construction

Zecon Berhad annual report 2008

It is pleasing to report on another profitable year for Zecon Group with improved revenue of RM157 million. 2008 has been a year filled with activities, domestically we saw significant progress in our projects on hand, namely the Matang-Rambungan Expressway in Kuching and the Triang Water Supply Scheme in Jelebu, Negeri Sembilan. Our international operation has been equally active with recruitments, deployment of manpower and mobilisation of machineries taking place during the year. It was the validation for all of us to see that the dedication and commitment from the respective project teams which had resulted in achieving the scheduled progresses in spite of the price hike in construction materials in most part of the year 2008. We continue to actively pursue opportunities to diversify our business. This desire, together with our calculative approach has begun to bear fruit for our international operations. On 21 January 2009, Zecon signed a Memorandum of Understanding with Qatari Diar, one of the biggest developers in Qatar which is owned by Qatar Investment Authority, to combine resources and expertise and to exchange technology know-how for any potential development projects in Qatar and the Gulf region. The signing represents the first step towards bringing in potential projects in the region and it is also the reward of a string of cautious approaches assumed by the Group to ensure our understanding of the market and business environment and engaging into projects with relatively low risk profile.

Included in this project is a 12.5km long “transfer tunnel” which reserves a special mention. The tunnel which runs through a mountain is the first of its kind for a water supply scheme in Malaysia and the second tunneling project after the Smart Tunnel in Kuala Lumpur. Once completed, the tunnel will become the longest in Malaysia. Except for the tunneling for which we have engaged a Korean subcontractor, all other infrastructure works are undertaken by Zecon. We expect some form of technology transfer arising from our ties with our Koreans counterpart. Toll Our Toll division continues to improve, as we optimistically predicted last year to have the daily users to exceed 20,000 barriers. We are pleased to note that approximately 7,558,840 users were recorded for the year ended 31 December 2008, an average of 20,709 users per day. A total of 7.12 million users were recorded last year corresponding period, thus recording a 6% increase. Revenue continues to increase each year since the official commencement in 2003 with RM9.19 million recorded for the year under review, a 7% increase as compared to RM8.61 million in the preceding year. The main contributor to the increase in revenue is the introduction of our reload package for the prepaid Toll cards which commenced in July 2008. A total of RM1.23 million was received from the combination of new and reloaded prepaid card, almost RM0.5 million more than the RM747,430 sold last year.

In addition to the above, we have also been active in seeking potential joint venture projects in Saudi Arabia and the surrounding region. At the time of this report, several projects and joint venture proposals have been studied and will soon be finalized and announced accordingly.

With the expected increase in the demand for reload package and our focus on prepaid cards, the revenue and users are anticipated to rise.

Construction and Infrastructure still being our major business segment contributed more than 80% of overall gross revenue for the year.

The current low interest rates especially for home buyers has led us to launch Phase 2 of our Vista Tunku Project in Petra Jaya, Kuching, consisting of 41 units of Double Storey Terrace houses as well as planning for the recommencement of the City Bridge Commercial Centre located at Jalan Tanah Puteh, Kuching soon.

We are still on course to secure approximately RM1 billion potential projects pending final approval as reported last year, namely, (1) Triang Water Supply Scheme, Package 5, (2) UNIMAS Faculty of Medical and Health Science and (3) Syarikat Perumahan Negara Berhad Petra Indah Housing Scheme. Matang – Rambungan Expressway, Matang, Kuching, Sarawak Our Matang Highway project reached a significant milestone in 2008 and is expected to be 100% completed in May 2009. This RM201 million 18 km two-lane double carriageway from Kuching city, Sarawak to the proposed new Federal Administrative Centre near Matang, located 20 km northwest of the city of Kuching, was a variation from the original 25 km. The 7 km was replaced by the revised route whereby this part of the road will be lengthened by another 13.3 km and narrowed into a two-lane single carriageway (“Revised Matang Route”) with a contract sum of RM124 million. The 18 km original route is now waiting for its official completion announcement whereas the Revised Matang Route was 7.5% completed as at the end of 2008 and is expected to be fully completed in 2011. This expressway besides linking Kuching city to the proposed Federal Administrative Centre, also serves to improve the traffic connectivity and together with the Revised Matang Route, will provide an alternative means to enter Kuching city without encountering congestion at the Petra Jaya roundabout. Triang Water Supply Scheme, Jelebu, Negeri Sembilan Triang Water Supply Scheme, another active project on hand in Negeri Sembilan also progressed as planned. As at the date of the printing of this report, the physical completions for each of the Packages are 56% for Package 1, 32% for Package 2 and 48% for Package 4.

Property Development

Outlook Despite the global economic uncertainties and weak forecasts across all major markets, Malaysia’s well-planned transfer of power and the successful installation of its 6th Prime Minister will certainly boost the market and investors’ confidence overall. Progressing With The Nation, I believe that Zecon is strategically positioned to explore and seize potential opportunities available in the new era. However, the newly released growth forecast by Bank Negara of between -1% and 1% means the outlook remains weak. Despite these uncertainties, we will continue to be innovative in our approach and seek growth including expansion into new markets both domestically and internationally. Besides nearly RM1 billion potential book orders mentioned above, we are also hopeful that our Private Finance Initiative (PFI) proposals to the Government will be successful with the RM7 billion budget allocated under the recent Mini-Budget for PFI and off-budget projects. Lastly, I would like to thank our committed people of all ranks, without them, all progress would not have been materialized; our shareholders and the board of directors for your belief and contribution towards our ambition. I strongly believe that with your continuous support, Zecon will be progressing in the right direction to becoming a world class multi-disciplined contractor, developer and concessionaire.

Datuk Haji Zainal Abidin bin Haji Ahmad Group Managing Director/Chief Executive Officer Date: 26 May 2009

11

From left to right: Ir. Haji Abang Azahari bin Abang Osman (Executive Director), Haji Saini bin Haji Ali (Executive Director), Datuk Dr. Haji Yusof @ Josree bin Yacob (Deputy Independent Chairman), Dato’ Abdul Majit bin Ahmad Khan (Independent Non-Executive Director), Richard Kiew Jiat Fong (Independent Non-Executive Director), Dato’ Haji Hamzah bin Haji Ghazalli (Independent Non-Executive Director), Datu Dr. Hatta bin Solhi (Independent Chairman), Poh Lik Gan @ Poh Li Thong (Indenpendent Non-Executive Director), Datuk Haji Zainal Abidin bin Haji Ahmad (Group Managing Director/CEO), Dato’ Dr. Mohd Yahya bin Nordin (Independent Non-Executive Director), Ir. Hui Kok Yuan (Executive Director), Jamil bin Jamaludin (Executive Director), Haji Zainurin bin Haji Ahmad (Deputy Managing Director), Ir. Ng Weng Fatt (Executive Director, not in the picture)

12

Zecon Berhad annual report 2008

Profile Of Directors Datu Dr. Hatta bin Solhi Age

: 65

Nationality

: Malaysian

Qualification

: Ph.D in Political Science (Development Studies) from the University of Hawaii.

Position held

: Independent Chairman

Working experience & occupation

: Datu Dr. Hatta was appointed to the Board of Directors of the Company on 24 April 2001. Prior to joining Zecon, he served as the Deputy State Secretary of Sarawak from August 1997 to November 2001 and had held several senior positions in the State and Federal Services.

Details of any board committee to which he belongs : • Member of Audit Committee • Chairman of Remuneration & Nomination Committee • Chairman of Option Committee Other directorships in public companies

: None

Securities holdings in the Company and its subsidiaries

:

Name Zecon Berhad

Relationship with directors

: None

Relationship with substantial shareholders

: None

Conflict of interest

: None

List of convictions for offences within the past 10 years other than traffic offences

: None

Direct No. of shares 20,000

% 0.02

Indirect No. of shares % -

-

No. of board meetings attended in the financial year : 5/5

Datuk Dr. Haji Yusof @ Josree bin Haji Yacob Age

: 53

Nationality

: Malaysian

Qualification

: • Degree in Doctorate (MD), UKM-1981 • Master of Science in Public Health (MSc PH), NUS (Singapore) -1985

Position held

: Deputy Independent Chairman

Working experience & occupation

: Datuk Yusof was appointed to the Board of Directors of the Company on 09 June 2008. He started his career in 1981 by joining Kuala Lumpur General Hospital as Medical Officer. He was in medical field for nine (9) years until he joined political sector in 1990. During his political arena, he held various positions within the UMNO Division Sabah. He was the Member of Parliament of Sipitang, Sabah and Dewan Rakyat Deputy Speaker till February 2008. He was the Chairman of Saham Sabah Berhad and Sedcovest Holdings Sdn Bhd till 2004. Besides, he was also appointed to the Board of other private limited companies and charitable organizations. He is currently sitting in the Board of Sutera Harbour Golf and Country Club Berhad.

Details of any board committee to which he belongs

: None

Other directorships in public companies

: Sutera Harbour Golf and Country Club Berhad

Securities holdings in the Company and its subsidiaries

: None

Relationship with directors

: None

Relationship with substantial shareholders

: None

Conflict of interest

: None

List of convictions for offences within the past 10 years : None other than traffic offences No. of board meetings attended in the financial year

: 2/3

13

Profile Of Directors Datuk Haji Zainal Abidin bin Haji Ahmad Age

: 51

Nationality

: Malaysian

Qualification

: • Master of Arts degree in Management from the University of Kent at Canterbury, England. : • Diploma in Accounting from the University of Kent at Canterbury, England. : • Bachelor of Arts from University Kebangsaan Malaysia.

Position held

: Group Managing Director/Chief Executive Officer

Working experience & occupation

: Datuk Zainal was appointed to the Board of Zecon on 28 July 1994 as Director and subsequently as Executive Chairman on 30 November 1996. On 24 April 2001, he was appointed the Group Managing Director/Chief Executive Officer. He started his career by joining the Sarawak Civil Service in 1981 until he move to private sector in 1987. Under his leadership, ZECON Group has undertaken dynamic diversification recent years and has even positioned itself for international ventures. `

Details of any board committee to which he belongs : None Other directorships in public companies

: Sarawak Concrete Industries Berhad

Securities holdings in the Company and its subsidiaries

:

Name

Direct No. of shares

%

3,655,200 30,000 34,000 49

3.07 30.0 14.2 49.0

Zecon Berhad Sarmax Sdn Bhd Teknik PS Sdn Bhd Zecon Construction Sdn Bhd

Indirect No. of shares % 65,689,475 -

55.15 -

Relationship with directors

: Brother to Haji Zainurin bin Haji Ahmad

Relationship with substantial shareholders

: Director and major shareholder of Dawla Capital Sdn BHd

Conflict of interest

: No conflict of interest apart for the related party transactions, which have been disclosed in the Notes to the Accounts.

