619 - - 1,226,619Trade and other payables (Notes 31 & 32) 45,003,806 - - 45,003,806

74,816,118 - - 74,816,118

2014

Financial assetsOther investment (Note 7) 16,024 - 16,024 -Accrued billings (Note 13) 44,563 44,563 - -Trade and other receivables

(Notes 14 &15) 28,387,569 28,387,569 - -Amount due from associates (Note 18) 35,239 35,239 - -Amount due from related parties (Note 19) 1,057,292 1,057,292 - -Fixed deposits with licensed banks

(Note 20) 952,600 952,600 - -Cash and bank balances (Note 21) 10,662,017 10,662,017 - -

41,155,304 41,139,280 16,024 -

Financial liabilitiesAmount due to related parties (Note 35) 180,132 - - 180,132Finance lease liabilities (Note 29) 2,733,853 - - 2,733,853Loans and borrowings (Notes 30 & 36) 24,750,680 - - 24,750,680Trade and other payables (Notes 31 & 32) 33,729,192 - - 33,729,192

61,393,857 - - 61,393,857

Company

2015

Financial assetsOther receivables (Note 15) 2,350 2,350 - -Amount due from subsidiaries (Note 17) 19,563,122 19,563,122 - -Amount due from associates (Note 18) 363 363 - -Fixed deposits with licensed banks

(Note 20) 162,745 162,745 - -Cash and bank balances (Note 21) 368,279 368,279 - -

20,096,859 20,096,859 - -



46. CATEGORIES OF FINANCIAL INSTRUMENTS (CONT’D)

The table below provides an analysis of financial instruments categorised as follows (cont’d):-


Company RM RM RM RM

2015 (cont’d)

Financial liabilitiesOther payables (Note 32) 2,543,438 - - 2,543,438Amount due to a subsidiary (Note 33) 1,200,000 - - 1,200,000Amount due to an associate (Note 34) 1,975 - - 1,975

3,745,413 - - 3,745,413

2014

Financial assetsOther receivables (Note 15) 12,524 12,524 - -Amount due from subsidiaries (Note 17) 11,493,579 11,493,579 - -Amount due from associates (Note 18) 328 328 - -Cash and bank balances (Note 21) 1,554,323 1,554,323 - -

13,060,754 13,060,754 - -

Financial liabilitiesOther payables (Note 32) 5,115,779 - - 5,115,779

47. FINANCIAL INSTRUMENTS

Financial risks management

The Group and the Company are exposed to financial risks arising from their operations and the use of financial instruments. Financial risk management policy is established to ensure that adequate resources are available for the development of the Group’s and the Company’s business whilst managing its credit risk, liquidity risk, foreign currency risk and interest rate risk. The Group and the Company operate within clearly defined policies and procedures that are approved by the Board of Directors to ensure the effectiveness of the risk management process.

The main areas of financial risks faced by the Group and Company and the policy in respect of the major areas of treasury activity are set out as follows:-

(a) Credit risk

Credit risk is the risk of a financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. It is the Group’s policy to enter into financial instrument with a diversity of creditworthy counterparties. The Group does not expect to incur material credit losses of its financial assets or other financial instruments.

Concentration of credit risk exists when changes in economic, industry and geographical factors similarly affect the group of counterparties whose aggregate credit exposure is significant in relation to the Group’s total credit exposure. The Group’s portfolio of financial instrument is broadly diversified along industry, product and geographical lines, and transactions are entered with diverse creditworthy counterparties, thereby mitigate any significant concentration of credit risk.

It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. The Group does not offer credit terms without the approval of the head of credit control.



(cont’d)

47. FINANCIAL INSTRUMENTS (CONT’D)

Financial risks management (cont’d)

(a) Credit risk (cont’d)

Following are the areas where the Group and the Company are exposed to credit risk:-

(i) Receivables

As at the end of the reporting date, the maximum exposure to credit risk arising from receivables is limited to the carrying amounts in the statements of financial position.

With a credit policy in place to ensure the credit risk is monitored on an ongoing basis, management has taken reasonable steps to ensure that receivables that are neither past due nor impaired are stated at their realisable values.

A significant portion of these receivables are regular customers that have been transacting with the Group. The Group uses ageing analysis to monitor the credit quality of the receivables. Any receivables having significant balances past due more than credit terms granted are deemed to have higher credit risk and are monitored individually.

The ageing analysis of these trade receivables is as follows:

2015 IndividuallyGross Impaired Net

Group RM RM RM

Not past due 18,901,623 - 18,901,623Past due for 1-30 days 6,487,957 - 6,487,957Past due for 31-60 days 1,923,893 - 1,923,893Past due for 61-90 days 3,105,093 - 3,105,093Past due for 91-120 days 5,352,685 - 5,352,685Past due for more than 121 days 11,488,612 (121,576) 11,367,036

47,259,863 (121,576) 47,138,287

2014

Not past due 20,056,527 - 20,056,527Past due for 1-30 days 2,307,391 - 2,307,391Past due for 31-60 days 856,220 - 856,220Past due for 61-90 days 3,092,402 - 3,092,402Past due for 91-120 days 368,849 - 368,849Past due for more than 121 days 832,387 (121,576) 710,811

27,513,776 (121,576) 27,392,200

The net carrying amount of trade receivables is considered as a reasonable approximate of fair value. The maximum exposure to credit risk is the carrying value of each class of receivables mentioned above.

Receivables that are individually determined to be impaired at the reporting date relate to receivables that are in significant financial difficulties and have defaulted in payments. These receivables are not secured by any collateral or credit enhancements.





(a) Credit risk (cont’d)

Following are the areas where the Group and the Company are exposed to credit risk (cont’d):-

(i) Receivables (cont’d)

Trade receivables that are neither past due nor impaired are creditworthy receivables with good payment records with the Group. None of the Group’s trade receivables that are neither past due nor impaired have been renegotiated during the financial year.

As at 31 December 2015, trade receivables of the Group of RM28,236,664 (2014: RM7,335,673) was past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default.

In respect of trade and other receivables, the Group is not exposed to any single counterparty or any group of counterparties having similar characteristics. Trade receivables consist of a large number of customers in various industries and geographical areas. Based on the historical information about customer default rates, management considers the credit quality of trade receivables that are not past due or impaired to be good.

(ii) Intercompany loans and advances

The maximum exposure to credit risk is represented by their carrying amounts in the statements of financial position.

The Company provides unsecured advances to subsidiaries and associates and monitors their results regularly.

As at the end of the reporting date, there was no indication that advances to the subsidiaries and associates are not recoverable.

(iii) Investments and other financial assets

The maximum exposure to credit risk is represented by the carrying amounts in the statements of financial position.

