contents...datuk dr. syed muhamad is also a director of euro holdings berhad, bsl corporation...

002 Corporate Information

003 Corporate Structure

004 Directors’ Profile

010 Financial Highlights

011 Management Discussion and Analysis

017 Sustainability Statement

018 Corporate Governance Overview Statement

024 Statement of Directors’ Responsibilities

025 Statement of Risk Management and Internal Control

028 Audit and Risk Management Committee Report

032 Additional Disclosures

033 Financial Statements

145 List of Properties

146 Analysis of Shareholdings

149 Analysis of Holdings in Warrants

152 Notice of Annual General Meeting

158 Statement Accompanying Notice of Annual General Meeting

• Form of Proxy

TABLE OF CONTENTS

< 002|SOLUTIONENGINEERINGHOLDINGSBERHAD•Annual Report 2018

CORPORATEINFORMATION

BOARD OF DIRECTORS

Datuk Dr. Syed Muhamad Bin Syed Abdul Kadir Independent Non-Executive Director/Chairman

Lim Yong Hew Group Managing Director

Dato’ Dr. Mohd Nazlee bin Kamal Deputy Group Managing Director (Appointed on 29/08/2018)

Lim Hai Guan Executive Director

Mohd Shahrin Bin Saparin @ Abd Rahman Executive Director

Lim Chiou Kim Executive Director

Low Wei Ngee Independent Non-Executive Director

Zainuddin Bin Muhamad Independent Non-Executive Director

AUDIT AND RISK MANAGEMENT COMMITTEE

Low Wei Ngee Independent Non-Executive Director/Chairman

Datuk Dr. Syed Muhamad Bin Syed Abdul Kadir Independent Non-Executive Director


NOMINATION AND REMUNERATION COMMITTEE

Datuk Dr. Syed Muhamad Bin Syed Abdul Kadir Independent Non-Executive Director/Chairman

Low Wei Ngee Independent Non-Executive Director


COMPANY SECRETARY

Ms Siew Suet Wei [MAICSA 7011254]

Ms Lim Yen Teng [LS0010182]

REGISTERED OFFICE

No. 5-9A, The Boulevard Offices, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur Tel: (03) 2282 6331/7331 Fax: (03) 2201 9331

PRINCIPAL OFFICE

PT 13796 Jalan Tekno Usahawan 2, Technology Park Malaysia, 57000 Kuala Lumpur, Wilayah Persekutuan, Malaysia Tel: (03) 2780 3890/3891 Fax: (03) 8082 1900 E-mail: [email protected]

WEBSITE

http://www.solutionholdings.com.my

PRINCIPAL BANKERS

Malayan Banking Berhad Alliance Bank Malaysia Berhad

AUDITORS

Folks DFK & Co. Chartered Accountants 12th Floor, Wisma Tun Sambanthan No.2, Jalan Sultan Sulaiman 50000 Kuala Lumpur

SHARE REGISTRAR

Tricor Investor & Issuing House Services Sdn Bhd Unit 32-01, Level 32, Tower A Vertical Business Suite Avenue 3, Bangsar South No. 8, Jalan Kerinchi 59200 Kuala Lumpur Tel. No.:(03) 2783 9299 Fax No.: (03) 2783 9222

STOCK EXCHANGE LISTING

ACE Market of Bursa Malaysia Securities Berhad Stock Name: SOLUTN Stock Code : 0093

Annual Report 2018•SOLUTIONENGINEERINGHOLDINGSBERHAD|003 >


directors’ profile(cont’d)

DatukDr.SyedMuhamad,a Malaysian aged 72, is our Independent Non-Executive Chairman and he was appointed to the Board on 28 May 2005. He graduated with a Bachelor of Arts (Hons.) from University of Malaya in 1971. He obtained a Masters of Business Administration from the University of Massachusetts, USA, in 1977 and proceeded to obtain a PhD (Business Management) from Virginia Polytechnic Institute and State University, USA in 1986. In 2005, he obtained a Bachelor of Jurisprudence (Hons.) from the University of Malaya. He obtained the Certificate in Legal Practice in 2008 from the Malaysian Professional Legal Board. He was admitted as an Advocate and Solicitor of the High Court of Malaya in July 2009 and obtained the Master of Law (Corporate Law) from Universiti Teknologi MARA in December 2009. In June 2011, he became a member of The Chartered Institute of Arbitrators, United Kingdom and became the Fellow of the Institute in May 2012.

He started his career in 1973 as Senior Project Officer, School of Financial Management at the National Institute of Public Administration (INTAN) and held various positions before his final appointment as Deputy Director (Academic). In November 1988, he joined the Ministry of Education as Secretary of Higher Education and thereafter assumed the post of Deputy Secretary (Foreign and Domestic Borrowing, Debt Management), Finance Division of Federal Treasury. From 1993 to 1997, he joined the Board of Directors, Asian Development Bank, Manila, Philippines, first as Alternate Director and later as Executive Director. Datuk Dr. Syed Muhamad then joined the Ministry of Finance as Secretary (Tax Division) and subsequently became the Deputy Secretary General (Operations) of Ministry of Finance. Prior to his retirement, Datuk Dr. Syed Muhamad was Secretary General, Ministry of Human Resources.

During his career, he wrote and presented many papers relating to human resources development. His special achievement was his dissertation “A Study on Board of Directors and Organizational Effectiveness” which was published by Garland Publisher, Inc. of New York in 1991.

Datuk Dr. Syed Muhamad is also a Director of Euro Holdings Berhad, BSL Corporation Berhad, ACR ReTakaful SEA Berhad and Malakoff Corporation Berhad. He is also the Chairman of Sun Life Malaysia Takaful Berhad and Sun Life Malaysia Assurance Berhad. In addition, he holds directorships in a number of private companies.

He does not have any family relationship with any directors and/or major shareholders of the Company. He has no conflict of interest with the Company and has no convictions for any offences within the past ten years.

Datuk Dr. Syed Muhamad Bin Syed Abdul KadirMalaysian, aged 72, MaleIndependent Non-Executive Chairman

Malaysian, aged 71,Independent Non-Executive Chairman

Lim Yong Hew

Malaysian, aged 59, MaleGroup Managing Director

Lim Chiou Kim

Malaysian, aged 47, FemaleExecutive Director


LimYongHew, a Malaysian aged 59, is our founder and Group Managing Director of the Solution Group. He was appointed to the Board on 28 May 2005. He graduated with a Bachelor of Engineering in Electrical Engineering (Hons) majoring in Control and Instrumentation from Salford University in 1982. He started his career with George Kent Malaysia as a Project Engineer. He then joined Foxboro Malaysia in 1985 as a Sales Engineer. He left the company to establish Solution Engineering Sdn Bhd (SESB) in 1988 where he took on the position of Managing Director. With his extensive business experience, Mr Lim has been the main driving force of the Group. His responsibilities cover various aspects of the Group’s overall business development and corporate strategy.

He is the uncle of Mr. Lim Hai Guan and Ms. Lim Chiou Kim. He has no conflict of interest with the Company and has no convictions for any offences within the past ten years.

LimChiouKim,a Malaysian aged 47, is our Executive Director and she was appointed to the Board on 28 May 2005. She graduated from Tunku Abdul Rahman College with a Bachelor of Science in Information Systems from Campbell University, USA in 1996. She started her career with Solution Engineering Sdn Bhd since 1996 as a System Analyst. She was promoted to Software Engineering Manager in 2001. In 2010, she was appointed as the Chief Operating Officer. She is responsible for the Software Development Department and Human Resource Planning. She oversees the general administration. She is also responsible for the overall Group’s operation and support the Group Managing Director in formulating and implementing the policies and corporate development plans of the Group.

She is the niece of Mr. Lim Yong Hew and sister of Mr. Lim Hai Guan. She has no conflict of interest with the Company and has no convictions for any offences within the past ten years.



Dato’Dr.MohdNazleeKamal,PhD., a Malaysian aged 56, is our Deputy Group Managing Director and he was appointed to the Board on 29 August 2018. He is also serving as Managing Director of One Green Solution Sdn Bhd and a Director of Solution Bioforce Sdn. Bhd. He holds a PhD. in Chemical Engineering from University of Queensland, Brisbane, Australia, a M.App.Sc in Biotechnology from University of New South Wales. Australia, and a Bachelor of Science in Chemical Engineering from Oregon State University, Oregon, USA. Dato’ Mohd Nazlee has over 30 years of diverse industry background in strategy, biotechnology and life sciences which including 15 years of executive management experience. He possesses strong expertise in both technical and business aspects in these areas. With the recognition of his wide industrial leadership, he played a pivotal role in the formulation of Malaysia’s National Biotechnology Policy in 2005. Using his exceptional expertise and network, he provided consultation to various organisations and small medium enterprises within the industry. Dato’ Dr. Mohd Nazlee served as a CEO of Bioeconomy Corporation (previously known as BiotechCorp) from 2011-2016. He played a leadership role in the rebranding and repositioning of the company to facilitate the nation’s trajectory into the World Bio-economy arena. He was also invited to serve on the Global Bio-economy Council in Berlin from 2015-2017.

Dato’ Dr. Mohd Nazlee was the founding CEO of Inno Biologics Sdn Bhd and the Group Managing Director of Inno Bio Ventures Sdn Bhd from 2002-2011. The main areas of focus for Inno Bio Group of Companies are biopharmaceutical manufacturing and cell-based diagnostics. Dato’ Dr. Mohd Nazlee has a wealth of experience encompassing marketing and technical portfolio with multinational companies such as Amersham Biosciences, Sartorius and B. Braun Biotech. Dato’ Dr. Mohd Nazlee served 10 years of tenure as a lecturer at the University of Technology Malaysia (1986-1996). He was responsible for the development of Bioprocess Engineering programme at the University. He invented the “External Spinfilter” now marketed by Sartorius BBI Systems (Patent No. PI9701436MY-131798-A). He has assumed leadership roles and also served on the boards of MAGIC, FRIM, NIBM, Bioeconomy Corporation (previously known as Biotech Corporation), Inno Biologics, and Inno Bio Ventures. He was also the Chairman of Bio-Xcell.


Lim Chiou Kim

Malaysian, aged 46,Executive Director

Dato’ Dr. Mohd Nazlee Kamal

Malaysian, aged 56, MaleDeputy Group Managing Director



Mohd Shahrin bin Saparin @ Abd Rahman

Malaysian, aged 56, MaleExecutive Director

LimHaiGuan, a Malaysian aged 52, is our Executive Director and he was appointed to the Board on 28 May 2005. He graduated with a Diploma in Mechanical and Manufacturing Engineering from Tunku Abdul Rahman College in 1990. He started his career with Solution Engineering Sdn Bhd (SESB) as a project engineer. Subsequently, he was promoted to Equipment Engineering Manager. In year 2013, he was appointed the Managing Director of SESB. He is leading the equipment production and project implementation teams. He is responsible for the product development and quality control. He is the Quality Management Representative in charge of formulating and implementing the quality management system of SESB in compliance with ISO 9001:2008.

He is the nephew of Mr. Lim Yong Hew and brother of Lim Chiou Kim. He has no conflict of interest with the Company and has no convictions for any offences within the past ten years.

Lim Hai Guan


Lim Hai Guan

Malaysian, aged 52, MaleExecutive Director

MohdShahrinbinSaparin@AbdRahman, a Malaysian aged 56, is our Executive Director and he was appointed to the Board on 28 May 2005. He graduated with a Bachelor of Science in Chemical Engineering from University of Southern California (USA) in 1987. He started his career with Lasera Systems Sdn. Bhd as a Sales and Project Engineer in Scientific Equipment Division where he was responsible for the marketing of laboratory and scientific products to various local universities. He was subsequently appointed as a Project Engineer responsible for the management of supply of locally fabricated engineering education equipment to local universities. He joined Solution Engineering Sdn Bhd in 2000 as a R&D Manager responsible for equipment research and development. He is now the Managing Director of Solution Bioforce Sdn Bhd.




Low Wei Ngee

Malaysian, aged 47, MaleIndependent Non-Executive Director

LowWeiNgee, a Malaysian aged 47, is our Independent Non-Executive Director and he was appointed to the Board on 28 May 2005. He graduated from Monash University, Australia in 1993 with a Bachelor of Business, Accounting and received his Certificate in Asian Corporate Finance from INSEAD, France in 1999. He is a member of Malaysian Institute of Accountants. He started his career with an international public accountant firm in Kuala Lumpur. Thereafter, he joined the commercial world where he spent the last 20 years in real estate, hospitality, gaming, science park management, retail, venture capital, information technology and education sectors, both locally and overseas. Currently he is a private investor managing his personal portfolio of assets.


ZainuddinBinMuhamad, a Malaysian aged 71, is our Independent Non-Executive Director and he was appointed to the Board on 12 June 2014. He studied Electrical Engineering and later did Diploma in Business Management. He started his career with Chemical Company Of Malaysia in 1968. He received detailed training in principles of process measurements and control instrumentation. He joined Foxboro Singapore in 1974 as Instruments Engineer, supervising installation, hook-up and commissioning instrumentation of grass-root plants in Malaysia and Indonesia. He returned to Malaysia and set up Foxboro Malaysia Sdn Bhd of which he became the General Manager for Foxboro Malaysia, managing the whole operation and responsible for setting up and supervising Foxboro Representatives in East Malaysia and Brunei. He joined Protek Consultants Engineers in 1988 as an Instruments Engineer, responsible for conceptual design of a large Compression Platform for SSB. He was then promoted to Senior Instrument Engineer and responsible for detailed designs and engineering of several drilling platforms instrumentation, controls and shutdown systems. He joined Delcom Services Sdn Bhd in 1991 as a Senior Manager responsible for Daniel Metering Systems. He was also an Operation Manager for Eckardt/Delcom joint venture. He joined Wehaya Controls Sdn Bhd in 1996 as a Managing Director of the company and responsible for sales and support of Valtek control valves and P+F products. He then joined Regeltec Engineering (M) Sdn Bhd as a Managing Director of the company and responsible for the company operation. From year 2001 to 2017, he was an Executive Director of Trisystems Flow Products Sdn Bhd responsible for the company’s operation, which mainly centered around securing and implementing Custody and Allocation metering projects.


Lim Chiou Kim


Zainuddin Bin Muhamad

Malaysian, aged 71, MaleIndependent Non-Executive Director


FINANCIALHIGHLIGHTS

FIVE YEAR FINANCIAL HIGHLIGHTSRM’000/Year Ended 31 December

Revenue

Net profit/(loss) attributable to shareholders

Cash position

Earnings/(loss) per share (sen)

Net Assets Value per Share (RM)

Total equity

No. of shares (’000)

Profit/(loss) before tax

Profit/(loss) after tax

2014

35,897

3,661

9,792

1.96

0.14

27,268

196,374

5,398

3,862

2015

29,073

5,416

11,996

1.83

0.16

32,343

199,815

8,450

5,730

2017

24,334

7,978

15,169

2.61

0.14

43,793

306,455

9,948

8,381

2018

13,067

(3,301)

16,868

(1.08)

0.13

39,651

306,455

(3,550)

(3,477)

2016

35,362

7,652

8,604

2.53

0.12

38,235

304,336

10,864

7,945

1.96

1.83

35

,36

2

24

,33

4

13,0

67

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

-

(2,000)

(4,000)

2,000

4,000

6,000

8,000

10,000

12,000

0

0.05

0.10

0.15

0.20

-

0.50

(0.50)

1.00

(1.00)

1.50

(1.50)

2.00

2.50

3.00

REVENUE (RM’OOO)

NET ASSETS VALUE PER SHARE (RM)

‘2014 ‘2015 ‘2016 ‘2017 ‘2018

‘2014 ‘2015 ‘2016 ‘2017 ‘2018 ‘2014 ‘2015 ‘2016 ‘2017 ‘2018

35

,89

7

29

,073

2.53

2.6

1

(1.0

8)

‘2014 ‘2015 ‘2016 ‘2017 ‘2018

(3,5

50

)

(3,4

77

)

5,3

98

3,8

62

8,4

50

5,7

30

10,8

64

7,9

45

9,9

48

8,3

81

EARNINGS PER SHARE (SEN)

PROFIT (RM’000)

Profitbefore tax

Profitafter tax

0.14

0.16

0.12

0.14

0.1

3

FINANCIALHIGHLIGHTS

Annual Report 2018 • SOLUTION ENGINEERING HOLDINGS BERHAD | 011 >

The aim of Management Discussion and Analysis is to provide shareholders an overview of Solution Engineering Holdings Berhad’s (“The Company” or “The Group”) business operations, financial reviews for the financial year ended 31 December 2018 and future prospects.

OVERVIEW OF GROUP’S BUSINESS AND OPERATIONS

Company Profile

The Group is involved in five (5) core business segments, namely:-

1) Engineering Equipment; Design and development of equipment and software for engineering education, research and Technical and Vocational Education and Training (“TVET”) in chemical, mechanical, electrical, civil, control engineering and renewable energy under SOLTEQ brand;

2) Industrial Automation; Provision of industrial automation solutions, currently specialising in water works such as remote monitoring system for dams, tidal control system for irrigation and automation system for flood mitigation under SOLWEB brand;

3) Industrial Lubricants; Production and distribution of industrial lubricants under SOLMAX. The industrial lubricants also supply to companies to resell in their own labels and brands;

4) Biotechnology; Provision of laboratory and industrial biotechnology solutions such as design and development of equipment and processes for the manufacturing of products used in the biotechnology and pharmaceutical industries under SOLTEQ brand; and

5) Metal Fabrication and Assembly; To provide fabrication for pressurized vessels, heat exchangers, storage tanks, structures and process skids assembly.

The Group has 3 manufacturing sites, 2 located in Selangor and 1 in Kuala Lumpur.

Vision and Mission

The Group aims to become the most admired Malaysian technology company. Our mission is to maximize the stakeholder value. To achieve the vision and mission, we are determined to meet the following objectives:

1) Double digits percentage sales growth every year2) Further expand the network of local agents to cover the whole domestic market3) Target of 50 international agents by the year of 20204) Prompt delivery of products and services, and provision of effective and affordable after-sales services5) Continue to implement programmes and training to develop human capital competencies and skills

FINANCIAL REVIEW

The Group’s revenue for the year ended 31 December 2018 recorded a decrease of 46.3% from RM24.3 million in 2017 to RM13.1million, principally attributable to lower value of jobs completed during the year in its core business of engineering equipment manufacturing. The revenue of this business segment has reduced from RM18.1 million in 2017 to RM5.6 million. The revenue from industrial automation projects had also decreased from RM4.3 million in 2017 to RM2.5 million. The revenue of the other 3 business segments; Industrial lubricants, Biotechnology and Metal Fabrication and Assembly had increased from RM1 million to RM1.5 million, RM0.9 million to RM2.3 million and RM1 million to RM1.2 million respectively.

The Group’s cost of sales for the financial year of RM10.1 million decreased by RM4.0 million against RM14.1 million in 2017, consistent with the revenue decline in educational engineering equipment and automation business segment.

Other Income for the financial year was RM0.59 million, it had decreased by RM6.21 million as compared to RM6.8 million in 2017. In 2017, there was a gain on disposal of property of RM5.8 million (before real property gain tax of RM0.25 million).

MANAGEMENT DISCUSSION AND ANALYSIS

< 012 | SOLUTION ENGINEERING HOLDINGS BERHAD • Annual Report 2018

FINANCIAL REVIEW (CONT’D)

The Group’s had recorded a deficit of RM3.55 million in 2018, as compared to the profit before tax of RM9.9 million in 2017. The loss was due to low order book.

The Group’s effective tax rate during the financial year was 24%. The 15.7% low effective tax rate in the preceding year mainly attributable to gain on disposal of property not subjected to corporate tax, and reversal of over-provision of deferred taxation liability.

As at 31 December 2018, the Group’s total assets were registered at RM49.7 million, a decreased of RM0.5 million as compared to RM50.2 million in 2017. The plant, property and equipment has increased from RM9.7 million to RM14.8 million, this was mainly attributable to capital expenditures incurred for the construction of the new office and workshop at Technology Park Malaysia (“TPM”) which had completed during the year. However the increase in PPE had been compensated by the lower contract assets of RM3.1 million in 2018 as compared to RM8.3 million in 2017.

The total liabilities as at 31 December 2018 was RM10.0 million, which was higher by RM3.6 million, mainly attributable to new loans drawdown during the year for financing of capital expenditure.

The Group’s net assets as at 31 December 2018decreased by RM4.1 million to RM39.7 million from RM43.8 million recorded as at 31 December 2017.

Liquidity and Capital Resources

The cash and cash equivalents as at 31 December 2018 stood at RM16.9 million in comparison to RM15.2 million as at 31 December 2017.

The RM16.9 million cash and cash equivalents in FY2018, comprised deposits with money market fund, fixed deposits with licensed banks, cash and bank balances. As at 31 December 2018, fixed deposits with licensed banks amounting to RM7.3 million are placed under lien to secure credit facilities granted to the Group.

The Group’s other investment in trust funds increased by RM1.4 million, from RM3.3 million in FY2017 to RM4.7 million in FY2018.

In FY2018, RM4.8 million in capital expenditure was incurred in relation to the construction of new office and workshop building on subleased land at TPM. This capital expenditure was partly financed by bank term loan drawdown during the year. As a result, total borrowings has increased by RM2.9 million from RM3.6 million in FY2017 to RM6.5 million in FY2018.

The nature and the amount of capital commitments of the Group are mentioned in the notes to audited financial statements.

Gearing Ratio

The gearing ratio of the Group as at 31 December 2018 was 16.5% compared to 8.2% as at 31 December 2017. The increase in gearing ratio is due to bank borrowing undertaken for the construction of the Group’s new facility at TPM. This ratio is calculated as total borrowings divided by total equity.

management discussion and analysis(cont’d)


BUSINESS AND OPERATIONAL REVIEW

The Group was affected by the uncertain and challenging economics condition both locally and globally in 2018, with the poor business sentiment, the Group recorded a loss of RM3.5 million. The Group’s revenue was dropped drastically from RM24.3 million in 2017 to RM13.1 million in 2018. During the financial year, the Group reported the biggest loss in the first quarter but gradually recovered in the subsequent quarters, the loss in the last quarter was attributable to the impairment made for the new MFRS9.

During the financial year, the Group revenue was contributed from the 5 business segments as follows:

Business Segment % of Revenue Contribution to The Group

Engineering Equipment 43

Industrial Automation 19

Biotechnology 17

Industrial Lubricants 12

Metal Fabrication and Assembly 9

Engineering Equipment Segment

The Group is a local market leader in manufacturing of equipment for engineering education, research and TVET. The equipment are supplied to more than 60 public and private universities, university colleges, polytechnics, skilled training centers, advanced technical institutions and colleges locally. The Group also exports equipment to overseas countries in Asia, Middle East, Africa and Australia.

2018 continues to be a challenging year for engineering equipment sales. The major reason for the reduction was the decline in major job prospects in the market with similar order size the Group had received in preceding years. In addition to that, the change of government following the Malaysian general election 2018 has paused several sizable projects that we were working on. We were also experiencing stronger competition in the Malaysian market due to more players entering the industry.

To further strengthen the Group’s position in this segment, the Group has expanded all engineering equipment under our product range with the internet of things (IOT) capabilities in line with Malaysian government push for accelerating adoption of industry 4.0.

The Group continues to make concerted marketing efforts to expand its overseas market in the Southeast Asia, South Asia, Middle East, Africa and Australia such as by way of participation in various international trade fairs to promote the SOLTEQ brand.

Industrial Automation Segment

The Group has more than 25 years of experiences in automation and system integration. We provide solutions for process automation to factory automation Cloud computing and industry internet of things (“IIOT”) are amongst the drivers for the transformation of Industry 4.0. We are using cloud computing to develop web based SCADA under the brand of SOLWEB.

The Group is promoting its cloud computing and IIOT products through business networking, sales meeting and participation in exhibitions. However, the saleswas not favourable due to steep competition in the industry, as well as due to the challenging economics condition, both government and public sector were prudent in spending.

The Group’s plan to export cloud computing and IIOT products has not achieved good result, the biggest challenge the Group faced was to get competent cloud computing engineer. Moving forward, we will be focusing more on the domestic market.



Industrial Lubricants Segment

The Group’s sales of SOLMAX industrial lubricants had increased from RM1 million in 2017 to RM1.5 million in 2018 which is in line with the Group forecast. The Group developed a new premium series which is under market testing now. It is expected to be rolled out commercially in the second half of 2019.

The Group’s lubricants and hydraulic oil are gaining good acceptance from the customers, 80% of the customers repeated their order after using our products. The Group expecting the sales will continue to grow in double digits in 2019.

The Group also provides OEM blending and packaging services to its customers.

Biotechnology Segment

The Group has successfully embarking its expansion into food, pharmaceutical and biotech industries. During the financial year the Group was awarded several contracts which include new equipment like the bio-ingredient reactor, Supercritical Fluid Extraction and advanced Milk and Juice Pasteurisation System. Strategic alliances and new industrial customers are also critical in contributing to overall growth. At the same time, measures are taken to mitigate risk and uncertainties arising from pricing pressures, value-based contracting, geopolitical climate and policy changes.

Expansion Plan

The Group is undertaking continuous product and services improvement and expansion efforts to provide good quality products and enhanced value-added after sales services and supports to its customers. This includes the following:-

• UndertakingcontinuousR&Dactivitiestodevelopnewproductsandproductranges;• ContinuousR&Dactivitiesfortheimprovementofitsproductfeatures,functionalitiesandusage;and• Expandingtheprojectmanagement,maintenanceandservicingservicestocustomersbywayofincreasingthestaff

size and improve the employees’ competencies and skills to provide comprehensive after-sales, repair and maintenance services to customers. This also includes expanding its range of engineering services to include the provision of contracted maintenance services.

The Group has moved into the new office and assembly facility at Technology Park Malaysia. The facility has state of the art training facilities for both local and overseas customers. The facility has been occupying since September 2019. This facility is expected to enhance the Group corporate image and boost our local and international standing in the technical training industry.

The Group had successfully organised a SOLTEQ engineering equipment international sales conference at the new facility at TPM in third quarter of 2018.

During the year, the Group continues to explore merger and acquisition opportunities in companies in the same industry but with different product ranges, in order to further strengthen its position in the market.



PROSPECT FOR THE GROUP

Engineering Equipment Segment

The Malaysian Government is putting a lot of emphasis on education in its budget 2019. The Education Ministry receives the largest funding allocation for year 2019 at RM60.2 billion, or 19.1% of the entire budget.

From the above allocation, RM206 million will be allocated to develop and prepare training programmes at polytechnics and community colleges. RM30 million will go towards setting up a Technical Vocational Education and Training fund to create a more competitive environment as well as training programmes to fulfil the industry’s needs. Another RM20 million will be used to increase the competency among the youth through the TVET Bootcamp Programme. Private higher learning institutions will receive RM400 million to fund research and development programmes.

Industrial Automation Segment

The Government is putting effort to promote high-technology industries and minimise dependency on manpower. In order to move up the value chain and increase productivity, companies are encouraged to adopt advanced technology to automate their process, however due to the poor business sentiment most of the companies are prudent in spending.

The transformation to Industry 4.0 will need the technology drivers that include simulation, industrial internet of things, horizontal and vertical system integration, cloud computing and others. In despite of these will lead to increase in demand for industrial automation and system integration services, the economics must improve in order for the companies to be willing to invest in implementing automation.

Industrial Lubricants Segment

The number of vehicles continue to grow as the population increasing and the household spending power is getting better. Industrial lubricants is a very competitive business, however the demand is high and it is increasing, therefore it’s viable. The growth of the e-commerce has leaded to the growth of the logistics and transportation sector. These factors combined have led to increased lubricants consumption. The Group expects the lubricants sales will continue to grow.

In order to further increase its sales, the Group will expand its market to East Coast and East Malaysia. The Group also plan to sell its lubricants via direct selling.

TheGroupwillcontinueitsR&Dtodevelopmoreproductstowidentheproductrange.

Biotechnology Segment

In the bio-based industry, the focus today is to use mammalian and microbial systems, fermentation and other clean tech methods to manufacture sustainable products from natural resources, agricultural biomass, biological waste and other low-carbon feedstocks.

Bio-based production process encompasses a value chain from bio-based pharmaceutical, food supplements, agriculture through the manufacture of consumer goods that provides an alternative to petroleum’s value chain and brings environmental, economic and other benefits. The bio-based economy can potentially generate new markets for agricultural producers, boost innovation in domestic manufacturing, and stimulate sustainable economic growth.

The bio-based economy and industrial biotechnology are poised for accelerated growth in the 21st century; government policies can significantly improve this growth by identifying and supporting all segments of the value chain.



Biotechnology Segment (Cont’d)

Global bio-based chemicals market is expected to grow with a 16.67% CAGR over the forecast period of 2019-2027. Several factors that are responsible for the advancement of the market are:

• Governmentpoliciestowardsbusinesssustainabilityprograms• Intensivefluctuationsinthecrudeoilprices• Highmarketprobableofbio-basedchemicalproducts• Usageofeco-friendlyproduct• Escalatingdemandofbio-basedproductsamongsttheendusers

DIVIDEND POLICY

Our Board is adopting a dividend payout policy of not less than 0.5 cent dividend shall be declared per financial year, subject to yearly net profit after tax of not less than RM4.8 mil and necessary approval from the shareholders being obtained. This dividend policy shall be reviewed from time to time by the Board and the Audit Committee. From FY2014 to FY2017, the Group has been rewarding its shareholders with a 1 cent declared dividends.



The Group recognises the importance of how economy, environment and society (“EES”) could impact its sustainability and how its businesses could impact the EES. In order to be a sustainable organisation, the Group is always mindful of conducting businesses that are economically viable, environmentally friendly and socially responsible.

To show the Group’s commitment in practicing sustainability policy, the Group had renamed its Audit committee to Audit and Risk Management committee. It’s the responsibility of the committee and the Management to identify material sustainability matters, develop sustainability policy to manage and deal with the matters based on both of the internal and external sources, i.e. from the organization point of view and feedback from the stakeholders.