List of convictions for offences within the past 10 years other than traffic offences

: None

No. of board meetings attended in the financial year : 4/5

Haji Zainurin bin Haji Ahmad Age

: 48

Nationality

: Malaysian

Qualification

: • Master of Commerce Degree in Business Administration from University of Canterbury, Christchurch, New Zealand. : • B Sc. in Business Administration from Indiana Institute of Technology, Indiana, USA. : • Diploma in Business Studies from Universiti Teknologi MARA.

Position held

: Deputy Managing Director

Working experience & occupation

: Haji Zainurin was appointed to the Board on 12 June 1998. He enjoyed a 13-year tenure in finance and commercial sectors. He was the General Manager of Advance Finance Berhad (now known as Advance Establishment Berhad), Kuching prior to joining Zecon in 16 April 1999 as Executive Director. He was re-designated as Deputy Managing Director of Zecon on 01 June 2008.

Details of any board committee to which he belongs : • Chairman of Risk Management Committee • Member of Option Committee Other directorships in public companies

: Halifax Capital Berhad

Securities holdings in the Company and its subsidiaries

:

Name Zecon Berhad

14

Direct No. of shares 525,000

% 0.44

Indirect No. of shares % -

-

Zecon Berhad annual report 2008

Profile Of Directors Relationship with directors

: Brother to Datuk Haji Zainal Abidin bin Haji Ahmad

Relationship with substantial shareholders

: None

Conflict of interest

: No conflict of interest apart for the related party transactions, which have been disclosed in the Notes to the Accounts.

List of convictions for offences within the past 10 years other than traffic offences

: None

No. of board meetings attended in the financial year

: 4/5

Poh Lik Gan @ Poh Li Thong Age

: 64

Nationality

: Malaysian

Qualification

: • B.Sc in Quantity Surveying from Reading University, London in 1969. • Diploma in Quantity Surveying from College Of Estate Management, London in 1968. • Fellow of the Royal Institution of Chartered Surveyors. • Fellow of The Institution of Surveyors Malaysia.

Position held

: Independent Non-Executive Director

Working experience & occupation

: Appointed to the Board of Directors of the Company on 25 October 2004. He began his career as an Assistant Quantity Surveyor with Philip Pank & Partners (“PP&P”), London in 1968. From 1969 to 1973, he was with Jabatan Kerja Raya, Sarawak in Kuching Division. Subsequently, he started Contract Services Consultants and retired in 1988 as a Senior Partner. He is currently the Project Director of Jurudaya Construction Sdn Bhd, a post which he held since 1989.

Details of any board committee to which he belongs

: • Chairman of Audit Committee • Member of Remuneration & Nomination Committee

Other directorships in public companies

: None

Securities holdings in the Company and its subsidiaries

:

Name Zecon Berhad

Relationship with directors

: None

Relationship with substantial shareholders

: None

Conflict of interest

: None

List of convictions for offences within the past 10 years other than traffic offences

: None

No. of board meetings attended in the financial year

: 5/5

Direct No. of shares 40,000

%

Indirect No. of shares %

0.04

-

-

Dato’ Dr. Mohd Yahya bin Nordin Age

: 59

Nationality

: Malaysian

Qualification

: • Ph.D (Local Government) Wales, United Kingdom (1987). • M.Sc. (Town Planning) Wales, United Kingdom (1980). • Bachelor of Social Science (Hons), Universiti Sains Malaysia (1973). • Diploma in Public Administration from Universiti Malaya (1976).

Position held

: Independent Non-Executive Director

Working experience & occupation

: Appointed to the Board of Directors of the Company on 26 January 2007. He had served the Government of Malaysia for more than 32 years until his mandatory retirement on December 2005. Apart from his formal duties as a public official, he was also involved in the activities of professional bodies in which he was a Registered Town Planner with the Board of Town Planners Malaysia.

Details of any board committee to which he belongs

: • Member of the Audit Committee • Member of Remuneration & Nomination Committee

Other directorships in public companies

: None

15

Profile Of Directors Securities holdings in the Company and its subsidiaries

: None

Relationship with directors

: None

Relationship with substantial shareholders

: None

Conflict of interest

: None

List of convictions for offences within the past 10 years other than traffic offences

: None

No. of board meetings attended in the financial year

: 4/5

Dato’ Haji Hamzah bin Haji Ghazalli Age

: 59

Nationality

: Malaysian

Qualification

: • Master Degree of Arts in International Affair (Management) from University of Ohio, United States. • B.A. Hons from Universiti of Malaya.

Position held

: Independent Non-Executive Director

Working experience & occupation

: Appointed to the Board of Directors of the Company on 26 February 2007. He was an Administrative and Diplomatic Services Officer and had served the Government of Malaysia for more than 32 years. He started his career with the Government of Malaysia in April 1973 and retired in April 2005. Prior to his retirement, he was the State Secretary of Negeri Sembilan.

Details of any board committee to which he belongs : None Other directorships in public companies

: Halifax Capital Berhad

Securities holdings in the Company and its subsidiaries

: None

Relationship with directors

: None

Relationship with substantial shareholders

: None

Conflict of interest

: None

List of convictions for offences within the past 10 years other than traffic offences

: None

No. of board meetings attended in the financial year : 5/5

Dato’ Abdul Majit Bin Ahmad Khan Age

: 63

Nationality

: Malaysian

Qualification

: • Bachelor of Economics (Hons) from University of Malaya

Position held

: Independent Non-Executive Director

Working experience & occupation

: Appointed to the Board of Directors of the Company on 16 May 2007. He had served in the Prime Minister’s Department and the Ministry of Foreign Affairs as well as in several mission abroad and senior position in the Ministry of Foreign Affairs for thirty-four years. He also act as the Under Secretary of West Asia and the OIC and has participated in several Ministerial and Prime Ministerial visits to West Asian Countries and OIC Meetings. He was also a Director General of ASEAN and he actively participated in the organization of the 30th ASEAN Ministerial Meeting held in Kuala Lumpur as well as the ASEAN Head of Summit and the 10+3 Summit Meetings in Malaysia.

16

Zecon Berhad annual report 2008

Profile Of Directors : In 1998, he was appointed as the Ambassador of Malaysia to the People’s Republic of China and concurrently accredited to the Democratic People’s Republic of Korea until his retirement on 2 January 2005. He is currently the President of the Malaysia-China Friendship Association (PPMC), Exco Member of the Malaysia-China Business Council. Details of any board committee to which he belongs : None Other directorships in public companies

: • Hong Leong Islamic Bank • HLG Unit Trust Bhd • OSK Investment Bank Bhd

Securities holdings in the Company and its subsidiaries

: None

Relationship with directors

: None

Relationship with substantial shareholders

: None

Conflict of interest

: None

List of convictions for offences within the past 10 years other than traffic offences

: None

No. of board meetings attended in the financial year : 4/5

Richard Kiew Jiat Fong Age

: 55

Nationality

: Malaysian

Qualification

: Richard is a fellow Member of the following: • The Institute of Chartered Accountants in England and Wales; • The Association of Chartered Certified Accountants, United Kingdom; and • The Institute of Certified Public Accountants of Singapore. • He is also a member of Malaysian Institute Accountants.

Position held

: Independent Non-Executive Director

Working experience & occupation

: Richard Kiew was appointed to the Board of Directors of the Company on 01 June 2008. He has seven years working experience in England with firms of Chartered Accountants. When he came back to Malaysia, he worked as an audit manager for four years before started his own audit firm in 1986 as a sole practitioner.

Details of any board committee to which he belongs

: Member of the Audit Committee

Other directorships in public companies

: Sarawak Concrete Industries Berhad

Securities holdings in the Company and its subsidiaries

:

Name Zecon Berhad

Relationship with directors

: None

Relationship with substantial shareholders

: None

Conflict of interest

: None

Direct No. of shares 63,000

% 0.05

Indirect No. of shares % -

-

List of convictions for offences within the past 10 years : None other than traffic offences No. of board meetings attended in the financial year

: 3/3

17

Profile Of Directors Ir. Hui Kok Yuan Age

: 59

Nationality

: Malaysian

Qualification

: • Bachelor degree in Civil Engineering from the University of Adelaide. • Member of both Institution of Engineers Malaysia and Australia. • Professional Engineer, Board of Engineers, Malaysia.

Position held

: Executive Director

Working experience & occupation

: Hui Kok Yuan was appointed Executive Director of the Company on 16 February 2001. He joined Jabatan Kerja Raya (Public Works Department) Sarawak as an Executive Engineer in 1976 supervising government building projects. In 1982, he was transferred to Sarawak Land Custody and Development Authority (“LCDA”) as a Civil Engineer involved in the planning and design of urban development projects. In 1994, he joined the private sector where he was involved in the management and administration of commercial and housing projects. In 1993, he was awarded the ‘Pingat Perkhidmatan Bakti’ by the Sarawak Government.

Details of any board committee to which he belongs

: None

Other directorships in public companies

: None

Securities holdings in the Company and its subsidiaries

:

Name Zecon Berhad

Relationship with directors

: None

Relationship with substantial shareholders

: None

Conflict of interest

: None

Direct No. of shares 250,000

% 0.21

Indirect No. of shares % -

-

List of convictions for offences within the past 10 years : None other than traffic offences No. of board meetings attended in the financial year

: 5/5

Ir. Haji Abg Azahari bin Abg Osman Age

: 47

Nationality

: Malaysian

Qualification

: • Bachelor Degree of Science in Civil Engineering from the University of Iowa, USA in 1985. • Member of Institution of Engineers, Malaysia. • Professional Engineer, Board of Engineers Malaysia.

Position held

: Executive Director

Working experience & occupation

: Haji Abg Azahari was appointed to the Board of Directors of the Company on 08 March 2004. He began his career by joining Jabatan Kerja Raya (JKR) in 1985 He served JKR in Kuching, Sarikei and Sibu Divisions prior to joining PPES Works (Sarawak) Sdn Bhd, a subsidiary of Cahaya Mata Sarawak Berhad (CMS). He held several senior positions within the CMS Group. He was appoint the General Manager of the Company in June 2002.