In view of the sound credit rating of counterparties, management does not expect any counterparty to fail to meet its obligations.

(iv) Financial/corporate guarantees

The maximum exposure to credit risk amounts to RM22,570,193 (2014: RM9,608,076) representing the outstanding banking facilities of the subsidiaries as at end of the reporting period.

The Company provides unsecured corporate guarantees to licensed banks in respect of banking facilities granted to certain subsidiaries. The Company monitors on an ongoing basis the results of the subsidiaries and repayments made by them. As at the end of the reporting period, there was no indication that any subsidiaries would default on repayment.

(b) Liquidity risk

Liquidity risk is the risk that the Group and the Company will not be able to meet their financial obligations as they fall due to shortage of funds.

In managing its exposures to liquidity risk arises principally from its various payables and bank borrowings, the Group and the Company maintain a level of cash and cash equivalents and bank facilities deemed adequate by the management to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they fall due.



(cont’d)



(b) Liquidity risk (cont’d)

The Group and the Company aim at maintaining a balance of sufficient cash and deposits and flexibility in funding by keeping diverse sources of committed and uncommitted credit facilities from various banks.

The summary of the maturity profile based on the contractual undiscounted repayment obligation is as follows:

Liquidity risk analysis

Group Current Non-current Carrying amount

contractual cash flow

Within 1 year

2 to 5 years

More than 5 years

RM RM RM RM RM

2015Trade payables 39,642,357 39,642,357 39,642,357 - -Other payables 5,361,449 5,361,449 5,361,449 - -Progress billings 1,226,619 1,226,619 1,226,619 - -Amount due to director 1,400,040 1,400,040 1,400,040 - -Amount due to related

parties 890,324 890,324 890,324 - -Amount due to associate 1,975 1,975 1,975 - -Bank borrowings 24,412,049 26,264,664 18,597,363 5,452,109 2,215,192Finance lease liabilities 1,881,305 1,988,009 1,252,764 557,833 177,412

Total 74,816,118 76,775,437 68,372,891 6,009,942 2,392,604

2014Trade payables 17,436,454 17,436,454 17,436,454 - -Other payables 16,292,738 16,292,738 16,292,738 - -Amount due to related

parties 180,132 180,132 180,132 - -Bank borrowings 24,750,680 25,010,209 13,644,183 11,045,764 320,262Finance lease liabilities 2,733,853 2,936,787 1,391,384 1,545,403 -

Total 61,393,857 61,856,320 48,944,891 12,591,167 320,262

CompanyCarrying amount

Current contractual

cash flowWithin 1 year

RM RM RM

2015Other payables 2,543,438 2,543,438 2,543,438Amount due to a subsidiary 1,200,000 1,200,000 1,200,000Amount due to an associate 1,975 1,975 1,975

3,745,413 3,745,413 3,745,413

2014Other payables 5,115,779 5,115,779 5,115,779





(c) Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

To mitigate the Group’s and the Company’s exposure to foreign currency risk, the Group and the Company are exposed to foreign currency risk on sales and purchases that are denominated in a currency other than the respective functional currencies of Group entities. The currency giving rise to this risk is primarily US Dollar (USD), Hong Kong Dollar (HKD), Singapore Dollar (SGD) and Thai Baht (THB).

The Group is also exposed to currency translation risk arising from its net investment in foreign operation in Singapore, Hong Kong and Thailand. The investment is not hedged as currency positions in HKD, SGD and THB are considered to be long-term in nature.

The Group’s and the Company’s exposure to foreign currency risk, based on carrying amounts as of the end of the reporting period are as follows:-

Group 2015Denominated in

USD HKD SGD THBRM RM RM RM

Trade receivables 14,314 4,246,942 37,792 -Cash and bank balances 489,121 3,743,974 - 2,113Amount due from an associate 363 - - -Other receivables - 524,179 - -Other payables - 999,538 - -Amount due to an associate 1,975 - - -Trade payables 1,029,887 859,919 - -

Group 2014Denominated in

USD HKD SGD THBRM RM RM RM

Trade receivables 58,699 1,304,657 77,261 -Cash and bank balances 229,228 3,169,134 - 5,818Amount due from associate 328 - - -Other receivables - 395,823 - -Other payables - 713,127 - -Borrowings - 125,461 - -Trade payables 1,906,182 774,749 - -

Company 2015Denominated in

THB USD HKDRM RM RM

Cash and bank balances 2,113 400 4,131Amount due from subsidiaries - - 1,068,985Amount due from associate - 363 -Amount due to associate - (1,975) -



(cont’d)



(c) Foreign currency risk (cont’d)

The Group’s and the Company’s exposure to foreign currency risk, based on carrying amounts as of the end of the reporting period are as follows (cont’d):-

Company (cont’d) 2014Denominated in

THB USD HKDRM RM RM

Cash and bank balances - 400 5,818Amount due from subsidiaries - - 182,798Amount due from associate - 328 -

Group Increase/(Decrease)Profit for the

financial year Equity2015 RM RM

USD/RM - Strengthened 1.78% (9,417) 9,417- Weakened 1.78% 9,417 (9,417)

HKD/RM - Strengthened 1.79% 119,088 (119,088)- Weakened 1.79% (119,088) 119,088

SGD/RM - Strengthened 1.19% 449 (449)- Weakened 1.19% (449) 449

THB/RM - Strengthened 1.02% 21 (21)- Weakened 1.02% (21) 21

Increase/(Decrease)Profit for the


USD/RM - Strengthened 0.55% (8,854) 8,854- Weakened 0.55% 8,854 (8,854)

HKD/RM - Strengthened 0.69% 22,559 (22,559)- Weakened 0.69% (22,559) 22,559

SGD/RM - Strengthened 0.26% 198 (198)- Weakened 0.26% (198) 198






(c) Foreign currency risk (cont’d)

The Group’s and the Company’s exposure to foreign currency risk, based on carrying amounts as of the end of the reporting period are as follows (cont’d):-

Company Increase/(Decrease)Profit for the


USD/RM - Strengthened 1.78% 22 (22)- Weakened 1.78% (22) 22


HKD/RM- Strengthened 1.79% 19,201 (19,201)- Weakened 1.79% (19,201) 19,201

Increase/(Decrease)Profit for the


USD/RM - Strengthened 0.55% 4 (4)- Weakened 0.55% (4) 4

THB/RM - Strengthened 0.55% 1,029 (1,029)- Weakened 0.55% (1,029) 1,029

Exposures to foreign exchange rates vary during the financial year depending on the volume of overseas transactions. Nonetheless, the analysis above is considered to be representation of the Group’s and the Company’s exposures to foreign currency risk.

(d) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of the Group’s and the Company’s financial instruments will fluctuate because of changes in market interest rates.