Human Resource Development and Management

The Group needs talent in all its business segments, especially in the area of research and development. Looking for talent and competent staff are always challenging. The Group offer internship to students from various courses, about 30 placements are offered every year, this is part of the Group sustainability policy to support the Malaysian education system in human capital development, at the same time, which will also facilitate the Group in identifying the right talent to fit the available positions.

The Group has always acknowledge employees as its most valuable asset. The Group had moved to a new 3 storey office building in September 2018. The Group strives to provide a conducive working environment to its employees, the new office is equipped with training facility, lift, unlimited internet access, VOIP system and the necessary office equipment. The new office building is located in a gated and guarded park with ample parking space.

The Group is committed to ensure not only a safe but also a healthy workspace for its employees, quality water filters are installed to provide good quality drinking water and smoking is disallowed within the workspace. The Group provides medical benefits to employees; employees are covered by Group Medical Insurance.

The Group send employees to attend relevant workshop, seminar and training to acquire new knowledge, update on new technology and to improve skills and competency of its employees in order to perform their duties more effectively.

Social and Environmental Responsibilities

The Group is committed in protecting the environment, reducing the pollution and conservation of the revenue natural resources. The Group’s new office building is installed with a rainwater harvesting system which helps to reduce the demand on the municipal treated water supply, save cost and as a backup to the water supply for production use. Harvesting and storing rainwater can also reduce erosion and pollution to rivers, lakes, and oceans by reducing the amount of storm water runoff. Rainwater harvesting is a sustainable water management practice that can be implemented by anyone to be environmentally responsible and promote self-sufficiency.

The Group will also invest and install a solar photovoltaic (“PV”) system at its rooftop. Solar energy is a renewable resource, when we use solar energy to generate electricity we do not deplete the earth of its natural resources, i.e. coal, coke, natural gas and crude oil at the same time also help the Group to save its electricity bills. Electricity produced by PV cells is clean and silent with no carbon release or water pollution, this is in line with the government initiative of reducing the carbon footprint. With the solar PV system it reduces the chances of electricity shortage to the Group’s operation and production disruption which can causes production loss.

The Group also sees helping others to install solar PV system is a viable business opportunity; the Group has obtained approval from SEDA to be a registered system integrator for solar PV system installation. The benefits of pursuing solar business other than saving the environment will also creating a new revenue stream for the Group. The Solar PV system at the rooftop will be used as a showcase.

Social Welfare

During the financial year, the Group had made some contributions to its customers and the society in the form of sponsorship and donations namely for purposes of research seminar, charities, sports, and cultural events.

SUSTAINABILITY STATEMENT


CORPORATE GOVERNANCE OVERVIEW STATEMENT

The Board of Directors (“the Board”) of Solution Engineering Holdings Berhad (“the Company” or “Solution Engineering”) is committed in ensuring good corporate governance practices are adopted within the company and its subsidiaries (“the Group”), as set out in the Malaysian Code on Corporate Governance 2017 (“the Code”) and Rule 15.25 of the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) in discharging its duties and responsibilities to safeguard and enhance shareholders’ value and financial performance of the Group.

ESTABLISH CLEAR ROLES AND RESPONSIBILITIES

Roles and Responsibilities of the Board

The Board plays an important role in formulating and charting its strategic direction, setting out short and long terms plans and objectives, overseeing and reviewing the Group’s business operation and performance within a systematic and controlled environment while ensuring that it complies with the principles of good corporate governance. In discharging its fiduciary and leadership functions, the Board has assumed the following throughout the year:

• ReviewingandadoptingstrategiccorporateplansandprogramsfortheGroup• Reviewingtheriskmanagementframework• Approvingacquisitionsanddisposalsofnewventuresandinvestments• Approvingmajorcapitalinvestmentsandmaterialagreementsincludingtheacquisitionanddisposalsofproperties• Identifyingprincipalriskandtoensureimplementationofappropriateinternalcontrolsystemandmitigationmeasures

to manage these risks• OverseeingandevaluatingtheconductoftheGroup’sbusinesses• ReviewtheadequacyandintegrityoftheGroup’sinternalcontrolsystemandmanagementinformationsystem• AnyothermatterswhicharerequiredtobeapprovedbytheBoardpursuanttotherelevantrules,lawsandregulations

Further, the Executive Directors are responsible for leading and managing the daily operational matters of the Group, including the co-ordination and implementation of policies and strategic decisions for the expansion of the business, while the role of the Independent Non-Executive Directors are particularly important in providing unbiased and independent views, advice and judgments to ensure that the interests of minority shareholders and the general public are given due consideration in the decision-making processes of the Board.

Access to and Supply of Information

All Directors have unrestricted access to information of the Group and on an on-going basis, the Directors interact with the management team to seek further information, updates or explanation on any aspect of the Group’s operations or businesses. The Directors have access to the advice and services of the Company Secretary and may seek external independent professional advice on any matter connected with the discharge of their responsibilities as they may deem necessary and appropriate, at the Company’s expense, to assist them in their decision-making.

Prior to each Board meeting, all Board members are provided with the agenda and information necessary for deliberation at the Board meeting, for them to review. The proceedings of all Board meetings are duly minuted and kept by the Company Secretary at the registered office of the Company. The Company Secretary attends all Board meetings and ensures that the Board procedures are followed and that applicable laws and regulations are complied with as well as highlighting all issues which he/she feels ought to be brought to the Board’s attention.


STRENGTHEN COMPOSITION

Board Composition

The Board of Directors of the Company comprises eight (8) members. The composition complies with the ACE Market Listing Requirements of the Bursa Malaysia Securities Berhad which is as follows:

• One(1)IndependentNon-ExecutiveChairman• Two(2)IndependentNon-ExecutiveDirectors• Five(5)ExecutiveDirectors

The Board has within it, professionals drawn from various backgrounds who are committed to business integrity and professionalism in all their activities. The Board also includes a lady director even though we do not have a formal policy on gender diversity; bringing in-depth and diversity in experience, expertise and perspectives to the Company’s business operation. A brief profile of each member is set out on pages 5 to 9.

Establish of Nomination & Remuneration Committee

TheNomination&RemunerationCommitteeconsistsofthreemembers,allofwhomareindependentdirectors,hasassumedthe following responsibilities throughout the year;

• ToreviewtheappropriatesizeandbalanceoftheBoard,includingappropriatenessofnon-executiveparticipation.

• Toreviewtherequiredmixofskills,experience,knowledgeandresponsibilitiesofBoardofDirectors.

• TorecommendcandidatesforappointmenttotheBoardandBoardCommittees.

• ToassisttheBoardinestablishingproceduresforannualassessmentoftheeffectivenessoftheBoardasawholeandeach Board Committee (including its size and composition), as well as the contribution of each individual Director.

• Toreviewtheremunerationpackage,termsofemployment,rewardstructureandfringebenefitsforExecutiveDirectorsand key positions.

Duringthefinancialyearended31December2018,thereweretwoNomination&RemunerationCommitteemeetingsheldanddetails of the member’s attendance are set out as follows:-.

Nomination & Remuneration Committee Establish of Nomination & Remuneration Committee

Datuk Dr. Syed Muhamad bin Syed Abdul Kadir (Chairman, Independent Non-Executive Director)

1/2

Low Wei Ngee (Member, Independent Non-Executive Director)

2/2

Zainuddin bin Muhamad (Member,Independent Non-Executive Director)

2/2

corporate governance overview statement(cont’d)


Establish Formal and Transparent Remuneration Policies and Procedures’ Remuneration

TheNomination&RemunerationCommittee reviews,assessesand recommends to theBoard the remunerationpackagesof the Executive Directors in all forms, with other independent professional advice or outside advice as necessary. None of the Executive Directors participated in any way in determining their respective remuneration. The remuneration of Executive Directors is structured to link rewards to corporate and individual performance.

TheNomination&RemunerationCommitteealsoreviews,assessesandrecommendstotheBoardtheremunerationpackagesof the Non-Executive Directors based on their contribution to the Group in terms of knowledge, responsibility and experience. The remuneration of Non-Executive Directors is determined at levels, which will enable the Company to attract and retain such directors with the relevant experience and expertise to contribute to the success of the Group.

The details of the remuneration of Directors of the Company comprising remuneration received/receivable from the Company and subsidiaries during the financial year ended 31 December 2018 are set out as follows:

Amount received by Directors from the Company and its subsidiaries are set out in the following table:-

Type of remuneration

Executive Directors

RM

Independent Non-Executive

Directors RM

TotalRM

Fees 90,000 98,400 188,400

Salaries and other emoluments 1,297,909 – 1,297,909

TOTAL 1,387,909 98,400 1,486,309

The number of Directors whose total remuneration during the financial year fell within the following bands is analysed below:

Range of remuneration

Number of Directors

ExecutiveDirectors

IndependentNon-Executive

Directors

Below RM50,000 – 2

RM50,001 to RM100,000 – 1

RM100,001 to RM150,000 – –

RM150,001 to RM200,000 1 –

RM200,001 to RM250,000 1 –

RM250,001 to RM300,000 2 –

RM300,001 to RM350,000 – –

RM350,001 to RM400,000 – –

RM400,001 to RM450,000 1 –

RM450,001 to RM500,000 – –

RM500,001 to RM550,000 – –

The aggregate remuneration paid or payable to all Directors of the Company and its subsidiaries during the financial year ended 31 December 2018 is listed on named basis with the detailed remuneration breakdown is available on Practice 7.1 of Corporate Governance Report.



REINFORCE INDEPENDENCE

Annual Assessment of Independent Directors

TheNomination&RemunerationCommitteeandtheBoardhaveupontheirannualassessment,concludedthateachofthe3 Independent Non-Executive Directors continue to demonstrate conduct and behaviour that are essential indicators of independence.

The Independent Non-Executive Directors are not employees and they do not participate in the day-to-day operation of the Group. They are free from any business or other relationship which would materially interfere with the exercise of their independent judgments. They bring an external perspective, constructively challenge and help in developing proposals on strategy, scrutinize the performance of Management in meeting approved goals and objectives, and monitor the risk profile of the Group’s business and the reporting of quarterly business performances.

Both Datuk Dr. Syed Muhamad and Low Wei Ngee who have served on the Board for 13 years by 27 May 2018 remain objective and independent in expressing their views and in participating in deliberations and decision making of the Board and Board Committees. The length of their services on the Board does not in any way interfere with their exercise of independent judgment and ability to act in the best interests of the Group. Their re-elections to the Board are therefore to be sought at the forthcoming 15th AGM.

FOSTER COMMITMENT

Time Commitment and Board Meetings

The Board is mindful on the importance of time commitment in attending to the matters of the Group in general, including attendance at the meeting of the Board, Board Committees and other types of meetings.

The Board has at least five (5) regularly scheduled meetings annually to review the operations of the Group and to approve the quarterly and annual financial statements, with additional meetings convened as and when necessary.

During the year, the Board of Directors has met five (5) times and details of the Directors’ attendance are set out as follows:

Directors Attendance

Datuk Dr. Syed Muhamad bin Syed Abdul Kadir (Chairman and Independent Non-Executive Director)

4/5

Lim Yong Hew (Group Managing Director) 5/5

Lim Hai Guan (Executive Director) 5/5

Lim Chiou Kim (Executive Director) 5/5

Mohd Shahrin Bin Saparin @ Abd Rahman (Executive Director) 5/5

Low Wei Ngee (Independent Non-Executive Director) 4/5

Zainuddin bin Muhamad (Independent Non-Executive Director) 5/5

Dato’ Dr. Mohd Nazlee bin Kamal (Deputy Group Managing Director)[Appointed on 29/08/2018]

1/1



Appointments to the Board and Re-election of Directors

In accordance with the Company’s Articles of Association, at least one-third (1/3) of the directors shall retire from office, at least once in three (3) years, but shall be eligible for re-election at the Annual General Meeting. The Board is satisfied that the Directors who required standing for re-election at the forthcoming AGM continue to demonstrate the necessary commitment to be fully effective members of the Board.

Directors’ Training

The Board recognises the importance of the training needs for its members to further enhance their skills and knowledge on relevant new laws and regulations to keep abreast with the latest developments. Those training programs enable them discharge their duties effectively.

During the financial year, members of the Board had attended relevant training programmes to enhance their knowledge which they had collectively or individually considered as benefit in discharging their stewardship responsibilities. Amongst others the seminars and conference attended by one or more Directors during the year are as follows:

• CEOFaculty• SpeakerforLeadershipTalkinUniversitiMalaya• DialogYBMenteridenganIndustriZonTengah&MajlisGraduasiFellowCEO• IslamicFinanceTrainingModuleforBoardofDirector(IF4BOD)withBankNegara.• AuditCommitteeInstitute(ACI)BreakfastRoundtable2018.• FIDEForumonBlockChaininFinancialServicesIndustry.• KhazanahMegatrendsForum2018.• FIDEForum:DinnerTalkwithDr,MarshallGoldsmithinconjunctionwiththelaunchofFIDEForum’s“DNA”ofaBoard

Leader.

The Directors will continue to undergo other relevant training programmes to further enhance their skills and knowledge from time to time.

UPHOLD INTEGRITY IN FINANCIAL REPORTING

Compliance of Financial Statement with Applicable Reporting Standards

The Board strives to present true and fair, comprehensive, balanced and meaningful evaluation and assessment of the Group’s financial performance and prospects through the annual audited financial statements and quarterly interim financial reports to its stakeholders, in particular, shareholders, investors and the regulatory authorities. In preparing the financial statements, the Directors are required to select appropriate accounting policies, consistently applied and supported by reasonable and prudent judgments and estimates. The Directors have responsibility for ensuring that the Company keeps proper accounting records which disclose with accuracy at any time the financial position of the Company which enables them to ensure that the financial statements comply with the Companies Act 2016, the Malaysia Financial Reporting Standards and the Listing Requirements. The Directors also have responsibility for taking such steps as are reasonable to safeguard the assets of the Group for prevention and detection of fraud and other irregularities.

Independence of External Auditors

TheGrouphasestablishedatransparentandprofessionalrelationshipwiththeGroup’sExternalAuditors,MessrsFolksDFK&Co. The Audit Committee has been explicitly accorded the power to communicate directly with them. The External Auditors fill an essential role for the shareholders by enhancing the reliability of the Group’s financial statements and giving assurance of that reliability to users of those financial statements.

In the course of audit of the Group’s financial statements, the External Auditors are invited to attend the Audit Committee meetings to present audit plan and audit findings. The appointment of the External Auditors is subject to the approval of the shareholders at the Annual General Meeting.



RECOGNISE AND MANAGE RISKS

The Board acknowledges their responsibility in maintaining an internal control system that provides reasonable assurance of effective and efficient operations, and in compliance with laws and regulations as well as internal procedures and guidelines. The Board is also responsible for assessing the integrity of financial information and adequacy of the Group’s system of internal control and risk management processes.

Internal Audit Function

The Group’s internal audit function is currently assigned to Total Advisors Sdn Bhd whereby the annual Internal Audit Report was presented to the Audit Committee directly.

Further details of the activities of the Internal Audit functions are set out in the Audit Committee Report.

TIMELY AND HIGH QUALITY DISCLOSURE

The Group observes the Corporate Disclosure Guide and the Listing Requirements issued by Bursa Securities. The Group also acknowledges the need for timely and equal dissemination of material information to the shareholders and the public at large.

The Group announces its quarterly and full year results within the stipulated time frame. The financial statements and other information are circulated and publicly released through BURSALINK, on a timely basis to ensure effective distribution of information concerning the Group.

The Group has also established a web-site at http://solutionholdings.com.my for shareholders and the public to access Group’s information, financial statements, news and recent developments on a timely basis and for feedback.

STRENGTHEN RELATIONSHIP BETWEEN COMPANY AND SHAREHOLDERS

The Board recognizes the importance of transparency and accountability to its shareholders and the need for regular, effective and comprehensive communication with the Company’s shareholders by providing them information of the Group’s business activities, financial performance, material information and corporate developments. Such information is disseminated via annual reports, circulars to shareholders, quarterly financial results and the various announcements made from time to time. All shareholders have the opportunity to participate in discussions with the Board on matters relating to the Group’s operation and performance at the Company’s Annual General Meeting (“AGM”).

The AGM is the principal forum for dialogue and interaction with all the shareholders to raise their concerns pertaining to the issues in the Annual Report, resolutions being proposed and the financial performance and business operations in general. Notice of AGM and annual reports will be sent to all shareholders within the period prescribed by the Company’s Constitution.

Poll Voting at General Meetings

In line with the revised Listing Requirements of Bursa Securities, all resolutions put in the forthcoming annual general meetings will be voted by poll.



The Directors are required to prepare financial statements for each financial year which give a true and fair view of the financial statements of the Company and of the Group at the end of the financial year and of their results and cash flows of the Company and of the Group for the financial year then ended.

In preparing the financial statements for the financial year ended 31 December 2018, the Directors have:

- adopted relevant and appropriate accounting policies and applying them consistently- made judgments and estimates that are prudent and reasonable- ensured applicable accounting standards have been adopted- prepared the financial statements on going concern basis

The Directors have responsibility of ensuring that the Company and the Group keep proper accounting records and that such records are disclose with reasonable accuracy of the financial statements of the Company and of the Group and which enable them to ensure that the financial statements comply with the Companies Act 2016, the Malaysia Financial Reporting Standards and the Listing Requirements.

The Directors have overall responsibilities for taking such steps that are reasonably open to them to safeguard the assets of the Group to prevent and detect fraud as well as other irregularities.

STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RELATION TO THE FINANCIAL STATEMENTS


STATEMENT OF RISK MANAGEMENT AND INTERNAL CONTROL

INTRODUCTION

The Board of Directors of the Group is committed to maintain a sound risk management framework and effective internal controls within the Group to safeguard its assets and shareholders’ investment as recommended under the Malaysian Code on Corporate Governance 2017 (“Code”) and guided by Rule 15.26(b) of the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”), and the Statement of Risk Management and Internal Control: Guidelines for Directors of Listed Issuers which is issued by the Taskforce on Internal Control with the support and endorsement of the Exchange. With the approval of the Board of Directors (“the Board”), Solution Engineering Holdings Berhad (“Company”) is pleased to provide the following statement on the state of internal control of the Company and its subsidiaries (“Group”) :-

BOARD RESPONSIBILITY

The Board acknowledges its overall responsibility in maintaining a sound risk management framework and system of internal control in safeguarding the shareholders’ investments and the Group’s assets, and for reviewing the adequacy and integrity of the system which not only covers financial controls but also operational and compliance controls and risk management.

The Board confirms that there is an ongoing process of identifying, evaluating, and managing the significant risks faced by the Group for the financial year under review and approving of the annual report and financial statements.

The system of internal control is designed to manage the risk of failure to achieve business objectives, and inherently it can only provide reasonable but not absolute assurance against material misstatement or loss.

RISK MANAGEMENT

The Board recognises that the process of identification, evaluation and management of significant risks faced by the Group is an ongoing process. The Board has delegated the implementation of the policies on risk and control to the Management which remains accountable to the Board, to ensure that the Group’s risk management and internal control system are operating adequately and effectively.

The Management is responsible for identifying and assessing the risks faced by the Group, and in the design and operation of suitable internal controls to mitigate these risks identified. As part of carrying out this responsibility, and with the assistance of the out-sourced internal auditors which report directly to the Audit Committee, the Management has established a satisfactory Internal Control System with Risk Management embedded in the internal controls.

The Management also reviews the risk management process on an ongoing basis.

The Board through the Audit Committee, with the assistance of the Internal Auditors, will further review and improve the existing internal control processes within the Group every year. The Group will continue to focus on key risks and corresponding controls to ensure that it is able to respond effectively to the changing business and competitive environment.


Key aspects of the Group’s risk management process are:

• Organisationstructurethatclearlydefinesthemanagementfunctions,responsibilitiesanddelegatedauthorities.

• Documentedorganisation-wide standardoperatingpolicies, procedures and limitsof approvingauthorities for keybusiness units are set out and communicated to all levels. These are periodically reviewed and updated in accordance with changes in the operating environment.

• ActiveinvolvementbytheExecutiveDirectorsintherunningofthebusinessandoperationsoftheGroupandtheyreportto the Board on significant changes in the business and external environment.

• TheGroup’scomputerizedinformationsystemsarecontinuouslybeingmonitoredandstreamlinedtoensurecompliancewith hardware and software regulations and guidelines for system integrity, effectiveness and efficiency.

• Timelyfinancialreportingprocessinprovidingrelevantfinancialinformationformanagementreview.Announcementoffinancial information is further subjected to Audit Committee’s review prior to Board’s approval. In addition, statutory auditors’ opinion is sought for as and when required.

• Boardmeetings are scheduled regularly.Boardpapers aredistributed to themembers aheadof themeetings andinformation is presented and deliberated which would ensure that the Board maintains full and effective control on the direction of the Group.

• Weeklyproductionmeetingsareconductedtoidentifykeyproductionissuesandtoallocateresponsibilityfortrackingand monitoring of all on-going projects.

• Managementmeetingsareheldregularlyamongstkeymanagementstaffforvariousplanningandmonitoringaswellas to address weaknesses and to improve efficiency and productivity.

• EstablishmentofManagementReviewMeetingundertheISO9001:2008toreviewqualitypolicyandqualityobjectivesfor continual improvement of the effectiveness of Quality Management System. Scheduled audits are conducted internally as well as by the external ISO auditors.

INTERNAL AUDIT

The Audit Committee is entrusted by the Board to ensure that an effective and adequate Risk Management and Internal Control system is in place during the financial year. The Group had outsourced the internal audit function to an independent consulting firm, Total Advisors Sdn Bhd (“Total Advisors”) which assists the Audit Committee in providing assurance on effectiveness as well as the adequacy and integrity of the Group’s systems of internal control.

The Board works in ensuring that an ongoing process of identifying, evaluating, monitoring and managing significant risks of the Group is in place. Such process is applied consistently throughout the Group and is constantly reviewed by the Board with the assistance of the Internal Auditors. Total Advisors conducts audits on all principal areas of operations and continuously offers assurances on the efficiency and adequacy of the system of internal control. The internal audit function is independent of the activities it audits and audits are performed with impartiality, proficiency and with due professional care.

Statement of Risk Management and Internal Control(cont’d)


INTERNAL AUDIT (CONT’D)

As part of the internal audit function, follow-up reviews are done to ensure that all weaknesses and non-compliances of the Internal Control system have been rectified. The weaknesses and non-compliances that have been identified were not deemed as significant and material in their impact to the Group’s businesses, financial conditions and results of operation, and hence have not been disclosed in this Statement. Total Advisors reports to the Audit Committee whose members are all independent and non executive members of the Board.

Annually, the Audit Committee reviews the Internal Audit Plan to ensure the adequacy of the scope of work and resources to perform such work. All reports by Total Advisors are presented to the Audit Committee which in turn ensures that all material weaknesses identified are satisfactorily rectified and controls are put in place to monitor the risks identified.

ADEDQUACY AND EFFECTIVENESS OF THE GROUP’S RISK MANAGEMENT AND INTERNAL CONTROL SYSTEM

The Board has received assurance from the Managing Director and Executive Directors that the Group’s risk management and internal controls system is operating effectively, in all material aspects, based on the risk management and internal control system of the Group.

The Group’s risk management and internal controls system do not apply to its associated companies as the Group does not has any controlling interest in them. However, the Group oversees the investment in those associated companies by monitoring their performances through reviewing of financial reports, sales orders and other information submitted on a quarterly basis.

Nevertheless, the Board of Directors recognizes that the system must continuously evolve and improve to support the Group’s business activities.

REVIEW OF THE STATEMENT BY EXTERNAL AUDITORS

In accordance to paragraph 15.23 of the ACE Market Listing Requirement of the Bursa Malaysia Securitites Berhad, the External Auditors have reviewed this Statement for inclusion in the Annual Report of the Group for the year ended 31 December 2018 and reported to the Board that nothing has come to their attention that caused them to believe that the Statement is inconsistent with their understanding of the process the Board has adopted in the review of the adequacy and integrity of internal controls of Solution Engineering Holdings Berhad.

This Statement on Risk Management and Internal Control had been approved by the Board on 3 April 2019.

Statement of Risk Management and Internal Control(cont’d)


AUDIT AND RISK MANAGEMENT COMMITTEE

The Audit Committee of the Company was established on 17 June 2005 and had on 3 April 2019 renamed as the Audit and Risk Management Committee to serve as a Committee to the Board of Directors (“Board”).

MEMBERS OF THE AUDIT AND RISK MANAGEMENT COMMITTEE

Members of the Audit and Risk Management Committee during the financial year ended 31 December 2018 are as follows:

Members Designation

Low Wei Ngee Independent Non-Executive Director/Chairman

Datuk Dr. Syed Muhamad bin Syed Abdul Kadir Independent Non-Executive Director

Zainuddin bin Muhamad Independent Non-Executive Director

TERMS OF REFERENCE

Composition of Audit Committee

The Audit Committee shall be appointed by the Board from amongst the Board of Directors who are non-executive directors and shall comprise at least three (3) members, a majority of whom shall be Independent Directors. No alternate Director shall be appointed as a member of the Audit Committee.

At least one (1) member of the Audit Committee must be a member of the Malaysian Institute of Accountants or if he/she is not a member of the MIA, he/she must have at least 3 years’ working experience and;

(a) He/she must have passed the examinations specified in Part 1 of the 1st Schedule of the Accountants Act 1967; or(b) He/she must be a member of one of the associations of accountants as specified in Part II of the 1st Schedule of the

Accountants Act 1967; or

fulfils such other requirements as prescribed or approved by the Bursa Malaysia Securities Berhad.

The term of office and performance of the Committee and each of its members shall be reviewed by the Board at least once every three (3) years. In the event of any vacancy with the result that the number of members is reduced to below three, the vacancy must be filled within two (2) months, but in any case not later than three (3) months.

Chairman

The Chairman of the Audit Committee shall be appointed by the Board, or failing which, by the members of the Audit Committee themselves. The Chairman shall be an Independent Director.

In the event of the Chairman’s absence, the meeting shall be chaired by another Independent Director.

Secretary

The Company’s Secretary shall be the secretary of the Audit Committee and shall be responsible for drawing up agendas in consultation with the Chairman and circulating to the committee members prior to each meeting.

The Company Secretary shall also be responsible for recording attendance, keeping minutes of meetings and circulating to committee members and members of the Board.

AUDIT AND RISK MANAGEMENT COMMITTEE REPORT


Frequency of Meetings

The quorum for a meeting shall be two (2) members, provided that the majority of the members present at the meeting shall be Independent Directors.

The Committee shall meet at least four (4) times a year to coincide with the review of the quarterly and annual financial statement prior to presentation to the Board for approval. However, additional meetings may be called as and when required with reasonable notice as the Committee Members deem fit.

The Committee may invite the internal and external auditors, any other Board members and senior management of the Group to be in attendance during meetings to assist in its deliberations.

Rights and Authority

The Audit Committee shall:

• haveexplicitauthoritytoinvestigateanymatterwithinitstermsofreference;• havetheresourceswhicharerequiredtoperformitsduties;• havefullandunrestrictedaccesstoallinformation,documentandemployeesoftheGroup;• havedirectcommunicationchannelswiththeInternalandExternalAuditors;• beabletoobtainindependentlegalorindependentprofessionaladviceintheperformanceofitsdutiesatthecostof

the Company;• haveauthorisation toconvenemeetingswith the InternalandExternalAuditors, excluding theattendanceofother

directors and employees of the Company, whenever deemed necessary.

Duties and Responsibilities of the Audit Committee

In fulfilling its primary objectives, the Committee shall undertake the following duties and responsibilities:

ExTERNAL AUDIT

• ToreviewtheappointmentofExternalAuditors,theaudit,resignationordismissalandtomakerecommendationstotheBoard;

• Toreviewtheauditplan,thenatureandscopeofauditwiththeExternalAuditorsbeforetheauditcommences;• ToreviewtheproposedauditfeesfortheExternalAuditorsinrespectoftheirauditoftheGroup;• ToreviewanymanagementletterssentbytheExternalAuditorstotheCompanyandtheManagement’sresponseto

such letters;• ToreviewtheCompany’spoliciesandprocedureswiththeManagementandExternalAuditorstoensuretheadequacy

accounting and financial reporting controls;• ToreviewtheauditfindingsraisedbytheExternalAuditorsandensurethatissuesarebeingmanagedandrectified

appropriately and timely manner;• ToreviewtheassistancegivenbytheofficersandemployeesoftheGrouptotheExternalAuditors;• TohavedirectcommunicationchannelswiththeExternalAuditorsandtomeetwiththeExternalAuditorswithoutthe

presence of Management, at least twice a year; and• TodiscussissuesarisingfromtheinterimandfinalauditandanymattertheExternalAuditorsmaywishtodiscuss(in

the absence of Management where necessary).

INTERNAL AUDIT

• Toreviewtheeffectivenessoftheinternalauditfunction;and• Toreviewtheinternalauditprogramandresultsoftheinternalauditprocess.

audit and risk management committee report(cont’d)


INTERNAL CONTROLS

• To reviewtheadequacyof riskmanagement frameworkand toprovideassurance to theBoardofDirectorson theeffectiveness of the Company’s risk management processes; and

• Toreviewandevaluatethequalityandeffectivenessoftheinternalcontrolandmanagementinformationsystems.

FINANCIAL REPORTING

• ToreviewquarterlyreportsonconsolidatedresultsandannualfinancialstatementspriortosubmissiontotheBoardof Directors focusing particularly on going concern assumption, compliance with accounting standards and regulatory requirements, any changes in accounting policies and practices, significant issues arising from the audit and major judgemental areas; and

• TomonitorrelatedpartytransactionsenteredintobytheCompanyortheGroupandtodetermineifsuchtransactionsare undertaken on an arm’s length basis and normal commercial terms and on terms not more favourable to the related parties than those generally available to the public and to review conflicts of interest that may arise within the Company or the Group including any transaction, procedures or course of conduct that raises questions of Management’s integrity.