Details of any board committee to which he belongs : Member of Risk Management Committee Other directorships in public companies

: None

Securities holdings in the Company and its subsidiaries

: None

Relationship with directors

: None

Relationship with substantial shareholders

: None

Conflict of interest

: None

List of convictions for offences within the past 10 years other than traffic offences

: None

No. of board meetings attended in the financial year : 3/5

18

Zecon Berhad annual report 2008

Profile Of Directors Jamil bin Jamaludin Age

: 48

Nationality

: Malaysian

Qualification

: • Advanced Diploma in Accountancy from Universiti Teknologi MARA. • Member of the Malaysian Institute of Accountant.

Position held

: Executive Director

Working experience & occupation

: Jamil was appointed to the Board of Directors of the Company on 08 May 2001. He was the Senior Manager with Land Custody and Development Authority, Sarawak. Prior to this, he has worked in Jabatan Audit Negara, Sarawak Economic Development Corporation and Hamden & Kiu dan Rakan-Rakan as an Accountant.

Details of any board committee to which he belongs

: Member of Risk Management Committee

Other directorships in public companies

: None

Securities holdings in the Company and its subsidiaries

: None

Relationship with directors

: None

Relationship with substantial shareholders

: None

Conflict of interest

: None

List of convictions for offences within the past 10 years : None other than traffic offences No. of board meetings attended in the financial year

: 5/5

Haji Saini bin Haji Ali Age

: 48

Nationality

: Malaysian

Qualification

: • Bachelor of Science in Civil Engineering, Loughborough University of Technology, England in 1984. • Master in Business Administration (with distinction) from the Warwick University, England in 1998.

Position held

: Executive Director

Working experience & occupation

: Haji Saini was appointed to the Board of Directors of the Company on 01 June 2008. He began his career as a Civil Engineer with the Sarawak Housing and Development Commission (“SHDC”) in 1983, supervising various government housing projects. Saini held several senior positions in SHDC and was made the acting Chief Executive Officer prior to his retirement from SHDC in 2002. Subsequently, he joined Zecon Berhad (“Zecon”) as a General Manager in 2003. In recognition of his service, Encik Saini was awarded the Ahli Mangku Negara (AMN) by the Federal Government in 1996. In the same year, he also received the Pingat Perkhidmatan Bakti (PPB) from the State Government.



Details of any board committee to which he belongs : Member of Risk Management Committee Other directorships in public companies

: None

Securities holdings in the Company and its subsidiaries

: None

Relationship with directors

: None

Relationship with substantial shareholders

: None

Conflict of interest

: None

List of convictions for offences within the past 10 years other than traffic offences

: None

No. of board meetings attended in the financial year : 2/3

19

Profile Of Directors Ir. Ng Weng Fatt Age

: 48

Nationality

: Malaysian

Qualification

: • Graduated as a Civil/Structural Engineer from University of Dublin , Ireland in 1983. • A registered Professional Engineer (Malaysia) and a corporate Member of the Institution of Engineers, Malaysia since 1990.

Position held

: Executive Director

Working experience & occupation

: Ng Weng Fatt was appointed to the Board of Directors of the Company on 02 March 2009. He has 25 years of consultant and construction experience. He started his career with a local consulting engineers environment mainly involved in designing civil works for highway and bridges in 1984. As a consultant he also supervised the construction of 2 packages of the North South Highway and one Jabatan Kerja Raya Federal Road project in Kuala Lumpur. In 1995, he joined an established main board construction firm specialised in heavy civil engineering works. He was involved in the construction of and completion of an underground station for the LRT-2 system in Kuala Lumpur. He also coordinated and assisted in the launching of the first Tunnel Boring Machine in KL for the LRT-2 underground system. He later became the deputy head of operation covering a wide scope of work in the construction organisation i.e. projcect development, contract/legal, quality management and risk management. He also oversees the construction of a highway project in India where he is a member of the executive committee for the JV consortium.

Details of any board committee to which he belongs

: None

Other directorships in public companies

: None

Securities holdings in the Company and its subsidiaries

: None

Relationship with directors

: None

Relationship with substantial shareholders

: None

Conflict of interest

: None

List of convictions for offences within the past 10 years : None other than traffic offences No. of board meetings attended in the financial year

20

: None

Zecon Berhad annual report 2008

Corporate Governance

All Zecon Group’s 2,000 acres of land banks are situated in prime locations within 7.5km from city center

Proposed Petra Indah Development Project (Artist Impression)

Corporate Governance Statement

22

Statement of Directors’ Responsibility

25

Statement on Internal Control

26

Audit Committee Report

27

Additional Compliance Information

30

21

Corporate Governance Statement The Board of Directors of Zecon Berhad (“Board”) recognises the importance of good corporate governance as crucial to maintain the continued growth and success of the Group. As such the Board is committed in ensuring that Corporate Governance is observed and practised by the Company with the ultimate objective of maximising shareholder and stakeholder value.The Board is pleased to demonstrate as below on how the Company has applied the principles as set out in the Malaysian Code on Corporate Governance (“Code”).

22

1.

THE BOARD OF DIRECTORS



a)

Composition of the Board



The Board comprises of Fourteen (14) members, of which seven (7) are Executive Directors and seven (7) Non-Executive Directors who are also the Independent Directors. The profiles of the Directors are set out on page 13 to 20 of this Annual Report.



There is a clear division of duties between the Chairman and the Group Managing Director/Chief Executive Officer. The Chairman is mainly responsible for the orderly conduct and running of the Board while the Group Managing Director/Chief Executive Officer is overseeing the day-to-day operations of the Group and implementation of Board Policies and decisions with the support of Deputy Managing Director and the Executive Directors. The Independent Non-Executive Directors play an important role in providing independent advice, judgement, ensuring an impartial Board decision making process as well as safeguarding the interests of other parties such as the minority shareholders.



The Independent Non-Executive Directors are independent of management and free of any relationship which could materially interfere with the exercise of their independent judgement. No individual or group of individuals dominates the Board’s decision making. The wide mix of professional skills, management experience, financial and public service background of the Board members have resulted in an effective Board accordingly. A Senior Independent Director, Datu Dr. Hatta bin Solhi has been identified as the one to whom concerns may be conveyed.



Appointment and Re-election

b)



The identification and appointment of new Directors undergo a process led by the Remuneration & Nomination Committee (“RNC”). Thereafter upon approval by the Board, the Company provides an induction programme for the new Directors to allow them to understand the business and ultimately to enable them to contribute effectively at Board meetings.The Board will ensure that all newly appointed Directors to undergo the Mandatory Accreditation Programme (“MAP”) as required under the Listing Requirements (“LR”) of Bursa Malaysia Securities Berhad (“Bursa Securities”) within four (4) months after their appointments.



In accordance with the LR and the Articles of Association of the Company, all Directors seek re-election at least once every three years. The newly appointed Directors shall hold office only until the next Annual General Meeting and shall be eligible for reelection.



Board Meetings

c)



The Board Meetings are held at quarterly interval with additional meetings held as and when necessary. For the current financial year ended 31 December 2008 (“FY under review”), the Board had met five (5) times. All Directors had complied with the minimum 50% of attendance requirement in respect of Board Meeting as stipulated in the LR.



The attendance record of each Director for the FY under review is as follows:-



Name of Director



Datu Dr. Hatta bin Solhi Datuk Haji Yusof @ Josree bin Haji Yacob (@) Datuk Haji Zainal Abidin bin Haji Ahmad Poh Lik Gan @ Poh Lik Thong Dato’ Dr. Mohd Yahya bin Nordin Dato’ Haji Hamzah bin Haji Ghazalli Richard Kiew Jiat Fong (#) Dato’ Abdul Majit bin Ahmad Khan Haji Zainurin bin Haji Ahmad Ir. Hui Kok Yuan Ir. Haji Abg Azahari bin Abg Osman Jamil bin Jamaludin Haji Saini bin Haji Ali (#) Ir. Ng Weng Fatt (*)

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14.

Attendance

% of Attendance

5/5 2/3 4/5 5/5 4/5 5/5 3/3 4/5 4/5 5/5 3/5 5/5 2/3 -

100 67 80 100 80 100 100 80 80 100 60 100 67 -

Zecon Berhad annual report 2008

Corporate Governance Statement

Notes: (@) Appointed on 09.06.2008 (#) Appointed on 01.06.2008 (*) Appointed on 02.03.2009



Directors’ Training

d)



All Directors inclusive of the newly appointed Directors have attended the MAP in accordance with the LR.



During the FY under review, the type of training attended by the Directors were as follows:-



i) ii) iii) iv) v) vi)



Dato’ Dr. Mohd Yahya bin Nordin was unable to attend any training during the year due to his heavy work commitment.



The Directors will continue to undergo other relevant training programmes in order to equip themselves in the corporate regulatory developments as well as current developments of the industry.



e)

Managing Strategic Corporate Planning; Effective Chairmanship; The Art of Living (Managing and Mitigating Stress); Enhancing Team Success; National Tax Conference 2008; and 2009 Budget Seminar

Supply of information



The Secretaries will ensure that notices, agendas and board papers of each meeting are distributed to the directors in a timely manner prior to Board Meetings and on an ongoing basis to enable the Directors to peruse, consider, obtain additional information and seek further clarification when necessary. There is a list of matters, which are reserved specifically for Board’s consideration and these include strategic plans and budgets for the Group, and business development issues. Material acquisitions and disposals of assets, and potential investments by the Group are also considered extensively at Board level.



Senior Management Officers may be invited to attend Board Meetings or Committee Meetings when necessary to furnish the Board with explanations and clarifications on the matters tabled at the meetings.



All Directors have full access to the advice and services of the Company Secretaries and Senior Management. The Directors may obtain independent professional advice in the furtherance of their duties at the Company’s expense, if necessary.



The Directors will be updated by the Company Secretaries on new statutory requirements relating to their duties and responsibilities. The Board will ensure that the Company Secretary attend all Board Meetings.