The Group’s and the Company’s fixed rate borrowings are exposed to a risk of change in their fair value due to changes in interest rates. The Group’s and the Company’s variable rate borrowings are exposed to a risk of change in cash flows due to changes in interest rates. Short term receivables and payables are not significantly exposed to interest rate risk.



(cont’d)



(d) Interest rate risk (cont’d)

The interest rate profile of the Group’s significant interest-bearing financial instruments, based on carrying amounts as at end of the reporting period are:

Group2015 2014

RM RM

Fixed rate instrumentsFinancial liabilities (1,881,305) (2,733,853)

Floating rate instruments Financial assets 2,507,201 952,600Financial liabilities (25,612,049) (24,750,680)

(23,104,848) (23,798,080)

Interest rate sensitivity analysis

At 31 December 2015, the Group is exposed to changes in market interest rates through bank borrowings at variable interest rates. Other borrowings are at fixed interest rates. The exposure to interest rates for the Group’s short term placement is considered immaterial.

The following table illustrates the sensitivity of profit to a reasonably possible change in interest rates of +/- 100 basis points (“bp”). These changes are considered to be reasonably possible based on observation of current market conditions. The calculations are based on a change in the average market interest rate for each period, and the financial instruments held at each reporting date that are sensitive to changes in interest rates. All other variables are held constant.

Group Effect on profit for the year+100bp -100bp

RM RM

31 December 2015 (231,048) 231,048

31 December 2014 (237,981) 237,981

Fair value of financial instruments

The carrying amounts of short term receivables and payables, cash and cash equivalents and short term borrowings approximate their fair values due to the relatively short term nature of these financial instruments and insignificant impact of discounting.




Fair value of financial instruments (cont’d)

The table below analyses financial instruments carried at fair value and those not carried at fair value for which fair value is disclosed, together with their values and carrying amounts shown in the statement of financial position.

Fair value of financial

instruments carried at fair value

Fair value of financial

instruments not carried at

fair value Total

fair valueCarrying amount

Level 2Group RM RM RM RM

2015Financial assetOther investment 15,614 - 15,614 15,614

Financial liabilitiesFinance lease liabilities - 1,832,690 1,832,690 1,881,305Borrowings - 23,339,707 23,339,707 24,412,049

2014Financial assetOther investment 16,024 - 16,024 16,024

Financial liabilitiesFinance lease liabilities - 2,817,366 2,817,366 2,733,853Borrowings - 21,574,615 21,574,615 24,750,680

Policy on transfer between levels

The fair value of an asset to be transferred between levels is determined as of the date of the event or change in circumstances that caused the transfer.

Level 1 Fair Value

Level 1 fair value is derived from quoted price (unadjusted) in active markets for identical financial assets or liabilities that the entity can access at the measurement date.

Level 2 Fair Value

Level 2 fair value is estimated using inputs other than quoted prices included within Level 1 that are observable for the financial assets or liabilities, either directly or indirectly.

Non-derivatives financial liabilities

Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the end of the reporting period. In respect of the liability component of convertible notes, the market rate of interest is determined by reference to similar liabilities that do not have a conversion option. For finance leases that market rate of interest is determined by reference to similar lease agreements.



(cont’d)


Fair value of financial instruments (cont’d)

Non-derivatives financial liabilities (cont’d) The effective interest rates used to discount estimated cash flow are as follows:-

Group2015 2014

% %

Term loans 5.35 – 7.85 5.10 – 8.10Finance lease liabilities 2.38 – 6.51 2.35 – 3.70Bank overdraft 5.35 –7.85 7.00 – 7.85Bankers’ acceptance 3.95 – 8.41 3.44 – 5.93

48. COMMITMENTS

(i) Capital Commitments

Group2015 2014

RM RM

Capital expenditure- Authorised and contracted for:

- Property, plant and equipment 74,698 -

(ii) Operating lease commitments – As lessor

The future minimum lease payments receivable under cancellable operating lease commitments are:

Group2015 2014

RM RM

Future minimum lease payments receivables:

Not later than one year 797,145 595,633Later than one year but not later than five years 318,200 109,718

Total 1,115,345 705,351

Operating lease commitments represent rental receivables for the rent of the Group’s office. Leases are negotiated for 1 to 3 years (2014: 1 to 3 years) term.



49. CAPITAL MANAGEMENT

The Group’s objectives when managing capital is to maintain a strong capital base and safeguard the Group’s ability to continue as a going concern, so as to maintain investor, creditor and market confidence and to sustain future development of the business.

There were no changes in the Group’s approach to capital management during the year.

Under the requirement of Bursa Malaysia PN17, the Group is required to maintain a consolidated shareholders’ equity equal to or not less than the 25% of the issued and paid-up capital (excluding treasury shares). The Company has complied with this requirement.

50. SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR

(i) The warrant holders exercised the following Warrants 2010/2015 to subscribe for new ordinary shares at an exercise price of RM0.12 per share. The new shares issued during the financial year rank pari passu in all respects with the existing ordinary shares of the Company as follows:-

Date of exercise

Number of warrant

exercised

Number of new ordinary shares

subscribed

5 January 2015 399,200 399,20013 January 2015 30,000 30,00027 January 2015 165,000 165,00011 February 2015 40,000 40,00018 February 2015 467,900 467,90027 February 2015 408,200 408,2005 March 2015 530,800 530,80010 March 2015 1,261,500 1,261,50012 March 2015 2,898,000 2,898,00018 March 2015 392,800 392,80023 March 2015 7,434,600 7,434,60025 March 2015 3,408,760 3,408,76030 March 2015 16,587,200 16,587,2003 April 2015 15,653,000 15,653,0009 April 2015 485,400 485,40015 April 2015 22,130,300 22,130,30016 April 2015 16,576,636 16,576,63620 April 2015 5,875,900 5,875,90023 April 2015 20,678,500 20,678,50024 April 2015 600,400 600,400

(ii) On 9 March 2015, Simat Technologies Public Co., Ltd (“Simat”), an associate Company issued a private

placement of 7.0 million Simat shares. However, the Company do not subscribed their entire portion of the shareholding resulted a dilution of Company’s interest in Simat from 19.91% to 19.54% and a gain on deemed disposal of RM0.5 million.

(iii) On 27 March 2015, the Company had disposed of 2.0 million Simat shares representing 0.53% equity interest in Simat at Baht 5.85 per share for a total cash consideration of Baht 11,670,604 (equivalent to RM1,308,108). This disposal reduced the Group’s interest in Simat from 19.54% to 19.01% and a gain of RM1.0 million was resulted.

(iv) On 2 June 2015, Simat undertook a private placement of 2.7 million Simat shares and exercised of 3.3 million Employee Stock Option Program (“ESOP’’) – warrant resulted a dilution of Grand-Flo’s interest in Simat from 19.01% to 18.72% and a gain on deemed disposal of RM0.2 million.