Summary of Activities of the Audit and Risk Management Committee

There were five (5) Audit Committee meetings held during the financial year ended 31 December 2018. The number of meetings attended by the Committee Members is as follows:

Name of Director Audit Committee Meetings Attendance

Low Wei Ngee(Chairman and Independent Non-Executive Director)

4/5

Datuk Dr. Syed Muhamad bin Syed Abdul Kadir (Independent Non-Executive Director)

4/5

Zainuddin bin Muhamad (Independent Non-Executive Director)

5/5

During the financial year ended 31 December 2018, the main activities undertaken by the Audit Committee were as follows:

• ReviewedtheInternalandExternalAuditors’scopeofworkandannualauditplanningmemorandumoftheGrouppriorto the commencement of the annual audit;

• Reviewedtheresultsoftheauditreport,togetherwithManagement’sresponsestothefindingsoftheExternalAuditors;• ReviewedthequarterlyandannualAuditedFinancialStatementsoftheGrouptoensurecompliancewiththeACEMarket

Listing Requirements of Bursa Malaysia Securities Berhad and the applicable approved accounting standards issued by the Malaysian Accounting Standards Board (MASB) prior to submission to the Board of Directors for its approval;

• ReviewedtheAuditCommitteeReportandStatementonInternalControlandrecommendtotheBoardofDirectorsforapproval prior to their inclusion in the Annual Report;

• Reviewedanddeliberatedoninternalauditreports,auditrecommendationsmadeandManagement’sresponsetotheserecommendations;

• EvaluatedtheeffectivenessoftheExternalAuditorsandmakerecommendationstotheBoardofDirectorsontheirre-appointment and remuneration; and

• ReviewedtherelatedpartytransactionsenteredintobytheGroup.



Internal Audit Function

The Group has outsourced its internal audit function to an independent internal audit firm since November 2008.

The Group’s Internal Auditor assists the Audit Committee in discharging its duties and responsibilities. Its role is to undertake regular and systematic reviews of internal controls and then provide the Audit Committee with independent and objective reports on the adequacy of internal controls and procedures in the operating business entities within the Group and the extent of compliance with the Group’s policies and procedures as well as applicable laws, regulation, directives and regulatory requirements.

The Audit Committee reviews and approves the internal audit plan which was developed based on the key risk areas and major operating units of the Group. The Internal Auditors carried out audits in accordance with approved internal audit plan and report independently to the Audit Committee. The findings and recommendations of the internal audit reviews were presented to the Audit Committee.

In addition, the Internal Auditors also performed follow-up visits to ensure that corrective actions have been implemented in a timely manner. Based on the internal audit reviews conducted for the year, some weaknesses in internal control were identified but they were not deemed significant hence have not been included in this Annual Report.

The cost incurred for the internal audit function in respect of the financial year ended 31 December 2018 was RM20,085.



EMPLOYEE SHARE OPTION SCHEME

The Company had obtained its shareholders approval for the establishment of Employees’ Share Option Scheme (ESOS) of up to 30% of the total issued and paid-up share capital for the eligible employees and directors and its subsidiaries at the EGM dated 16 January 2014. On 6 February 2014, the Company had announced that the effective date of implementation of the ESOS is on 30 January 2014.

There were no options granted to the Directors and employees during the financial year ended 31 December 2018. The details of options granted are disclosed in the Directors’ Report and Note 16 (a) and Note 17 (b) of the Audited Financial Statements for the financial year ended 31 December 2018.

On 22 January 2019, the Company had announced to extend the existing ESOS of the Company which commenced on 30 January 2014 and expired on 29 January 2019 for another five (5) years until 29 January 2024 in accordance with the terms of the ESOS Bylaws.

PARTICULARS OF AUDIT AND NON-AUDIT FEES

For the financial year ended 31 December 2018, the amount of audit fees paid or payable to the auditors was as below:

Company Group RM RM

Audit fees 20,000 73,100Non-audit fees 8,000 8,000

MATERIAL CONTRACTS INVOLVING DIRECTORS’ AND SUBSTANTIAL SHAREHOLDERS’ INTEREST

There were no material contracts entered into by the Company and its subsidiaries, involving the directors and substantial shareholders’ interests during the financial year.

ADDITIONAL DISCLOSURESPursuant to the Listing Requirements of Bursa Malaysia Securities

034 Directors’ Report

042 Statement By Directors

042 Statutory Declaration

043 Consolidated Statement of Financial Position

045 Consolidated Statement of Profit or Loss and Other Comprehensive Income

046 Consolidated Statement of Changes in Equity

047 Consolidated Statement of Cash Flows

049 Statement of Financial Position

050 Statement of Profit or Loss and Other Comprehensive Income

051 Statement of Changes in Equity

052 Statement of Cash Flows

053 Notes to the Financial Statements

141 Independent Auditors’ Report to the Members

FINANCIAL STATEMENTS


The directors hereby submit their report and the audited financial statements of the Group and of the Company for the financial year ended 31 December 2018.

PRINCIPAL ACTIVITIES

The principal activity of the Company is that of investment holding. The principal activities of the subsidiaries are set out in Note 8 to the financial statements.

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

RESULTS

Group Company RM RM

(Loss)/Profit for the year (3,477,488) 2,857,089

Attributable to:-- Owners of the Company (3,300,649) 2,857,089- Non-controlling interests (176,839) –

(3,477,488) 2,857,089

RESERVES AND PROVISIONS

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

DIVIDEND

No dividend has been paid or declared since the end of previous financial year.

The directors do not recommend the payment of any final dividend in respect of financial year ended 31 December 2018.

SHARE CAPITAL

There were no changes in the issued and paid-up capital of the Company during the financial year.

DIRECTORS’ REPORT


WARRANTS

On 5 July 2016, a total of 101,329,365 free detachable Warrants have been issued and allotted to the shareholders in conjunction with a bonus issue on the basis of one (1) Warrant for every two (2) existing ordinary shares held in the Company.

The Warrants were constituted by a Deed Poll dated 13 June 2016.

The Warrants are listed on the ACE Market of the Bursa Malaysia Securities Berhad on 11 July 2016 and confer the right to holders thereof at any time, not later than maturity date of 4 July 2021, to subscribe for one new ordinary share in the Company for every warrant held at an exercise price, to be paid in cash, of RM0.20 per share or as adjusted in certain circumstances as set out in the Deed constituting the warrants. Any warrants not exercised by the date of maturity will thereafter lapse and cease to be valid for any purpose.

The movements of the Warrants during the financial year are as follows :-

Number of Warrants As at During the year As at 01.01.2018 Issued Exercised 31.12.2018

Warrants 101,326,199 – – 101,326,199

EMPLOYEES’ SHARE OPTION SCHEME

The Company’s Employees’ Share Option Scheme (“ESOS” or “the Scheme”) is governed by the By-Laws which were approved by the shareholders on 16 January 2014 and implemented on 30 January 2014 and will expire on 29 January 2024 (“the Option Period”). The movements of options over unissued ordinary shares granted to eligible directors and employees of the Group during the financial year are as follows :-

Option over number of ordinary shares Exercise As at During the year As atGrant date price 01.01.2018 Granted Exercised Forfeited 31.12.2018

28.09.2016 RM0.220 3,537,000 – – – 3,537,000

The salient features of the ESOS scheme are as follows :-

(i) Scheme shall be in force for a period of five years commencing from 30 January 2014 (effective date) and expiring on 29 January 2019 and may be extended for a further period of up to five years at the sole and absolute discretion of the Board of Directors upon recommendation from the ESOS Committee, provided always that the option period shall not in aggregate exceed a duration of ten years from the effective date.

On 22 January 2019, the option period has been extended for another five years until 29 January 2024 in accordance with the terms of the Scheme.

(ii) Eligible persons are employees of the Group, who has attained 18 years of age, been confirmed and is employed full time and is on the payroll of the Group. Employees serving under employment contract may be considered where the contract is for a duration of at least 2 years. The eligibility for participation in ESOS shall be at the discretion of the ESOS Committee appointed by the Board of Directors.

(iii) The total number of shares to be issued under ESOS shall not exceed 30% of the issued and paid-up share capital of the Company, at any point of time throughout the duration of Scheme.

directors’ report(cont’d)


EMPLOYEES’ SHARE OPTION SCHEME (CONT’D)

The salient features of the ESOS scheme are as follows (Cont’d):-

(iv) The price payable for the exercise of an ESOS Option (“Exercise Price”) shall be determined by the ESOS Committee at its discretion based on the 5 days volume weighted average market price of the underlying Company shares as quoted by Bursa Securities, immediately prior to the Date of Offer with a discount of not more than 10% (or such lower or higher limit in accordance with any prevailing guidelines, rules or regulations issued by Bursa Securities or any other relevant regulatory authorities), if deemed appropriate, or the par value of the Company shares, whichever is the higher.

The exercise price as determined by the ESOS Committee shall be conclusive and binding on the Grantee.

(v) The offer to participate in the ESOS shall be valid for acceptance for a period of 14 days from the date of offer or such longer period as may be determined by the ESOS Committee on a case to case basis at its discretion.

(vi) All new ordinary shares issued upon exercise of the option under ESOS will rank pari passu in all respects with the existing ordinary shares of the Company except that the shares so issued will not be entitled to any dividends, rights allotments and/or other distributions, the entitlement date of which is prior to the date of allotment of the new ordinary shares.

SUBSIDIARIES

The details of the subsidiaries of the Group are disclosed in Note 8 to the financial statements.

DIRECTORS

The names of the directors during the financial year and during the period from the end of the financial year to the date of this report are :-

Datuk Dr. Syed Muhamad Bin Syed Abdul KadirLim Yong HewLim Hai GuanLim Chiou KimMohd Shahrin Bin Saparin @ Abd RahmanLow Wei NgeeZainuddin Bin Muhamad Dato’ Dr. Mohd Nazlee Bin Kamal (Appointed on 29 August 2018)

The names of directors of the Company’s subsidiaries since the beginning of the financial year to the date of this report are as follows:-

Lim Yong HewLim Hai GuanMohd Shahrin Bin Saparin @ Abd RahmanLim Chiou KimAbu Bakar Bin Ahmad NasirChai Ko FongMaswandy Bin Abu OthmanDato’ Dr. Mohd Nazlee Bin Kamal



DIRECTORS’ INTERESTS

According to the Register of Directors’ Shareholdings, particulars of interests of directors at the end of the financial year in shares, warrants and options over ordinary shares of the Company and its subsidiaries during the financial year were as follows :-

Number of ordinary shares Balance at During the year Balance at 01.01.2018 Acquired Disposed 31.12.2018

The Company

Datuk Dr. Syed Muhamad Bin Syed Abdul Kadir- Direct 2,845,422 – – 2,845,422

Lim Yong Hew- Direct 79,959,549 – – 79,959,549 - Indirect 1 3,176,101 – – 3,176,101

Lim Hai Guan- Direct 5,688,315 – – 5,688,315 - Indirect 2 3,001,902 – – 3,001,902

Lim Chiou Kim- Direct 8,667,258 – – 8,667,258 - Indirect 1 3,501,902 – – 3,501,902

Mohd Shahrin Bin Saparin @ Abd Rahman- Direct 2,993,100 – (1,595,000) 1,398,100

Low Wei Ngee- Direct 99 – – 99

Zainuddin Bin Muhamad- Direct 2,046,921 – – 2,046,921

Dato’ Dr. Mohd Nazlee Bin Kamal- Direct – 833,400 – 833,400

Indirect 1 Deemed interested by virtue of their immediate family’s interest and their substantial shareholdings in Solvest Sdn. Bhd.

Indirect 2 Deemed interested by virtue of his substantial shareholdings in Solvest Sdn. Bhd.



DIRECTORS’ INTERESTS (CONT’D)

Number of warrants with an exercise price of RM0.20 per ordinary share Balance at During the year Balance at 01.01.2018 Entitled Disposed 31.12.2018

Datuk Dr. Syed Muhamad Bin Syed Abdul Kadir 948,474 – – 948,474

Lim Yong Hew- Direct 26,286,516 – – 26,286,516 - Indirect 1 1,033,967 – – 1,033,967 Lim Hai Guan - Indirect 2 1,000,634 – – 1,000,634 Lim Chiou Kim - Direct 2,889,086 – – 2,889,086 - Indirect 2 1,000,634 – – 1,000,634

Mohd Shahrin Bin Saparin @ Abd Rahman 997,700 – (427,000) 570,700

Low Wei Ngee 66 – – 66

Zainuddin Bin Muhamad 667,307 – – 667,307

Dato’ Dr. Mohd Nazlee Bin Kamal – 500,000 – 500,000

34,824,384 500,000 (427,000) 34,897,384

Indirect 1 Deemed interested by virtue of his immediate family’s interest and his substantial shareholdings in Solvest Sdn. Bhd.

Indirect 2 Deemed interested by virtue of their substantial shareholdings in Solvest Sdn. Bhd.



DIRECTORS’ INTERESTS (CONT’D) Number of options over ordinary share Exercise Balance at During the year Balance at price 01.01.2018 Granted Exercised 31.12.2018

Datuk Dr. Syed Muhamad Bin Syed Abdul Kadir RM0.220 230,000 – – 230,000

Lim Hai Guan RM0.220 800,000 – – 800,000

Lim Chiou Kim RM0.220 650,000 – – 650,000

Mohd Shahrin Bin Saparin @ Abd Rahman RM0.220 600,000 – – 600,000 Low Wei Ngee RM0.220 150,000 – – 150,000

2,430,000 – – 2,430,000

By virtue of his substantial shareholdings in the Company, Lim Yong Hew is also deemed to be interested in shares in its subsidiaries to the extent of interests held by the Company.

Other than as disclosed above, no other directors in office at the end of the financial year held any interests, direct or indirect, in shares, warrants and options of the Company and its subsidiaries.

DIRECTORS’ REMUNERATION

The particulars of remuneration paid to the directors and past directors of the Group and of the Company are disclosed in Note 26 to the financial statements.

INDEMNITY

No indemnity was given to nor was there any insurance effected for the directors, officers or auditors of the Company during the financial year.

DIRECTORS’ BENEFITS

Since the end of the previous financial year, none of the director of the Group and of the Company has received or become entitled to receive any benefits (other than those disclosed as directors’ remuneration in 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 other than by virtue of transactions entered into in the ordinary course of business as disclosed in Note 32 to the financial statements.

As at the end of the financial year and during the financial year, there did not subsist any arrangement to which the Company was a party, whereby the directors or their nominees might acquire benefits by means of acquisition of shares in, or debentures of, the Company or any other body corporate other than any benefits which may be derived from the share options granted under the Company’s ESOS and warrants issued as disclosed in Directors’ Interest section of this report.



AUDITORS’ REMUNERATION

The details of remuneration paid or payable to the auditors of the Group and of the Company are disclosed in Note 26 to the financial statements.

OTHER STATUTORY INFORMATION

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

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

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

(b) At the date of this report, the directors are not aware of any circumstances :-

(i) which would render the amount written off for bad debts and the amount of allowance made for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent;

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

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

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

(c) At the date of this report, there does not exist :-

(i) 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 liabilities of any other person; and

(ii) any contingent liabilities in respect of the Group and of the Company which have arisen since the end of the financial year.

(d) In the opinion of the directors :-

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

(ii) the results of the 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

(iii) no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of operations of the Group and of the Company for the financial year in which this report is made.



AUDITORS Theauditors,Messrs.FolksDFK&Co.,haveexpressedtheirwillingnesstocontinueinoffice.

On behalf of the Board of Directors,

LIM YONG HEW LIM CHIOU KIMDirector Director

This report is made pursuant to the directors’ resolution passed on

Date :



We, LIM YONG HEW and LIM CHIOU KIM, being two of the directors of SOLUTION ENGINEERING HOLDINGS BERHAD, do hereby state that in the opinion of the directors, the accompanying financial statements are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the provisions of the Companies Act 2016 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2018 and of the financial performance and cash flows of the Group and of the Company for the financial year ended on that date.

Signed in accordance with a resolution of the directors,

LIM YONG HEWDirector

LIM CHIOU KIMDirector

Date :

STATEMENT BY DIRECTORS(Pursuant to Section 251(2) of the Companies Act 2016)

STATUTORY DECLARATION(Pursuant to Section 251(1)(b) of the Companies Act 2016)

I, LIM YONG HEW, being the director primarily responsible for the financial management of SOLUTION ENGINEERING HOLDINGS BERHAD, do solemnly and sincerely declare that to the best of my knowledge and belief, the accompanying financial statements are correct, and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by the ) abovenamed LIM YONG HEW at )Kuala Lumpur in the Federal Territory this )

LIM YONG HEWBefore me,

Commissioner for Oath


Group 2018 2017 Note RM RMASSETS

Non-Current AssetsProperty, plant and equipment 5 12,644,907 9,747,133 Intangible assets 6 43,200 78,488 Prepaid land lease payments 7 2,157,708 – Investment in an associate 9 608,772 1,020,512

15,454,587 10,846,133

Current AssetsInventories 10 1,238,319 1,162,771 Amount due from contract customers 11 – 8,741,560 Contract assets 11 3,138,224 – Trade and other receivables 12 6,230,509 8,299,075 Amount due from an associate 13 1,407,029 2,680,702 Tax recoverable 714,844 67,743 Short term investments 15 4,697,168 3,260,697 Deposits, cash and bank balances 16 16,868,219 15,168,870

34,294,312 39,381,418

Total Assets 49,748,899 50,227,551

EQUITY AND LIABILITIES

Equity attributable to owners of the CompanyShare capital 17 31,089,110 31,089,110 Reserves 18 7,450,115 11,404,906

38,539,225 42,494,016 Non-controlling interests 1,111,479 1,298,529

Total Equity 39,650,704 43,792,545

Non-Current LiabilitiesHire purchase payables 19 283,992 335,163 Term loan (secured) 20 5,688,607 2,998,045 Deferred tax liabilities 21 1,791 49,701

5,974,390 3,382,909

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2018


Group 2018 2017 Note RM RM

Current LiabilitiesAmount due to contract customers 11 – 148,564 Contract liabilities 11 510,577 – Trade and other payables 22 3,011,933 2,487,508 Amount due to directors 23 41,446 41,446 Hire purchase payables 19 191,422 185,824 Term loan (secured) 20 368,427 49,042 Taxation – 139,713

4,123,805 3,052,097

Total Liabilities 10,098,195 6,435,006

Total Equity and Liabilities 49,748,899 50,227,551

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

consolidated statement of financial positionas at 31 december 2018 (cont’d)


Group 2018 2017 Note RM RM

Revenue 24 13,067,241 24,334,110

Cost of sales 25 (10,101,141) (14,075,905)

Gross profit 2,966,100 10,258,205

Other income 585,940 6,785,185

Administrative and distribution expenses (6,218,430) (6,534,891)

Net impairment losses of financial instruments and contract assets (653,491) (291,595)

(Loss)/Profit from operations (3,319,881) 10,216,934

Share of loss in an associate (111,740) (200,408)

Finance costs (118,529) (68,518)

(Loss)/Profit before taxation 26 (3,550,150) 9,948,008

Taxation 27 72,662 (1,566,592)

(Loss)/Profit for the financial year and total comprehensive (loss)/income for the financial year (3,477,488) 8,381,416

(Loss)/Profit for the financial year and total comprehensive (loss)/income for the financial year attributable to :-Owners of the Company (3,300,649) 7,977,909 Non-controlling interests (176,839) 403,507

(3,477,488) 8,381,416

(Loss)/Earnings per share attributable to owners of the Company (sen)Basic 28(a) (1.08) 2.61 Diluted 28(b) (1.08) 2.31

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the Year Ended 31 December 2018



CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the Year Ended 31 December 2018

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Group 2018 2017 RM RM

Cash flows from operating activities(Loss)/Profit before taxation (3,550,150) 9,948,008

Adjustments for :-Amortisation of intangible assets 35,288 35,288 Amortisation of prepaid land lease payments 20,292 – Bad debts written off – 22,596 Depreciation of property, plant and equipment 406,708 316,031 Dividend income from short term investments (139,968) (119,107)Gain on disposal of short term investments (10,603) (133,557)Gain on disposal of property, plant and equipment and non-current asset held for sale – (5,809,567)Impairment losses on trade receivables and contract assets 719,601 291,565 Impairment losses on amount due from an associate 5,220 – Impairment losses on investment in an associate 300,000 – Net gain on changes in fair value of short term investments (26,897) (1,081)Interest income (230,865) (143,429)Interest expense 94,340 36,452 Inventories written off – 15,507 Reversal of impairment losses on contract assets (71,330) – Share of loss in an associate 111,740 200,408 Unrealised (gain)/loss on foreign exchange (68,252) 80,851 Property, plant and equipment written off – 33,949

Operating (loss)/profit before working capital changes (2,404,876) 4,773,914 (Increase)/Decrease in inventories (75,548) 82,990 Decrease in amount due from contract customers 8,592,996 124,792Increase in contract assets (3,194,435) – Decrease/(Increase) in trade and other receivables 1,021,182 (1,784,989)Decrease in amount due from an associate 1,115,622 2,549,807 Increase in contract liabilities 510,577 – Increase/(Decrease) in trade and other payables 524,425 (2,921,565)

Cash generated from operations 6,089,943 2,824,949 Interest paid (94,340) (36,452)Tax refunded 47,186 50,417 Tax paid (809,248) (2,622,811)

Net cash from operating activities 5,233,541 216,103

CONSOLIDATED STATEMENT OF CASH FLOWS




Cash flows from investing activitiesInterest received 230,865 143,429 Acquisition of additional shares in a subsidiary from non-controlling interest (Note 8(a)(ii)) – (95,000)Subscription to additional shares in a subsidiary by a non-controlling interest (Note 8(a)(i)) – 200,000 Net placement of deposits under lien (193,601) (3,522,142)Net (placements)/withdrawal of short term investments (1,259,003) 7,036,722 Purchase of property, plant and equipment (Note 30(a)) (5,315,674) (7,936,689)Proceeds from disposal of property, plant and equipment and non-current asset held for sale – 7,757,115

Net cash (used in)/generated from investing activities (6,537,413) 3,583,435

Cash flows from financing activitiesDividend paid – (3,064,545)Dividend paid to non-controlling interest – (330,750)Net repayment to directors – (174,554)Proceeds from issuance of shares pursuant to exercise of ESOS – 465,960 Proceeds from issuance of shares pursuant to exercise of warrants – 133 Repayments of hire purchase (Note 30(b)) (212,381) (188,667)Proceeds from term loan (Note 30(b)) 3,009,947 2,616,594

Net cash generated from / (used in) financing activities 2,797,566 (675,829)

Net increase in cash and cash equivalents 1,493,694 3,123,709

Currency translation difference 12,054 (80,851)Cash and cash equivalents at beginning of financial year 8,081,739 5,038,881

Cash and cash equivalents at end of financial year (Note 16) 9,587,487 8,081,739


consolidated statement of cash flowsfor the year ended 31 december 2018 (cont’d)


STATEMENT OF FINANCIAL POSITION

As At 31 December 2018


Company 2018 2017 Note RM RM

ASSETS

Non-Current AssetsProperty, plant and equipment 5 1,542 1,727Investment in subsidiaries 8 31,533,583 31,533,583Amount due from subsidiaries 14 1,080,505 –

32,615,630 31,535,310

Current AssetsOther receivables 12 105,770 79,770Amount due from an associate 13 20,000 20,000Amount due from subsidiaries 14 14,067,643 11,500,799Tax recoverable – 35Short term investments 15 1,665,612 1,111,844Deposits, cash and bank balances 16 332,077 1,689,416

16,191,102 14,401,864

Total Assets 48,806,732 45,937,174

EQUITY AND LIABILITIES

Equity attributable to owners of the CompanyShare capital 17 31,089,110 31,089,110Reserves 18 17,616,134 14,759,045

Total Equity 48,705,244 45,848,155

Current LiabilitiesOther payables 22 101,488 56,979Amount due to subsidiaries 14 – 32,040

Total Liabilities 101,488 89,019

Total Equity and Liabilities 48,806,732 45,937,174


STATEMENT OF PROFIT OR LOSSAND OTHER COMPREHENSIVE INCOME For the Year Ended 31 December 2018


Company 2018 2017 Note RM RM

Revenue 24 3,500,000 –

Other income 455,635 583,844

Administrative and distribution expenses (1,098,546) (801,325)

Profit/(Loss) before taxation 26 2,857,089 (217,481)

Taxation 27 – –

Profit/(Loss) for the financial year and total comprehensive income/(loss) for the financial year 2,857,089 (217,481)


STATEMENT OF CHANGES IN EQUITY


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13

,878

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6

68

,66

7

45

,84

8,15

5


STATEMENT OFCASH FLOWSFor the Year Ended 31 December 2018


Company 2018 2017 RM RM

Cash flows from operating activitiesProfit/(Loss) before taxation 2,857,089 (217,481)

Adjustments for :-Depreciation of property, plant and equipment 185 123Dividend income from short term investments (50,063) (45,977) Dividend income from subsidiaries (3,500,000) – Gain on disposal of short term investments – (135,498)Discount implicit on amount due from subsidiaries 251,511 –Net fair value gain on short term investments (11,515) (1,844)

Operating loss before working capital changes (452,793) (400,677)

(Increase)/Decrease in other receivables (26,000) 24,230Increase in amount due from subsidiaries (3,898,860) (1,479,050)Increase in amount due from an associate – (20,000)Increase/(Decrease) in other payables 44,509 (35,636)(Decrease)/Increase in amount due to subsidiaries (32,040) 16,200

Cash used in operations (4,365,184) (1,894,933)Tax refund 35 –

Net cash used in operating activities (4,365,149) (1,894,933)

Cash flows from investing activitiesAcquisition of shares in subsidiaries (Note 8(a)) – (1,150,000)Dividend received 3,500,000 – Net (placements)/withdrawal of short term investments (492,190) 6,110,471 Purchase of property, plant and equipment – (1,850)

Net cash generated from investing activities 3,007,810 4,958,621

Cash flows from financing activitiesDividend paid – (3,064,545)Proceeds from issuance of shares pursuant to exercise of ESOS – 465,960 Proceeds from issuance of shares pursuant to exercise of warrants – 133

Net cash used in financing activities – (2,598,452)

Net (decrease)/increase in cash and cash equivalents (1,357,339) 465,236

Cash and cash equivalents at beginning of financial year 1,689,416 1,224,180

Cash and cash equivalents at end of financial year (Note 16) 332,077 1,689,416


1. GENERAL INFORMATION

Solution Engineering Holdings Berhad is a public company limited by shares, incorporated and domiciled in Malaysia, and is listed on the ACE Market of Bursa Malaysia Securities Berhad.

Its registered office is located at Suite 705, Block A, Kelana Business Centre, 97, Jalan SS 7/2, 47301 Petaling Jaya, Selangor Darul Ehsan and principal place of business is located at PT 13796 Jalan Tekno Usahawan 2 Technology Park Malaysia, 57000 Kuala Lumpur.

The principal activity of the Company is that of investment holding. The principal activities of the subsidiaries are set out in Note 8 to the financial statements.

The financial statements of the Group and of the Company were authorised for issue by the Board of Directors in accordance with a resolution of directors on 24 April 2019.

2. BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1 Basis of Preparation

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

The financial statements of the Group and the Company are prepared under the historical cost convention unless otherwise indicated in the summary of significant accounting policies.

The accounting policies applied by the Group and the Company are consistent with those applied in the previous financial year other than the application of new MFRSs, IC Interpretations and the amendments to MFRSs as disclosed in Note 2.2.

2.2 Application of New MFRSs and IC Interpretations and Amendments to MFRSs

During the financial year, the Group and the Company have applied the following new MFRSs, IC Interpretations and amendments to MFRSs issued by the Malaysian Accounting Standards Board (“MASB”) which are effective for accounting period beginning on or after 1 January 2018 :-

MFRS 9, Financial Instruments (IFRS 9 issued in July 2014)MFRS 15, Revenue from Contracts with CustomersClarifications to MFRS 15, Revenue from Contracts with CustomersAmendments to MFRS 2 - Classification and Measurement of Share-based Payment TransactionsAmendments to MFRS 4 - Applying MFRS 9, Financial Instruments with MFRS 4 Insurance Contracts Amendments to MFRS 140 - Transfers of Investment PropertyAmendments to MFRSs Classified as “Annual Improvements to MFRS Standards 2014 - 2016 Cycle” :- Amendments to MFRS 1, First-time Adoption of Malaysian Financial Reporting Standards - Amendments to MFRS 128, Investments in Associates and Joint VenturesIC Interpretation 22, Foreign Currency Transactions and Advance Consideration

The applications of the new MFRS 9 and MFRS 15 have resulted in changes in the Group’s accounting policies as further explained in Note 3. The adoption of the IC Interpretations and amendments to MFRSs that are effective for the current financial year did not have any significant impact on the Group’s and the Company’s financial statements.

NOTES TO THE FINANCIAL STATEMENTS

At 31 December 2018


notes to the financial statements at 31 december 2018 (cont’d)

2. BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

2.3 New MFRSs, IC Interpretations and Amendments to MFRSs That Are Not Yet Effective and Have Not Been Early Adopted

The Group and the Company have not early adopted the following new MFRSs, IC Interpretations and amendments to MFRSs that have been issued by the MASB but are not yet effective :-

Effective for annual periods beginning on or after 1 January 2019MFRS 16, LeasesAmendments to MFRS 9 - Prepayment Features with Negative CompensationAmendments to MFRS 119 - Plan Amendment, Curtailment or SettlementAmendments to MFRS 128 - Long-term Interests in Associates and Joint VenturesAmendments to MFRSs Classified as “Annual Improvements to MFRS Standards 2015 - 2017 Cycle” :- Amendments to MFRS 3, Business Combinations and MFRS 11, Joint Arrangements- Previously Held Interest in a Joint Operation- Amendments to MFRS 112, Income Taxes - Income Tax Consequences of Payments on Financial Instruments Classified as Equity- Amendments to MFRS 123, Borrowing Costs - Borrowing Costs Eligible for CapitalisationIC Interpretation 23, Uncertainty over Income Tax Treatments

Effective for annual periods beginning on or after 1 January 2020Amendments to MFRS 3 - Definition of a BusinessAmendments to MFRS 101 and Amendments to MFRS 108 - Definition of Material

Effective for annual periods beginning on or after 1 January 2021MFRS 17, Insurance Contracts

Effective for annual periods beginning on or after a date to be determined by the MASBAmendments to MFRS 10 and MFRS 128 - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

The Group and the Company will apply the above new MFRSs, IC Interpretations and amendments to MFRSs that are applicable once they become effective. Their main features and impact on initial application are summarised below.