Directors’ Remuneration

f)



The Company recognises the need to ensure that remuneration of Directors are appreciable and reflective of the responsibility and commitment that goes with Board membership. The Company has therefore adopted a remuneration structure that attempts to retain and attract the right Executive Directors needed to run the Company successfully. The remuneration of the Executive Directors is reviewed annually by the RNC and recommended for Board’s approval. The Executive Directors play no part in determining their own remuneration package.



In the case of Non-Executive Directors, their remuneration package is decided by the Board as a whole, individual Director do not participate in the discussion and decision of their own remuneration. The Company has provided an appropriate remuneration which reflects the experience and level of responsibilities undertaken by each Non-Executive Director.



Contrary to the best practice as outlined in the Code, the Board does not wish to disclose the details of remuneration of each Directors, however in line with the LR, the aggregate remuneration of the Directors are disclosed on page 68 of the Directors’ Report to the Financial Statements.

2.

BOARD COMMITTEES



The Board delegates specific duties and responsibilities to the respective Committees of the Board namely, Audit Committee (“AC”), RNC and Risk Management Committee (“RMC”) in order to augment the business and corporate efficiency.

23

Corporate Governance Statement

The Chairman of the relevant Board Committee will report to the Board on the key issues deliberated by the Board Committee at its Board Meeting and the minutes of the AC will also be presented to the Board for information.



a)





b)

The primary aims on the establishment of the AC are to assist the Board in fulfilling its responsibilities relating to accounting and reporting practices of the Group and to monitor the work of the Internal Audit Function. Further details on the AC are set out in the AC Report on pages 27 to 29 of this Annual Report. Remuneration & Nomination Committee



The RNC which was set up on 24 May 2001 comprising of three (3) members, all of them are Independent Non-Executive Directors. The RNC has been delegated with the following duties and responsibilities:-





•





•





•





• •



24

Audit Committee

c)

Recommend candidates for appointment to the Board and Board Committees and recommend to the Board for decision and approval; Determine the remuneration packages of the Executive Directors and to ensure that their remuneration commensurate with their experience and performance; Review the composition of the Board and experiences and mix of skills of the directors and also to ensure that there is balance between executive, non-executive, and independent directors; Assess annually the effectiveness of the Board as a whole; and Evaluate the terms and conditions of the service contract of the Executive Directors, and recommend to the Board for approval on the extension of service contract of the Executive Directors, if necessary.

The RNC meets as and when need arises. For the FY under review, the RNC had met three (3) times with all members attended. Risk Management Committee



The RMC was set up on 24 May 2003. The members comprising of Deputy Managing Director as Chairman, three (3) Executive Directors and two (2) Heads of Division. The RMC reports its activities and findings to the AC who in turn submit its comments on the findings to the Board. The RMC is delegated with the following specific tasks:-



i)

Establish and maintain the risk management framework within the Group;



ii)

Assess and evaluate the risk management process on a periodic basis;



iii) Set the risk appetite of the Group; and



iv) Monitor and implement action plans to mitigate high risk areas within the Group



The RMC also design the Project Management’s Risks checklists which are used by subsidiary companies for the implementation of major projects. The General Manager of Internal Audit is the Secretary of the RMC and also the Administrator of the risk management software, RMSolution which are used to capture all the risk component, risk details, risk assessment, gross risk, net risk, management action plans, etc.

3.

SHAREHOLDER AND INVESTOR RELATIONS



The Company maintains a regular policy of disseminating information that is material for shareholders attention. In line with the regulatory requirements, various announcements, including quarterly financial results were made during the year via the Bursa Link, thus provide the shareholders and the investing public with an overview of the Group’s performance and operations.



The Company has established a website (www.zecon.com.my) which shareholders and members of the public can access to the corporate information and updates relating to the Company and for channelling their queries.



At the Annual General Meeting, the Directors welcome the opportunity to gather the views of shareholders. Notices of each general meeting are issued in a timely manner to all shareholders, and in the case of special businesses, a statement explaining the effect of the proposed resolutions is provided. All Directors are available to respond to questions from shareholders during the meeting. The external auditors are also present to provide professional and independent clarifications on issues and concerns raised by the shareholders.



Our Corporate Division Personnel will provide ongoing updates on the significant developments or activities of the Group with research/financial analysts, investors and institutional shareholders. The same presentation will also be made available to the media to capture a wider readership. However, discretion was exercised during these sessions to ensure sensitive information is not disclosed before the required announcement was released to Bursa Securities.

Zecon Berhad annual report 2008

Corporate Governance Statement 4.

ACCOUNTABILITY AND AUDIT



In an attempt to produce a balanced and understandable assessment of the Company’s position and prospects, particularly in the financial reports, the Directors have implemented a quality control procedure to ensure that all financial reports have been prepared based on acceptable accounting standards and policies. These financial reports also undergo a review process by the AC prior to approval by the Board.



The Board understands that in order to strengthen the accountability aspect of financial reporting, the Company needs to maintain a sound system of internal control to safeguard shareholders’ investment and the Company’s assets. Hence the Company has developed a comprehensive system of internal control comprising of clear structures and accountabilities, well-understood policies and procedures and budgeting and review process.



The effectiveness of the system of internal control is then scrutinised by an Internal Auditor, who operates independently from the activities of the Company, under the purview of the AC. Details of the internal audit activities carried out during the year are outlined on pages 27 and 28 of the AC report.



The Board also maintains an appropriate relationship with the Company’s external auditors, through formal and transparent arrangement with the AC. These arrangements are stated on page 28 of the AC report.

5.

COMPLIANCE STATEMENT



The Board is satisfied that for the FY under review, the Group has complied with the best practices of as set out in the code.

This Corporate Governance Statement is made in accordance with the resolution of the Board of Directors dated 28 April 2009.

Statement of Directors’ Responsibility in Respect of the Financial Statements

The Companies Act, 1965 requires the Directors to prepare financial statements for each financial year, which give a true and fair view of the state of the affairs of the Group and the Company at the end of the financial year, and of the profit and cash flows of the Group and the Company for the financial year. In preparing the financial statements, the Directors are also responsible for the adoption of suitable accounting policies and their consistent use in the financial statements, supported where necessary by reasonable and prudent judgements. The Directors hereby confirm that suitable accounting policies have been consistently applied in respect of preparation of the financial statements. The Directors also confirm that the Company maintains adequate accounting records and sufficient internal controls to safeguard the assets of the Group and the Company, and to prevent and detect fraud and other irregularities. These are described more fully on item 4 of this page. This Directors’ Responsibility Statement is made in accordance with resolution of the Board of Directors dated 28 April 2009.

25

Statement on Internal Control This statement of Internal Control by the Board is made pursuant to paragraph 15.27(b) of the Bursa Malaysia Securities Berhad’s Listing Requirements (“LR”) with respect to the Group’s compliance with the principles and the best practices for internal controls as provided in the Malaysian Code of Corporate Governance. This statement had been reviewed by the External Auditors, Ernst & Young as required under paragraph 15.24 of the LR. Internal Control The Board has implemented an internal control system that is designed to identify and manage the risks in meeting the Group’s business objectives. The scope of control covers not only financial controls, but also operational and compliance controls as well as risk management. Due to the inherent limitations in any system of internal control, these systems are designed to manage, rather than eliminate the risks of failure to achieve business objectives. Accordingly, the system can only provide reasonable but not absolute assurance against material misstatements or losses. The key elements of the Group’s internal control system are described as follows:1.

Organisational structure with defined lines of responsibilities, delegation of authorities, segregation of duties and information flow for all aspects of the business. This is clearly documented in internal policies and operation procedures as set out in the Financial Policies and Procedures Manual. The manual is reviewed and updated by the management regularly.

2.

The implementation of risk management framework and risk checklist specifically for projects and the regular reviews by Risk Management Committee (“RMC”) enhance and also strengthen the internal controls in respect to the business operations of the Group.

3.

Regular audits to ensure compliance with all requirements of ISO9001:2000. The ISO 9001 certification serves as a quality assurance approach where customers are assured of continuous delivery of the highest quality of products and services provided by the Group.

4.

Independent appraisals by internal auditors to ensure ongoing compliance with policies, procedures, standards and legislations whilst assessing the effectiveness of the Group’s system of financial, compliance and operational controls.

5.

Policies and procedures on related party transactions (RPT) had been put in place and a review of RPT has been a permanent agenda in the Audit Committee (“AC”) Meetings.

Risk Management Framework The Group has in place an ongoing process for identifying, evaluating, monitoring and managing the significant risks affecting the achievement of its business objectives. This is a continuous process, subject to regular review, evaluating and managing the significant risks by the RMC. The role of the RMC, comprising of Executive Directors and Head of Departments would include periodic reviews and reporting on the status of risk mitigation actions, new risks identified and risks that have changed characteristics and corresponding controls. On a half yearly basis, a consolidated risk management report summarising the significant risks and status of action plans of the respective divisions are presented to the AC for review, deliberation and recommendation for endorsement by the Board. Internal Audit The Internal Audit Division (“IAD”) of the Group carries out its functions independently and provides the AC and the Board with sufficient assurance of the adequacy and integrity of the internal controls system. On a quarterly basis, the IAD submits audit reports and plans status for review by the AC. Included in the reports are recommended corrective measures to address weaknesses in the internal controls. The IAD has been adequately resourced with experienced personnel. This statement does not include the state of internal controls in joint ventures and associated companies, which have not been dealt with as part of the Group. The Board is of the opinion that the current system of internal controls in place throughout the Group is sufficient to safeguard the Group’s interest and is pleased to report that no major findings were discovered to indicate weaknesses in the internal controls.

26

Zecon Berhad annual report 2008

Report of Audit Committee The Audit Committee of Zecon Berhad is pleased to present its Audit Committee (“AC” or “Committee”) Report (“Report”) for the year ended 31 December 2008. The Board has approved this Report via its circular resolution dated 28 April 2009. 1.

Composition and Meeting Attendance



In line with the Corporate Governance Code, all four (4) members of the AC are independent and Non-Executive Directors. Mr. Richard Kiew Jiat Fong (AC member) besides being a Member of the Malaysian Institute of accountant is also a Fellow Member of the following:-



i. ii. iii.



In this respect, Zecon Berhad is in compliance with paragraph 15.10(1) of the Bursa Malaysia Securities Berhad’s Listing Requirement (“LR”).



During the year, the AC held five (5) meetings. Committee members’ attendances at the meetings are as follows:-

The Institute of Chartered Accountants in England and Wales; The Association of Chartered Certified Accountants, United kingdom; and The Institute of Certified Public Accountants of Singapore.