(cont’d)

50. SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR (CONT’D)

(v) On 24 July 2015, Simat undertook a private placement of 2.0 million Simat shares resulted a dilution of Grand-Flo’s interest in Simat from 18.72% to 18.62% and a gain on deemed disposal of RM0.2 million.

(vi) On 28 September 2015, Simat undertook a private placement of 8.0 million Simat shares resulted a dilution of Grand-Flo’s interest in Simat from 18.62% to 18.24% and a gain on deemed disposal of RM0.5 million.

51. EVENTS AFTER FINANCIAL YEAR

Profit Guarantee

Pursuant to the acquisition (“Acquisition”) of 50.0004% of Innoceria Sdn Bhd (“ISB”) from Chuah Chew Hai and Chong Poh Yoong (“the Vendors”) for a total purchase consideration of RM15.0 million satisfied by an issuance and allotment of 29,411,765 new Company shares at an issue price of RM0.34 per share and cash of RM5.0 million which was completed on 21 August 2014, the Vendor also irrevocably covenant, warrants and guarantee to the Company that ISB shall have aggregate audit Profit After Tax (“PAT”) of at least RM15.0 million (“Profit Guarantee”) as follows:-

• RM5.0millionforthefinancialperiodcommencing1January2014andended31December2014(“Year1Guaranteed PAT”); and

• RM10.0millionforthefinancialperiodcommencing1January2015andending31December2015(“Year2 Guaranteed PAT”)

On 23 March 2016, the Vendors requested an extension of the Profit Guarantee Period to include financial year ending 31 December 2016 ie the Vendors shall achieve the Profit Guarantee over three (3) financial years ended 31 December 2014, 31 December 2015 and ending 31 December 2016 (“Extended Profit Guarantee Period”).

On 25 March 2016, the Board of Directors of Company agreed to and approved the Vendors’ request for the Extended Profit Guarantee Period after reasonable consideration of the unexpected longer gestation period in the development business which was not foreseen at the time of the Acquisition.

The detail of the Extended Profit Guarantee period is as follow:-

Extended Profit Guarantee

(RM)

Financial year ended 31 December 2014 2,700,000.00Financial year ended 31 December 2015 7,900,000.00Financial year ending 31 December 2016 4,400,000.00

Total 15,000,000.00

The Year 2 Guaranteed PAT shortfall shall be aggregated with the PAT for the financial year ending 31 December 2016 to determine the total shortfall, if any, before releasing the balance of the cash consideration net of any shortfall to the Vendors.

In view that the Proposed Extension of Profit Guarantee Period is considered to be a material variation pursuant to Paragraph 8.22 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, the approval of the shareholders of the Company will be sought for the Proposed Extension of Profit Guarantee Period at an extraordinary general meeting to be convened.

Disposal of Shares in Associate

On 18 January 2016, Labels Network Sdn Bhd, a wholly-owned subsidiary company of the Company entered into a Share Sale Agreement to dispose of its entire 42,800 ordinary shares held in High Rich Trading & Services Corporation (“High Rich”) representing 40% of the total paid-up charter capital of High Rich for a cash consideration of VND6,806,000,000 (approximately RM1.34 million).



52. COMPARATIVE INFORMATION

Certain comparative figures in the financial statements have been reclassified on the face of the statements of financial position, statements of profit or loss and other comprehensive income and statements of cash flows to conform with the current year presentation.

As previously reported As reclassified

Group RM RM

Statements of financial positionTrade receivables 27,692,200 27,392,200Other receivables 1,291,602 1,247,039Accrued billings - 44,563Amount due from directors - 150,000Amount due from related parties 907,292 1,057,292

Statement of cash flowChanges in receivables (5,188,650) (4,844,087)Changes in directors - (150,000)Changes in related parties (664,692) (814,692)Changes in accrued billings - (44,563)



(cont’d)

DISCLOSURE OF REALISED AND UNREALISED PROFITS

Bursa Malaysia Securities Berhad has on 25 March 2010 and 20 December 2010, issued directives require all listed corporations to disclose the breakdown of unappropriated profits or accumulated losses into realised and unrealised on Group and Company basis, as the case may be, in quarterly reports and annual audited financial statements.

The breakdown of retained earnings as at the reporting date that has been prepared by the Directors in accordance with the directives from Bursa Malaysia Securities Berhad stated above and the Guidance on Special Matter No. 1 issued on 20 December 2010 by the Malaysian Institute of Accountants are as follows:-

Group Company2015 2014 2015 2014

RM RM RM RM

Total retained earnings of the Company and its subsidiaries- Realised 61,905,864 49,946,479 22,050,839 19,164,315- Unrealised 1,045,094 1,703,715 - -

62,950,958 51,650,194 22,050,839 19,164,315

Total share of retained earnings from the associates- Realised 4,087,992 4,495,078 - -

67,038,950 56,145,272 22,050,839 19,164,315Less: Consolidation adjustments (14,899,961) (11,136,188) - -

Total Group retained earnings as per consolidated financial statements 52,138,989 45,009,084 22,050,839 19,164,315

The disclosure of realised and unrealised profit or loss above is solely for complying with the disclosure requirements stipulated in the directives of Bursa Malaysia Securities Berhad and should not be applied for any other purposes.


Authorised Share Capital : RM100,000,000.00Issued and Fully Paid-up Capital : RM48,311,571.10Class of shares : Ordinary Shares of RM0.10 eachVoting Rights by Show of Hand : One vote for every memberVoting Rights by Poll : One vote for every share held

DISTRIBUTION SCHEDULE OF SHAREHOLDERS

Size of HoldingsNo. of

Holders %No. of

Shares *** %

1-99 4 0.23 178 0.00100-1,000 314 18.15 81,828 0.021,001-10,000 411 23.76 2,909,400 0.6110,001-100,000 804 46.47 32,420,800 6.77100,001-23,941,584 (*) 193 11.16 277,922,388 58.0423,941,585 and above (**) 4 0.23 165,497,117 34.56

TOTAL: 1,730 100.00 478,831,711 100.00

* Less than 5% of Issued Shares** 5% and above of Issued Shares*** Excluding a total of 4,284,000 shares bought and retained as treasury shares

ANALYSIS OF SHAREHOLDINGS as at 31 March 2016


SUBSTANTIAL SHAREHOLDERS’ SHAREHOLDINGSas at 31 March 2016(As per the Register of Substantial Shareholders)