2.3.1 Effective for annual periods beginning on or after 1 January 2019

(a) MFRS 16, Leases

MFRS 16 will supersede the existing MFRS 117 Leases, IC Interpretation 4 Determining whether an Arrangement contains a Lease, IC Interpretation 115 Operating Leases – Incentives and IC Interpretation 127 Evaluating the Substance of Transactions Involving the Legal Form of a Lease and it sets out the principles for the recognition, measurement, presentation and disclosures of leases.

Under the existing MFRS 117, lessees and lessors are required to classify their leases as either finance leases or operating leases and account for those two types of leases differently. It requires a lessee to recognise assets and liabilities arising from finance leases but not from operating leases.




2.3 New MFRSs, IC Interpretations and Amendments to MFRSs That Are Not Yet Effective and Have Not Been Early Adopted (Cont’d)

2.3.1 Effective for annual periods beginning on or after 1 January 2019 (Cont’d)

(a) MFRS 16, Leases (Cont’d)

The new MFRS 16 introduces a single accounting model and requires a lessee to recognise assets and liabilities for the rights and obligations arising from all leases and hence eliminates the distinction between finance leases and operating leases. As a consequence, a lessee recognises right-of-use assets and lease liabilities arising from operating leases. The right-of-use asset is depreciated in accordance with the principle in MFRS 116 Property, Plant and Equipment and the lease liability is accreted over time with interest expense recognised in the profit or loss.

For lessors, MFRS 16 retains most of the accounting requirements in MFRS 117. Lessors continue to classify all leases as either operating leases or finance leases.

(b) Amendments to MFRS 9 - Prepayment Features with Negative Compensation

The Amendments allow entities to measure prepayable financial assets with negative compensation at amortised cost or at fair value through other comprehensive income if certain conditions are met.

(c) Amendments to MFRS 119 - Plan Amendment, Curtailment or Settlement

The Amendments require an entity to use updated actuarial assumptions to determine current service cost and net interest for the remainder of the annual reporting period after the plan amendment, curtailment or settlement when the entity remeasures its net defined benefit liability or asset.

(d) Amendments to MFRS 128 - Long-term Interests in Associates and Joint Ventures

The Amendments clarify that entities shall apply MFRS 9, including its impairment requirements, to account for long-term interests in an associate or joint venture that, in substance, form part of the net investment in the associate or joint venture to which the equity method is not applied.





2.3.1 Effective for annual periods beginning on or after 1 January 2019 (Cont’d)

(e) Amendments to MFRSs Classified as “Annual Improvements to MFRS Standards 2015 - 2017 Cycle”

The Annual Improvements to MFRS Standards 2015 - 2017 Cycle include amendments to the following MFRSs :-

• TheamendmentstoMFRS3BusinessCombinationsclarifythatwhenanentityobtainscontrol of a business that is a joint operation, it remeasures previously held interests in that business. The amendments to MFRS 11 Joint Arrangements clarify that when an entity obtains joint control of a business that is a joint operation, the entity does not remeasure previously held interests in that business.

• TheamendmentstoMFRS112IncomeTaxesclarifythatanentityrecognisestheincometax consequences of dividends in profit or loss because income tax consequences of dividends are linked more directly to past transactions than to distributions to owners, except if the tax arises from a transaction which is a business combination or is recognised in other comprehensive income or directly in equity.

• TheamendmentstoMFRS123BorrowingCostsclarifythatwhenaqualifyingassetisreadyfor its intended use or sale, an entity treats any outstanding borrowing made specifically to obtain that qualifying asset as part of general borrowings.

(f) IC Interpretation 23, Uncertainty over Income Tax Treatments

MFRS 112 Income Taxes, includes requirements on recognition and measurement of tax assets and liabilities, but does not specify how to reflect uncertainty. As a result, entities apply diverse reporting methods when the application of tax law is uncertain.

When there is uncertainty over income tax treatments, the Interpretation addresses :-

• whetheranentityconsidersuncertaintaxtreatmentsseparately;• theassumptionsanentitymakesabouttheexaminationoftaxtreatmentsbytaxation

authorities;• howanentitydeterminestaxableprofit(taxloss),taxbases,unusedtaxlosses,unused

tax credits and tax rates; and• howanentityconsiderschangesinfactsandcircumstances.





2.3.2 Effective for annual periods beginning on or after 1 January 2020

(a) Amendments to MFRS 3 - Definition of a Business

The amendments clarify the definition of a business with the objective of assisting entities to determine whether a transaction should be accounted for as a business combination or as an asset acquisition. The distinction is important because an acquirer does not recognise goodwill in an asset acquisition.

The amendments, amongst others, clarify that to be considered a business, an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. The amendments also add an optional concentration test that permits a simplified assessment of whether an acquired set of activities and assets is not a business.

An entity shall apply these amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 January 2020 and to asset acquisitions that occur on or after the beginning of that period.

(b) Amendments to MFRS 101 and Amendments to MFRS 108 - Definition of Material

The amendments refine the definition by including ‘obscuring information’ in the definition of material to respond to concerns that the effect of including immaterial information should not reduce the understandability of an entity’s financial statements. The prior definition focuses only on information that cannot be omitted (material information) and does not consider the effect of including immaterial information.

Other refinements to the definition include incorporating some existing wording in MFRS 101 and the Conceptual Framework for Financial Reporting. Consequently, the amendments align the definition of material across MFRS Standards and other publications.

Entities are required to apply the amendments prospectively for annual periods beginning on or after 1 January 2020.

2.3.3 Financial impact on initial application

The initial application of the new MFRSs, IC Interpretations and amendments to MFRSs is not expected to have any significant impact on the Company’s financial statements of the Group and of the Company other than the application of MFRS 16 Leases which will result in the recognition of right-of-use assets amounting to RM380,614 and a corresponding similar amount of lease liabilities on the Group’s financial statements.




2.4 Basis of Consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries. The financial statements of the subsidiaries are prepared for the same reporting date as the Company. The consolidated financial statements are prepared using uniform accounting policies for like transactions and other events in similar circumstances.

Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group :

• haspowerovertheentity;• isexposed,orhasrights,tovariablereturnsfromitsinvolvementwiththeentity;and• hastheabilitytoaffectthosereturnsthroughitspowerovertheentity.

The Group reassesses whether it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of controls listed above.

Subsidiaries are consolidated using the acquisition method as explained in Note 2.5 and consolidation of a subsidiary begins from the date the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary.

In preparing consolidated financial statements, intra-group balances and transactions and the resulting unrealised profits are eliminated on consolidation. Unrealised losses are eliminated on consolidation and the relevant assets are assessed for impairment. The consolidated financial statements reflect external transactions and balances only. When necessary, adjustments are made to the financial statements of subsidiaries to ensure conformity with the Group’s accounting policies. The total comprehensive income of a subsidiary is attributed to the Group and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Changes in the Group’s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. 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 interests are adjusted and the fair value of the consideration paid or received by the Group is recognised directly in equity and attributed to owners of the Company. If the Group loses control of a subsidiary, the assets (including any goodwill) and liabilities of the subsidiary and non-controlling interests will be derecognised at their carrying amounts at the date when control is lost. Any investment retained in the former subsidiary is recognised at its fair value at the date when control is lost. The resulting difference between the amounts derecognised and the aggregate of the fair value of consideration received and investment retained is recognised as gain or loss in profit or loss attributable to the Group.




2.5 Business combinations

Acquisitions of businesses are accounted for using the acquisition method except for combinations of entities or businesses under common control. The consideration transferred for the acquisition of an acquiree is measured at fair value which is calculated as the sum of the acquisition-date fair values of assets transferred, liabilities incurred, equity interests issued and contingent consideration given. Acquisition-related costs are recognised as an expense in the periods in which the costs are incurred.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their acquisition-date fair values, except for non-current assets (or disposal group) that are classified as held for sale which shall be measured at fair value less costs to sell.

Goodwill is measured as the excess of the aggregate of the consideration transferred, the amount of any non-controlling interests and the acquisition-date fair value of any previously held equity interest over the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed. The excess of the Group’s interest in the net amounts of the identifiable assets, liabilities and contingent liabilities over the aggregate of the consideration transferred, the amount of any non-controlling interests and the acquisition-date fair value of any previously held equity interest is recognised immediately in profit or loss.

Subsidiaries arising from common control combinations are consolidated using the principles of merger accounting. The common control combinations are business combinations in which all the combining entities have common ultimate controlling parties prior to and immediately after such combinations. Under the principles of merger accounting, the assets and liabilities of the combining entities are consolidated using the existing book values from the controlling parties’ perspective and the results of each of the combining entity are presented as if the combination had been effected throughout the current and previous comparative periods presented.

On consolidation, the cost of investment is matched against the nominal value of ordinary shares acquired and any resulting credit difference (merger reserve) is classified under equity as a non distributable reserve and any resulting debit difference (merger deficit) is adjusted against suitable consolidated reserves.

Non-controlling interests represent that portion of profit or loss and net assets of a subsidiary not attributable, directly or indirectly, to the Group. For each business combination, non-controlling interests are measured either at their fair value at the acquisition date or at the non-controlling interests’ proportionate share of the subsidiary’s identifiable net assets. Non-controlling interests in the net assets of consolidated subsidiaries comprised the amount of non-controlling interests at the date of original combination and their share of changes in equity since the date of combination.

In a business combination achieved in stages, any previously held equity interest is remeasured at its acquisition-date fair value and the resulting gain or loss is recognised in profit or loss.




2.6 Goodwill

Goodwill arising on the acquisitions of subsidiaries is recognised as an asset and carried at cost as established at the acquisition date less any accumulated impairment losses. Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. For the purpose of impairment testing, goodwill from acquisition date is allocated to each of the Group’s cash-generating unit (“CGU”) or groups of CGUs that are expected to benefit from the synergies of the combination in which the goodwill arose. The test for impairment of goodwill on consolidation is in accordance with the Group’s accounting policy for impairment of non-financial assets. An impairment loss recognised for goodwill is not reversed in a subsequent period.

Where goodwill forms part of a CGU or groups of CGUs 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 and the portion of the CGU retained.

2.7 Associates

An associate is an entity, including an unincorporated entity, over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control of those policies.

Investments in associates are accounted for in the consolidated financial statements using the equity method. Under the equity method, the investments in associates are initially recognised at cost and adjusted thereafter for the Group’s share of the profit or loss and changes in the associates’ other comprehensive income after the date of acquisition. Equity accounting is discontinued when the Group’s share of losses of an associate equals or exceeds its interest in the associate. Once the Group’s interest in such associate is reduced to zero, additional losses are provided for and a liability recognised, only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate. If the associate subsequently reports profits, the Group resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognised.

Unrealised gain on transactions between the Group and the associate are eliminated to the extent of the Group’s interest in the associate. Unrealised losses are eliminated and the relevant assets are assessed for impairment.

On acquisition of an investment in an associate, any excess between the cost of the investment and the Group’s share of net fair value of the associate’s identifiable asset and liabilities is accounted for as goodwill and is included in the carrying amount of the investment and is not amortised. Any excess of the Group’s share of the net fair value of the associate’s identifiable assets and liabilities over the cost of the investment is included as income in the determination of the Group’s share of the associate’s profit or loss in the period in which the investment is acquired.

After the application of the equity method, the Group determines whether it is necessary to recognise any additional impairment loss with respect to the Group’s net investment in the associate. The Group determines at the end of each reporting date whether there is any objective evidence that the investments in associates are impaired. If such evidence exists, the Group determines the amount of impairment by comparing the investment’s recoverable amount with its carrying amount (including goodwill) and the impairment loss is recognised to profit or loss as part of the Group’s share of results of associates.




2.7 Associates (Cont’d)

In applying the equity method of accounting, the latest audited financial statements of the associate are used. Where the reporting dates of the Group and the associate are not coterminous, equity accounting is applied on the management accounts made to the financial year end of the Group. Uniform accounting policies are adopted for like transactions and events in similar circumstances.

When the Group reduces its equity interest in an associate but continues to apply the equity method, the Group reclassifies to profit or loss the proportion of gain or loss that had previously been recognised in other comprehensive income.

The Group discontinues the use of equity method from the date when its investment ceases to be an associate. If the Group retains interest in the former associate and the retained interest is a financial asset, the Group measures the retained interest at fair value at that date. The Group recognises in profit or loss the difference between (i) the fair value of any retained interest and any proceeds from disposing of a part interest in the associate; and (ii) the carrying amount of the investment at the date the equity method was discontinued.

2.8 Investments in Subsidiaries

In the Company’s separate financial statements, investments in subsidiaries are accounted for at cost less any accumulated impairment losses. The investments are reviewed for impairment in accordance with the Group’s accounting policy for impairment of non-financial assets as disclosed in Note 2.12. On disposal of such investments, the difference between the net disposal proceeds and the net carrying value of the investments is recognised as a gain or loss on disposal in the Company’s profit or loss.

2.9 Property, Plant and Equipment and Depreciation

All items of property, plant and equipment are initially recorded 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.

Subsequent to recognition, property, plant and equipment except for capital work-in-progress are stated at cost less accumulated depreciation and any accumulated impairment losses. When significant parts or property, plant and equipment are required to be replaced in intervals, the Group recognised such parts as individual assets with specific useful lives and depreciation, respectively. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the property, plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in profit or loss as incurred.

Capital work-in-progress is not depreciated as these assets are not yet available for use. Subleased land is amortised over the remaining period of its lease of 26.8 years. Buildings on leasehold land is depreciated over its estimated useful life of 50 years or over the period of land lease, whichever is shorter. Depreciation of other property, plant and equipment is calculated on a straight-line basis to write off their costs to their residual values over the estimated useful lives of the assets concerned, which are as follows:-

Office equipment and furniture and fittings 3 to 10 yearsTools 10 yearsMotor vehicle 10 yearsPlant and machinery 5 yearsSignboard 10 yearsRenovation 10 years




2.9 Property, Plant and Equipment and Depreciation (Cont’d)

The residual values and useful lives of assets are reviewed at each financial year end and adjusted prospectively, if appropriate, where expectations differ from previous estimates. Property, plant and equipment are reviewed for impairment in accordance with the Group’s accounting policy for impairment of non-financial assets as disclosed in Note 2.12.2.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. The difference between the net disposal proceeds, if any and the net carrying value is recognised in the profit or loss in the year the asset is derecognised.

2.10 Intangible Assets

2.10.1 Research and development expenditure

All research expenditure are recognised in the statement of comprehensive income as incurred.

Expenditure incurred on projects to develop new products is capitalised and deferred only when the Group 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 expenditures which do not meet these criterias are expensed when incurred.

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 indication of impairment and the amortisation period and method are also reviewed at least at each statement of financial position date.

2.11 Financial Assets

The Group recognises all financial assets in its statement of financial position when, and only when, the Group becomes a party to the contractual provisions of the instruments.

All regular way purchases or sales of financial assets are recognised and derecognised using trade date accounting. A regular way purchase or sale is a purchase or sale of a financial asset that requires delivery of asset within the time frame established generally by regulation or convention in the marketplace concerned. Trade date accounting refers to:-

• therecognitionofanassettobereceivedandtheliabilitytopayforitonthetradedatei.e.thedate the Group commits itself to purchase or sell an asset; and

• derecognitionofanassetthatissold,therecognitionofanygainorlossondisposalandtherecognition of a receivable from the buyer for payment in the trade date.




2.11 Financial Assets (Cont’d)

2.11.1 Classification

From 1 January 2018, the Group classifies its financial assets into the following measurement categories depending on the business models used for managing the financial assets and the contractual cash flow characteristics of the financial assets:

(a) at amortised cost;

(b) fair value through other comprehensive income; and

(c) fair value through profit or loss.

Financial assets are reclassified when and only when the Group changes its business model for managing the financial assets and the reclassification of all affected financial assets is applied prospectively from the reclassification date i.e. on the first day of the first reporting period following the change in business model.

2.11.2 Measurement

At initial recognition, trade receivables without a significant financing component are measured at their transaction price when they are originated.

Other financial assets are initially measured at fair value plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs. Transaction costs of financial assets at fair value through profit or loss are expensed to profit or loss when incurred.

(a) Debt instruments

Subsequent measurement of debt instruments depends on the Group’s business models for managing the financial assets and the contractual cash flow characteristics of the financial assets. The Group’s debt instruments are categorised into the following measurement categories :

(i) Amortised cost

A financial asset is measured at amortised cost if both of the following conditions are met and it is not designated as at fair value through profit or loss at initial recognition :

• thefinancialassetisheldwithinabusinessmodelwhoseobjectiveistoholdfinancialassets in order to collect contractual cash flows; and

• thecontractualtermsofthefinancialassetgiveriseonspecifieddatestocashflowsthat are solely payments of principal and interest (“SPPI”) on the principal amount outstanding.

These financial assets are measured at amortised cost using the effective interest method less any impairment losses. Interest income, gains or losses on derecognition, foreign exchange gains or losses and impairment are recognised in profit or loss. Impairment losses are presented as a separate line item in the statement of profit or loss and other comprehensive income.





2.11.2 Measurement (Cont’d)

(a) Debt instruments (Cont’d)

(ii) Fair value through other comprehensive income (“FVOCI”)

A financial asset is measured at FVOCI if both of the following conditions are met and it is not designated as FVTPL at initial recognition :

• thefinancialassetisheldwithinabusinessmodelwhoseobjectiveisachievedbyboth collecting contractual cash flows and selling financial assets; and

• thecontractualtermsofthefinancialassetgiveriseonspecifieddatestocashflowsthat are solely payments of principal and interest (“SPPI”) on the principal amount outstanding.

Changes in fair value of these financial assets are recognised in other comprehensive income. When the financial asset is derecognised, the cumulative gains or losses previously recognised in other comprehensive income is reclassified from equity to profit or loss. Interest income calculated using the effective interest method, foreign exchange gains or losses and impairment are recognised in profit or loss. Impairment losses are presented as a separate line item in the statement of profit or loss and other comprehensive income.

(iii) Fair value through profit or loss (“FVTPL”)

A financial asset is measured at FVTPL if it does not meet the criteria for amortised cost or FVOCI. This includes all derivative financial assets.

The Group may, at initial recognition, irrevocably designate a financial asset as measured at FVTPL that otherwise meets the criteria for amortised cost or FVOCI if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

Changes in fair value of financial assets at FVTPL and interest or dividend income are recognised in profit or loss.

(b) Equity instruments

The Group subsequently measures all equity investments at fair value.

For equity investments at FVTPL, changes in fair value are recognised in profit or loss. Where the Group has elected to present the changes in fair value in other comprehensive income, the amounts presented are not subsequently transferred to profit or loss when the equity investments are derecognised. The cumulative gains or losses is transferred to retained profits instead. The election is made on an instrument-by-instrument basis and it is irrevocable. The amount presented in other comprehensive income includes the related foreign exchange gains or losses.





2.11.2 Measurement (Cont’d)

(b) Equity instruments (Cont’d)

Dividend income from equity investments at FVTPL and FVOCI is recognised in profit or loss as other income when the Group’s right to receive payment has been established.

Changes in the fair value of equity investments at FVTPL are recognised in other income or expenses, as applicable, in the profit or loss. Impairment losses or reversal of impairment losses on equity instruments measured at FVOCI are recognised in other comprehensive income and are not reported separately from other changes in fair value.

2.11.3 Derecognition of financial assets

The Group derecognises a financial asset when, and only when, the contractual rights to the cash flows from the financial asset expires or it transfers the financial asset without retaining control or transfers substantially all the risks and rewards of ownership of the financial asset to another party.

On derecognition of a financial asset in its entirety, the difference between the carrying amount measured at the date of derecognition and the sum of the consideration received (including any new asset obtained less any new liability assumed) is recognised in profit or loss.

2.11.4 Accounting policies applied until 31 December 2017

The Group has applied MFRS 9 retrospectively but has elected not to restate comparative information as permitted by the Standard. As a result, the comparative information provided in these financial statements continues to be accounted for in accordance with the previous accounting policies.

Classification and measurement

Until 31 December 2017, the Group’s financial assets were classified into the following specified categories depending on the nature and purpose of the financial assets and was determined at the time of initial recognition.

(a) Financial assets at fair value through profit or loss

Financial assets were classified at fair value through profit or loss when the financial assets were either held for trading or designated as such upon initial recognition.

After initial recognition, financial assets at fair value through profit or loss were measured at fair value with any gains or losses arising from changes in fair values recognised in profit or loss. The net gains or losses did not include any exchange differences, dividend or interest earned on the financial asset. Exchange differences, dividend and interest earned on financial assets at fair value through profit or loss were recognised separately in profit or loss as part of other income or other expenses.

Derivatives that were linked to and must be settled by delivery of unquoted equity instruments whose fair value could not be reliably measured were measured at cost less any impairment losses.





2.11.4 Accounting policies applied until 31 December 2017 (Cont’d)

Classification and measurement (Cont’d)

(b) Held-to-maturity investments

Held-to-maturity investments were non-derivative financial assets with fixed or determinable payments and fixed maturity that the Group had the positive intention and ability to hold to maturity.

Subsequent to initial recognition, held-to-maturity investments were measured at amortised cost using the effective interest rate method less any impairment losses. A gain or loss was recognised in profit or loss when the held-to-maturity investment was derecognised or impaired, and through the amortisation process.

(c) Loans and receivables

Loans and receivables were non-derivative financial assets with fixed or determinable payments that were not quoted in an active market. Trade receivables, loans and other receivables were classified as loans and receivables.

Subsequent to initial recognition, loans and receivables were measured at amortised cost using the effective interest method less any impairment losses. Gains and losses were recognised in profit or loss when loans and receivables were derecognised or impaired, and through the amortisation process.

(d) Available-for-sale financial assets

Available-for-sale financial assets were non-derivative financial assets that were designated as available for sale or were not classified as loans and receivables, held-to-maturity investments or at fair value through profit or loss. Available-for-sale financial assets comprise quoted and unquoted equity and debt instruments that were not held for trading.

Subsequent to initial recognition, quoted equity and debt instruments were measured at fair value and investments in equity instruments that did not have a quoted market price in an active market and whose fair value could not be reliably measured were measured at cost. A gain or loss from changes in fair value was recognised in other comprehensive income, except that impairment losses, foreign exchange gains or losses on monetary instruments and interest calculated using the effective interest method were recognised in profit or loss. The cumulative gain or loss previously recognised in other comprehensive income was reclassified from equity to profit or loss as a reclassification adjustment when the financial asset was derecognised. Dividends on an equity instrument were recognised in profit or loss when the Group’s right to receive payment was established.





2.11.4 Accounting policies applied until 31 December 2017 (Cont’d)

Derecognition of financial assets

The Group derecognised a financial asset when, and only when, the contractual rights to the cash flows from the financial asset expired or it transferred the financial asset without retaining control or transferred substantially all the risks and rewards of ownership of the financial asset to another party.

On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income was recognised in profit or loss.

2.12 Impairment

2.12.1 Financial assets

From 1 January 2018, upon the adoption of MFRS 9, the Group recognises loss allowance for expected credit losses (“ECLs”) on :-

• financialassetsmeasuredatamortisedcost;

• debtinstrumentsmeasuredatfairvaluethroughothercomprehensiveincome(“FVOCI”);

• contractassets;

• leasereceivables;and

• financialguaranteecontracts.

ECLs are based on the difference between the contractual cash flows due in accordance with the contract and the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.

ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12 months i.e. a 12-month ECL. For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default i.e. a lifetime ECL.

For trade receivables and contract assets, the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the customers and the economic environment.




2.12 Impairment (Cont’d)

2.12.1 Financial assets (Cont’d)

From 1 January 2018, upon the adoption of MFRS 9, the Group recognises loss allowance for expected credit losses (“ECLs”) on :- (Cont’d)

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating expected credit loss, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s historical experience and informed credit assessment (including forward-looking information). The Group considered that the credit risk on a financial asset has increased significantly when constructual payments are more than 10 months past due.

An impairment loss in respect of financial assets measured at amortised cost is recognised in profit or loss and the carrying amount of the asset is reduced through the use of an allowance account.

At each reporting date, the Group assesses whether financial assets carried at amortised cost and debt instruments at FVOCI are credit-impaired. A financial assets is credit impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial assets have occurred. The gross carrying amount of a financial assets is written off (either partially or full) to the extent that there is no realistic prospect o recovery. This is generally the case when the Group determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group’s procedures for recovery amount due.

Accounting policies applied until 31 December 2017

The Group assessed at the end of each reporting period whether there was any objective evidence that a financial asset, other than financial assets at fair value through profit or loss, was impaired. Financial assets were considered to be impaired when objective evidence indicated that a loss event had occurred after the initial recognition of the assets and that the loss event had a negative effect on the estimated future cash flows of that asset that could be reliably estimated. Losses expected as a result of future events, no matter how likely, were not recognised. For quoted equity instrument, a significant or prolonged decline in the fair value of the investment below its cost was considered to be objective evidence of impairment.

An amount of impairment loss in respect of financial assets measured at amortised cost was measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate i.e. the effective rate computed at initial recognition. The carrying amount of the asset was reduced through an allowance account. The amount of loss was recognised in profit or loss.





2.12.1 Financial assets (Cont’d)

Accounting policies applied until 31 December 2017 (Cont’d)

If in a subsequent period the amount of the impairment loss on financial assets measured at amortised cost decreased and the decrease could be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss was reversed by adjusting the allowance account to the extent that the carrying amount of the financial asset did not exceed its amortised cost had the impairment not been recognised at the date the impairment was reversed. The amount of reversal was recognised in profit or loss.

When an available-for-sale financial asset was impaired, the cumulative loss in relation to decline in fair value previously recognised in other comprehensive income was reclassified from equity and recognised in profit or loss as a reclassification adjustment even though the financial asset had not been derecognised. The amount of cumulative loss that was reclassified was the difference between the acquisition cost (less any principal repayment and amortisation) and current fair value, less any impairment loss on that financial asset previously recognised in profit or loss.

Impairment losses recognised in profit or loss for an investment in an equity instrument classified as available-for-sale was not reversed through profit or loss. Increase in fair value, if any, subsequent to the impairment loss, was recognised in other comprehensive income.

If the fair value of a debt instrument classified as available-for-sale increased in a subsequent period and the increase could be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss was reversed with the amount of the reversal was recognised in profit or loss.

An amount of impairment loss in respect of financial assets carried at cost was measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses were not reversed in subsequent periods.

2.12.2 Non-financial assets

The carrying amounts of non-financial assets (other than inventories, contract assets, lease receivables, deferred tax assets, assets arising from employee benefits, investment property that is measured at fair value and non-current assets or disposal groups held for sale) are reviewed for impairment at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated to determine the amount of impairment loss. For goodwill recognised in a business combination and that has an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated annually or more frequently when indicators of impairment are identified.





2.12.2 Non-financial assets (Cont’d)

An impairment loss is recognised if the carrying amount of an asset or a cash generating unit (“CGU”) exceeds its recoverable amount. A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or group of assets. Impairment losses recognised in respect of CGUs (or groups of CGUs) are allocated first to reduce the carrying amount of any goodwill arising from a business combination allocated to the units (or groups of units) and then to reduce the carrying amount of the other assets in the units (or groups of units) on a pro rata basis.

The recoverable amount of an asset or CGU is the higher of its fair value less costs of disposal and its value in use. 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.

An impairment loss is recognised in profit or loss in the period in which it arises.

Impairment loss on goodwill is not reversed in a subsequent period. An impairment loss for an asset other than goodwill is reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. The carrying amount of an asset other than goodwill is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior years. A reversal of impairment loss for an asset other than goodwill is recognised in profit or loss.

2.13 Inventories

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

Cost is determined on the weighted average cost basis. Cost of raw materials, consumable and engineering equipment components comprise all costs of purchase plus incidentals in bringing these inventories to their present location and condition.

Net realisable value represents the estimated selling price in the ordinary course of business less the estimated cost of completion and selling expenses.

2.14 Contract Costs

Contract costs are recognised as an asset when the following criteria are met :

(a) In relation to incremental costs of obtaining a contract, the Group recognises the costs as an asset if the Group expects to recover those costs.

(b) In relation to costs to fulfil a contract, the Group recognises the contract costs as an asset if (i) they relate directly to a contract or to an anticipated contract that the Group can specifically identify; (ii) when the costs generate or enhance resources of the Group that will be used in satisfying performance obligations in the future; and (iii) the costs are expected to be recovered.




2.14 Contract Costs (Cont’d)

These assets are initially measured at cost and are subsequently amortised on a systematic basis that is consistent with the transfer to the customers of the goods or services to which the assets relate. An impairment loss is recognised in profit or loss to the extent that the carrying amount of the asset exceeds the remaining amount of consideration expected to be received less the remaining costs expected to be incurred. A reversal of impairment loss is recognised in profit or loss when the impairment conditions no longer exist or have improved. The increased carrying amount does not exceed the amount that would have been determined (net of amortisation) if no impairment loss had been recognised previously.

2.15 Contract Assets and Contract Liabilities

Contract asset is the right to consideration for goods or services transferred to the customers. In the case of property development and construction contracts, contract asset is the excess of cumulative revenue earned over the billings to-date. Contract assets are reviewed for impairment in accordance with the Group’s accounting policy on impairment as disclosed in Note 2.12.1.

Contract liability is the obligation to transfer goods or services to customers for which the Group has received the consideration or has billed the customer. In the case of construction contracts, contract liability is the excess of the billings to-date over the cumulative revenue earned. Contract liabilities include downpayments received from customers and other deferred income where the Group has billed or has collected the payment before the goods are delivered or services are provided to the customers.


Prior to the application of MFRS 15 commencing from 1 January 2018, in respect of property development activities, the excess of revenue recognised in profit or loss over billings to purchasers was classified as accrued billings within current assets and the excess of billings to purchasers over revenue recognised in profit or loss was classified as progress billings within current liabilities.

In relation to construction contract activities, the difference between (i) the sum of cost incurred for construction and engineering contracts-in-progress and profit attributable to contract-in-progress less foreseeable losses, if any; and (ii) progress billings issued, was classified as amount due from/(to) customers for contract work and was presented within current assets or current liabilities respectively on the statement of financial position.