Committee Members

Designation

Meetings Attendance Year 2008

Total

Feb. 18

Apr. 15

May 22

Aug. 11

Nov. 21

√

√

√

5/5

Poh Lik Gan

Chairman Independent Director

√

√

Datu Dr. Hatta Bin Solhi

Independent Director

√

√

√

√

√

5/5

Jamil Bin Jamaludin (Resigned on 1/6/2008)

Executive Director

√

√

Absent

-

-

2/3

Dato’ Dr. Mohd Yahya Bin Nordin

Independent Director

Absent

√

√

√

√

4/5

Richard Kiew Jiat Fong (Appointed w.e.f 1/6/2008)

Independent Director

-

-

-

√

√

2/2

2.

Activities during the year



In line with the terms of reference of the Committee, the following activities were carried out:-

(i) External Audit

‹ ‹ ‹ ‹

Review the scope of work and audit plan for the year. Review the results of the audit, the audited financial statements and the management letter. Attending to concerns raised by the auditor without the presence of the Executive Director Recommend for the Board’s consideration the appointment of external auditors and the audit fees

(ii) Internal Audit

‹ ‹

Review and approve the scope of work and audit plans for the year Review the internal audit reports and discussed on the management’s action taken to improve the system of internal control and any outstanding matters.



(iii) Financial Statements

‹

Review the quarterly unaudited financial results, year end audited financial statements and recommend to the Board for consideration and approval.



(iv) Related party transaction

‹

Review the related party transactions entered into by Zecon Group of Companies.



(v) Risk Management

‹

Monitor the progress of risk management framework of Zecon Group of Companies.

3.

Activities of the Internal Audit Division



The Internal Audit Division was established on 1 April 2002 and it reports directly to the AC.



For the year 2008, the activities of the internal audit are as follows:-



(i) Preparation of Audit Planning Memorandum and the Internal Audit Plan for the year. (ii) Secretary to Risk Management Committee of Zecon Berhad and also Zecon Water Corporation Sdn Bhd.

27

Report of Audit Committee



(iii) Secretary to AC. (iv) Conduct internal audit assignments as per Internal Audit Plan and special audit assignments on an ad-hoc basis based on the requests of the Senior Management. (v) The General Manager for Internal Audit is also the Quality Management Representative (QMR) responsible in managing the Quality Management System (ISO). (vi) Preparation of AC Report and Statement of Internal Controls for the Company’s Annual Report 2008.

4.

Terms of Reference



(i)



Composition



a. The Committee shall be appointed by the Board and shall consist of not less than three (3) members;



b. All the AC members must be non-executive directors and with a majority of them being independent directors;



c. An alternate Director shall not be appointed as a member of the Committee;



d. At least one member of the AC must be a member of the Malaysian Institute of Accountant; or if he is not a member of the Malaysian Institute of Accountants, he must have at least three (3) years’ working experience and:-



i.

he must have passed the examinations specified in Part 1 of the 1st Schedule of the Accountants Act 1967; or



ii.

he must be a member of one (1) of the Associations of Accountants specified in Part II of the 1st Schedule of the Accountants Act 1967.



e. The members of the Committee shall elect a Chairman from amongst their number who shall be an independent Director.



f. If the number of members of the Committee is reduced below three (3), the Board shall within three (3) months appoint such number of new members as may be required to make up the minimum of three (3) members.



(ii) Authority



The Committee shall, in accordance with a procedure to be determined by the Board and at the cost of the Company:-



a.

have the authority to investigate any matter within its terms of reference;



b.

have the resources which are required to perform its duties;



c.

have full and unrestricted access to any information pertaining to the Company;



d.

have direct communication channels with both the external and internal auditors;



e.

be able to obtain independent professional opinion or other advice; and



f.

be able to convene meetings with the external auditors, excluding the attendance of the executive members of the Board, whenever deemed necessary.



(iii) Duties The duties and scope of the Committee shall be to review the following and report the same to the Board;-

a.

28

with the external auditors: (i) the scope of their audit plan; (ii) their evaluation of the system of internal control; (iii) the audit reports on the financial statements; (iv) the assistance given by the Company’s employees to the external auditor; (v) any letter of resignation from the external auditors; and (vi) nomination of the external auditors and the determination of audit fees.

Zecon Berhad annual report 2008

Report of Audit Committee

b.

the effectiveness of the internal control systems including the internal audit programmes, process, results of internal audit programmes, processes or investigation undertaken and whether or not appropriate actions have been taken on recommendations of internal audit functions.



c.



the quarterly results and year end financial statements of the Company and the Group, prior to submission to the Board for approval, focusing particularly on:(i) changes in or implementation of accounting policy; (ii) significant and unusual event; and (iii) compliance with accounting standards and other legal requirements.



d.

any related party transactions and conflict of interest situation that may arise within the Company or Group.



e.

verify the allocation of options to employees under the relevant criteria decided by the Option Committee.



f.

any other functions as may be agreed by the Committee and the Board or as may be required or empowered by statutory legislation or guidelines issued by the relevant governing authorities.



Where the Committee is of the view that any matter reported to the Board has not been satisfactorily resolved resulting in breach of the LR, the Committee must promptly report such matter to BMSB.



The Committee members’ term of office and performance are subject to review by the Board every three (3) years to determine whether the Committee has carried out their duties in accordance with the Terms of Reference.



(iv) Frequency and Attendance



The Committee shall hold at least four (4) regular meetings a year and such additional meetings as the Chairman shall decide in order to fulfill its duties. The Committee at its discretion, may invite any person to its AC meeting.



A quorum for the Committee shall be two (2) members and majority of members present must be independent directors.



The General Manager for Internal Audit shall be the Secretary to the AC.



The Chairman shall table any material issues raised in the AC meeting at the subsequent Board Meeting of the Company.

29

Additional Compliance Information 1.

Share Buy-backs



The Company did not enter into any share buy-back transaction during the financial year 2008.

2.

Options, Warrants or Convertible Securities



There were no options, warrants or convertible securities issued during the financial year 2008.

3.

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



The Company did not sponsor any ADR or GDR programme during the financial year 2008.

4.

Imposition of Sanctions or Penalties



There were no material sanctions or penalties imposed by the relevant regulatory bodies on the Company or its subsidiaries, directors or management during the financial year 2008.

5.

Non-Audit Fees



The was no non-audit fees paid by the Company to the External Auditors, Messrs. Ernst & Young for the financial year ended 31 December 2008.

6.

Variation in results



The variance between the unaudited results previously announced and the audited results for the financial year ended 31 December 2008 are as follows:Unaudited results (RM’000) 1,008 (411) 597

Profit For The Year Minority Interest Net Profit For The Year After Minority Interest

Audited results (RM’000) 1,010 (1) 1,009



The deviation in the Group’s Net Profit After Minority Interest for the year ended 31 December 2008 arose from the difference in minority interest amount as reported by the Group’s Auditor.

7.

Profit Guarantee



There were no transactions that require profit guarantee during the financial year ended 31 December 2008.

8.

Material Contracts



There were no material contracts of the Company and its subsidiaries involving directors and substantial shareholders either still subsisting at the end of the financial year 2008 or entered into since the end of previous financial year.

9.

Revaluation Policy on Landed Properties



There was no revaluation carried out on the landed properties of the Company and its subsidiaries during the financial year 2008.

10. Recurrent Related Party Transactions of a Revenue or Trading Nature (“RRPT”)

The Company had on 09 June 2008 obtained a Mandate from its shareholders to carry out the Recurrent Related Party Transactions of a revenue or trading nature.



For the financial year ended 31 December 2008, the Company and its subsidiaries had entered into the following RRPT: Provider

Nature of Transaction

Recipient

1 Al-Quds Travel (Sarawak) Sdn Bhd

Travel agency services

Zecon Berhad

2 SCIB Concrete Manaufacturing Sdn Bhd

Purchase of Roofing Tile

Zecon Land Sdn Bhd

3 SCIB Concrete Manaufacturing Sdn Bhd

Purchase of Culvert

Zecon Dredging Sdn Bhd

Total

30

Amount (RM)

%

Name of Connected Person

12,272

0.007

Datuk Haji Zainal Abidin Bin Haji Ahmad & Haji Zainurin bin Haji Ahmad

6,981

0.004

Datuk Haji Zainal Abidin Bin Haji Ahmad

711,720

0.411

Datuk Haji Zainal Abidin Bin Haji Ahmad

730,973

0.423

Zecon Berhad’s Corporate Social Responsibility Reporting 2008

Mohd Azlan Iskandar World’s No12 squash player Under Zecon’s sponsorship since 2003 31

Zecon Berhad’s Corporate Social Responsibility Reporting 2008 Zecon Group’s 2nd Report on Corporate Social Responsibility (CSR) This is the second year which we report on Zecon Group lever CSR. Last year we disclosed our CSR Definition, Objectives, Initiatives, Monitoring and Reporting. The activities in 2008 mainly focused on integrating our CSR work and to promote and involve our people in the entire organisation. This CSR Report offers an overview of the responsible business practice and social commitment which we hope in a long run will lift our brand value and recognition for our business and our society. Zecon CSR 2008 focus on people in the organization, not only should the organisation be responsible to the public, the community and the environment of its operations, it should also be responsible to its employees, to ensure that they are being treated fairly and just, and that they have access to their basic need and protect them from any hazardous conditions at all time.