No. of Shares Held

No. Name of ShareholdersDirect

Interest %*IndirectInterest %*

1. Grand-Flo Corporation Sdn. Bhd. 73,861,852 15.43 - -2. Tan Bak Hong 20,988,636 4.38 75,183,852(1) 15.703. Yap Li Li 1,322,000 0.28 94,850,488(2) 19.814. Tan Chuan Hock 12,600,000 2.63 12,000,000(3) 2.515. Silver Oak Management Ltd 30,000,000 6.27 - -6. Chong Poh Yoong 29,412,165 6.14 7,765,000(4) 1.627. Chuah Chew Hai 7,765,000 1.62 29,412,165(5) 6.14

Notes:-(1) Deemed interested by virtue of the shares held by his spouse, Yap Li Li and both his and his spouse’s interest in Grand-

Flo Corporation Sdn. Bhd.(2) Deemed interested by virtue of the shares held by her spouse, Tan Bak Hong and both her and her spouse’s interest

in Grand-Flo Corporation Sdn. Bhd.(3) Deemed interested by virtue of his interest in Al Capital Sdn. Bhd.(4) Deemed interested by virtue of the shares held by her spouse, Chuah Chew Hai.(5) Deemed interested by virtue of the shares held by his spouse, Chong Poh Yoong.

DIRECTORS’ SHAREHOLDINGS as at 31 March 2016(As per the Register of Directors’ Shareholdings)

No. of Shares Held

No. Name of DirectorsDirect

Interest %*IndirectInterest %*

1. Tan Bak Hong 20,988,636 4.38 75,183,852(1) 15.702. Yap Li Li 1,322,000 0.28 94,850,488(2) 19.813. Tan Chuan Hock 12,600,000 2.63 12,000,000(3) 2.514. Cheng Ping Liong 8,861,734 1.85 - -5. Wan Kok Weng 11,983,470 2.50 9,230,768(4) 1.936. Chan Pik Khew (Alternate to Wan Kok Weng) 9,230,768 1.93 11,983,470(5) 2.507. Chuah Chew Hai 7,765,000 1.62 29,412,165(6) 6.14

Notes:-(1) Deemed interested by virtue of the shares held by his spouse, Yap Li Li and both his and his spouse’s interest in Grand-

Flo Corporation Sdn. Bhd.(2) Deemed interested by virtue of the shares held by her spouse, Tan Bak Hong and both her and her spouse’s interest

in Grand-Flo Corporation Sdn. Bhd.(3) Deemed interested by virtue of his interest in AI Capital Sdn. Bhd.(4) Deemed interested by virtue of the shares held by his spouse, Ms. Chan Pik Khew.(5) Deemed interested by virtue of the shares held by her spouse, Mr. Wan Kok Weng.(6) Deemed interested by virtue of the shares held by his spouse, Ms. Chong Poh Yoong.

ANALYSIS OF SHAREHOLDINGSas at 31 March 2016

(cONt’D)


ANALYSIS OF SHAREHOLDINGSas at 31 March 2016(cONt’D)

STATEMENT OF SHAREHOLDINGSTHIRTY LARGEST REGISTERED SHAREHOLDERS AS AT 31 MARCH 2016(Without aggregating securities from different securities accounts belonging to the same person)

No. Name Holdings % *

1. Grand-Flo Corporation Sdn. Bhd. 73,861,852 15.432. DB (Malaysia) Nominee (Asing) Sdn. Bhd.

Exempt an for Bank of Singapore Limited 32,223,100 6.733. HSBC Nominees (Asing) Sdn. Bhd.

Exempt an for BNP Paribas Wealth Management Singapore Branch 30,000,000 6.274. Chong Poh Yoong 29,412,165 6.145. Cimsec Nominees (Tempatan) Sdn. Bhd.

CIMB Bank for Tan Bak Hong 19,031,000 3.976. Thongkam Manasilapapan 15,719,700 3.287. Asas Masyhur Sdn. Bhd. 14,668,300 3.068. Cimsec Nominees (Tempatan) Sdn. Bhd.

CIMB Bank for Lim Wee Chai 13,000,000 2.719. Tan Chuan Hock 12,600,000 2.6310. AI Capital Sdn. Bhd. 12,000,000 2.5111. Wan Kok Weng 11,983,470 2.5012. Alliancegroup Nominees (Asing) Sdn. Bhd.

Sun Hung Kai Investment Services Limited for CL Solutions Services Limited 11,796,352 2.4613. Cartaban Nominees (Tempatan) Sdn. Bhd.

Exempt an for Credit Industriel ET Commercial 11,727,900 2.4514. Chan Pik Khew 9,230,768 1.9315. Cheng Ping Liong 8,861,734 1.8516. Lee Poh Lan 8,200,000 1.7117. Vibrant Model Sdn. Bhd. 7,000,000 1.4618. Miracle Hectares Sdn. Bhd. 6,871,000 1.4319. Mohammed Noor Bin Mohd Sham 5,796,100 1.2120. Chuah Chew Hai 5,500,000 1.1521. Su Bee Leng 5,450,000 1.1422. Tan Check Ee 5,200,000 1.0923. Cimsec Nominees (Tempatan) Sdn. Bhd.

CIMB Bank for Lim Wee Chai 5,000,000 1.0424. Wui Mee Ling 4,570,800 0.9525. Lee Kuan Meng 3,000,000 0.6326. Tan Jyh Yaong 3,000,000 0.6327. Moi Ming Huei 2,937,716 0.6128. Cimsec Nominees (Tempatan) Sdn. Bhd.

CIMB Bank for Moi Ming Huei 2,717,000 0.5729. Cimsec Nominees (Tempatan) Sdn. Bhd.

CIMB Bank for Phang Chet Ping 2,715,000 0.5730. Tan Bak Leng 2,552,780 0.53

* All percentage shareholding computations are based on the issued and paid-up capital less treasury shares account (4,284,000 shares) arising from the share buy-back exercise.