2.16 Cash and Cash Equivalents

Cash and cash equivalents consist of cash and banks balances, deposits and short term investments which are readily convertible to known amount of cash and which are subject to an insignificant risk of change in value used by the Group in the management of its short term funding requirements, reduced by bank overdrafts. The statements of cash flows are prepared using the indirect method.




2.17 Financial Liabilities

The Group recognises all financial liabilities in its statement of financial position when, and only when, the Group becomes a party to the contractual provisions of the instruments.

2.17.1 Classification and measurement

Financial liabilities are initially measured at fair value minus, in the case of financial liabilities not at fair value through profit or loss, directly attributable transaction costs. Transaction costs of financial assets at fair value through profit or loss are expensed to profit or loss when incurred.

Financial liabilities are classified as either financial liabilities at fair value through profit or loss or financial liabilities measures at amortised costs.

(a) Fair value through profit or loss (“FVTPL”)

Financial liabilities are classified as at FVTPL when the financial liability is either held for trading or it is designated as at FVTPL upon initial recognition or derivatives that are liabilities.

A financial liability is classified as held for trading if:-

• ithasbeenincurredprincipallyforthepurposeofrepurchasingitinthenearterm;or

• oninitialrecognition,itispartofaportfolioofidentifiedfinancialinstrumentsthattheGroup manages together and has a recent actual pattern of short-term profit-taking; or

• itisaderivativethatisnotdesignatedandeffectiveasahedginginstrument.

After initial recognition, financial liabilities at FVTPL are measured at fair value with any gains or losses arising from changes in fair value recognised in profit or loss. If a financial liability is designated as at FVTPL, the change in fair value that is attributable to changes in the credit risk of that liability is presented in other comprehensive income and the remaining change in fair value of the liability is presented in profit or loss. The net gains or losses recognised in profit or loss do not include any exchange differences or interest paid on the financial liability. Exchange differences and interest expense on financial liabilities at FVTPL are recognised separately in profit or loss as part of other income or other expenses.


After initial recognition, financial liabilities at fair value through profit or loss are measured at fair value with any gains or losses arising from changes in fair value recognised in profit or loss. The net gains or losses recognised in profit or loss do not include any exchange differences or interest paid on the financial liability. Exchange differences and interest expense on financial liabilities at fair value through profit or loss are recognised separately in profit or loss as part of other income or other expenses.

Derivative liability that is linked to and must be settled by delivery of an unquoted equity instrument whose fair value cannot be reliably measured is measured at cost.




2.17 Financial Liabilities (Cont’d)

2.17.1 Classification and measurement (Cont’d)

(b) Amortised cost

All financial liabilities, other than those categorised as FVTPL are subsequently measured at amortised cost using the effective interest method.

A gain or loss on other financial liabilities at amortised cost is recognised in profit or loss when the liabilities are derecognised and through the amortisation process.

2.17.2 Derecognition of financial liabilities

A financial liability is derecognised when, and only when, the obligation specified in the contract is extinguished. When an existing financial liability is exchanged with the same lender on substantially different terms or the terms of an existing liability are substantially modified, they are accounted for as an extinguishment of the original financial liability and a new financial liability is recognised. The difference between the carrying amount of a 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.

2.18 Offsetting financial instruments

Financial assets and financial liabilities are offset when the Group has a legally enforceable right to offset and intends to either settle on a net basis, or to realise the asset and settle the liability simultaneously.

2.19 Financial Guarantee Contracts

A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument.

Financial guarantee contracts are recognised initially as a liability at fair value, net of transaction costs. Subsequent to initial recognition, financial guarantee contracts are measured at the higher of (i) the amount determined in accordance with the expected credit loss model; and (ii) the amount initially recognised less, where appropriate, the cumulative amount of income recognised in accordance with the principles of MFRS 15 Revenue from Contracts with Customers.

Financial guarantee contracts were recognised initially as a liability at fair value, net of transaction costs. Subsequent to initial recognition, financial guarantee contracts were amortised in profit or loss using the straight-line method over the contractual period or, when there was no specified contractual period, recognised in profit or loss upon discharge of the guarantee. When settlement of a financial guarantee contract became probable, an estimate of the obligation was made in accordance with MFRS 137 Provisions, Contingent Liabilities and Contingent Assets. If the carrying amount of the financial guarantee was lower than the obligation estimated, the carrying value was adjusted to the obligation amount and accounted for as a provision.




2.20 Hire Purchase and Finance Lease Arrangements and Operating Leases

A lease is recognised as a finance lease if it transfers substantially to the Group all the risks and rewards incidental to ownership of the leased assets. All other leases are classified as operating leases.

Assets acquired under hire purchase arrangements are recognised and measured in a similar manner as finance leases.

2.20.1 Assets acquired under hire purchase and finance lease arrangements

Assets acquired under hire purchase and finance lease arrangements are stated at the amounts equal at the inception of the arrangement to the lower of the fair values and the present values of the minimum hire purchase or lease payments.

The corresponding obligations are taken up as hire purchase or finance lease liabilities. Hire purchase or lease payments are apportioned between the outstanding liabilities and finance charges which are recognised in profit or loss over the period of the hire purchase/lease term so as to produce a constant periodic rate of interest on the remaining balance of the liabilities for each period.

The depreciation policy of property, plant and equipment acquired under hire purchase and finance lease arrangements are consistent with the Group’s depreciation policy as set out in Note 2.9 above.

2.20.2 Operating lease

Operating lease payments are recognised as expenses in profit or loss on a straight-line basis over the period of the relevant leases.

2.21 Share Capital

Ordinary shares are classified as equity. Distributions to holders of ordinary shares are debited directly to equity and dividends declared on or before the end of the reporting period are recognised as liabilities. Costs directly attributable to equity transactions are accounted for as a deduction, net of tax, from equity.

When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly attributable costs, net of any tax effects, is recognised as a deduction from equity. Repurchased shares that are not subsequently cancelled are classified as treasury shares in statement of changes in equity.

Where 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 sold or reissued subsequently, the difference between the sales consideration and the carrying amount are shown as movement in equity.




2.22 Income Taxes

Tax expense is the aggregate amount of current and deferred taxes. Current and deferred taxes are recognised as income or expense in profit or loss except to the extent that the taxes relate to items recognised outside profit or loss, either in other comprehensive income or directly in equity or a business combination.

Current tax assets and liabilities is the expected tax payable on the taxable profit for the year or tax recoverable from the taxation authorities and is calculated using tax rates enacted or substantially enacted at the end of the reporting period.

Deferred tax is recognised, using the liability method, on temporary differences at end of the reporting period between the carrying amounts of assets and liabilities in the financial statements and the amounts attributed to those assets and liabilities for taxation purposes.

Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences and unabsorbed tax losses and unused tax credits to the extent that it is probable that future taxable profit will be available against which the assets can be utilised.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and is reduced to the extent that it is no longer probable that the related tax benefits will be realised.

Tax rates enacted or substantively enacted at the end of the reporting period are used to determine deferred tax.

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

2.23 Revenue Recognition

The Group has applied MFRS 15 retrospectively with the cumulative effect of initially applying this Standard recognised at the date of initial application i.e. on 1 January 2018. Accordingly, the revenue recognised for 2017 has not been restated and they continue to be accounted for in accordance with the previous accounting policies.

From 1 January 2018, the Group recognises revenue from a contract with customer when it satisfies a performance obligation by transferring control of a promised good or service to the customer. Performance obligations may be satisfied over time or at a point in time. Revenue is measured based on the consideration specified in the contract which the Group expects to be entitled in exchange for transferring the good or service, excluding the amounts collected on behalf of third parties.




2.23 Revenue Recognition (Cont’d)

The Group recognises revenue from the following business activities :

(i) Contract revenue

The Group’s contract revenue is derived from contracts for the design, development, installation and inspection of plant and equipment and are recognised as a single performance obligation.

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

The Group becomes entitled to invoice customers based on the achievement of a series of performance-related milestones. When a particular milestone is reached the customer is sent an invoice for the related milestone payment. The Group will previously have recognised a contract asset for any work performed. Any amount previously recognised as a contract asset is reclassified to trade receivables at the point at which it is invoiced to the customer. If the cumulative milestone payment exceeds the revenue recognised to date then the Group recognises the differences as a contract liability. There is no significant financing component in contracts with customers as the payment term is always less than one year from the date of milestone payment or transfer of promised goods or services to customers.

Therefore, no adjustment is made to the promised amount of consideration for the effects of time value of money.

(ii) Sales of goods

Revenue from sales of goods recognised at the point in time when control of the asset is transferred to the customer, generally on acceptance by customers of the individual contract.

(iii) Repair and maintenance or rendering of services

Revenue from a contract for repair and maintenance or rendering of services comprise deliverables which represent a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer are recognised over time, using an input method, based on cost incurred to-date relative to the total expected cost to the satisfaction of the service.

For certain arrangements, where the Group contracted to transfer a good or service (or a bundle of goods or services) that is distinct, revenue is recognised at a point in time when the customer obtain control of the asset or services.


Prior to 1 January 2018, revenue is measured at the fair value of the consideration received or receivable net of discounts and rebates. Revenue is recognised to the extent that is probable that the economic benefits associated with the transaction will flow to the Group, and the amount of revenue and the cost incurred or to be incurred in respect of the transaction can be reliably measured. The following specific recognition criteria must also be met for each of the Group’s activities before revenue is recognised :-




2.23 Revenue Recognition (Cont’d)

Accounting policies applied until 31 December 2017 (Cont’d)

(i) Sales of goods and service rendered

Revenue from sales of goods subject to installation and inspection is recognised upon acceptance by customers of the individual contracts.

Revenue from rendering of services is recognised by reference to the stage of completion of the services at the end of the reporting period.

(ii) Contract revenue

Revenue recognition policy from contracts is described as follows :

Revenue and expense recognition

Where the outcome of a construction contract can be estimated reliably, contract revenue and contract costs are recognised as revenue and expenses respectively by reference to the stage of completion of the contract activity at the statement of financial position date. The stage of completion is measured by reference to the proportion of contract costs incurred for work performed bear to date to the estimated total contract costs.

Where the outcome of construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred that it is probable will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred.

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

2.24 Revenue from Other Sources and Other Income

(i) Interest income

Interest income is recognised on a time proportion basis, taking into account the principal outstanding and the effective interest rate applicable.

(ii) Dividend income

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

2.25 Employee Benefits

2.25.1 Short term employee benefits

Wages, salaries, social security contribution, paid annual leave and sick leave, bonuses and non-monetary benefits are recognised as an expense in the period in which the associated services are rendered by employees of the Group.




2.25 Employee Benefits (Cont’d)

2.25.2 Defined contribution plan

The Group provides post-employment benefits by way of contribution to defined contribution plans operated by the relevant authorities at the prescribed rates.

Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into a separate entity (a fund) and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods.

The Group’s contributions to defined contribution plans are recognised as an expense in the period to which they relate.

2.25.3 Share-based payment

The Company operates an equity-settled share-based compensation plan for eligible employees of the Group. The fair value of the employee services received in exchange for the grant of the share options is recognised as an expense in profit or loss over the vesting period of the grant with a corresponding increase in equity.

The total amount to be expensed over the vesting period is determined by reference to the fair value of the share options granted. The fair value of the share options is measured at grant date, taking into account, if any, the market vesting conditions upon which the options were granted but excluding the impact of any non-market vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable on vesting date.

At each reporting date, the Group revises its estimates of the number of options that are expected to vest. It recognises the impact of the revision to the original estimates, if any, in profit or loss, and a corresponding adjustment to equity. The equity amount is recognised in the share option reserve until the option is exercised, upon which it will be transferred to share premium, or until the option expires, upon which it will be transferred directly to retained profits.

The proceeds received net of any directly attributable transaction costs are credited to equity when the options are exercised.

The grant by the Company of the share options to employees of subsidiaries in the Group is treated as a capital contribution. The fair value of employee services received, measured by reference to the grant date fair value is recognised over the vesting period as an increase to investments in subsidiaries with a corresponding credit to equity in the Company’s financial statements.

2.26 Foreign Currency

(i) Functional and presentation currency

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




2.26 Foreign Currency (Cont’d)

(ii) Foreign currency transactions and balances

In preparing the financial statements of the individual entities, transactions in foreign currencies are measured in the respective functional currencies at the exchange rates approximating those ruling at the transaction dates. At each year end, monetary assets and liabilities denominated in foreign currencies are translated at the rates of exchange ruling at the year end. Non-monetary items denominated in foreign currencies that are measured at historical cost are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items denominated in foreign currencies measured at fair value are translated using the exchange rates at the date when the fair value was determined.

Exchange differences arising on the settlement of foreign currency transactions and from the translation of foreign currency monetary assets and liabilities are recognised in profit or loss.

Exchange differences arising on the translation of non-monetary items carried at fair value are included in profit or loss for the period except for the differences arising on the translation of non-monetary items in respect of which gains and losses are recognised in other comprehensive income. Exchange differences arising from such non-monetary items are recognised to other comprehensive income.

2.27 Borrowing Costs

Borrowing costs are capitalised as part of the cost of a qualifying asset if they are directly attributable to the acquisition, construction or production of that 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.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred. Borrowing costs consist of interest and other costs that the Group incurred in connection with the borrowing of funds.

2.28 Earnings per Share

The Group presents basic and diluted (where applicable) earnings per share [“EPS”] data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares. No adjustment is made for anti-dilutive potential ordinary shares.

2.29 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 revenues 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, which in this case is the Board of Directors that makes strategic decisions, to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available.




2.30 Contingencies

A contingent liability or asset is a possible obligation or benefit that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of uncertain future event(s) not wholly within control of the Group.

Contingent liabilities and assets are not recognised in the statement of financial position of the Group and of the Company.

2.31 Fair Value Measurements

Fair value of an asset or a liability, except for share-based payment and leasing transactions, 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 measurement assumes that the transaction to sell the asset or transfer the liability takes place either in the principal market or in the absence of a principal market, in the most advantageous market. For non-financial assets, the fair value measurement 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.

When measuring fair value, the Group maximises the use of relevant observable inputs and minimises the use of unobservable inputs. Fair value measurements are categorised into different levels in a fair value hierarchy based on the input used in the valuation technique as follows :-

Level 1 : Quoted prices (unadjusted) in active market for identical assets or liabilities;

Level 2 : Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

Level 3 : Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Transfer between levels of the fair value hierarchy are deemed to have occurred on the date of the event or change in circumstances that caused the transfer.

2.32 Provisions

Provisions are recognised when the Group has a present legal and constructive obligation as a result of past events and 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. Where the effect of time value of money is material, the amount of provision is measured at the present value of the expenditure expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Where discounting is used, the increase in the amount of a provision due to passage of time is recognised as finance cost.



3. CHANGES IN ACCOUNTING POLICIES

The Group has adopted the new MFRS 9 Financial Instruments and MFRS 15 Revenue from Contracts with Customers for the first time in the current financial statements commencing from 1 January 2018. The adoption has resulted in changes in the Group’s accounting policies as explained further in Notes 3.1 and 3.2 respectively.

Due to the transitional methods chosen by the Group in applying the new Standards, comparative information as presented throughout these financial statements has not been restated to the reflect the new requirements.

3.1 MFRS 9 Financial Instruments

MFRS 9 replaces the requirements of MFRS139 that relate to the recognition, classification and measurement of financial assets and financial liabilities, derecognition of financial instruments, impairment of financial assets and hedge accounting. The new accounting policies are disclosed in Notes 2.11, 2.12.1, 2.17 and 2.19.

MFRS 9 has been adopted without restating comparative information in accordance with the transitional provisions of the Standard and the reclassification and adjustments arising from the new requirements are therefore not reflected in the statement of financial position as at 31 December 2017. Instead, they are recognised in the opening balances as at 1 January 2018. The financial instruments information presented for 2017 do not reflect the requirements of MFRS 9 but rather those of MFRS 139.

The impact of the initial application of MFRS 9 on the retained profits, fair value reserves and non-controlling interests (“NCI”) as at 1 January 2018 is as follows :

Group RM

Impact on retained profitsBalance at 1 January 2018 11,192,686

Recognition of allowance for expected credit losses under MFRS 9 (Notes 3.1(b)) (664,353)NCI share of allowance for expected credit losses 10,211

Net adjustment to retained profits on application of MFRS 9 on 1 January 2018 (654,142)

Restated retained profits as at 1 January 2018 10,538,544

Impact on non-controlling interests (“NCI”) - Group only Balance at 1 January 2018 1,298,529

NCI share of allowance for expected credit losses (10,211)

Restated NCI as at 1 January 2018 1,288,318



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3. CHANGES IN ACCOUNTING POLICIES (CONT’D)

3.1 MFRS 9 Financial Instruments (Cont’d)

(b) Impairment of financial assets and contract assets

MFRS 9 replaces the incurred loss model under MFRS 139 with the expected credit loss impairment model which are as described in Note 2.12.1. The initial application of the MFRS 9 impairment model has resulted in additional allowance for impairment and the impact is shown in the reconciliation below:-

Group Loss Allowance As at As at 31.12.2017 Effect of 01.01.2018 under adoption of under MFRS 139 MFRS 9 MFRS 9 RM RM RM

Trade receivables 291,565 402,834 694,399Amount due from an associate – 152,831 152,831Contract assets recognised on application of MFRS 15 (Note 3.2) 108,688 108,688

291,565 664,353 955,918

Note 36.2(c) describes the details about how the Group measures the allowance for impairment on financial assets.

3.2 MFRS 15 Revenue from Contracts with Customers MFRS 15 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts

with customers. MFRS 15 replaced the previous revenue recognition guidance including MFRS 111 Construction Contracts, MFRS 118 Revenue and the related IC Interpretations.

The Group has adopted MFRS 15 which resulted in changes in accounting policies and adjustments to the financial position as at 1 January 2018. MFRS 15 has been adopted using the cumulative effect method where the cumulative effects of initially applying the Standard are recognised in the opening retained profits as at 1 January 2018. Under this transition method, the Group has elected to apply the Standard retrospectively only to contracts that are not completed contracts as at 1 January 2018. Accordingly, the information presented for 2017 has not been restated and continues to be presented as previously reported under MFRS 111, MFRS 118 and the related interpretations. In addition, the Group has elected the practical expedient not to retrospectively restate contracts that were modified before the date of initial application.



3. CHANGES IN ACCOUNTING POLICIES (CONT’D)

3.2 MFRS 15 Revenue from Contracts with Customers (Cont’d)

The impact of the initial application of MFRS 15 on the financial position of the Group and of the Company as at 1 January 2018 is as follows :

Effects of (Restated) Carrying Effects of adoption of Carrying amount as at adoption of ECL from amount as at 01.01.2018 MFRS 15 MFRS 9 01.01.2018 RM RM RM RM

Group

Current assetsAmount due from contract customers 8,741,560 (8,741,560) – – Contract assets – 8,741,560 (108,688) 8,632,872

Current liabilitiesAmount due to contract customers 148,564 (148,564) – – Contract liabilities – 148,564 – 148,564

The initial application of MFRS 15 has no impact on the opening retained profits of the Group and of the Company as the revenue recognition policies under the previous revenue recognition standards do not differ substantially from the revenue recognition requirements under MFRS 15.

4. CRITICAL ACCOUNTING JUDGEMENT AND KEY SOURCES OF ESTIMATION UNCERTAINTY

The preparation of financial statements in conformity with the MFRSs requires management to exercise their judgement in the process of applying the Group’s accounting policies and which may have significant effects on the amounts recognised in the financial statements. It also requires the use of accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the results reported for the reporting period and that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. Although these judgements and estimates are based on the management’s best knowledge of current events and actions, actual results may differ.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.



4. CRITICAL ACCOUNTING JUDGEMENT AND KEY SOURCES OF ESTIMATION UNCERTAINTY (CONT’D)

(a) Significant judgements in applying the Group’s accounting policies

In the process of applying the Group’s accounting policies, which are described in Note 2, the management are of the opinion that any instances of application of judgement are not expected to have a significant effect on the amounts recognised in the financial statements, apart from those involving estimations which are dealt with below.

(b) Key sources of estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

(i) Contract revenue

The Group recognised contract revenue over time using an input method which is measured by reference to the proportion of costs incurred for work performed bear to date to the estimated total costs to satisfy the performance obligation.

Significant judgement is required in determining the total contract costs which will be incurred to complete a contract, total contract revenue, as well as the recoverability of the contracts. Total contract revenue also includes an estimation of the recoverable variation works that are recoverable from the customers. In making the judgements, the Group relies on past experience. Where the actual total contract costs is different from the estimated total contract costs, such difference will impact contract revenue and the profits or losses recognised. The amount of contract revenue recognised during the year is disclosed in Note 24.

(ii) Impairment of receivables

The Group uses a provision matrix to calculate ECLs for trade receivables and contract assets. The provision rates are based on days past due for groupings of various customer segments that have similar loss patterns such as customer type and rating.

The provision matrix is initially based on the Group’s historical observed default rates. The Group will calibrate the matrix to adjust the historical credit loss experience with forward looking information. For instance, if forecast economic conditions such as GDP are expected to deteriorate over the next year which can lead to an increased number of defaults, the historical default rates will be adjusted. At every reporting date , the historical observed default rates are updated and changes in the forward looking estimates are analysed. The amounts of allowances for ECL recognised as at 31 December 2018 in respect of contract assets, trade receivables and amount due from an associate are disclosed in Note 11, 12 and 13 respectively.

Prior to 1 January 2018, the Group made an allowance for impairment loss based on an assessment of the recoverability of receivables. Allowances are applied to receivables where events or changes in circumstances indicate that the carrying amounts may not be recoverable. In assessing the extent of irrecoverable debts, the management has given due consideration to all pertinent information relating to the ability of the debtors to settle debts. Where the expectation is different from the original estimate, such difference will impact the carrying value of the receivables. The carrying amounts of receivables and the cumulative allowances for impairment losses are disclosed in Note 12.



4. CRITICAL ACCOUNTING JUDGEMENT AND KEY SOURCES OF ESTIMATION UNCERTAINTY (CONT’D)

(b) Key sources of estimation uncertainty (Cont’d)

(iii) Depreciation

Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives. The management estimates the useful lives of property, plant and equipment, other than land and buildings, to be between 3 to 10 years. These are common life expectancies applied in the industry. The carrying amounts of the Group’s and the Company’s property, plant and equipment as at 31 December 2018 are stated in Note 5 to the financial statements. Changes in the expected level of usage and technological developments could impact the economic useful lives and residual values of these assets, therefore future depreciation charges could be revised.

(iv) Income taxes

Judgement is involved in determining the provision for income taxes. There are certain transactions and computations for which the estimation of the provision for income taxes is made and which the ultimate tax determination is uncertain during the ordinary course of business. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred income tax provisions, where applicable, in the period in which such determination is made.



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

Company 2018 2017 RM RMSignboard

CostBalance at 1 January 1,850 – Additions – 1,850

Balance at 31 December 1,850 1,850

Accumulated depreciationBalance at 1 January 123 – Charge for the financial year 185 123

Balance at 31 December 308 123

Net book value as at 31 December 1,542 1,727

(a) Details of property, plant and equipment acquired under hire purchase arrangement are as follows :-


Motor vehicles, at net book value 1,033,585 945,625

6. INTANGIBLE ASSETS

Development Goodwill expenditure Total RM RM RMGroup

CostBalance At 1 January 2018 7,910 176,442 184,352 Additions – – –

Balance At 31 December 2018 7,910 176,442 184,352

Accumulated amortisationBalance At 1 January 2018 – 105,864 105,864 Charged during the financial year – 35,288 35,288

Balance At 31 December 2018 – 141,152 141,152



6. INTANGIBLE ASSETS (CONT’D)

Development Goodwill expenditure Total RM RM RM

Net carrying amountAt 31 December 2018 7,910 35,290 43,200

At 31 December 2017 7,910 70,578 78,488

(i) The above goodwill has been allocated to a subsidiary acquired in prior years.

(ii) Development expenditure is incurred in respect of process, plant design and commissioning of new additive-added lubricants and is amortised over the estimated finite useful lives of not exceeding 5 years to administrative and distribution expenses. The amortisation period and amortisation method are reviewed annually, and changes, if any, are treated as changes in estimates.

7. PREPAID LAND LEASE PAYMENTS

Group 2018 RM

Subleased land

CostAt 1 January 2018 – Additions 2,178,000

At 31 December 2018 2,178,000

Accumulated amortisationAt 1 January 2018 – Charged during the financial year 20,292

At 31 December 2018 20,292

Net carrying amount

At 1 January 2018 –

At 31 December 2018 2,157,708

The Group’s subleased land, has been charged to a licensed bank in consideration for banking facilities granted to the Group as disclosed in Note 20.



8. INVESTMENT IN SUBSIDIARIES

Company 2018 2017 RM RM

Unquoted shares, at cost 30,485,263 30,485,263 Options granted to employees of subsidiaries 1,048,320 1,048,320

31,533,583 31,533,583

The details of the subsidiaries are as follows:-

Principal place of business Effective interest

Name of Principal and country of 2018 2017company activities incorporation % %

Direct subsidiaries of the Company

Solution Engineering Design and Malaysia 100 100 Sdn. Bhd. development for engineering education and research, and provision of training and curriculum content development

Solution Biogen Sdn. Bhd. Design, develop, Malaysia 100 100 produce and trade of pilot plant for biolubricant project and industrial lubricant

SolutionE&ETechnology Designand Malaysia 70 70 Sdn. Bhd. development of ultrasonic solvent extraction of oil from spent absorbent project

SolutionA&CTechnology Designand Malaysia 70 70 Sdn. Bhd. development of all kinds of industrial automation system

Solution Bioforce Undertakes all types Malaysia 100 100Sdn. Bhd. and kinds of biotechnology business

Solar Solution Sdn. Bhd. Dormant Malaysia 100 100



8. INVESTMENT IN SUBSIDIARIES (CONT’D)

The details of the subsidiaries are as follows :- (Cont’d)



One Green Solution Direct selling of Malaysia 90 90 Sdn. Bhd. wellness, lifestyle and other products

Solution Process Systems Metal fabrication and Malaysia 70 70 Sdn. Bhd. assembly works

AlltheabovesubsidiariesareauditedbyFolksDFK&Co.

(a) Transactions in previous financial year

(i) Subscription to additional shares issued by a subsidiary, One Green Solution Sdn Bhd.

On 1 August 2017, One Green Solution Sdn Bhd (“OGS”) had increased its issued and paid up share capital from 1,000,000 ordinary shares to 2,000,000 ordinary shares by way of issuance of an additional 1,000,000 new ordinary shares for working capital purposes. The Company has subscribed for an additional 800,000 ordinary shares for a total consideration of RM800,000 and which resulted in the Company’s equity interest in OGS to decrease from 100% to 90%.

(ii) Acquisition of additional shares in subsidiary, Solution Process Systems Sdn. Bhd.

On 21 July 2017, Solution Engineering Sdn. Bhd. (“SESB”), a wholly-owned subsidiary of the Company acquired an additional 19% equity interest in Solution Process Systems Sdn. Bhd. (“SPS”) for a total consideration of RM95,000. The transaction had resulted in SESB’s equity interest in SPS to increase from 51% to 70%.

Subsequently on 15 November 2017, the Company acquired from SESB the latter’s entire shareholdings or representing 70% equity interest in SPS for a total consideration sum of RM 350,000. As a result of this transaction, SPS became a directly owned subsidiary of the Company.

(iii) The transactions undertaken in (i) and (ii) above have resulted in the Group’s retained profits to decrease by RM81,085 and non-controlling interest to increase by RM186,085.




(c) Non-controlling interests in subsidiaries

The summarised financial information for each subsidiary that has material non-controlling interests (“NCI”) are set out below. The amounts in the summarised financial information are before inter-company eliminations.

Summarised assets and liabilities

2018 SA&C (1) SE&E (2) OGS (3) SPS (4)

RM RM RM RM

Non-current assets 181,870 – – 231,171Current assets 3,189,595 177,851 1,343,833 1,825,032

3,371,465 177,851 1,343,833 2,056,203

Non-current liabilities (59,669) – – –Current liabilities (458,477) (25,164) (102,909) (1,672,818)

(518,146) (25,164) (102,909) (1,672,818)

Net assets 2,853,319 152,687 1,240,924 383,385

2017 SA&C (1) SE&E (2) OGS (3) SPS (4)

RM RM RM RM

Non-current assets 131,779 - - 5,694Current assets 3,671,646 197,053 1,682,478 829,649

3,803,425 197,053 1,682,478 835,343

Non-current liabilities (32,428) - - -Current liabilities (651,388) (19,824) (34,540) (321,862)

(683,816) (19,824) (34,540) (321,862)

Net assets 3,119,609 177,229 1,647,938 513,481

(1) SolutionA&CTechnologySdnBhd(2) SolutionE&ETechnologySdnBhd(3) One Green Solution Sdn Bhd(4) Solution Process Systems Sdn Bhd




(c) Non-controlling interests in subsidiaries (Cont’d)

Summarised profit or loss and other comprehensive income

2018 SA&C (1) SE&E (2) OGS (3) SPS (4)

RM RM RM RM

Revenue 2,488,663 – – 2,426,774

Loss for the financial year (232,256) (24,542) (407,014) (130,097)Other comprehensive income/(loss) – – – –

Total comprehensive loss for the financial year (232,256) (24,542) (407,014) (130,097)

Dividends paid to NCI – – – –

2017 SA&C (1) SE&E (2) OGS (3) SPS (4)

RM RM RM RM

Revenue 4,254,773 – – 2,490,553

Profit/(Loss) for the financial year 1,006,195 (2,717) (330,367) 451,667 Other comprehensive income/(loss) – – – –

Total comprehensive income/(loss) for the financial year 1,006,195 (2,717) (330,367) 451,667

Dividends paid to NCI – – – 330,750




(c) Non-controlling interests in subsidiaries (Cont’d)

Summarised cash flows 2018 SA&C (1) SE&E (2) OGS (3) SPS (4)

RM RM RM RM

Net cash (outflow)/inflow from operating activities (126,207) (19,202) (556,678) 339,482 Net cash inflow/(outflow) from investing activities 125,907 – 541,149 (241,780)Net cash inflow from financing activities 39,347 – – –

Net increase/(decrease) in cash and cash equivalents 39,047 (19,202) (15,529) 97,702

2017 SA&C (1) SE&E (2) OGS (3) SPS (4)

RM RM RM RM

Net cash (outflow)/inflow from operating activities (447,788) (33,356) 99,107 179,062 Net cash inflow/(outflow) from investing activities 415,102 – (1,054,189) 53,665 Net cash inflow from financing activities (15,248) – 1,000,000 (524,400)

Net increase/(decrease) in cash and cash equivalents (47,934) (33,356) 44,918 (291,673)

(1) SolutionA&CTechnologySdnBhd(2) SolutionE&ETechnologySdnBhd(3) One Green Solution Sdn Bhd(4) Solution Process Systems Sdn Bhd



9. INVESTMENT IN AN ASSOCIATE


Unquoted shares, at cost 993,600 993,600 Less: Impairment on investment (300,000) –

693,600 993,600 Share of post acquisition (losses)/profits (84,828) 26,912

608,772 1,020,512



Held by Solution Engineering Sdn. Bhd.