Activities 2008 saw Zecon’s CSR continued to be under monitoring from top management, most CSR Initiatives were achieved except for the Trees Planting event which was being postponed. As Charity Begins At Home, it is vital to ensure that our people are fully aware of the importance of environmental issues like recycling and saving energy, understand our CSR Objectives and Policies. Our emphasis for the 12 months under review has been to cultivate the knowledge into habit with practice which will be implemented through our Zecon Green Initiatives programme which aimed to transform our people into environmental ambassadors so that they can bring positive influence and greater awareness to all those they encountered in their respective line of duties. The Group also maintains its ambition in academic field with the 2 main excellence awards and scholarship to University of Sarawak Malaysia (UNIMAS) and Curtin University of Technology. In sport, Zecon continued what it had accomplished since 2003 with the signing of the extension of corporate sponsorship with Mohd Azlan Iskandar for another year. The new extension continues to provide performance incentive bonuses based on tournament wins which is much needed for Azlan to stay competitive by participating in as many tournaments as possible. The welfare and safety of our employees is one of the key elements in the Zecon’s CSR definition. In October, Menara Zecon which houses Zecon Berhad Corporate Head Office is located, was declared a Smoke-Free Building. Smoking is strictly prohibited inside the entire building. The move, besides to support the Government’s effort to eradicate smoking among Malaysians, also aimed to make our work place healthier for our people. Zecon Green Initiatives program has also been approved by the Board and will be kickoff in the 2nd Quarter of 2009. This program will give Zecon Group employees of all ranks opportunity to transform environmental knowledge and theories into real actions including but not limited to activities like 3 Rs (Reduce, Reuse & Recycle) practice; “Say No To Plastic Bags” campaign; and, Energy-Saving exercise. Zecon Group always believe that saving the environment of its community and the areas of its business activities must start from within the organization, our people must believe that our actions and effort will bring positive return in a greater scale eventually. With that, it is our priority to improve and to increase the internal knowledge sharing and internal reporting on CSR-related activities.

32

Zecon Berhad’s Corporate Social Responsibility Reporting 2008

Zecon Berhad annual report 2008

ZECON’S CSR Activities & The Next Step

Activities in 2008

Next Step



UNIMAS Scholarship Programme - Since 2006

Maintain



ZECON BERHAD Excellence Awards for UNIMAS Faculty of Engineering students - Since 2003

Maintain



Maintain



Sponsoring Mohd Azlan Iskandar, Malaysia’s National & World 12th ranked Squash player - Since 2003



Providing Industries Training - Each year Zecon Berhad and its subsidiaries accepted and provide training for students under this program

Maintain



Love-In-The-Box Community Event - Zecon Group’s staff of all ranks contributed gifts for underprivileged children in this yearly event.

Maintain

Social



Adopting a school in our local community by year 2009



On going

Zecon Berhad Group-Level Environmental Policies

Environment

Resume Tree Planting event in association with non governmental/profit organization in 2009



Incorporating CSR into the Code of Conducts, including non-discriminatory policies

On going

Workplace

No Smoking Workplace

Maintain



Conducting Group-Level Employees Survey & Dialog

33

Zecon Berhad’s Corporate Social Responsibility Framework

ZECON’S CSR Definition ZECON’s CSR is a commitment involving a series of voluntary initiatives which will benefit the local society, environment and workplace where our organization operates. ZECON’S CSR forms an integral part of our organization’s business processes and corporate strategies; it goes beyond charity, corporate press coverage and simply compliance of law. ZECON’S CSR involves stakeholders and the commitment of the entire organisation’s workforce. ZECON’S CSR Objectives • To be an organization trusted by society • To enrich our society and protect the environment in which we operate by carrying out our operations responsibly • To improve our working environment by respecting diversity and human rights, offering equal opportunity and eradicating discrimination, all for improving the integrity of our workforce • In a long run, to achieve brand recognition and tangible financial value (profitability and investment potential) through a successfully implemented CSR Programme ZECON CSR Initiatives • Offering scholarship for University of Malaysia Sarawak (UNIMAS) and/or local universities needy achievers • Providing academic excellence awards to encourage top achievers of UNIMAS and/or local universities, especially those from the Faculty of Engineering • Sponsoring our CSR Icon, Mohd Azlan Iskandar, national and world top 12 ranked squash player, in pursuing his ambition • Continuing to provide Workplace training for local universities students under Industries Training Programme • Adopting local school by the year 2009 • Maintaining our Tree Planting event as part of our overall green campaign • Sponsoring Post Graduates of local universities to enter into Research & Development for greener solution for Contractors and Developers in reducing their environmental footprints ZECON’S CSR Monitoring and Reporting • CSR manager to monitor and document CSR activities and development systematically • To produce annual CSR Report for the review and adoption of Zecon Berhad’s Board of Directors • To disclose CSR Statement, activities and prospects in the Annual Report

We would welcome suggestions for further improvement of Zecon Group’s CSR disclosure. [email protected]

34

Directors’ Report & Audited Financial Statements

University Malaysia Sarawak new campus

Directors’ Report

36

Statement by Directors and Statutory Declaration

41

Report of the Auditors

42

Income Statements

43

Balance Sheets

44

Consolidated Statement of Changes in Equity

45

Company Statement of Changes in Equity

47

Consolidated Cash Flow Statement

48

Company Cash Flow Statement

50

Notes to the Financial Statements

52

35

Directors’ Report The directors have pleasure in presenting their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 December 2008. Principal activities The principal activities of the Company are foundation engineering, civil engineering and building contracting works and their related activities. The principal activities of the subsidiaries are set out in Note 17 to the financial statements. There have been no significant changes in the nature of the principal activities of the Group and of the Company during the financial year. Results Profit/(loss) for the year Attributable to: Equity holders of the Company Minority interests

Group RM

Company RM

1,010,683 ==========

(9,536,733) ==========

1,009,674 1,009 –––––––––––– 1,010,683 ==========

(9,536,733) –––––––––––– (9,536,733) ==========

There were no material transfers to or from reserves or provisions during the financial year other than those disclosed in the financial statement. In the opinion of the directors, 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. Directors The names of the directors of the Company in office since the date of the last report and at the date of this report are: Datu Dr. Hatta Bin Solhi Datuk Haji Yusof @ Josree Bin Haji Yacob Datuk Haji Zainal Abidin Bin Haji Ahmad Haji Zainurin Bin Haji Ahmad Poh Lik Gan @ Poh Li Thong Dato’ Dr. Mohd. Yahya Bin Nordin Dato’ Haji Hamzah Bin Haji Ghazalli Dato’ Abdul Majit Bin Ahmad Khan Ir. Hui Kok Yuan Ir. Haji Abg. Azahari Bin Abg. Osman Jamil Bin Jamaludin Richard Kiew Jiat Fong Haji Saini Bin Haji Ali Ir. Ng Weng Fatt

(Appointed on 9 June 2008)

(Appointed on 1 June 2008) (Appointed on 1 June 2008) (Appointed on 2 March 2009)

Directors’ benefits Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement to which the Company was a party, whereby the directors might acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate, other than those arising from the share options granted under the Employees’ Share Option Scheme. Since the end of the previous financial year, no director has received or become entitled to receive any benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by the directors as shown in Note 9 to the financial statements or the fixed salary of a full-time employee of the Company) by reason of a contract made by the Company or a related corporation with any director or with a firm of which he is a member, or with a company in which he has a substantial financial interest, except as disclosed in Note 37 to the financial statements.

36

Zecon Berhad annual report 2008

Directors’ Report Remuneration and Nomination Committee The Remuneration and Nomination Committee carries out the annual review of the Group’s remuneration policy in general, and determines the remuneration packages of Executive Directors of the Company. The Remuneration and Nomination Committee proposes, subject to the approval of the Board of Directors of the Company, the remuneration to be paid to each Director for his services as a Member of the Board as well as committees of the Board. The members of the Remuneration and Nomination Committee comprising the independent Non-Executive Directors of the Company who have served since the date of the last report are: Datu Dr. Hatta Bin Solhi Poh Lik Gan @ Poh Li Thong Dato’ Dr. Mohd. Yahya Bin Nordin

Chairman

Directors’ interests According to register of directors’ shareholdings, the interests of directors in office at the end of the financial year in shares and options over shares in the Company and its related corporations during the financial year were as follows:

Number of Ordinary Shares of RM1 Each Exercise At of 1.1.2008 Acquired Options Sold

At 31.12.2008

The Company Direct interest Datu Dr. Hatta Bin Solhi Datuk Haji Zainal Abidin Bin Haji Ahmad Poh Lik Gan @ Poh Li Thong Haji Zainurin Bin Haji Ahmad Hui Kok Yuan Jamil Bin Jamaludin Richard Kiew Jiat Fong

20,000

-

-

-

20,000

7,413,000 40,000 525,000 250,000 40,000 -

1,691,700 - - - - 63,000

- - - - - -

(5,449,500 ) - - - (40,000 ) -

3,655,200 40,000 525,000 250,000 63,000

37,093,300

28,740,175

-

(144,000 )

65,689,475

The Company Indirect interest Datuk Haji Zainal Abidin Bin Haji Ahmad



Number of Ordinary Shares of RM1 Each Exercise At of 1.1.2008 Acquired Options Sold

At 31.12.2008

Dawla Capital Sdn. Bhd. Datuk Hj. Zainal Abidin Bin Hj. Ahmad - direct interest

250,000

-

-

-

250,000

37

Directors’ Report Directors’ interests (contd.) Related company

Number of Ordinary Shares of RM1 Each Exercise At of 1.1.2008 Acquired Options Sold

At 31.12.2008

Halifax Capital Berhad Datuk Haji Zainal Abidin Bin Haji Ahmad - direct interest

2,515,200

-

-

-

2,515,200

Number of Ordinary Shares of RM1 Each At 1.1.2008 and 31.12.2008

Teknik PS Sdn. Bhd. Datuk Haji Zainal Abidin Bin Haji Ahmad - direct interest

34,000

Zecon Construction Sdn. Bhd. Datuk Haji Zainal Abidin Bin Haji Ahmad - direct interest

49

Sarmax Sdn. Bhd. Datuk Haji Zainal Abidin Bin Haji Ahmad - direct interest The Company Datuk Haji Zainal Abidin Bin Haji Ahmad Haji Zainurin Bin Haji Ahmad Hui Kok Yuan Haji Abg. Azahari Bin Abg. Osman Jamil Bin Jamaludin

30,000 Number of Ordinary Shares of RM1 Each Exercise Price At RM 1.1.2008 Granted Exercised

At 31.12.2008

1.16 1.16 1.16

550,000 395,300 262,500

- - -

- - -

550,000 395,300 262,500

1.16 1.16

175,000 140,000

- -

- -

175,000 140,000

There were no other movements in shares and options of the Company or its related corporations during the financial year other than as disclosed. Datuk Haji Zainal Abidin Bin Haji Ahmad, by virtue of his interest in the Company, is also deemed interested in shares of all the Company’s subsidiaries to the extent the Company has an interest. None of the other directors in office at the end of the financial year had an interest in shares and options in the Company or its related corporations during the financial year.