Title/LocationDescription/Existing Use

Currentuse Tenure

Age of building (Years)

Land/Built-up

Area

Carrying Value as at 31.12.2015

(RM)Date of

Acquisition

No.3-1, 3-2, 3-3, 3-4, Block D2 Jalan PJU 1/39, Dataran Prima 47301 Petaling Jaya Selangor Darul Ehsan Malaysia

Five storey shop office

Office Freehold 17 years 771 sq m 2,904,099 8-Dec-04

No. G-9-1, 2 & 3 Lorong Bayan Indah 1,Bay Avenue, Queensbay, Sg. Nibong, 11900 Penang, Malaysia

Three storey shop office

Office, laboratory

and warehouse

Freehold 7 years 363 sq m 3,427,144 17-Nov-05

No. 34 Jalan Utama 1/15 Taman Perindustrian Puchong Utama, Sek 1 47140 Puchong Selangor

Single storey industrial building

Office Leasehold for 99 years/Expires 16

August 2094

20 years 148 sq m 572,567 10-Dec-08


Single storey factory

Factory Leasehold for 99 years/Expires 16

August 2094

20 years 148 sq m 573,282 21-Aug-08




August 2094

20 years 148 sq m 535,063 21-Aug-08




August 2094

20 years 148 sq m 535,063 21-Aug-08




August 2094

20 years 148 sq m 535,063 21-Aug-08




August 2094

20 years 148 sq m 496,844 21-Aug-08




August 2094

20 years 148 sq m 496,844 21-Aug-08




August 2094

20 years 148 sq m 535,024 26-Nov-10

LIST OF PROPERTIES


NOTICE OFANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the Thirteenth Annual General Meeting of GRAND-FLO BERHAD (“Grand-Flo” or “the Company”) will be held at The Greens 3, Ground Floor, Sports Wing, Tropicana Golf & Country Resort, 47410 Petaling Jaya, Selangor Darul Ehsan on Wednesday, 15 June 2016 at 11.00 a.m. to transact the following businesses:-

A G E N D A

1. To receive the Audited Financial Statements for the financial year ended 31 December 2015 together with the Reports of the Directors and Auditors thereon.

(Please refer to Note a)

2. To declare a first and final single tier dividend of 0.5 sen per ordinary share for the financial year ended 31 December 2015.

(Resolution 1)

3. To approve the payment of Directors’ fees for the financial year ended 31 December 2015. (Resolution 2)

4. To re-elect the following Directors who retire by rotation pursuant to Article 104 of the Company’s Articles of Association:

i. Mr. Tan Bak Hong (Resolution 3)ii. Mr. Tan Chuan Hock (Resolution 4)iii. Mr. Yek Deiw See (Resolution 5)

5. To re-elect Mr. Chuah Chew Hai, the Director who retires pursuant to Article 110 of the Company’s Articles of Association.

(Resolution 6)

6. To re-appoint Messrs. SJ Grant Thornton as Auditors of the Company until the conclusion of the next Annual General Meeting and to authorise the Directors to fix their remuneration.

(Resolution 7)

As Special Business :To consider and if thought fit, pass with or without any modifications, the following resolutions:-

7. ORDINARY RESOLUTION 1 (Resolution 8)CONTINUING IN OFFICE AS INDEPENDENT NON-EXECUTIVE DIRECTOR

“THAT approval be and is hereby given to Mr. Yu Chee Sing who has served as an Independent Non-Executive Director of the Company for a cumulative term of more than nine (9) years, to continue to act as an Independent Non-Executive Director of the Company pursuant to Recommendation 3.3 of the Malaysian Code on Corporate Governance 2012.

8. ORDINARY RESOLUTION 2 (Resolution 9)CONTINUING IN OFFICE AS INDEPENDENT NON-EXECUTIVE DIRECTOR

“THAT approval be and is hereby given to Mr. Yek Deiw See who has served as an Independent Non-Executive Director of the Company for a cumulative term of more than nine (9) years, to continue to act as an Independent Non-Executive Director of the Company pursuant to Recommendation 3.3 of the Malaysian Code on Corporate Governance 2012.

9. ORDINARY RESOLUTION 3 (Resolution 10)RE-APPOINTMENT OF DIRECTOR PURSUANT TO SECTION 129(6) OF THE COMPANIES ACT, 1965

“THAT pursuant to Section 129(6) of the Companies Act, 1965, Tan Sri Datuk Adzmi Bin Abdul Wahab, who is over the age of seventy (70) years, be and is hereby re-appointed as Director of the Company to hold office until the conclusion of the next Annual General Meeting of the Company.”


10. ORDINARY RESOLUTION 4 (Resolution 11)GENERAL AUTHORITY FOR THE DIRECTORS TO ISSUE SHARES PURSUANT TO SECTION 132D OF THE COMPANIES ACT, 1965

“THAT pursuant to Section 132D of the Companies Act, 1965, and subject to the approvals of the relevant governmental and/or regulatory authorities, the Directors be and are hereby empowered to allot and issue shares in the Company from time to time at such price, upon such terms and conditions, for such purposes and to such person or persons whomsoever as the Directors may deem fit provided that the aggregate number of shares issued pursuant to this resolution does not exceed 10% of the issued share capital of the Company for the time being AND THAT the Directors be and are also empowered to obtain approval from the Bursa Malaysia Securities Berhad for the listing of and quotation for the additional shares so issued AND THAT such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company.”

11. ORDINARY RESOLUTION 5 (Resolution 12)PROPOSED RENEWAL OF THE AUTHORITY FOR THE COMPANY TO PURCHASE ITS OWN SHARES OF UP TO TEN PERCENT (10%) OF ITS ISSUED AND PAID UP SHARE CAPITAL (“PROPOSED RENEWAL OF SHARE BUY-BACK AUTHORITY”)

“THAT, subject always to the Companies Act, 1965 (“the Act”), rules, regulations and orders made pursuant to the Act, provisions of the Memorandum and Articles of Association of the Company, the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) (“Listing Requirements”) and the approvals of any other relevant governmental and/or regulatory authorities, the Company be and is hereby authorised to purchase and/or hold such amount of ordinary shares of RM0.10 each in the Company’s issued and paid up share capital (“Grand-Flo Shares”) through Bursa Securities upon such terms and conditions as the Directors may deem fit and expedient in the interest of the Company provided that:

(i) the aggregate number of Grand-Flo Shares bought-back and/or held as treasury shares does not exceed ten percent (10%) of the total issued and paid up share capital of the Company subject to a restriction that the issued and paid up share capital of the Company does not fall below the public shareholding spread requirement of the Listing Requirements;

(ii) the maximum funds to be allocated for the share buy-back shall not exceed the aggregate of the retained earnings and the share premium accounts of the Company; and

(iii) the Grand-Flo Shares purchased pursuant to the Proposed Renewal of Share Buy-Back Authority are to be treated in any of the following manner:

(a) cancel the purchased Grand-Flo Shares;

(b) retain the purchased Grand-Flo Shares as treasury shares for distribution as share dividends to the shareholders of the Company and/or be resold through Bursa Securities in accordance with the relevant rules of Bursa Securities and/or be cancelled subsequently; or

(c) retain part of the purchased Grand-Flo Shares as treasury shares and cancel the remainder,

AND THAT such authority shall commence immediately upon the passing of this resolution until:

(i) the conclusion of the next Annual General Meeting (“AGM”) of the Company following the general meeting at which this resolution is passed, at which time it shall lapse, unless the authority is renewed by a resolution passed at the next AGM; or


(cONt’D)


(ii) the expiration of the period within which the next AGM after that date it is required by law to be held; or

(iii) revoked or varied by ordinary resolution passed by the shareholders of the Company at a general meeting of the Company,

whichever occurs first, but not so as to prejudice the completion of the purchase(s) by the Company of the Grand-Flo Shares before the aforesaid expiry date and made in any event, in accordance with the provisions of the guidelines issued by Bursa Securities and any prevailing laws, rules, regulations, orders, guidelines and requirements issued by any other relevant government and/or regulatory authorities;

AND FURTHER THAT, the Directors of the Company be and are hereby authorised to take all such steps as are necessary or expedient to implement, finalise, complete or to effect the Proposed Renewal of Share Buy-Back Authority with full powers to assent to any conditions, modifications, resolutions, variations and/or amendments (if any) as may be imposed by the relevant authorities and to do all such acts and things as they may deem fit and expedient in the best interest of the Company to give effect to and to complete the purchase of the Grand-Flo Shares.”