Global Plus Solution Supplying scientific Malaysia 30 30 Sdn. Bhd. equipment and apparatus and providing engineering consultancy services

The summarised financial information of Global Plus Solution Sdn Bhd presented below represents the financial statements of the associate and not the Group’s share of those amounts.

2018 2017 RM RM

Assets and liabilities

Non-current assets 81,698 95,894 Current assets- Cash and cash equivalents 1,498,653 1,143,238 - Other current assets 1,016,026 3,100,348

Total assets 2,596,377 4,339,480

Non-current liabilities- Non-current financial liabilities (excluding trade and other payables) 50,127 69,264 - Other non-current liabilities – 4,600 Current liabilities- Current financial liabilities (excluding trade and other payables) 19,137 18,182 - Other current liabilities 1,651,488 2,999,342

Total liabilities 1,720,752 3,091,388



9. INVESTMENT IN AN ASSOCIATE (CONT’D)

The summarised financial information of Global Plus Solution Sdn Bhd presented below represents the financial statements of the associate and not the Group’s share of those amounts. (Cont’d)

2018 2017 RM RM

Results

Revenue 4,036,234 5,210,731 Loss after taxation (251,466) (668,026)

The reconciliation of net assets to the carrying amount as at 31 December 2018 is as follows :-

2018 2017 RM RM

Net assets of associate 875,625 1,248,092 Proportion of ownership interest held by the Group 30% 30%

262,687 374,427 Goodwill on acquisition of associate included in cost of investment 346,085 646,085

Carrying value of Group’s interest in associate 608,772 1,020,512

10. INVENTORIES


At cost: Raw materials 544,606 424,351 Engineering equipment components 401,539 423,119 Work in progress 110,293 – Finished goods 181,881 315,301

1,238,319 1,162,771



11. CONTRACT BALANCES

The contract assets and contract liabilities of the Group are presented in accordance with MFRS 15 and MFRS 9 as follows:-

Group RM2018

At the beginning of financial year –Effect of adoption of MFRS 15 and MFRS 9 8,484,308

As restated 8,484,308

Revenue recognised during the financial year 11,704,437Progress billings during the financial year (17,613,575)

2,575,170Net reversal of impairment loss 52,477

At 31 December 2,627,647

Analysed as:-

Contract assets 3,194,435Less: Allowance for impairment losses (56,211)

3,138,224 Contract liabilities (510,577)

Net 2,627,647

The amount due from/(to) contract customers of the Group are presented based on MFRS 111 as follows:-

Group RM2017

Contract costs incurred to date 43,962,538Attributable profits 35,699,295

79,661,833Less: Progress billings (71,068,837)

8,592,996

Analysed as:-Amount due from contract customers 8,741,560Amount due to contract customers (148,564)

8,592,996



11. CONTRACT BALANCES (CONT’D)

11.1 Contract assets / (liabilities)

The contract assets primarily relate to the Group’s rights to consideration for goods delivered or service rendered to customers but not yet billed at end of reporting date. The contracts assets are transferred to receivables when rights become unconditional. Contract liabilities primarily relate to the Group’s obligation to transfer goods or services to customer for which the consideration has been received or receivable from the customers.

Revenue recognised during the financial year that was included in the contract liability at beginning of the financial year amounted to RM148,564.

Contract assets have decreased due to lesser number of contract work-in-progress at the end of financial year. Contract liabilities have increased due to an increase in number of contracts as at end of financial year for which the billing milestones exceeded the revenue recognised.

11.2 Unsatisfied performance obligation

Aggregate amount of transaction prices allocated to performance obligations that are unsatisfied at the end of financial year and the periods in which they are expected to be recognised are summarised as follows :-


Within 1 year 8,167,582 2,879,721Between 1 and 2 years 860,000 438,211

9,027,582 3,317,932

11.3 The movements in allowance for impairment losses on contract assets during the financial year are as follows:-


At beginning of financial year – –Effect of adoption of MFRS 9 108,688 –

Allowance for impairment loss as at 1 January 108,688 –Additional impairment losses 18,853 –Reversal of impairment losses (71,330) –

At end of financial year 56,211 –



12. TRADE AND OTHER RECEIVABLES

Group Company 2018 2017 2018 2017 RM RM RM RM

Trade receivables 6,672,991 7,917,373 – – Less: Allowance for impairment losses (1,395,147) (291,565) – –

5,277,844 7,625,808 – – Deposits 302,668 198,736 79,770 79,770 Other receivables 138,874 126,540 – – Prepayments 511,123 347,991 26,000 –

6,230,509 8,299,075 105,770 79,770

Trade receivables are non-interest bearing. The Group’s normal credit term ranges from 0 to 60 days (2017: 0 to 90 days) from the date of invoice.

Ageing analysis of trade receivables

The ageing analysis of and the impairment losses recognised for the Group’s trade receivables in accordance with MFRS 139 are as follows:-

Group 2017 RM Neither past due nor impaired 3,667,033

1 to 30 days past due not impaired 471,854 31 to 60 days past due not impaired 593,490 61 to 90 days past due not impaired 9,651 More than 90 days past due not impaired 2,883,780

3,958,775 Past due and impaired 291,565

7,917,373 Less: Allowance for impairment losses (291,565)

7,625,808

Trade receivables that are not impaired are considered to be creditworthy and are able to settle their debts.

The Group does not hold any collateral as security for the trade receivables as at the end of the reporting period.

During the financial year, the Group did not renegotiate the terms of any trade receivables.

Further information on credit risk is disclosed in Note 36.2(c).



12. TRADE AND OTHER RECEIVABLES (CONT’D)

Allowance for impairment losses

Movements in allowance for impairment losses on trade receivables during the financial year are as follows. Comparative amounts for 2017 are presented in accordance with the requirements of MFRS 139.


At beginning of financial year 291,565 43,444 Effect of adoption of MFRS 9 402,834 –

Opening loss allowance as at 1 January 694,399 43,444 Additional impairment losses 700,748 291,565 Bad debts written off – (43,444)

At end of financial year 1,395,147 291,565

13. AMOUNT DUE FROM AN ASSOCIATE


Amount due from an associate 1,565,080 2,680,702 20,000 20,000 Less: Allowance for impairment losses (158,051) - - -

1,407,029 2,680,702 20,000 20,000

The amount due from an associate is interest free, unsecured and is repayable according to the Group’s normal credit term of 30 days. Settlement is expected to be made in cash.

Allowance for impairment losses

Movements in allowance for impairment losses on amount due from an associate during the year are as follows:-


At beginning of financial year – – – – Effect of adoption of MFRS 9 152,831 – – –

Opening loss allowance as at 1 January 152,831 – – – Additional impairment losses 5,220 – – –

At end of financial year 158,051 – – –



14. AMOUNT DUE FROM/(TO) SUBSIDIARIES

The amount due from/(to) subsidiaries are interest free, unsecured and are repayable on demand. Settlement is expected to be made in cash. The amount due from subsidiaries has been classified into current and non-current portions based on the expected timing of settlement of the debts.

15. SHORT TERM INVESTMENTS


Investment in unit trust funds, at fair value 4,697,168 3,260,697 1,665,612 1,111,844

16. DEPOSITS, CASH AND BANK BALANCES


Deposits with money market funds 323,659 1,513,247 163,950 1,352,568Fixed deposits with licensed banks 7,280,732 7,087,131 – –Cash and bank balances 9,263,828 6,568,492 168,127 336,848

Total deposits, cash and bank balances 16,868,219 15,168,870 332,077 1,689,416

Less:Fixed deposits with licensed banks (7,280,732) (7,087,131) – –

Cash and cash equivalents 9,587,487 8,081,739 332,077 1,689,416

The fixed deposits as at end of financial year have been pledged to licensed bank in consideration for banking facilities granted to the group and hence, are not allowable for genaral use.



17. SHARE CAPITAL

Group and Company Group and Company 2018 2017 2018 2017 Number of shares RM RM

Issued and fully paid :-

As at 1 January 306,454,531 304,335,865 31,089,110 30,433,587Issued during the financial year :-- Exercise of ESOS – 2,118,000 – 272,160 - Exercise of warrant – 666 – 133 Transferred from option reserve upon exercise of ESOS – – – 30,180 Effect of transition to no par value shares on 31 January – – – 353,050

As at 31 December 306,454,531 306,454,531 31,089,110 31,089,110

The new Companies Act 2016 (“the Act”) which became effective from 31 January 2017 has removed the concept of authorised share capital and par value of share capital. Section 74 of the Act provides that all shares issued before or upon commencement of the Act shall have no par or nominal value. In accordance with the transitional provision under Section 618(2) of the Act, any amount outstanding in the credit of the share premium account shall become part of the share capital. Notwithstanding, the share premium amount can be utilised for purposes set out in the Section 618(3) within 24 months upon commencement of the Act. Pursuant to the aforesaid, the share premium of RM353,050 was transferred to the share capital account and formed part of the share capital of the Company upon commencement of the Act on 31 January 2017. The change to no par value shares has no effect on the number of ordinary shares in issue of the Company.

The issued and paid-up share capital of the Company was increased from RM30,433,587 to RM31,089,110 in the previous year through the issue of 2,118,666 new ordinary shares by way of :-

(i) issue of 2,118,000 new ordinary shares for cash pursuant to the exercise of Employee’s Share Option Scheme (“ESOS”) at exercise prices of RM0.220 per ordinary share; and

(ii) issue of 666 new ordinary shares for cash pursuant to the exercise of the Warrants at an exercise price of RM0.20 per ordinary share.



17. SHARE CAPITAL (CONT’D)

All the new ordinary shares issued during the financial year rank pari passu in all respects with the existing ordinary shares of the Company.

(a) Employees’ Share Option Scheme

The Company’s Employees’ Share Option Scheme (“ESOS” or “the Scheme”) is governed by the By-Laws which were approved by the shareholders on 16 January 2014.

The salient features of the ESOS as contained in the By-Laws are as follows :-

(i) Scheme shall be in force for a period of five years from 30 January 2014 (effective date) expiring on 29 January 2019 and may be extended for a further period of up to five years at the sole and absolute discretion of the Board of Directors upon recommendation from the ESOS Committee, provided always that the ESOS shall not in aggregate exceed a duration of ten years from the effective date.

On 22 January 2019, the option period has been extended for another five years until 29 January 2024 in accordance with the terms of the Scheme.

(ii) Eligible persons are employees of the Group, who has attained 18 years of age, been confirmed and is employed full time by and is on the payroll of the Group. Employees serving under employment contract may be considered where the contract is for a duration of at least 2 years. The eligibility for participation in ESOS shall be at the discretion of the ESOS Committee appointed by the Board of Directors.

(iii) The total number of shares to be issued under ESOS shall not exceed 30% of the issued and paid-up share capital of the Company, at any point of time throughout the duration of Scheme.

(iv) The price payable for the exercise of an ESOS Option (“Exercise Price”) shall be determined by the ESOS Committee at its discretion based on the 5 days volume weighted average market price of the underlying Company shares as quoted by Bursa Securities, immediately prior to the Date of Offer with a discount of not more than 10% (or such lower or higher limit in accordance with any prevailing guidelines, rules or regulations issued by Bursa Securities or any other relevant regulatory authorities), if deemed appropriate, or the par value of the Company shares, whichever is the higher. The exercise price as determined by the ESOS Committee shall be conclusive binding on the Grantee.

(v) The offer to participate in the ESOS shall be valid for acceptance for a period of 14 days from the date of offer or such longer period as may be determined by the ESOS Committee on a case to case basis at its discretion.

(vi) All new ordinary shares issued upon exercise of the option under ESOS will rank pari passu in all respects with the existing ordinary shares of the Company except that the shares so issued will not be entitled to any dividends, rights allotments and/or other distributions, the entitlement date of which is prior to the date of allotment of the new ordinary shares.



17. SHARE CAPITAL (CONT’D)

(a) Employees’ Share Option Scheme (Cont’d)

The movements in the number of options granted during the financial year over unissued ordinary shares and the weighted average exercise prices are as follows :-

Option over number of ordinary sharesGrant Exercise As at During the year As atdate price 01.01.2018 Granted Exercised Forfeited 31.12.2018

28.09.2016 0.220 3,537,000 - - - 3,537,000

Option over number of ordinary sharesGrant Exercise As at During the year As atdate price 01.01.2017 Granted Exercised Forfeited 31.12.2017

28.09.2016 0.220 5,655,000 - (2,118,000) - 3,537,000

During the financial year,no share options has been exercised (2017: 2,118,000 new ordinary shares at weighted average exercise price per share of RM0.22). The weighted average share price at the dates of exercise in previous year was RM0.31.

(b) Warrants

Group and Company 2018 2017 Number of warrants

As at 1 January 101,326,199 101,326,865Exercised - (666)

As at 31 December 101,326,199 101,326,199

The Company had on 5 July 2016 issued a total of 101,329,365 free detachable Warrants in conjunction with a bonus issue of shares to entitled shareholders on the basis of one (1) Warrant for every two (2) existing ordinary shares held in the Company.

The Warrants were constituted by a Deed Poll dated 13 June 2016.

The warrants are listed on the ACE Market of the Bursa Malaysia Securities Berhad and confer the right to holders thereof at any time, not later than maturity date of 4 July 2021, to subscribe for one new ordinary share in the Company for every warrant held at an exercise price, to be paid in cash, of RM0.20 per share or as adjusted in certain circumstances as set out in the Deed constituting the warrants. Any warrants not exercised by the date of maturity will thereafter lapse and cease to be valid for any purpose.



18. RESERVES


Non-distributableShare premium (Note 18(a)) – – – – Option reserve (Note 18(b)) 212,220 212,220 212,220 212,220 Merger relief reserve (Note 18(c)) – – 13,878,158 13,878,158

Distributable Retained profit 7,237,895 11,192,686 3,525,756 668,667

7,450,115 11,404,906 17,616,134 14,759,045

(a) Share premium

This represents premium arising from issues of shares, net of related expenses. The movements in share premium during the financial year are as follows:-

Group/Company 2018 2017 RM RM

Balance at 1 January – 62,350 Exercise of ESOS – 193,800 Transferred from option reserve on the exercise of share options (Note 18(b)) – 96,900 Effect of transition to no par value shares on 31 January 2017 (Note 17) – (353,050)

Balance at 31 December – –

(b) Option reserve

The movements in option reserve during the financial year are as follows:-


Balance at 1 January 212,220 339,300 Transferred to share premium on exercise of share options (Note 18 (a)) – (96,900)Transferred to share capital on exercise of share options (Note 17) – (30,180)


(c) Merger relief reserve

The acquisition of Solution Engineering Sdn. Bhd. was accounted for using the merger method pursuant to a group restructuring exercise for the purpose of an initial public offering.



19. HIRE PURCHASE PAYABLES


Future minimum payments:-Within 1 year 209,432 206,479 Between 2 to 5 years 303,467 357,382

512,899 563,861 Future finance charge on hire purchase (37,485) (42,874)

Present value 475,414 520,987 Payable within 1 year (included under current liabilities) (191,422) (185,824)

Payable between 2 to 5 years (included under non-current liabilities) 283,992 335,163

20. TERM LOAN (SECURED)


Term loan 1Interest at 7.42% (2017: 7.17%) per annum repayable by 60 monthly instalments of RM5,637.00 each commencing from 2 November 2017 206,143 273,787

Term loan 2Interest at 5.12% (2017: 4.87%) per annum repayable by 180 monthly instalments of RM52,167.00 each commencing upon drawdown of loan in full 5,850,891 2,773,300

6,057,034 3,047,087

The term loan is repayable as follows:-

Within twelve months 368,427 49,042

More than one year but less than two years 407,762 548,353 More than two years but less than five years 1,285,073 1,819,836 After five years 3,995,772 629,856

5,688,607 2,998,045

6,057,034 3,047,087



20. TERM LOAN (SECURED) (CONT’D)

The term loans of the Group as at 31 December 2018 were secured by way of:-

i. first party legal charge over a piece of subleased land of a subsidiary as disclosed in Note 7;

ii. lien over certain fixed deposits of a subsidiary as disclosed in Note 16; and

iii. corporate guarantee by the Company.

21. DEFERRED TAx LIABILITIES


Balance at 1 January 49,701 148,660 Recognised in profit or loss (47,910) (98,959)


The components and movements of deferred tax assets and liabilities prior to offsetting are as follows:-

As at Recognised in As at 01.01.2018 profit or loss 31.12.20182018 RM RM RM

Deferred tax liabilitiesExcess of capital allowances over depreciation 56,030 371,389 427,419Other taxable temporary differences – 18,561 18,561

56,030 389,950 445,980

Deferred tax assetsUnutilised capital allowances – (392,789) (392,789)Unabsorbed tax losses – (45,071) (45,071)Other deductible temporary differences (6,329) – (6,329)

(6,329) (437,860) (444,189)

Net 49,701 (47,910) 1,791



21. DEFERRED TAx LIABILITIES (CONT’D)

As at Recognised in As at 01.01.2017 profit or loss 31.12.20172017 RM RM RM

Deferred tax liabilitiesExcess of capital allowances over depreciation 169,769 (113,739) 56,030Other taxable temporary differences 68 (68) –

169,837 (113,807) 56,030

Deferred tax assetsOther deductible temporary differences (21,177) 14,848 (6,329)

Net 148,660 (98,959) 49,701

Deferred tax assets have not been recognised in respect of the following items :-


Unutilised capital allowances 800,000 545,000Unabsorbed tax losses 2,389,000 756,000

3,189,000 1,301,000

22. TRADE AND OTHER PAYABLES


Trade payables 1,758,910 1,347,410 – -

Other payables :- Other payables 648,850 497,546 39,318 26,710 Accruals 552,037 642,552 62,170 30,269 Provisions 52,136 – – –

1,253,023 1,140,098 101,488 56,979

3,011,933 2,487,508 101,488 56,979

The credit terms of the Group’s trade payables range from 0 to 90 days (2017: 0 to 90 days).

23. AMOUNT DUE TO DIRECTORS

The amount due to directors is interest free, unsecured and is repayable on demand.



24. REVENUE


Contract revenue 10,426,703 21,889,378 – –Repairs and maintenance services revenue 568,527 950,505 – –Sales of goods 2,072,011 1,494,227 – –Dividend income from subsidiaries – – 3,500,000 –

13,067,241 24,334,110 3,500,000 –

Disaggregation of revenue


Business segments:-

Engineering education and research- Contract revenue 6,906,739 16,705,476- Repair and maintenance services 538,997 913,382- Sales of engineering components 582,263 910,141

8,027,999 18,528,999

Provision of industrial automation services- Contract revenue 2,340,432 4,211,503- Repair and maintenance services 29,530 37,123- Sales of engineering components 118,702 6,147

2,488,664 4,254,773

Sales of bio-lubricants 1,371,046 1,047,385

Metal fabrication and assembly works 1,179,532 502,953

Total 13,067,241 24,334,110

Timing of revenue recognition

- at a point in time 2,072,011 1,963,673- over time 10,995,230 22,370,437

13,067,241 24,334,110

Disaggregation of revenue by geographical location is disclosed in Note 35.2.



25. COST OF SALES


Contract costs 8,530,693 12,658,191Cost of services rendered 481,345 444,164Cost of goods sold 1,089,103 973,550

10,101,141 14,075,905

26. (LOSS)/PROFIT BEFORE TAxATION


This has been arrived at after charging :-

Auditors’ remuneration :-- Statutory audit 62,590 59,000 18,000 16,000- Under provision in prior years 10,510 6,250 2,000 4,000- Other services 8,000 8,000 8,000 8,000Amortisation of intangible assets 35,288 35,288 – –Amortisation of prepaid land lease payments 20,292 – – –Depreciation of property, plant and equipment 406,708 316,031 185 123Discount implicit in amount due from subsidiaries – – 251,511 –Bad debts written off – 22,596 – –Impairment losses for:-- Investment in an associate 300,000 – – –- Trade receivables 700,748 291,565 – –- Contract assets 18,853 – – –- Amount due from an associate 5,885 – – –Interest expenses- Hire purchase 23,404 20,754 – –- Term loans 70,936 15,698 – –Inventories written off – 15,507 – –Loss on changes in fair value of short term investments 1,409 – – –Property, plant and equipment written off – 33,949 – –Realised loss on foreign exchange 6,546 14,239 – –Rental expenses :- - Premises 1,366,400 432,160 319,800 303,160- Equipment 51,578 114,302 – –- Motor vehicles – 7,155 – –



26. (LOSS)/PROFIT BEFORE TAxATION (CONT’D)


This has been arrived at after charging :- (Cont’d)

Directors’ remuneration :- Directors of the Company - Fee 188,400 188,400 188,400 188,400 Directors of subsidiaries - Employees Provident Fund (EPF) 191,276 203,427 – – - Fee 18,000 18,000 – – - Salaries and other benefits 1,528,719 1,638,221 – – - Benefits-in-kind 66,633 76,000 – –

Unrealised loss on foreign exchange – 80,851 – 3

and crediting :-

Bad debt recovered – (29,239) – –Dividend income :- - short term investments (139,968) (119,107) (50,063) (45,977)- subsidiaries – – (3,500,000) –Interest income (230,865) (143,429) – –Income from money market fund (54,396) (141,307) (7,811) (86,965)Gain on disposal of property, plant and equipment and non-current asset held for sale – (5,809,567) – –Gain on disposal of short term investments (10,603) (133,557) – (135,498)Gain on changes in fair value of short term investments (28,306) (1,081) (11,515) (1,844)Gain on foreign exchange - Realised (38) – – –- Unrealised (68,252) – – –Rental income – – (393,900) (313,560)Reversal of impairment losses for:- - Contract assets (71,330) – – –- Amount due from an associate (665) – – –



27. TAxATION


Malaysian income tax :-- Current year provision – 1,526,573 – –- (Over)/Under provision in respect of prior years (24,752) 138,978 – –

(24,752) 1,665,551 – –Deferred taxation (Note 21) :-- Relating to origination and reversal of temporary differences – (98,891) – –- Over provision in respect of prior years (47,910) (68) – –

(47,910) (98,959) – –

Tax (income)/expense (72,662) 1,566,592 – –

Malaysian income tax is calculated at the statutory rate of 24% (2017: 24%) on the estimated taxable profit for the financial year.

The numerical reconciliation between the tax (income)/expenses recognised in profit or loss and the income tax expense applicable to (loss)/profit before taxation at the statutory income tax rates of the Group and of the Company is as follows :-


(Loss)/Profit before taxation (3,550,150) 9,948,008 2,857,089 (217,481)

Tax at the Malaysian statutory rates of 24% (2017: 24%) (852,036) 2,387,523 685,701 (52,195)

Tax effects in respect of :-Expenses not deductible for tax purposes 253,334 574,324 156,211 114,805Income not subject to tax (30,316) (1,439,394) (841,912) (62,610)Utilisation of deferred tax assets not recognised previously – (110,047) – –Deferred tax assets not recognised during the financial year 629,018 15,276 – –

Balance c/f – 1,427,682 – –



27. TAxATION (CONT’D)

The numerical reconciliation between the tax (income)/expenses recognised in profit or loss and the income tax expense applicable to (loss)/profit before taxation at the statutory income tax rates of the Group and of the Company is as follows :- (Cont’d)


Balance b/f – 1,427,682 – –Taxation (over)/under provision in prior years:-- Income tax (24,752) 138,978 – –- Deferred tax (47,910) (68) – –

Tax (income)/expense (72,662) 1,566,592 – –

As at 31 December 2018, the Group has estimated unutilised capital allowances amounting to RM2,389,000 (2017: RM 545,000) which subject to the approval of the tax authorities, can be used to offset against future taxable profits.

In accordance with the provision of the Finance Act 2018 and subject to the approval of the tax authorities, the Group’s unabsorbed tax losses up to the year of assessment 2018 amounting to RM800,000 shall be available for deduction against future taxable profits until the year of assessment 2025 and any amount not utilised by the end of 2025 will be disregarded. Unabsorbed tax losses for the year of assessment 2019 onwards shall be available for deduction for a maximum period of seven consecutive years of assessment immediately following that year of assessment and any amount which is not deducted at the aforementioned period of seven years shall be disregarded.

28. (LOSS)/EARNINGS PER SHARE

(a) Basic Basic (loss)/earnings per share is calculated by dividing the Group’s (loss)/profit attributable to shareholders of

the Company for the financial year by the weighted average number of ordinary shares in issue during the financial year.


Net (loss)/profit for the financial year attributable to shareholders of the Company (3,300,649) 7,977,909

Weighted average number of ordinary shares in issue 306,454,531 306,136,699

Basic (loss)/earnings per share (sen) (1.08) 2.61



28. (LOSS)/EARNINGS PER SHARE (CONT’D)

(b) Diluted

For purpose of calculation of diluted earnings per share, the profit for the financial year attributable to owners of the Company and the weighted average number of ordinary shares in issue during the financial year have been adjusted for the dilutive effects of all potential ordinary shares arising from the assumed exercise of the share options under the Employees’ Share Option Scheme and exercise of warrants.


(Loss)/Profit attributable to owners of the Company (loss)/profit used to determine basic losses/ diluted earnings per share (3,300,649) 7,977,909

Weighted average number of ordinary shares in issue 306,454,531 306,136,699 Effect of dilution from assumed exercise of share options and warrants** – 38,552,529

Adjusted weighted average number of ordinary shares in issue 306,454,531 344,689,228

Diluted (losses)/earnings per share (sen) (1.08) 2.31

** The share options and warrants exercisable at the end of financial year ended 31 December 2018 do not have dilution effect to the earnings per ordinary share as the average market share price per ordinary shares does not exceed the exercise price of the share options and warrants.

29. DIVIDENDS


Interim single tier dividend of 1 sen per ordinary share in respect of the financial year ended 31 December 2017 – 3,064,545



30. NOTES TO STATEMENTS OF CASH FLOWS

(a) Purchase of property, plant and equipment and prepaid land lease payments


Cash purchase 5,315,674 7,936,689 – 1,850 Hire purchase financing 166,808 193,000 – –

5,482,482 8,129,689 – 1,850

The principal amount of instalment payments for property, plant and equipment acquired through hire purchase arrangements are reflected as cash outflows from financing activities.

(b) Liabilities arising from financing activities

Changes in the Group’s liabilities arising from financing activities, including both cash and non-cash changes, during the financial year are analysed in the table below :-

As at Net Acquisition of As at 01.01.2018 Cash Flow PPE 31.12.2018 RM RM RM RMGroup

Hire purchase financing 520,987 (212,381) 166,808 475,414 Term loan (secured) 3,047,087 3,009,947 – 6,057,034

3,568,074 2,797,566 166,808 6,532,448

As at Net Acquisition of As at 01.01.2017 Cash Flow PPE 31.12.2017 RM RM RM RMGroup

Hire purchase financing 516,654 (188,667) 193,000 520,987 Term loan (secured) 430,493 2,616,594 – 3,047,087

947,147 2,427,927 193,000 3,568,074

The cash flow from hire purchase financing and term loan comprised the net amount of proceeds from borrowings and repayments of borrowings and this is reflected as cash flows from financing activities in the Group’s statement of cash flows.



31. STAFF COSTS AND EMPLOYEES INFORMATION


Staff cost comprised:-

Salaries, wages and bonuses 1,805,480 2,354,884Amount contributed under defined contribution plan :-- Employees Provident Fund (EPF) 233,738 277,317Others 114,750 126,222

2,153,968 2,758,423

The number of employees of the Group and of the Company at end of the financial year was 52 (2017: 59). Employees include executive directors of the Group and of the Company.

32. RELATED PARTY TRANSACTIONS AND BALANCES

Group and Company

(a) Identity of related parties

For the purpose of these financial statements, parties are considered to be related if one party has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or when both parties subject to common control or common significant influence of another party. Related parties may be individuals or other entities.

(b) The Group and the Company had the following transactions with related parties during the financial year :-


Income

Dividend income from subsidiaries – – 3,500,000 –

Rental income from subsidiaries – – 393,900 313,560

Sales to an associate 3,973,706 5,537,926 – –

3,973,706 5,537,926 3,893,900 313,560



32. RELATED PARTY TRANSACTIONS AND BALANCES (CONT’D)

Group and Company (Cont’d)

(b) The Group and the Company had the following transactions with related parties during the financial year :- (Cont’d)


Expenses

With a corporate in which a director of the Company has substantial interests - Service charges – 25,186 – –

– 25,186 – –

(c) Indebtedness with related parties as at end of reporting period comprised :-


Receivables Amount due from an associate 1,407,029 2,680,702 20,000 20,000 Amount due from subsidiaries – – 14,067,643 11,500,799

Payables Amount due to directors 41,446 41,446 – – Amount due to subsidiaries – – – 32,040

The indebtednesses with related parties are unsecured and interest free. The amounts are repayable on demand except for the amount due from an associate which is to be settled in accordance with normal trade terms. All settlement are expected to be in cash.

No expense has been recognised during the financial year in respect of bad or doubtful debts due from the related parties other than the impairment loss recognised for amount due from an associate as disclosed in Note 13.