38

Zecon Berhad annual report 2008

Directors’ Report Employees’ share option scheme The Zecon Berhad Employees’ Share Options Scheme (“ESOS”) is governed by the by-laws approved by the shareholders at an Extraordinary General Meeting held on 15 February 2005. The ESOS was implemented on 22 March 2005 and is to be in force for a period of 5 years from the date of implementation. The salient features and other terms of the ESOS are as follows: (a)

The number of new ordinary shares to be offered under the ESOS shall be subject to a maximum of 15% of the issued and paid-up share capital of the Company at any time during the existence of the ESOS.

(b)

Any employee, including the Executive Directors of the Zecon Berhad group, shall be eligible to participate in the ESOS if: (i)

the employee has been confirmed in service as a full time Executive Director or employee on the date of offer; and

(ii)

where the employee is not a Malaysian citizen, he must be serving the Group on a full time basis or where he is serving under an employment contract, the contract should be for a duration of at least three years; and

(c)

No option shall be granted for less than 100 shares.

(d)

The price payable upon exercise of the options under the ESOS shall be at a discount of not more than 10% from the five market days’ weighted average market price of the Company’s shares immediately preceding the date of offer or at the par value of the shares, whichever is higher.

On 16 October 2007, a total of additional 8,684,800 new ordinary shares of RM1.00 each were issued and granted listing and quotation. Other statutory information (a)

(b)

Before the income statements and balance sheets 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 provision for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate provision had been made for doubtful debts; and

(ii)

to ensure that any current assets which were unlikely to realise their value as shown in the accounting records in the ordinary course of business had been written down to an amount which they might be expected so to realise.

At the date of this report, the directors are not aware of any circumstances which would render: (i)

the amount written off for bad debts or the amount of the provision for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent; and

(ii)

the values attributed to the current assets in the financial statements of the Group and of the Company misleading.

(c)

At the date of this report, the directors are not aware of any circumstances 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.

(d)

At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or financial statements of the Group and of the Company which would render any amount stated in the financial statements misleading.

(e)

As at the date of this report, there does not exist:



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



(ii)

(f )

In the opinion of the directors:

any contingent liability of the Group or of the Company which has arisen since the end of the financial year.

(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 affect the ability of the Group or of the Company to meet their obligations when they fall due; and

(ii)

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 the operations of the Group or of the Company for the financial year in which this report is made.

39

Directors’ Report Significant events Details of significant events are disclosed in Note 39 to the financial statements. Auditors The auditors, Ernst & Young, have expressed their willingness to continue in office. Signed on behalf of the Board in accordance with a resolution of the directors dated 28 April 2009

Datu Dr. Hatta Bin Solhi

40

Datuk Haji Zainal Abidin Bin Haji Ahmad

Zecon Berhad annual report 2008

Statement by Directors pursuant to Section 169(15) of the Companies Act, 1965 We, Datu Dr. Hatta Bin Solhi and Datuk Haji Zainal Abidin Bin Haji Ahmad, being two of the directors of Zecon Berhad, do hereby state that, in the opinion of the directors, the accompanying financial statements set out on pages 43 to 99 are drawn up in accordance with the provisions of the Companies Act, 1965 and Financial Reporting Standards 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 2008 and of the results and the cash flows of the Group and of the Company for the year then ended. Signed on behalf of the Board in accordance with a resolution of the directors dated 28 April 2009

Datu Dr. Hatta Bin Solhi

Datuk Haji Zainal Abidin Bin Haji Ahmad

Statutory Declaration pursuant to Section 169(16) of the Companies Act, 1965 I, Jamil Bin Jamaludin, being the Director primarily responsible for the financial management of Zecon Berhad, do solemnly and sincerely declare that the accompanying financial statements set out on pages 43 to 99 are in my opinion 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 Jamil Bin Jamaludin at Kuching in the State of Sarawak on 28 April 2009

Jamil Bin Jamaludin

Before me,

41

Independent Auditors’ Report to the Members of Zecon Berhad (Incorporated in Malaysia) Report on the financial statements We have audited the financial statements of Zecon Berhad, which comprise the balance sheets as at 31 December 2008 of the Group and of the Company, and the income statements, statements of changes in equity and cash flow statements of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 43 to 99. Directors’ responsibility for the financial statements The directors of the Company are responsible for the preparation and fair presentation of these financial statements in accordance with Financial Reporting Standards and the Companies Act 1965 in Malaysia. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors’ responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements have been properly drawn up in accordance with Financial Reporting Standards and the Companies Act 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2008 and of their financial performance and cash flows for the year then ended. Report on other legal and regulatory requirements In accordance with the requirements of the Companies Act 1965 in Malaysia, we also report the following: (a)

In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries have been properly kept in accordance with the provisions of the Act.

(b)

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

(c)

The auditors’ reports on the accounts of the subsidiaries were not subject to any qualification and did not include any comment required to be made under Section 174(3) of the Act.

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

ERNST & YOUNG AF: 0039 Chartered Accountants Kuching, Malaysia Date: 28 April 2009

42

YONG VOON KAR 1769/04/10 (J/PH) Partner

Zecon Berhad annual report 2008

Income Statements

for the year ended 31 December 2008 Note Revenue

2008 RM

Group

Company

2007 RM

2008 RM

78,561,157

124,126,108

2007 RM

3

157,172,769

Cost of sales 4 Gross profit

(129,073,632 ) –––––––––––––– 28,099,137

(57,308,839 ) (114,902,880 ) –––––––––––––– –––––––––––––– 21,252,318 9,223,228

(36,838,758 ) –––––––––––––– 2,186,342

Other income 5 Administrative expenses Other expenses Operating profit/(loss) Finance costs 6 Share of profit/(loss) of associates Profit/(loss) before taxation 7

12,634,280 (10,465,821 ) (15,879,439 ) –––––––––––––– 14,388,157

20,313,504 8,512,759 (15,585,280 ) (8,430,255 ) (2,234,247 ) (12,562,403 ) –––––––––––––– –––––––––––––– 23,746,295 (3,256,671 )

4,242,683 (9,325,289 ) (1,043,676 ) –––––––––––––– (3,939,940 )

(13,295,070 )

(15,388,452 )

39,025,100

(7,969,637 )

(10,027,205 )

250,374 –––––––––––––– 1,343,461

(1,066,333 ) - –––––––––––––– –––––––––––––– 7,291,510 (11,226,308 )

–––––––––––––– (13,967,145 )

Income tax expense 10 Profit/(loss) for the year

(332,778 ) –––––––––––––– 1,010,683 ============

(3,066,386 ) 1,689,575 –––––––––––––– –––––––––––––– 4,225,124 (9,536,733 ) ============ ============

230,415 –––––––––––––– (13,736,730 ) ============

Attributable to: Equity holders of the Company Minority interests

1,009,674 1,009 –––––––––––––– 1,010,683 ============

4,177,720 47,404 –––––––––––––– 4,225,124 ============

(13,736,730 ) –––––––––––––– (13,736,730 ) ============

Earnings per share (sen): Basic, for profit for the year 11

0.92 ============

3.72 ============

11 Diluted, for profit for the year

0.92 ============

3.74 ============

(9,536,733 ) - –––––––––––––– (9,536,733 ) ============

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

43

Balance Sheets

as at 31 December 2008 Note ASSETS Non-current assets Property, plant and equipment 13 Prepaid land lease payments 14 15(a) Land held for development Intangible assets 16 17 Investment in subsidiaries Investment in associates 18 Investment in jointly controlled entity 19 20 Other investments Deferred tax assets 31 Current assets Development costs 15(b) 21 Inventories Amount due from customers for contract work 22 Trade receivables 23 Other receivables 24 Amount due from related companies 25 Cash and bank balances 26 TOTAL ASSETS

2008 RM

Group

2007 RM

2008 RM

Company

2007 RM

39,050,096 1,195,873 126,311,486 14,838,586 - 779,312 4,861,201 5,216,743 13,024,190 –––––––––––––– 205,277,487 ––––––––––––––

25,729,282 1,222,716 126,311,486 15,367,215 - 9,821,770 1 5,256,571 13,290,000 –––––––––––––– 196,999,041 ––––––––––––––

24,723,459 1,195,873 - - 55,544,905 175,000 1 5,216,743 - –––––––––––––– 86,855,981 ––––––––––––––

21,084,254 1,222,716 48,691,148 11,541,128 1 5,256,571 –––––––––––––– 87,795,818 ––––––––––––––

13,967,293 5,586,939 45,245,011 104,660,505 11,038,445 2,774,110 89,370,695 –––––––––––––– 272,642,998 –––––––––––––– 477,920,485 ============

9,971,402 6,879,620 45,414,671 79,874,734 54,931,894 2,656,191 18,845,698 –––––––––––––– 218,574,210 –––––––––––––– 415,573,251 ============

- 3,482,000 7,876,897 25,828,373 4,566,015 170,977,117 43,044,245 –––––––––––––– 255,774,647 –––––––––––––– 342,630,628 ============

4,322,000 28,966,785 20,346,368 12,625,430 97,074,850 14,690,164 –––––––––––––– 178,025,597 –––––––––––––– 265,821,415 ============

119,106,150 3,558,768 5,107,215 45,203,789 –––––––––––––– 172,975,922

119,106,150 3,558,768 5,102,806 44,194,115 –––––––––––––– 171,961,839

119,106,150 3,558,768 5,109,686 (18,846,436 ) –––––––––––––– 108,928,168

119,106,150 3,558,768 5,109,686 (9,309,703 ) –––––––––––––– 118,464,901

3,656,043 –––––––––––––– 176,631,965 ––––––––––––––

3,431,757 –––––––––––––– 175,393,596 ––––––––––––––

- –––––––––––––– 108,928,168 ––––––––––––––

–––––––––––––– 118,464,901 ––––––––––––––

148,108,094 ––––––––––––––

137,014,886 ––––––––––––––

87,015,954 ––––––––––––––

76,054,227 ––––––––––––––

73,830,552 16,529,343 52,392,826 7,121,937 - 3,305,768 –––––––––––––– 153,180,426 –––––––––––––– 301,288,520 –––––––––––––– 477,920,485 ============

39,437,467 11,293,213 36,805,333 11,857,782 - 3,770,974 –––––––––––––– 103,164,769 –––––––––––––– 240,179,655 –––––––––––––– 415,573,251 ============

49,496,067 4,821,456 27,966,801 1,876,553 62,435,629 90,000 –––––––––––––– 146,686,506 –––––––––––––– 233,702,460 –––––––––––––– 342,630,628 ============