12. ORDINARY RESOLUTION 6 (Resolution 13)PROPOSED RENEWAL OF SHAREHOLDERS’ MANDATE FOR RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE (“PROPOSED RENEWAL OF SHAREHOLDERS’ MANDATE FOR RRPT”)

“THAT, authority be and is hereby given in line with Paragraph 10.09 of the Listing Requirements of Bursa Malaysia Securities Berhad, for the Company and/or its subsidiaries to enter into any of the transactions with the related parties as set out in Section 1.3 of the Circular to Shareholders in relation to the Proposed Renewal of Shareholders’ Mandate for RRPT dated 29 April 2016 which are necessary for the day-to-day operations of the Company and/or its subsidiaries within the ordinary course of business of the Company and/or its subsidiaries, made on an arm’s length basis and on normal commercial terms which are those generally available to the public and are not detrimental to the minority shareholders of the Company.

AND THAT such authority shall commence immediately upon the passing of this resolution until:

(i) the conclusion of the next annual general meeting (“AGM”) of the Company following the general meeting at which the ordinary resolution for the Proposed Renewal of Shareholders’ Mandate for RRPT was passed, at which time it shall lapse, unless the authority is renewed by a resolution passed at the next AGM; or

(ii) the expiration of the period within which the next AGM after that date it is required by law to be held pursuant to Section 143(1) of the Companies Act, 1965 (“Act”) (but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Act); or

(iii) revoked or varied by an ordinary resolution passed by the shareholders of the Company at a general meeting,

whichever is earlier.

NOTICE OFANNUAL GENERAL MEETING(cONt’D)


AND FURTHER THAT the Directors of the Company be and are hereby authorised to do all acts, deeds and things as they may be deemed fit, necessary, expedient and/or appropriate in order to implement the Proposed Renewal of Shareholders’ Mandate for RRPT with full power to assent to all or any conditions, variations, modifications and/or amendments in any manner as may be required by any relevant authorities or otherwise and to deal with all matters relating thereto and to take all such steps and to execute, sign and deliver for and on behalf of the Company all such documents, agreements, arrangements and/or undertakings, with any party or parties and to carry out any other matters as may be required to implement, finalise and complete, and give full effect to the Proposed Renewal of Shareholders’ Mandate for RRPT in the best interest of the Company.”

13. To transact any other business of which due notice shall have been given in accordance with the Companies Act, 1965.

NOTICE OF DIVIDEND ENTITLEMENT

NOTICE IS ALSO HEREBY GIVEN that a first and final single tier dividend of 0.5 sen per share for the financial year ended 31 December 2015, if approved by the shareholders at the Annual General Meeting of the Company, will be paid on 15 July 2016 to the shareholders whose names appear in the Record of Depositors of the Company at the close of business on 30 June 2016.

A depositor shall qualify for entitlement to the dividend only in respect of:-

i. Shares transferred into the Depositor’s Securities Account before 4.00 p.m. on 30 June 2016 in respect of ordinary transfers; and

ii. Shares bought on the Bursa Malaysia Securities Berhad on a cum-entitlement basis according to the Rules of the Bursa Malaysia Securities Berhad.

By order of the Board

TEA SOR HUA (MACS 01324)YONG YEN LING (MAICSA 7044771)Company Secretaries

Date: 29 April 2016Petaling Jaya, Selangor Darul Ehsan

Notes:a) The Agenda 1 is meant for discussion only as the provision of Section 169(1) of the Companies Act, 1965 does not require

a formal approval of shareholders and hence, is not put forward for voting.b) A member entitled to attend and vote at the meeting is entitled to appoint a proxy or proxies to attend and vote in his stead.

A proxy may but need not be a member of the Company and the provisions of Sections 149(1)(a) and (b) of the Companies Act, 1965 shall not apply to the Company.

c) A shareholder shall be entitled to appoint up to two (2) proxies to attend and vote at the same meeting. Where a shareholder appoints two (2) proxies, he shall specify the proportion of his shareholdings to be represented by each proxy.

d) Where a member of the Company is an authorised nominee as defined under the Securities Industry (Central Depositories) Act 1991, it may appoint at least one (1) proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.

e) Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one (1) securities account (“omnibus account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds. The appointment of multiple proxies shall not be valid unless the proportion of its shareholdings represented by each proxy is specified.

f) The instrument appointing a proxy shall be in writing under the hand of the appointor or his attorney duly authorised in writing. If the appointor is a corporation, the instrument must be executed under its Common Seal or under the hand of an officer or attorney so authorised.

g) To be valid, the instrument appointing a proxy must be deposited at the registered office of the Company situated at Third Floor, No. 79 (Room A), Jalan SS21/60, Damansara Utama, 47400 Petaling Jaya, Selangor Darul Ehsan, not less than forty-eight (48) hours before the time for holding the meeting or any adjournment thereof.


(cONt’D)


h) For the purpose of determining a member who shall be entitled to attend the meeting, the Company will be requesting Bursa Malaysia Depository Sdn. Bhd. in accordance with Article 65(3) of the Company’s Articles of Association to issue a General Meeting Record of Depositors as at 8 June 2016. Only members whose names appear in the General Meeting Record of Depositors as at 8 June 2016 shall be regarded as members and entitled to attend, speak and vote at the Thirteenth AGM.

EXPLANATORY NOTES TO SPECIAL BUSINESS

1. Item 7 and Item 8 of the Agenda

The Nomination Committee of the Company has assessed the independence of Mr. Yu Chee Sing and Mr. Yek Deiw See respectively, who had served as an Independent Non-Executive Director of the Company for a cumulative term of more than nine (9) years, and recommended both of them to continue to act as an Independent Non-Executive Director of the Company. The justifications are stated in the Statement on Corporate Governance of the Annual Report for the financial year ended 31 December 2015 (“Annual Report 2015”).