(d) Compensation of key management personnel

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group either directly or indirectly. The key management personnel of the Group are the Directors of the Company and executive directors of subsidiaries and their remuneration for the financial year are disclosed in Note 26.



33. CAPITAL COMMITMENT


Sublease of land, construction of office cum production facilities

- Approved and contracted for – 3,929,000 – –

34. CONTINGENT LIABILITIES

Corporate guarantee (unsecured) Group Company

2018 2017 2018 2017 RM RM RM RM

Corporate guarantee issued for credit facilities granted to subsidiaries:-

- Limit of guarantee – – 14,461,500 14,461,500

- Utilised as at reporting date – – 6,296,793 3,121,675

Litigation

A subsidiary of the Company had initiated a legal claim in the Kuala Lumpur High Court (“High Court”) against two (2) parties (“defendants”) for the recovery of costs/expenses amounting to RM246,528 advanced by the subsidiary in prior years. The defendants had in turn counter claimed the subsidiary for loss of profit amounting to RM1,944,000. Previously, the High Court had given judgement in favor of the subsidiary’s claim against the first defendant but dismissed its claim against the second defendant. In addition, the defendants’ counter claim against the subsidiary was dismissed by the court. The first defendant had since filed an appeal to the Court of Appeal against the decision of the High Court. During the financial year, the Court of Appeal has dismissed the appeal and upheld the decision by the High Court.



35. SEGMENTAL INFORMATION

The Group has four reportable segments as described below which comprised the Group’s major business segments. These business segments are involved in different activities and are based on the Group’s management and internal reporting structure. The reportable segments are as follows:-

i. Engineering Designing and development of equipment for engineering education and research education and provision of training and curriculum content development and research

ii. Provision of Provision of industrial automation and system integration solutions for telemetry, industrial Supervisory Control and Data Acquisition (SCADA), instrumentation and control automation systems services

iii. Investment Investment in unit trust and money market funds

iv. Others Production and supply of industrial bio-lubricants, metal fabrication and assembly works

The performance of each business segment is evaluated based on the segment’s profit or loss which is measured on a basis not significantly different from the profit or loss included in the consolidated financial statements.

Segment revenue, results, assets and liabilities include items directly attributable to a segment and those where a reasonable basis of allocation exist.

Segment assets are measured based on all assets (including goodwill) of a segment, as included in the internal management reports that are reviewed by the Group’s Managing Director. Segment assets are used to measure the return on assets of each segment.



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are

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fit

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old

ers

of

th

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7

,977,

90

9



35

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ME

NTA

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OR

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CO

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35

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ain

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–

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ort

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ritt

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(

2,9

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19,6

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) –

–

–

(2

2,5

96

)



35. SEGMENTAL INFORMATION (CONT’D)

35.2 Geographical segments

In determining geographical segments of the Group, revenue is based on the geographical location of customers.

Malaysian Overseas Customers Customers Consolidated RM RM RM

Revenue - 2018 12,129,296 937,945 13,067,241 - 2017 21,937,842 2,396,268 24,334,110

35.3 Major customers

Revenue from transactions with major customers who individually accounted for 10 percent or more of Group’s revenue are summarised below :-

Revenue Segment 2018 2017 RM RM

Customer A – 4,691,694 Engineering education and research

Customer B 3,973,706 5,210,161 Engineering education and research

Customer C 2,073,150 – Engineering education and research

Customer D 1,505,043 – Engineering education and research

36. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT

A financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financial liability or equity instrument of another enterprise.

Financial assets of the Group include fixed deposits, cash and bank balances, trade and other receivables, amount due from an associate and short term investments.

Financial liabilities of the Group include trade and other payables, amount due to directors, hire purchase payables and term loans.

In respect of the Company, financial assets and financial liabilities also include amount due from/to subsidiaries.



36. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (CONT’D)

36.1 Categories of financial instruments

The Group’s and the Company’s financial instruments are categorised as follows:-

Financial assets as per statement of financial position

Fair value Carrying Amortised through amount cost profit or loss RM RM RM2018

GroupTrade and other receivables 5,719,386 5,719,386 –Amount due from an associate 1,407,029 1,407,029 –Short term investments 4,697,168 – 4,697,168Fixed deposits, cash and bank balances 16,868,219 16,868,219 –

28,691,802 23,994,634 4,697,168

CompanyOther receivables 79,770 79,770 –Amount due from an associate 20,000 20,000 –Amount due from subsidiaries 14,067,643 14,067,643 –Short term investments 1,665,612 – 1,665,612Fixed deposits, cash and bank balances 332,077 332,077 –

16,165,102 14,499,490 1,665,612

Fair value Carrying Loans and through amount receivables profit or loss RM RM RM2017

GroupTrade and other receivables 7,951,084 7,951,084 –Amount due from an associate 2,680,702 2,680,702 –Short term investments 3,260,697 – 3,260,697Deposits, cash and bank balances 15,168,870 15,168,870 –

29,061,353 25,800,656 3,260,697

CompanyOther receivables 79,770 79,770 –Amount due from an associate 20,000 20,000 –Amount due from subsidiaries 11,500,799 11,500,799 –Short term investments 1,111,844 – 1,111,844Deposits, cash and bank balances 1,689,416 1,689,416 –

14,401,829 13,289,985 1,111,844




36.1 Categories of financial instruments (Cont’d)

Financial liabilities as per statement of financial position

Carrying Amortised amount cost2018 RM RM

GroupTrade and other payables 3,011,933 3,011,933 Amount due to directors 41,446 41,446 Hire purchase payables 475,414 475,414 Term loan (secured) 6,057,034 6,057,034

9,585,827 9,585,827

Company Other payables 101,488 101,488

101,488 101,488

2017 Other financial liabilities at Carrying amortised amount cost RM RMGroupTrade and other payables 2,487,508 2,487,508 Amount due to directors 41,446 41,446 Hire purchase payables 520,987 520,987 Term loan (secured) 3,047,087 3,047,087

6,097,028 6,097,028

CompanyOther payables 56,979 56,979 Amount due to subsidiaries 32,040 32,040

89,019 89,019



36

. F

INA

NC

IAL

IN

ST

RU

ME

NT

S A

ND

FIN

AN

CIA

L R

ISK

MA

NA

GE

ME

NT

(C

ON

T’D

)

36

.2

Fin

an

cia

l ris

k m

an

ag

em

en

t o

bje

ctiv

es

an

d p

oli

cie

s

T

he G

rou

p’s

an

d t

he C

om

pan

y’s

fin

an

cial r

isk

man

ag

em

en

t p

olic

ies

seek

to e

nsu

re t

hat

ad

eq

uat

e fi

nan

cial r

eso

urc

es

are

ava

ilab

le fo

r th

e d

evelo

pm

en

t o

f th

e G

rou

p’s

an

d o

f th

e C

om

pan

y’s

bu

sin

ess

es

wh

ilst

man

ag

ing

th

eir

in

tere

st r

ate, l

iqu

idit

y, c

red

it a

nd

fo

reig

n e

xch

an

ge r

isks

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e G

rou

p a

nd

th

e

Co

mp

an

y o

pera

te w

ith

in c

learl

y d

efi

ned

gu

idelin

es

that

are

ap

pro

ved

by t

he d

irect

ors

an

d t

he G

rou

p’s

an

d t

he C

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y’s

po

licie

s are

no

t to

en

gag

e

in s

pecu

lati

ve t

ran

sact

ion

s.

T

here

has

been

no

ch

an

ge t

o t

he G

rou

p’s

an

d t

he C

om

pan

y’s

exp

osu

re t

o t

hese

fin

an

cial r

isks

or

the m

an

ner

in w

hic

h it

man

ag

es

an

d m

easu

res

the

risk

s. T

he p

olic

ies

in r

esp

ect

of

the m

ajo

r are

as

of

treasu

ry a

ctiv

ity a

re s

et

ou

t as

follo

ws:

-

(a)

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rest

ra

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isk

In

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ses

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m t

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d t

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ts a

nd

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ts.

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g t

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t th

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ts, t

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ffect

ive in

tere

st r

ates

of

the G

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p’s

an

d t

he C

om

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fin

an

cial i

nst

rum

en

ts a

s at

th

e

rep

ort

ing

dat

e a

nd

th

e p

eri

od

s in

wh

ich

th

ey r

ep

rice

or

mat

ure

, wh

ich

ever

is e

arl

ier

:-

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ffe

ctiv

e

M

ore

th

an

1

in

tere

st

Wit

hin

y

ea

r b

ut

less

M

ore

th

an

N

ote

ra

te

1 y

ea

r th

an

5 y

ea

rs

5 y

ea

rs

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lG

rou

p

%

R

M

RM

R

M

RM

20

18

Fin

an

cia

l ass

ets

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ed

rat

eF

ixed

dep

osi

ts w

ith

licen

sed

ban

k 16

3

.15 %

- 3

.35

%

7,2

80

,73

2

–

–

7,2

80

,73

2

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an

cia

l lia

bil

itie

s

Fix

ed

rat

eH

ire p

urc

hase

pay

ab

les

19

4.4

4%

- 6

.01%

1

91,

42

2

28

3,9

92

–

475

,414

Flo

atin

g r

ate

Term

loan

(se

cure

d)

20

5

.12%

- 7

.42

%

36

8,4

27

1,6

92

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5

3,9

95

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6

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,03

4



36

. F

INA

NC

IAL

IN

ST

RU

ME

NT

S A

ND

FIN

AN

CIA

L R

ISK

MA

NA

GE

ME

NT

(C

ON

T’D

)

36

.2

Fin

an

cia

l ris

k m

an

ag

em

en

t o

bje

ctiv

es

an

d p

oli

cie

s (C

on

t’d

)

(a)

Inte

rest

ra

te r

isk

(C

on

t’d

)

T

he f

ollo

win

g t

ab

le s

et

ou

t th

e c

arr

yin

g a

mo

un

ts, t

he e

ffect

ive in

tere

st r

ates

of

the G

rou

p’s

an

d t

he C

om

pan

y’s

fin

an

cial i

nst

rum

en

ts a

s at

th

e

rep

ort

ing

dat

e a

nd

th

e p

eri

od

s in

wh

ich

th

ey r

ep

rice

or

mat

ure

, wh

ich

ever

is e

arl

ier

:- (

Co

nt’

d)

E

ffe

ctiv

e

M

ore

th

an

1

in

tere

st

Wit

hin

y

ea

r b

ut

less

M

ore

th

an

N

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ra

te

1 y

ea

r th

an

5 y

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5 y

ea

rs

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lG

rou

p

%

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M

RM

R

M

RM

20

17

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an

cia

l ass

ets

Fix

ed

rat

e

Fix

ed

dep

osi

ts w

ith

licen

sed

ban

k 16

2

.90

% -

3.10

%

7,0

87,

131

–

–

7,0

87,

131

Fin

an

cia

l lia

bil

itie

s

Fix

ed

rat

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ab

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- 6

.01%

1

85

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3

35

,163

–

52

0,9

87

Flo

atin

g r

ate

Term

loan

(se

cure

d)

20

4

.87%

- 7

.17%

4

9,0

42

2

,36

8,18

9

62

9,8

56

3

,04

7,0

87




36.2 Financial risk management objectives and policies (Cont’d)

(a) Interest rate risk (Cont’d)

Sensitivity analysis for interest rate risk

At the reporting date, if interest rates on the floating rate financial assets and financial liabilities had been 50 basis points lower/higher, with all other variables held constant, the impact is immaterial to the Group’s and the Company’s profit net of tax.

The assumed movement in basis points for interest rate sensitivity analysis is based on prudent estimate of the current market environment.

(b) Liquidity and cash flow risks

Liquidity or cash flow risks is the risk of the inability to meet commitments associated with financial instruments while cash flow risk is the risk of uncertainty of future cash flow amount associated with a monetary financial instrument.

The Group actively manages its operating cash flows and the availability of funding so as to ensure that all repayment and funding needs are met. As part of its overall prudent liquidity management, the Group maintains sufficient levels of cash and cash equivalents to meet its working capital requirements and prudently balances its portfolio of short term and long term funding requirements.



36

. F

INA

NC

IAL

IN

ST

RU

ME

NT

S A

ND

FIN

AN

CIA

L R

ISK

MA

NA

GE

ME

NT

(C

ON

T’D

)

36

.2

Fin

an

cia

l ris

k m

an

ag

em

en

t o

bje

ctiv

es

an

d p

oli

cie

s (C

on

t’d

)

(b)

Liq

uid

ity

an

d c

ash

flo

w r

isk

s (C

on

t’d

)

T

he s

um

mary

of

the m

atu

rity

pro

file

of

the G

rou

p’s

an

d o

f th

e C

om

pan

y’s

fin

an

cial

liab

iliti

es

as

at t

he r

ep

ort

ing

dat

e b

ase

d o

n c

on

tract

ual

un

dis

cou

nte

d r

ep

aym

en

ts o

blig

atio

ns

is a

s fo

llow

s :-

E

ffe

ctiv

e

M

ore

th

an

inte

rest

W

ith

in

1 y

ea

r b

ut

less

M

ore

th

an

rate

1

ye

ar

tha

n 5

ye

ars

5

ye

ars

To

tal

Gro

up

N

ote

%

R

M

RM

R

M

RM

20

18

Trad

e a

nd

oth

er

pay

ab

les

22

-

3,0

11,9

33

–

–

3,0

11,9

33

H

ire p

urc

hase

pay

ab

les

19

4.4

4%

- 6

.01%

2

09

,43

2

30

3,4

67

–

512

,89

9

Term

loan

(se

cure

d)

20

5

.12%

- 7

.42

%

69

3,6

48

2

,69

5,2

14

4,8

49

,212

8

,23

8,0

74

3,9

15,0

13

2,9

98

,68

1

4,8

49

,212

1

1,76

2,9

06

20

17

Trad

e a

nd

oth

er

pay

ab

les

22

-

2,4

87,

50

8

–

–

2,4

87,

50

8

Hir

e p

urc

hase

pay

ab

les

19

4.4

4%

- 6

.01%

2

06

,479

3

57,3

82

–

5

63

,86

1 Te

rm lo

an

(se

cure

d)

20

4

.87%

- 7

.17%

2

09

,04

8

2,7

62

,85

8

64

7,9

95

3

,619

,90

1

2,9

03

,035

3

,120

,24

0

64

7,9

95

6

,67

1,270





(b) Liquidity and cash flow risks (Cont’d)

The summary of the maturity profile of the Group’s and of the Company’s financial liabilities as at the reporting date based on contractual undiscounted repayments obligations is as follows :- (Cont’d)

More than 1 year but less More than Within 1 year than 5 years 5 years TotalCompany Note RM RM RM RM

2018 Other payables 22 101,488 – – 101,488

2017 Other payables 21 56,979 – – 56,979 Amount due to subsidiaries 12 32,040 – – 32,040

89,019 – – 89,019

(c) Credit risk Credit risk is the risk of financial loss attributable to default on obligations by parties contracting with the

Group. The Group’s main exposure to credit risk is in respect of its trade receivables, short term investments, deposits with financial institutions and cash and bank balances. The Company’s exposure to credit risk arises principally from amount due from subsidiaries, short term investments, deposits and cash and bank balances and financial guarantee given to banks for credit facilities of subsidiaries as disclosed in Note 34.

Credit risk is addressed by the application of credit approvals, limits and monitoring procedures.

The credit risk on liquid funds is limited because the counterparties are licensed banks and financial institutions.

The Group’s maximum exposure to credit risk as at 31 December 2018 is represented by the carrying amount of each class of financial assets recognised in the statement of financial position.

Concentration of credit risk

As at the end of the reporting period, the Group has significant concentration of credit risk arising from the exposure to the amounts due from 4 major customers representing approximately 48% (2017: 2 major customer representing approximately 85%) of the total trade receivables. The amounts due and repayments from these customers are closely monitored by the management to ensure that the credit limits and terms agreed with the customers are complied with.





(c) Credit risk (Cont’d)

Recognition and measurement of impairment loss

(i) Trade receivables and contract assets

The Group uses an provision matrix to measure Expected Credit Losses (“ECLs”) of trade receivables and contract assets. In determining the ECLs, loss rates are calculated using a ‘roll rate’ method.

Loss rates are based on the payment profiles of sales over a period of 36 months before 1 January 2018 or 31 December 2018 respectively and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward looking information on macroeconomic factors affecting the ability of the customers to settle the receivables. The Group has identified the GDP of the country to be the most relevant factor and accordingly adjusts the historical loss rates based on expected changes in this factor.

From 1 January 2018, where the credit risk of a trade receivable has increased significantly and pass due more than one year, it is excluded from provision matrix and its expected credit losses are assessed individually by considering historical payment trends and financial strength of the receivable. The individual impairment will be considered on either full or partial of gross carrying amount.

Prior to 1 January 2018, trade receivables that were individually determined to be impaired comprised those customers who have defaulted on their payments and were considered to have financial difficulties in repaying their debts.

The gross carrying amounts of credit impaired trade receivables and contract assets are written off (either partial or full) when there is no realistic prospect of recovery. This is generally the case when the Group or the Company determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. Nevertheless, trade receivables and contract assets that are written off could still be subject to enforcement activities.






Recognition and measurement of impairment loss (Cont’d)

(i) Trade receivables and contract assets (Cont’d)

The following table provides information about the exposure to credit risk and ECLs for trade receivables and contract assets as at 31 December 2018:-

2018 Gross carrying Loss Net amount allowance balance RM RM RM

Current (not past due) 3,260,410 (69,385) 3,191,0251-90 days past due 1,704,654 (51,823) 1,652,83191-180 days past due 2,094,921 (172,582) 1,922,339181-300 days past due 299,631 (2,074) 297,557

7,359,616 (295,864) 7,063,752Credit impairedMore than 300 days past due 1,056,462 (214,723) 841,739Individually impaired 940,771 (940,771) –

9,356,849 (1,451,358) 7,905,491

Trade receivables 6,672,991 (1,395,147) 5,277,844Contract assets 2,683,858 (56,211) 2,627,647

9,356,849 (1,451,358) 7,905,491

(ii) Other receivables

Impairment of other receivables is recognised based on the general approach within MFRS 9 using the forward looking expected credit loss model. The methodology used to determine the amount of impairment is based on whether has been a significant increase in credit risk since initial recognition of the financial assets.

For those in which the credit risk has not increase significantly since initial recognition of the financial asset, twelve month expected credit losses along with gross interest income are recognised. For those in which the credit risk has increase significantly, lifetime expected credit losses along with the gross interest income are recognised.

Based on management’s assessment, the probability of the default of these receivables is low and hence, no loss allowance has been made.






Recognition and measurement of impairment loss (Cont’d)

(iii) Amount due from an associate

The method for determining ECLs for amount due from an associate is similar to the method disclosed in Note (i) above.

The following table provides information about the exposure to credit risk and ECLs for amount due from associate as at 31 December 2018:-

2018 Gross carrying Loss Net amount allowance balance RM RM RM

Current (not past due) 263,199 (3,211) 259,9881-90 days past due 186,767 (4,336) 182,43191-180 days past due 191,568 (14,332) 177,236181-300 days past due 317,818 (55,756) 262,062

959,352 (77,635) 881,717

Credit impairedMore than 300 days past due 605,728 (80,416) 525,312

1,565,080 (158,051) 1,407,029

(iv) Amount due from subsidiaries

The Company determines the probability of default for these amounts due from subsidiaries individually using internal information. No loss allowance has been recognised for amount due from subsidiaries as the Company considers them as low credit risk.

(v) Deposits, cash and bank balances

Deposit, cash and bank balances are neither past due nor impaired and they are placed with reputable licensed financial institutions with low credit risks. No loss allowance has been provided for as the Group consider that such loss, if any, will be immaterial.





(d) 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. The Group has transactional currency exposures arising from sales or purchases that are denominated in a currency other than the functional currency of the Group. The Group’s trade receivables and trade payables balances at the reporting date have similar exposures. The foreign currencies in which these transactions are denominated are mainly United States Dollar [“USD”], Singapore Dollar [“SGD”], and Euro Dollar [“EURO].

The Group holds cash and cash equivalents denominated in foreign currency for working capital purposes.

Exposure to foreign currency risk

The currency profile of the Group is as follows :-


Trade and other receivables

EURO 100,598 116,487 USD – 73,455

Trade and other payables

EURO – 42,760USD 105,230 118,325Others 3,841 5,790

Cash and cash equivalents

EURO 11,213 279SGD 121,574 –USD 1,595,224 1,624,542Others 315 337





(d) Foreign currency risk (Cont’d)

Sensitivity analysis for foreign currency risk

The following table demonstrated the sensitivity of the Group’s profit net of tax to a reasonably possible change in EURO, GBP, SGD and USD exchange rates against the functional currency of the Group, with all other variables held constant. The Group’s profit net of tax would increase/decrease, as applicable, by the amounts stated below if the individual foreign currency had strengthened/weakened by the following percentage:-

Change in Group currency rate 2018 2017 % RM RM

EURO 5 5,591 3,700 SGD 5 6,079 –USD 5 85,023 90,816

36.3 Fair value of financial instruments

(i) The carrying amounts of hire purchase payables and term loans approximate their fair value.

(ii) The carrying amounts of deposits, cash and bank balances, receivables and payables approximate their fair values due to the relatively short term nature of these financial instruments.

Fair value hierarchy

The fair value measurement hierarchies used to measure financial assets and liabilities carried at fair value in the statements of financial position as at 31 December 2018 are as follows :-

(i) Level 1 : Quoted prices (unadjusted) in active markets for identical assets or liabilities.

(ii) Level 2 : Input other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

(iii) Level 3 : Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

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.

There were no transfers between Level 1, Level 2 and Level 3 during the current financial year.




36.3 Fair value of financial instruments (Cont’d)

Determination of fair value

The Group and the Company do not have any financial liabilities carried at fair value as at 31 December 2018.

The following table shows an analysis of financial assets carried at fair value by level of fair value hierarchy :-

Level 1 Level 2 Level 3 Total Note RM RM RM RM Group

2018

Financial assetsShort term investments 15 4,697,168 – – 4,697,168

2017


Level 1 Level 2 Level 3 Total Note RM RM RM RM Company

2018


2017




37. SUBSEQUENT EVENT

On 21 February 2019, the Company had disposed its entire equity interest in its wholly owned subsidiary, Solar Solution Sdn.Bhd.acashconsiderationofRM70,000toanotherpartiallyownedsubsidiary,SolutionA&CTechnologySdn.Bhd.As a result of this transaction, Solar Solution Sdn Bhd became an indirectly owned subsidiary of the Company.

The transaction has no significant financial effect on the Group.

38. CAPITAL MANAGEMENT

The Group’s objectives when managing capital are to 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. In order to maintain the optimal capital structure, the Group may, from time to time, adjust the dividend payout to shareholders, return capital to shareholders, issue new shares, redeem debts or sell assets to reduce debts, where necessary.

In the management of capital risk, management takes into consideration the net debt equity ratio as well as the Group’s working capital requirement. As at end of the reporting period, the Group has excess cash and cash equivalents over its debts.

There was no change in the Group’s approach to capital management during the financial year.

39. COMPARATIVES

Certain comparatives figures in Consolidated Statement of Cash Flows have been amended to conform with current financial year’s presentation.


REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS

Opinion

We have audited the financial statements of SOLUTION ENGINEERING HOLDINGS BERHAD, which comprise the statements of financial position as at 31 December 2018 of the Group and of the Company, 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 year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information, as set out on pages 043 to 140.

In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Group and of the Company as at 31 December 2018, and of their financial performance and their cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia.

Basis of Opinion

We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence and Other Ethical Responsibilities

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

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the Group and of the Company for the current financial year. These matters were addressed in the context of our audit of the financial statements of the Group and of the Company as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matters How our audit addressed the key audit matters

1. Recognition of contract revenue

Contract revenue recognised by the Group during the financial year amounted to RM 22.8 million. The disclosures on recognition of contract revenue are set out in Note 2.23 (i) Note 4(b)(i) and Note 24 to the financial statements.

Contract revenue is recognised over time using an input method by reference to the proportion of contract costs incurred to date bear to the estimated total contract costs to satisfy the performance obligation. The process to determine the stages of completion involves significant management judgement and use of management estimates. Any error in the application of judgement or estimates could result in a material misstatement in the amount of revenue recognised.

Our procedures include the following :-

• We obtainedmanagement estimates of the coststo complete for individually significant contracts in progress as at end of reporting period and compared these estimates to purchases contracts, suppliers’ quotations or invoices where applicable to determine their reasonableness.

• Wetestedthecalculationsofstagesofcompletionusedby management to ascertain the accuracy of contract revenue recognised during the reporting period.

• We performed substantive test procedures overcontract costs and contract revenue by checking against the underlying supporting documents including contracts for sales and purchases.

INDEPENDENT AUDITORS’ REPORT

To the Members of Solution Engineering Holdings Berhad(Incorporated in Malaysia)


Key Audit Matters (Cont’d)

Key audit matters How our audit addressed the key audit matters

2. Impairment losses for trade receivables, contract assets and amount due from an associate

The Group have adopted MFRS 9, Financial Instruments, during the year with a date of transition on 1 January 2018. MFRS 9 introduces an expected credit loss (“ECL”) impairment model for financial assets measured at amortised cost or at fair value through other comprehensive income and contract assets.

Refer to:-• Note2.12-Accountingpolicy• Note3-Disclosureontheeffectsonadoption

of MFRS 9• Note4(b)(ii)-Significantaccountingestimate• Note 11, 12and 13-Allowance for impairment

losses for contract assets, trade receivables and amount due from an associate

The adoption of MFRS 9 changes the method in determining impairment from the incurred loss approach under MFRS 139 to a forward-looking ECL approach.

To measure ECL, the Group has used a provision matrix and made significant assumptions such as the expected future cash flows, future economic conditions and credit behaviour.

Our procedures included the following :

We have evaluated the procedures and internal controls over the assessment and monitoring of receivables and contract assets.

We assessed the appropriateness of the ECL model used by the Group against the requirements of MFRS 9. We also assessed the appropriateness of historical loss experience used and the reasonableness of forward-looking adjustments included in the calculation of ECL.

With respect to ECL individually assessed for credit-impaired receivables, we tested a sample of such receivables to assess management’s assumptions on the expected future cash flows and the reasonableness of impairment loss recognised.

INFORMATION OTHER THAN THE FINANCIAL STATEMENTS AND AUDITORS’ REPORT THEREON

The directors of the Company are responsible for the other information. The other information comprises information contained in the Annual Report, but does not include the financial statements of the Group and of the Company and our auditors’ report thereon.

Our opinion on the financial statements of the Group and of the Company does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements of the Group and of the Company, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements of the Group and of the Company or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

independent auditors’ report to the members of solution engineering holdings berhad(incorporated in malaysia) (cont’d)


RESPONSIBILITIES OF THE DIRECTORS FOR THE FINANCIAL STATEMENTS

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

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

AUDITORS’ RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about whether the financial statements of the Group and of the Company as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it exists. Misstatement can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing, we exercise professional judgement and maintain professional scepticism throughout the audit. We also :-

• IdentifyandassesstherisksofmaterialmisstatementofthefinancialstatementsoftheGroupandoftheCompany,whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtainanunderstandingofinternalcontrolrelevanttotheauditinordertodesignauditproceduresthatareappropriatein the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and of the Company’s internal control.

• Evaluatetheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesandrelateddisclosures made by the directors.

• Concludeontheappropriatenessofthedirectors,useofthegoingconcernbasisofaccountingand,basedontheauditevidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s or the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements of the Group and of the Company or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group or the Company to cease to continue as a going concern.

• Evaluatetheoverallpresentation,structureandcontentofthefinancialstatementsoftheGroupandoftheCompany,including the disclosures, and whether the financial statements of the Group and of the Company represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtainsufficientappropriateauditevidenceregardingthefinancial informationof theentitiesorbusinessactivitieswithin the Group to express an opinion on the financial statements of the Group. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

independent auditors’ report to the members of solution engineering holdings berhad

(incorporated in malaysia) (cont’d)


AUDITORS’ RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS (CONT’D)

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear an our independence, and where applicable, related safeguards.

From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial statements of the Group and of the Company for the current financial year and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

OTHER MATTERS

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

FOLKS DFK & CO. LEONG KOK TONGFIRM NO. : AF 0502 NO. : 02973/11/2019 JChartered Accountants Chartered Accountant

Kuala Lumpur

Date : 24 April 2019

independent auditors’ report to the members of solution engineering holdings berhad(incorporated in malaysia) (cont’d)


LIST OF PROPERTIES

PARTICULARS OF THE LANDED PROPERTIES

Description /Address A building consists of a 2 storey workshop and 3 storey office block built on a piece of subleased land from Technology Park Malaysia Corporation Sdn Bhd (“Sub-lessor”) held under H.S.(D) 116013, P.T. No. 13796, Mukim Petaling, Daerah Kuala Lumpur, Negeri Wilayah Persekutuan Kuala Lumpur, with a postal address of PT 13796, Jalan Tekno Usahawan 2, Technology Park Malaysia, 57000 Kuala Lumpur.

Owner Solution Engineering Sdn Bhd (“SESB”), a wholly-owned subsidiary of Solution Engineering Holdings Berhad

Tenure / Expiry Sub-lease for 30 years.Expiring 30 March 2045.

Existing Use TohousetheGroup’sDemonstrationandTrainingCentre,R&DDepartment,Design&EngineeringDepartment,Sales&MarketingDepartment,Finance&AdministrationDepartment and the Customer Support and Services Department.

Land Area 43,560 sq ft

Built-up Area 38,000 sq ft

Audited Net Book Value Subleased land - RM2,157,708Building - RM10,527,773

Restrictions-in-interest of the property

There is a restriction of interest on the property requiring the Sub-Lessor and/or the Federal Lands Commissioner’s consent to any transfer or charge of the property.

Encumbrances The subleased land is presently charged to Alliance Bank Malaysia Berhad under Presentation No. 29736/2017 for loan facilities granted to SESB.


ANALYSIS OF SHAREHOLDINGSAs at 29 March 2019

Issued and Paid-Up Capital : RM31,089,110Class of shares : Ordinary Shares Voting rights : One vote per ordinary share

ANALYSIS BY SIZE OF HOLDINGS

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

1 - 99 220 6.16 13,485 0.00100 to 1000 207 5.80 88,714 0.031,001 to 10,000 962 26.94 6,483,589 2.1210,001 to 100,000 1,824 51.08 71,288,988 23.26100,001 to 15,322,725 * 357 10.00 148,620,206 48.5015,322,726 and above ** 1 0.03 79,959,549 26.09

Total 3,571 100.00 306,454,531 100.00

Remarks :* Less than 5% of issued shares** 5% and above of issued shares

30 LARGEST ORDINARY SHAREHOLDERS

No. of No. Name Shares Held %

1. Lim Yong Hew 59,959,550 19.57

2. Lim Yong Hew 19,999,999 6.53

3. HSBC Nominees (Tempatan) Sdn. Bhd. 10,051,000 3.28 HSBC (M) Trustee Bhd. for RHB Small Cap Opportunity Unit Trust

4. Lim Chiou Kim 6,647,259 2.17

5. Lim Hai Guan 5,688,315 1.86

6. Cheng Pak Sing @ Chin Hwa Sen 3,388,900 1.11

7. Solvest Sdn Bhd 2,991,903 0.98

8. Syed Muhamad Bin Syed Abdul Kadir 2,845,422 0.93

9. Zainuddin Bin Muhamad 2,046,921 0.67

10. Lim Chiou Kim 2,019,999 0.66.11. Chan Yee Wah 2,010,345 0.66

12. See Kong Lam 1,943,300 0.63

13. Ang Boon Guan 1,931,100 0.63


30 LARGEST ORDINARY SHAREHOLDERS (CONT’D)

No. of No. Name Shares Held %

14. Lim Leong Yok 1,655,100 0.54

15. Toh Chee Thin 1,650,000 0.54

16. Public Nominees (Tempatan) Sdn Bhd 1,500,000 0.49 Pledged Securities Account For Tam Seng @ Tam Seng Sen (E-PTS)

17. Alliance Group Nominees (Tempatan) Sdn Bhd 1,400,000 0.46 Pledged Securities Account For Tan Oiy Pow

18. Mohd Shahrin Bin Saparin @ Abd Rahman 1,398,100 0.46

19. Chan Thong Wing 1,393,899 0.45 20. Fong Siling 1,300,000 0.42 21. Goh Siang Giang 1,300,000 0.42 22. Lim Bee Leyong 1,300,000 0.42 23. Maybank Nominees (Tempatan) Sdn Bhd Yeo Kim Hock 1,272,000 0.42 24. Lim Boon Seng 1,200,000 0.39 25. Tan Lee Soon Holdings Sdn Bhd 1,200,000 0.39 26. Tee Bok Eng 1,200,000 0.39 27. Federlite Holdings Sdn Bhd 1,190,600 0.39 28. Alliance Group Nominees (Tempatan) Sdn Bhd 1,188,650 0.39 Pledged Securities Account For Low Wee Yien

29. Loh Kok Wai 1,118,100 0.36 30. Maybank Nominees (Tempatan) Sdn Bhd 936,500 0.31 Soo Choon Swee

Total 143,726,962 46.90

analysis of shareholdings(cont’d)


REGISTER OF SUBSTANTIAL SHAREHOLDERS

Name of Direct Interest Indirect InterestNo. shareholders No. of Shares % No. of shares %

1. Lim Yong Hew 79,959,549 26.09 3,176,101 1.04 (1)

(1) Deemed interested by virtue of his immediate family members’ interest and shareholding in Solvest Sdn.Bhd.

REGISTER OF DIRECTORS’ SHAREHOLDINGS

Name of Direct Interest Indirect InterestNo. Directors No. of Shares % No. of shares %

1. Lim Chiou Kim 8,667,258 2.83 3,501,902 1.14

2. Lim Hai Guan 5,688,315 1.86 3,001,902 0.98

3. Lim Yong Hew 79,959,549 26.09 3,176,101 1.04 (1)

4. Low Wei Ngee 99 0.00 – –

5. Dato’ Dr. Mohd Nazlee Bin Kamal 843,400 0.28 – –

6. Mohd Shahrin Bin Saparin @ Abd Rahman 1,398,100 0.46 – –

7. Datuk Dr. Syed Muhamad Bin Syed Abdul Kadir 2,845,422 0.93 – –

8. Zainuddin Bin Muhamad 2,046,921 0.67 – –

analysis of shareholdings(cont’d)


ANALYSIS BY SIZE OF HOLDINGS IN WARRANTS

No. of No. of Size of Holdings Holders % Warrants %

1 to 99 297 21.20 11,311 0.01100 to 1000 141 10.06 75,990 0.071,001 to 10,000 399 28.48 2,184,802 2.1610,001 to 100,000 425 30.34 16,902,140 16.68100,001 - 5,066,308 * 137 9.78 43,565,440 43.005,066,309 and above ** 2 0.14 38,586,516 38.08

Total 1,401 100.00 101,326,199 100.00

Remarks :* Less than 5% of issued warrants** 5% and above of issued warrants

30 LARGEST WARRANTS HOLDERS

No. of No. Name Warrants Held %

1. Lim Yong Hew 19,619,850 19.36

2. RHB Capital Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Fong Siling (CEB) 12,300,000 12.14

3. Lim Yong Hew 6,666,666 6.58

4. Lim Chiou Kim 2,215,753 2.19

5. Alliance Group Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Tan Oiy Pow 1,123,000 1.11

6. Ong Kim Leng 1,100,000 1.09

7. Liew Yoke Lim 1,064,600 1.05

8. Solvest Sdn. Bhd. 997,301 0.98

9. Syed Muhamad bin Syed Abdul Kadir 948,474 0.94

10. Hueh Fai Ping 900,000 0.89

11. Lim Chiou Noan 857,695 0.85

12. Hue Boon Kiat 803,100 0.79

13. Public Invest Nominees (Asing) Sdn Bhd Exempt An for Phillip Securities Pte Ltd (Clients) 800,000 0.79

14. Public Nominees (Tempatan) Sdn Bhd Pledged Securities Account For Yeo Kim Hock (E-KPT) 792,133 0.78

ANALYSIS OF HOLDINGS IN WARRANTS

As at 29 March 2019


30 LARGEST WARRANTS HOLDERS (CONT’D)

No. of No. Name Warrants Held %

15. Cheong Boon Long 710,000 0.70

16. Lim Boon Seng 700,000 0.69

17. Maybank Nominees (Tempatan) Sdn Bhd Ong Kheng Hong 700,000 0.69

18. Lim Chiou Kim 673,333 0.66

19. Chan Yee Wah 670,115 0.66

20. Zainuddin Bin Muhamad 667,307 0.66

21. Lim Aye Choo 639,600 0.63

22. Chen Fook 600,000 0.59

23. Lee Swee Yong 600,000 0.59

24. Tong Siew Keng 575,900 0.57

25. Mohd Shahrin Bin Saparin @ Abd Rahman 570,700 0.56

26. Lai Hing 550,000 0.54

27. See Kong Lam 532,200 0.53

28. HLIB Nominees (Tempatan) Sdn Bhd Pledged Securities Account For Yap Chee Kheong (CCTS) 508,016 0.50

29. Mohd Nazlee Bin Kamal 500,000 0.49

30. Chan Thong Wing 464,633 0.46

Total 59,850,376 59.07

analysis of holdings in warrants(cont’d)


REGISTER OF SUBSTANTIAL WARRANT HOLDERS

Direct Interest Indirect InterestNo. Name of holders No. of warrants % No. of warrants %

1. Lim Yong Hew 26,286,516 25.94 1,033,967 1.02(1)

2. RHB Capital Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Fong Siling (CEB) 12,300,000 12.14 – –

(1) Deemed interested by virtue of his immediate family members’ interest and shareholding in Solvest Sdn.Bhd.

REGISTER OF DIRECTORS’ HOLDINGS

Direct Interest Indirect InterestNo. Name of Directors No. of warrants % No. of warrants %

1. Lim Chiou Kim 2,889,086 2.85 1,000,634 0.99

2. Lim Hai Guan – – 1,000,634 0.99

3. Lim Yong Hew 26,286,516 25.94 1,033,967 1.02

4. Low Wei Ngee 66 0.00 – –

5. Dato’ Dr. Mohd Nazlee Bin Kamal 500,000 0.49 – – 6. Mohd Shahrin Bin Saparin @ Abd Rahman 570,700 0.56 – –

7. Datuk Dr. Syed Muhamad Bin Syed Abdul Kadir 948,474 0.94 – –

8. Zainuddin Bin Muhamad 667,307 0.66 – –

analysis of holdings in warrants(cont’d)


NOTICE IS HEREBY GIVEN THAT the Fifteenth (15th) Annual General Meeting (“AGM”) of Solution Engineering Holdings Berhad will be held at PT 13796, Jalan Tekno Usahawan 2, Technology Park Malaysia, 57000 Kuala Lumpur on Tuesday, 28 May 2019 at 10.00 a.m. to transact the following businesses:

A G E N D A

ORDINARY BUSINESS

1. To receive the Audited Financial Statements for the financial year ended 31 December 2018 together with the Reports of the Directors and Auditors thereon.

2. To approve the payment of Directors’ Fees of RM188,400 for the financial year ended 31 December 2018.

3. To approve the payment of Directors’ benefits of RM188,400 for the period from 28 May 2019 until the next Annual General Meeting of the Company.

4. To re-elect the following Directors, who retire in accordance with Article 83 of the Company’s Constitution and being eligible, have offered themselves for re-election:

(i) Mr Lim Yong Hew

(ii) Mr Lim Hai Guan

5. To re-elect Dato’ Dr Mohd Nazlee bin Kamal, who retires pursuant to Article 90 of the Company’s Constitution and, being eligible, offers himself for re-election.

6. Tore-appointMessrsFolkDFK&Co.asAuditorsoftheCompanyandtoauthorisetheDirectorsto fix their remuneration.

SPECIAL BUSINESS

To consider and, if thought fit, to pass the following Resolutions:

7. RETENTION OF INDEPENDENT NON-ExECUTIVE DIRECTORS

“THAT approval be and is hereby given to retain the following Directors, who have served as Independent Non-Executive Directors of the Company for more than twelve (12) years, to continue to serve as Independent Non-Executive Directors of the Company until the conclusion of the next Annual General Meeting:

(i) Datuk Dr. Syed Muhamad Bin Syed Abdul Kadir

(ii) Mr. Low Wei Ngee

NOTICE OF ANNUAL GENERAL MEETING

(Please refer to Explanatory Note A)

ORDINARY RESOLUTION 1









8. AUTHORITY UNDER SECTIONS 75 AND 76 OF THE COMPANIES ACT 2016 FOR THE DIRECTORS TO ALLOT AND ISSUE SHARES

“THAT pursuant to Sections 75 and 76 of the Companies Act 2016 and subject always to the approval from the relevant authorities, where such approval is necessary, the Board of Directors be authorised to issue and allot shares in the Company at any time and upon such terms and conditions and for such purposes as the Directors may, in their absolute discretion deem fit, PROVIDED ALWAYS THAT the aggregate number of ordinary shares to be issued pursuant to this resolution does not exceed ten percent (10%) of the issued capital of the Company for the time being and that the Directors be and are also empowered to obtain the approval for the listing of and quotation for the additional shares so issued on the ACE Market of Bursa Malaysia Securities Berhad and that such authority shall continue to be in force until the conclusion of the next Annual General Meeting (“AGM”) of the Company or the expiration of the period within which the next AGM which is required by law to be held or revoked / varied by a resolution passed by the shareholders in general meeting whichever is the earlier.”

9. PROPOSED RENEWAL OF AUTHORITY FOR THE COMPANY TO PURCHASE ITS OWN SHARES

“THAT subject to the provisions under the Act, the Constitution of the Company, the ACE Market Listing Requirements and any other applicable laws, rules, regulations and guidelines for the time being in force, the Company be and is hereby authorised to purchase such number of ordinary shares in the Company (“Shares”) as may be determined by the Directors from time to time through Bursa Securities upon such terms and conditions as the Directors may deem fit and expedient in the interest of the Company provided that the aggregate number of shares purchased pursuant to this resolution shall not exceed 10% of the total issued and paid-up share capital of the Company.

THAT the maximum amount of funds to be allocated for the purpose of purchasing the Shares shall not exceed the retained profits of the Company.

THAT authority be and is hereby given to the Directors to decide at their discretion, as may be permitted and prescribed by the Act and/or any prevailing laws, rules, regulations, orders, guidelines and requirements issued by the relevant authorities for the time being in force to deal with any of the Shares so purchased by the Company in the following manner:

(a) the Shares so purchased could be cancelled; or(b) the Shares so purchased could be retained as treasury shares for distribution as dividends

or bonus shares to the shareholders of the Company and/or be resold through Bursa Securities in accordance with the relevant rules of Bursa Securities and/or transferred in accordance with the Act and/or be cancelled subsequently; or

(c) combination of (a) and (b) above.



notice of annual general meeting(cont’d)


THAT the authority conferred by this resolution will be effective immediately from the passing of this ordinary resolution and shall continue to be in force until:

(i) the conclusion of the next AGM of the Company, at which time the said authority would lapse unless by an ordinary resolution passed at that meeting, the authority is renewed, either unconditionally or subject to conditions; or

(ii) the expiration of the period within which the next AGM is required by law to be held; or(iii) the authority is revoked or varied by an ordinary resolution of the shareholders of the

Company in a general meeting,

whichever occurs first.

AND THAT the Directors be and are hereby authorised to take such steps as are necessary or expedient to implement or to effect the purchase(s) of the Shares with full power to assent to any conditions, modifications, variations and/or amendments as may be imposed by the relevant authorities and to take such steps as they may deem necessary or expedient in order to implement, finalise and give full effect in relation thereto.”

10. PROPOSED RENEWAL OF SHAREHOLDERS’ MANDATE FOR RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE

“THAT, subject to the provisions of the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad, approval be given to the Company and/or its subsidiary companies to enter into recurrent related party transactions of a revenue or trading nature (“Recurrent Related Party Transactions”) as set out in Section 3 of Part B of the Circular to Shareholders dated 30 April 2019, subject to the following:-

(a) The Recurrent Related Party Transactions are undertaken in the ordinary course of business which are necessary for the day-today operations on arm’s length basis, on normal commercial terms which are not more favourable to the related party than those generally available to the public and are not detrimental to the minority shareholders of the Company; and

(b) Disclosure is made in the annual report of the aggregate value of transactions conducted pursuant to the Proposed Renewal of Shareholders’ Mandate during the financial year.

THAT the authority conferred by this resolution will be effective immediately from the passing of this ordinary resolution and shall continue to be in force until:

(i) the conclusion of the next AGM of the Company, at which time the said authority would lapse unless by an ordinary resolution passed at that meeting, the authority is renewed, either unconditionally or subject to conditions;

(ii) the expiration of the period within which the next AGM is required by law to be held; or

(iii) the authority is revoked or varied by an ordinary resolution of the shareholders of the Company in a general meeting,

whichever occurs first.

AND THAT the Directors be and are hereby authorised to take such steps as are necessary or expedient to implement or to effect the Proposed Renewal of Shareholders’ Mandate.”




11. PROPOSED ADOPTION OF NEW CONSTITUTION OF THE COMPANY

“THAT approval be and is hereby given to revoke the existing Constitution (previously referred to as the Memorandum and Articles of Association) of the Company with immediate effect and in place thereof, the proposed new Constitution of the Company, as set out in Appendix I of the Circular to Shareholders dated 30 April 2019, be adopted as the Constitution of the Company AND THAT the Directors of the Company be authorised to assent to any modification, variation and/or amendment as may be required by the relevant authorities and to do all acts and things and take all such steps as may be considered necessary to give full effect to the foregoing.”

12. PROPOSED CHANGE OF COMPANY NAME FROM “SOLUTION ENGINEERING HOLDINGS BERHAD” TO “SOLUTION GROUP BERHAD” (“PROPOSED CHANGE OF NAME”)

“THAT the name of the Company be changed from “Solution Engineering Holdings Berhad” to “Solution Group Berhad” effective from the date of the Notice of Registration of New Name to be issued by the Companies Commission of Malaysia to the Company and that all references in the Constitution of the Company in relation to the name “Solution Engineering Holdings Berhad”, wherever the same may appear, shall be deleted and substituted with “Solution Group Berhad”.

AND THAT the Board be and is hereby authorised to carry out all the necessary steps and formalities in effecting the Proposed Change of Name.”

13. To transact any other business for which due notice shall have been given.

BY ORDER OF THE BOARD

SIEW SUET WEI (MAICSA 7011254)LIM YEN TENG (LS0010182)Company Secretaries

Kuala LumpurDate: 30 April 2019

NOTES: -

1. Depositors whose names appear in the Record of Depositors as at 21 May 2019 shall be regarded as members of the Company entitled to attend, speak and vote at the 15th Annual General Meeting.

2. A member entitled to attend and vote at the meeting is entitled to appoint one or more [but not more than three (3)] proxies, each representing a minimum of 100 shares held by the member to vote on his behalf. A proxy may but need not be a member of the Company. Where a member appoints two (2) or more proxies to attend and vote at the meeting, the appointment shall be invalid unless he specifies the proportion of his shareholdings to be represented by each proxy.

3. Where a member of the Company is an authorised nominee as defined under the Securities Industry (Central Depositories) Act, 1991, (“SICDA”) it may appoint at least one (1) proxy in respect of each securities account is holds with ordinary shares of the Company standing to the credit of the said securities account.

SPECIAL RESOLUTION 1




NOTES: - (Cont’d)

4. Where a member of the Company is an exempt authorised nominee as defined under the SICDA which is exempted from compliance with the provisions of Subsection 25(A)(1) of the SICDA, of which holds ordinary shares in the Company for multiple beneficial owners in one securities account (“omnibus account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds.

5. The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorised in writing or if the appointer is a corporation, either under its common seal or under the hand of an attorney duly authorised.

6. The instrument appointing a proxy and the power of attorney or other authority (if any), under which it is signed or notarially certified copy thereof, shall be deposited at the Registered Office of the Company at 5-9A, The Boulevard Offices, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur not less than forty-eight (48) hours before the time set for holding the 15th Annual General Meeting or any adjournment thereof.

ExPLANATORY NOTE A

This Agenda item is meant for discussion only as under the provisions of Section 340(1) of the Companies Act 2016, the audited financial statements do not require the approval of the shareholders. As such, this matter will not be put forward for voting.

ExPLANATORY NOTESTO SPECIAL BUSINESS

1. Ordinary Resolutions 7 and 8

Both, Datuk Dr. Syed Muhamad Bin Syed Abdul Kadir and Mr. Low Wei Ngee were appointed as Independent Non-Executive Directors of the Company on 28 May 2005 and have therefore served for more than twelve (12) years.

The Board vide the assessment conducted by the Nomination and Remuneration Committee, has recommended that both Datuk Dr. Syed Muhamad Bin Syed Abdul Kadir and Mr. Low Wei Ngee continue to act as Independent Non-Executive Directors of the Company based on the following reasons and subject to the approval of the Company’s shareholders through a two-tier voting process as described in the Guidance to Practice 4.2 of the Malaysian Code of Corporate Governance 2017:

(i) They fulfil the criteria under the definition on Independent Directors as per Guidance Note 9 of the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad.

(ii) They have devoted sufficient time and attention to their professional obligation and make informed and balanced decisions.

(iii) They are able to bring independent and objective judgment and act in the best interest of the Company.(iv) Their wide range of business experience relevant to the Group enables them to provide the Board with adiverse

set of corporate expertise, skills and competence.(v) They or persons connected with them have not developed, established or entered into any significant relationship

with the Executive Directors, Substantial Shareholders or management of the Company.

The proposed Ordinary Resolutions 7 and 8, if passed, will enable Datuk Dr. Syed Muhamad Bin Syed Abdul Kadir and Mr. Low Wei Ngee to continue serving as the Independent Non-Executive Directors of the Company.



2. Ordinary Resolution 9

The Company had during its 14th Annual General Meeting held on 31 May 2018 obtained from its shareholders, a general mandate pursuant to Sections 75 and 76 of the Companies Act 2016 to issue and allot shares in the Company up to an amount not exceeding 10% of the issued share capital of the Company and this mandate had not being exercised by the Company.

The Ordinary Resolution 9 is a renewal mandate of the general mandate for the issuance of shares by the Company under Sections 75 and 76 of the Companies Act 2016. The mandate, if passed, will give the Directors of the Company, the authority to issue and allot shares in the Company up to an amount not exceeding 10% of the issued share capital of the Company for the time being for such purposes as the Directors would consider to be in the best interest of the Company. This authority, unless revoked or varied by the Company in a general meeting will expire at the conclusion of the next Annual General Meeting of the Company.

This mandate would provide the Company the flexibility to raise fund including but not limited to placing of shares to finance future projects, working capital and / or acquisitions without having to convene a general meeting.


The proposed Ordinary Resolution 10, if passed, will give the Directors of the Company the authority to take all such steps as are necessary or expedient to implement, finalise, complete and/or effect the purchase(s) of Shares by the Company as the Directors may deem fit and expedient in the best interest of the Company. This authority will, unless renewed or revoked or varied by the Company at a general meeting, continue to be in force until the conclusion of the next AGM of the Company or the expiry of the period within which the next AGM of the Company following the 15th AGM is required by the law to be held. Please refer to Part D of the Circular to Shareholders dated 30 April 2019 which is despatched together with this Annual Report for more information.


The proposed Ordinary Resolution 11, if passed, will renew the authority for the Company and / or its subsidiary companies to enter into recurrent related party transactions of a revenue or trading nature are undertaken in the ordinary course of business which are necessary for the day-today operations on arm’s length basis, on normal commercial terms which are not more favourable to the related party than those generally available to the public and are not to the detrimental to the minority shareholders of the Company and shall lapse at the conclusion of the next AGM unless authority for its renewal is obtained from shareholders of the Company at the next general meeting. Please refer to Part B of the Circular of Shareholders dated 30 April 2019 which is despatched together with this Annual Report for more information.

5. Special Resolution 1

The proposed adoption of new Constitution (formerly known as the Memorandum and Articles of Association) of the Company is primarily for the purposes of streamlining the Company’s existing Memorandum and Articles of Association to be aligned with the Companies Act 2016 which was implemented with effect from 31 January 2017 and the amendments to the Listing Requirements of Bursa Malaysia Securities Berhad and the prevailing statutory and regulatory requirement applicable to the Company.

In view of the numerous amendments which would entail substantial amendments to the existing Memorandum and Articles of Association, the Board had proposed that a new Constitution as set out in Part C of the Circular to Shareholders dated 30 April 2019, be adopted. The proposed adoption shall take effect immediately once Special Resolution is passed by a majority of not less than seventy-five per centum (75%) of such members who are entitled to vote and do vote in person or by proxy at the 15th AGM.

6. Special Resolution 2

The Board had proposed for the Proposed Change of Name which will be beneficial to the Company by more accurately reflecting the Group’s current structure and the various business activities which is not solely focused on Engineering. The details of the Proposed Change of Name are set out in Part A of the Circular to Shareholders dated 30 April 2019. The Proposed Change of Name shall take effect from the date of the Notice of Registration of New Name to be issued by the Companies Commission of Malaysia to the Company.



1. DIRECTORS WHO ARE STANDING FOR RE-ELECTION AT THE FIFTEENTH (15TH) ANNUAL GENERAL MEETING OF THE COMPANY ARE:

(a) Lim Yong Hew(b) Lim Hai Guan(c) Dato’ Dr. Mohd Nazlee bin Kamal

2. DETAILS OF ATTENDANCE OF DIRECTORS AT BOARD MEETING

During the financial year ended 31 December 2018, five (5) Board Meetings were held and the details of the attendance of the Directors are as follows:

Executive Directors Number of Meeting Attended

Lim Yong Hew 5/5Lim Hai Guan 5/5Lim Chiou Kim 5/5Mohd Shahrin Bin Saparin @ Abd Rahman 5/5Dato’ Dr. Mohd Nazlee bin Kamal (Appointed on 29/08/2018) 1/1

Non Executive Directors Number of Meeting Attended

Datuk Dr. Syed Muhamad Bin Syed Abdul Kadir 4/5Low Wei Ngee 5/5Zainuddin Bin Muhamad 4/5

Date, Time and Venue of the Fifteenth (15th) Annual General Meeting of the Company

Venue : PT 13796, Jalan Tekno Usahawan 2, Technology Park Malaysia, 57000 Kuala Lumpur

Date&Time : Tuesday,28May2019at10.00a.m.

3. PROFILES OF DIRECTORS SEEKING FOR RE-ELECTION ARE SET OUT UNDER THE DIRECTORS’ PROFILE APPEARING ON PAGE 6, 7 AND 8.

There are no individuals who are standing for election as directors (excluding directors standing for a re-election

STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING(Pursuant to Paragraph 8.29 (2) of the ACE Market Listing Requirements of Bursa MalaysiaSecurities Berhad)

✄

PROxY FORM

SOLUTION ENGINEERING HOLDINGS BERHAD(654575-P) (Incorporated in Malaysia)

I/We ________________________________________________________ of _______________________________________ (FULL NAME AND NRIC/PASSPORT/COMPANY NO.) (FULL ADDRESS)

______________________________________________________________________________________________________

being a member/members of SOLUTION ENGINEERING HOLDINGS BERHAD hereby appoint:

(1) Mr/Ms ______________________________________________ (NRIC No. ______________________________________ )

OR failing whom, Mr/Ms ___________________________________ (NRIC No. ______________________________________ )

(the next name and address should be completed where it is desired to appoint two proxies)

(2) Mr/Ms ______________________________________________ (NRIC No. ______________________________________ )

failing whom, Mr/Ms ______________________________________ (NRIC No. ___________________________________ ) OR

(3) Mr/Ms ______________________________________________ (NRIC No. ______________________________________ )

failing whom, Mr/Ms ______________________________________ (NRIC No. ___________________________________ ) OR

failing either of them, the Chairman of the meeting as my/our proxy to vote for me/us on my/our behalf at the 15th Annual General Meeting of the Company to be held at PT 13796, Jalan Tekno Usahawan 2, Technology Park Malaysia, 57000 Kuala Lumpur on Tuesday, 28 May 2019 at 10.00 a.m. and at any adjournment thereof, in the manner indicated below:-

For Against

ORDINARYRESOLUTION 1

To approve the payment of Directors’ Fees of RM188,400 for the financial year ended 31 December 2018


To approve the payment of Directors’ benefits of RM188,400 for the period from 28 May 2019 until the next Annual General Meeting of the Company


To re-elect Mr Lim Yong Hew who retires in accordance with Article 83 of the Company’s Constitution


To re-elect Mr Lim Hai Guan who retires in accordance with Article 83 of the Company’s Constitution


To re-elect Dato’ Dr Mohd Nazlee bin Kamal who retires in accordance with Article 90 of the Company’s Constitution


Tore-appointMessrsFolkDFK&Co.asAuditorsoftheCompanyandtoauthorisethe Directors to fix their remuneration


To retain Datuk Dr. Syed Muhamad Bin Syed Abdul Kadir as an Independent Non-Executive Director


To retain Mr. Low Wei Ngee as an Independent Non-Executive Director


To approve the Authority under Sections 75 and 76 of the Companies Act for the Directors to allot and issue shares


Proposed renewal of authority for the Company to purchase its own shares


Proposed renewal of Shareholders’ Mandate for Recurrent Related PartyTransactions of a revenue or trading nature


Proposed adoption of new Constitution of the Company


Proposed Change of Name

Please indicate with an “x’ in the spaces provided above on how you wish to cast your vote. In the absence of specific directions, your proxy will vote or abstain as he thinks fit.

Dated this _________ day of __________ 2019

_______________________________________ Signature of Member / Common Seal

No. of shares held

CDS Account No.

No. of shares to be represented by each proxy

Proxy 1 Proxy 2 Proxy 3

AFFIXSTAMP

Fold this flap for sealing

Then fold here

1st fold here

NOTES: -

1. Depositors whose names appear in the Record of Depositors as at 21 May 2019 shall be regarded as members of the Company entitled to attend, speak and vote at the 15th Annual General Meeting.

2. A member entitled to attend and vote at the meeting is entitled to appoint one or more [but not more than three (3)] proxies,each representing a minimum of 100 shares held by the member to vote on his behalf. A proxy may but need not a member ofthe Company. Where a member appoints two (2) or more proxies to attend and vote at the meeting, the appointment shall beinvalid unless he specifies the proportion of his shareholdings to be represented by each proxy.

3. Where a member of the Company is an authorised nominee as defined under the Securities Industry (Central Depositories) Act, 1991 (“SICDA”), 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.

4. Where a member of the Company is an exempt authorised nominee as defined under the SICDA which is exempted from compliance with the provisions of Subsection 25(A)(1) of the SICDA, of which holds ordinary shares in the Company for multiple beneficial owners in one securities account (“omnibus account”), there is no limit to the number of proxies which the exempt authorized nominee may appoint in respect of each omnibus account it holds.

5. The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorised in writing or if the appointer is a corporation, either under its common seal or under the hand of an attorney duly authorised.

6. The instrument appointing a proxy and the power of attorney or other attorney (if any), under which it is signed or notarially certified copy thereof, shall be deposited at the Registered Office of the Company at 5-9A, The Boulevard Offices, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur not less than forty-eight (48) hours before the time set for holding the 15th Annual General Meeting or any adjournment thereof.

THE COMPANY SECRETARYSOLUTION ENGINEERING HOLDINGS BERHAD (654575-P)

No. 5-9A The Boulevard OfficesMid Valley CityLingkaran Syed Putra 59200 Kuala Lumpur

“15TH ANNUAL GENERAL MEETING”

SOLUTION ENGINEERING HOLDINGS BERHAD (654575-P)(Incorporated in Malaysia under the Companies Act, 1965)

PT13796 Jalan Tekno Usahawan 2,Technology Park Malaysia,57000 Kuala Lumpur, Wilayah PersekutuanTel : +603 2780 3890/3891Fax No. : +603 8082 1900E-mail : [email protected]

www.solutionholdings.com.my

contents...datuk dr. syed muhamad is also a director of euro holdings berhad, bsl corporation...

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