2. Item 9 of the Agenda

The Resolution proposed under item 9 of the Agenda is to seek shareholders’ approval pursuant to Section 129(6) of the Companies Act, 1965 for the re-appointment of Tan Sri Datuk Adzmi Bin Abdul Wahab, a Director who is over the age of seventy years and vacated office pursuant to Section 129(2) of the Companies Act, 1965. If passed, it will enable Tan Sri Datuk Adzmi Bin Abdul Wahab to hold office until the conclusion of the next AGM.

Tan Sri Datuk Adzmi Bin Abdul Wahab has, during his tenure as the Independent Non-Executive Chairman of the Board, provided a strong leadership and was responsible for ensuring the adequacy and effectiveness of the Board’s governance process.


The Ordinary Resolution proposed under item 10 of the Agenda is a renewal of the general mandate for issuance of shares by the Company under Section 132D of the Companies Act, 1965. The Ordinary Resolution, if passed, will give the Directors of the Company from the date of the above meeting, authority to allot and issue ordinary shares from the unissued capital of the Company for such purposes as the Directors consider would be in the interest of the Company. The authority, unless revoked or varied by the Company in a general meeting, will expire at the next AGM.

This general mandate will provide flexibility to the Company for allotment of shares for any possible fund raising activities, including but not limited to further placing of shares, for the purpose of funding future investment project(s), working capital and/or acquisition(s).

As at the date of this Notice, no new shares in the Company were issued pursuant to the mandate granted to the Directors at the last AGM held on 25 May 2015 which will lapse at the conclusion of the Thirteenth AGM.


The Ordinary Resolution proposed under item 11 of the Agenda is to renew the shareholders’ mandate for the share buy-back by the Company. The said proposed renewal of shareholders’ mandate will empower the Directors to buy-back and/or hold up to a maximum of 10% of the Company’s issued and paid up share capital at any point of time, by utilising the amount allocated which shall not exceed the total retained profits and/or share premium account of the Company. This authority unless revoked or varied by the Company at a general meeting, will expire at the conclusion of the next AGM, or the expiration of period within which the next AGM is required by law to be held, whichever is earlier.

Please refer to the Share Buy-Back Statement to Shareholders dated 29 April 2016 for further details.


The Ordinary Resolution proposed under item 12 of the Agenda if passed, will renew the mandate for the Company and/or subsidiaries to enter into Recurrent Related Party Transactions in accordance with Paragraph 10.09 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad.

Further information is set out in the Circular to Shareholders dated 29 April 2016.

NOTICE OFANNUAL GENERAL MEETING(cONt’D)

PROXY FORM

I/We (full name in capital letters) NRIC/Company No.

of (full address)

being (a) member(s) of GRAND-FLO BERHAD (607392-W) hereby appoint (full name in capital letters)

NRIC No. of (full address)

or failing him/her (full name in capital letters), NRIC No. of (full address)

or failing him/her, the Chairman of the Meeting as my/our proxy to vote for me/us on my/our behalf at the Thirteenth Annual General Meeting of the Company to be held at The Greens 3, Ground Floor, Sports Wing, Tropicana Golf & Country Resort, 47410 Petaling Jaya, Selangor Darul Ehsan on Wednesday, 15 June 2016 at 11.00 a.m. and at any adjournment thereof.

Please indicate with an “X” in the appropriate spaces how you wish your votes to be cast. If no specific direction as to vote is given, the Proxy will vote or abstain from voting at his/her discretion.

No. Resolutions For Against1. To approve the payment of a first and final single tier dividend of 0.5 sen per ordinary share2. To approve the payment of Directors’ fees.3. To re-elect Mr. Tan Bak Hong as Director of the Company.4. To re-elect Mr. Tan Chuan Hock as Director of the Company.5. To re-elect Mr. Yek Deiw See as Director of the Company.6. To re-elect Mr. Chuah Chew Hai as Director of the Company.7. To re-appoint Messrs. SJ Grant Thornton as Auditors of the Company.8. To retain Mr. Yu Chee Sing as an Independent Non-Executive Director of the Company.9. To retain Mr. Yek Deiw See as an Independent Non-Executive Director of the Company.10. To re-appoint Tan Sri Datuk Adzmi Bin Abdul Wahab as Director of the Company.11. To authorise the Directors to allot shares pursuant to Section 132D of the Companies Act, 196512. To approve the Proposed Renewal of Share Buy-Back Authority13. To approve the Proposed Renewal of Shareholders’ Mandate for RRPT

Dated this ________ day of _______________ 2016

Signature of Member(s)/Common Seal

Notes:a) A member entitled to attend and vote at the meeting is entitled to appoint a proxy or proxies to attend and vote in his stead. A proxy may but need not be a

member of the Company and the provisions of Sections 149(1)(a) and (b) of the Companies Act, 1965 shall not apply to the Company.

b) A shareholder shall be entitled to appoint up to two (2) proxies to attend and vote at the same meeting. Where a shareholder appoints two (2) proxies, he shall specify the proportion of his shareholdings to be represented by each proxy.

c) Where a member of the Company is an authorised nominee as defined under the Securities Industry (Central Depositories) Act 1991, it may appoint at least one (1) proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.

d) Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one (1) securities account (“omnibus account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds. The appointment of multiple proxies shall not be valid unless the proportion of its shareholdings represented by each proxy is specified.

e) The instrument appointing a proxy shall be in writing under the hand of the appointor or his attorney duly authorised in writing. If the appointor is a corporation, the instrument must be executed under its Common Seal or under the hand of an officer or attorney so authorised.

f) To be valid, the instrument appointing a proxy must be deposited at the registered office of the Company situated at Third Floor, No. 79 (Room A), Jalan SS21/60, Damansara Utama, 47400 Petaling Jaya, Selangor Darul Ehsan, not less than forty-eight (48) hours before the time for holding the meeting or any adjournment thereof.

g) For the purpose of determining a member who shall be entitled to attend the meeting, the Company will be requesting Bursa Malaysia Depository Sdn. Bhd. in accordance with Article 65(3) of the Company’s Articles of Association to issue a General Meeting Record of Depositors as at 8 June 2016. Only members whose names appear in the General Meeting Record of Depositors as at 8 June 2016 shall be regarded as members and entitled to attend, speak and vote at the Thirteenth Annual General Meeting.

CDS Account No. No. of shares held

Percentage of shareholdings to be represented by the proxies:

No. of shares %

Proxy 1

Proxy 2

TOTAL 100

1st fold here

2nd fold here

The Company Secretary

Grand-Flo Berhad (607392-W)

Third Floor, No 79 (Room A)Jalan SS 21/60Damansara Utama47400 Petaling JayaSelangor Darul Ehsan

AFFIXSTAMPHERE

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