29,271,028 29,569,940 6,912,866 5,062,147 486,306 –––––––––––––– 71,302,287 –––––––––––––– 147,356,514 –––––––––––––– 265,821,415 ============

EQUITY AND LIABILITIES Equity attributable to equity holders of the Company Share capital 32 Share premium 32 Other reserves 33 Retained earnings/(accumulated losses) 34 Minority interests Total equity Non-current liabilities 27 Borrowings Current liabilities Borrowings 27 Amount due to customers for contract work 22 Trade payables 29 Other payables 30 Amount due to related companies 25 Current tax payable Total liabilities TOTAL EQUITY AND LIABILITIES

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

44

RM

(Note 32)

- - - - -

Net expense recognised directly in equity

Profit for the year

Total recognised income and expense for the year

Acquisition of additional interest in subsidiary

Disposal of partial interest in subsidiary -

-

-

-

-

-

3,558,768

RM

(Note 32)

premium

-

-

4,409

-

4,409

4,409

(6,880 )

RM

(Note 33)

reserve

Share Foreign exchange reserve

-

-

-

-

-

-

4,416,854

RM

RM

Total

-

1,009,674

1,009,674

-

-

-

-

1,014,083

1,009,674

4,409

4,409

44,194,115 171,961,839

RM

(Note 34)

earnings

Retained

- -

-

-

-

-

-

692,832

RM

(Note 33) (Note 33)

reserves

Other Revaluation

RM

equity

Total

(976,723 )

1,200,000

1,009

1,009

-

-

(976,723 )

1,200,000

1,015,092

1,010,683

4,409

4,409

3,431,757 175,393,596

RM

interests

Minority

3,558,768

(2,471 )

4,416,854

692,832

45,203,789 172,975,922

3,656,043 176,631,965

============ ============ ============ ============ ============ ============ ============ ============ ============

At 31 December 2008 119,106,150

–––––––––––––– –––––––––––––– –––––––––––––– –––––––––––––– –––––––––––––– –––––––––––––– –––––––––––––– –––––––––––––– ––––––––––––––

-

Group

Foreign currency translation:

At 1 January 2008 119,106,150



Note

capital





Share



Non-Distributable



Distributable

Attributable to equity holders of the Company



Zecon Berhad annual report 2008

Consolidated Statement of Changes in Equity

for the year ended 31 December 2008

45

46 - - -

Foreign currency translation: Group

Net expense recognised directly in equity

Profit for the year

Total recognised income and expense for the year

Dividends

- -

Issue of warrants

Disposal of partial interest in subsidiary



At 31 December 2007

-

-

(22,084,270 )

1,389,568

-

-

-

-

-

24,253,470

RM

(Note 32)

premium

-

-

-

-

-

(673 )

-

(673 )

(673 )

(6,207 )

RM

(Note 33)

reserve

Share Foreign exchange reserve

-

4,416,854

-

-

-

-

-

-

-

-

RM

-

-

-

-

-

-

-

-

-

692,832

RM

(Note 33) (Note 33)

reserves

Other Revaluation

RM

Total

-

-

-

-

(2,433,102 )

4,177,720

4,177,720

-

-

-

4,416,854

-

10,074,368

(2,433,102 )

4,177,047

4,177,720

(673 )

(673 )

42,449,497 155,726,672

RM

(Note 34)

earnings

Retained

RM

equity

Total

904,537

-

-

-

-

47,404

47,404

-

-

904,537

4,416,854

-

10,074,368

(2,433,102 )

4,224,451

4,225,124

(673 )

(673 )

2,479,816 158,206,488

RM

interests

Minority

3,558,768

(6,880 )

4,416,854

692,832

44,194,115 171,961,839

3,431,757 175,393,596

============ ============ ============ ============ ============ ============ ============ ============ ============

119,106,150

–––––––––––––– –––––––––––––– –––––––––––––– –––––––––––––– –––––––––––––– –––––––––––––– –––––––––––––– –––––––––––––– ––––––––––––––

22,084,270

Bonus issue



8,684,800

Pursuant of ESOS

Issue of ordinary shares:

-

At 1 January 2007

12

88,337,080

-

RM

(Note 32)



Note

capital





Share



Non-Distributable



Distributable

Attributable to equity holders of the Company



Consolidated Statement of Changes in Equity

for the year ended 31 December 2008

Zecon Berhad annual report 2008

Company Statement of Changes in Equity for the year ended 31 December 2008

Non-Distributable Distributable (Accumulated losses) Share Share Other retained capital premium reserves earnings/ Note (Note 32) (Note 32) (Note 33) (Note 34) RM RM RM RM At 1 January 2008

119,106,150

3,558,768

5,109,686

(9,309,703)

Total equity RM 118,464,901

Loss for the year, representing total recognised income and expense for the year

-

-

-

(9,536,733)

(9,536,733)



––––––––––––––

––––––––––––––

––––––––––––––

––––––––––––––

––––––––––––––

At 31 December 2008

119,106,150

3,558,768

5,109,686

(18,846,436)

108,928,168



============

============

============

============

============

At 1 January 2007

88,337,080

24,253,470

692,832

6,860,129

120,143,511

Loss for the year, representing total recognised income and expense for the year

-

-

-

(13,736,730)

(13,736,730)

Dividends

12

-

-

-

(2,433,102)

(2,433,102)

Bonus issue

22,084,270

(22,084,270)

-

-

-

Employee Share Option Scheme (“ESOS”)

8,684,800

1,389,568

-

-

10,074,368

Issue of ordinary shares pursuant to:

Issue of warrants

-

-

4,416,854

-

4,416,854



––––––––––––––

––––––––––––––

––––––––––––––

––––––––––––––

––––––––––––––

At 31 December 2007

119,106,150

3,558,768

5,109,686

(9,309,703)

118,464,901



============

============

============

============

============

47

Consolidated Cash Flow Statement for the year ended 31 December 2008

Note Cash Flows From Operating Activities Profit before taxation

48

2008 RM

2007 RM

1,343,461

7,291,510

Adjustments for: Amortisation of toll concession Amortisation of prepaid land lease payments Depreciation of property, plant and equipment Gain on disposal of subsidiaries 17(a) Gain on disposal of property, plant and equipment Gross dividend income Impairment in value of investments Interest expense Interest income Loss on disposal of other investments Loss on foreign exchange rate Property, plant and equipment written-off Provision for doubtful debts Provision for stocks obsolescence Reversal of provision for doubtful debts Share of results of associates Operating profit before working capital changes

176,412 26,843 1,278,437 (673,608 ) (30,999 ) - 9,292,832 13,295,070 (761,620 ) 2,329 4,409 1,600 5,882,687 382,399 - (250,374 ) –––––––––––––– 29,969,878

264,017 26,843 2,789,759 (15,957,601 ) (1,938,678 ) (20,685 ) 15,388,452 (207,761 ) 13,830 74,326 1,509,388 (362,475 ) 1,066,333 –––––––––––––– 9,937,258

Decrease in land held for development Increase in development costs Decrease in inventories Increase in amount due to customers for contract work Decrease/(increase) in receivables Increase in payables Decrease in amount due to related companies Cash generated from operations

- (3,995,891 ) 910,282 8,437,183 13,224,615 10,851,648 (117,919 ) –––––––––––––– 59,279,796

17,917,040 (3,166,017 ) 180,790 1,881,731 (93,063,345 ) 70,928,761 –––––––––––––– 4,616,218

Interest paid Interest received Taxation (paid)/refunded Net cash generated from/(used in) operating activities

(13,295,070 ) 761,620 (532,173 ) –––––––––––––– 46,214,173 ––––––––––––––

(15,388,452 ) 207,761 921,623 –––––––––––––– (9,642,850 ) ––––––––––––––

Zecon Berhad annual report 2008

Consolidated Cash Flow Statement for the year ended 31 December 2008

Note Cash Flows From Investing Activities

2008 RM

2007 RM

Purchase of property, plant and equipment (i) Proceeds from disposal of property, plant and equipment 17(b) Net cash inflow on acquisition of a subsidiary Investment in jointly controlled entities Proceeds on disposal of other investments Proceeds on disposal of subsidiaries, net of cash received 17(a) Net dividends received Net cash (used in)/generated from investing activities Cash Flows From Financing Activities

(16,939,145 )

(1,590,192 )

31,000 477 (4,861,200 ) 37,499

1,615,097 532,834

49,000 - –––––––––––––– (21,682,369 ) ––––––––––––––

20,040,376 15,100 –––––––––––––– 20,613,215 ––––––––––––––

Repayment of term loan Repayment of hire purchase payables Repayment of bankers’ acceptances and revolving credit facilities Proceeds from drawdown of term loan Proceeds from issuance of shares Proceeds from issuance of shares to minority interests Proceeds from issuance of warrants Dividends paid (Increase)/decrease in fixed deposits pledged Net cash used in financing activities Net increase in cash and cash equivalents

(13,745,521 ) (10,192,189 )

(5,486,374 ) (1,880,254 )

(11,609,400 ) 84,050,000 - 1,200,000 - - (62,837,662 ) –––––––––––––– (13,134,772 ) –––––––––––––– 11,397,032

(19,776,600 ) 8,336,800 10,074,368 4,416,854 (2,433,102 ) 776,098 –––––––––––––– (5,972,210 ) –––––––––––––– 4,998,155

Cash and cash equivalents at the beginning of the year 26 Cash and cash equivalents at the end of the year

3,112,647 –––––––––––––– 14,509,679 ============

(1,885,508 ) –––––––––––––– 3,112,647 ============

(i) During the year, the Group acquired property, plant and equipment by the following means: Cash Hire purchase and finance lease arrangements

2008 RM

16,939,145 693,100 –––––––––––––– 17,632,245 ============

2007 RM 1,590,192 781,418 –––––––––––––– 2,371,610 ============

49

Company Cash Flow Statement for the year ended 31 December 2008

Note Cash Flows From Operating Activities

2008 RM

2007 RM

Loss before taxation

(11,226,308 )

(13,967,145 )

Adjustments for: Amortisation of prepaid land lease payment Depreciation of property, plant and equipment Gain on disposal of property, plant and equipment Gross dividend income Impairment in value of investment in associate Interest expense Interest income Loss on disposal of other investments Provision for doubtful debts Loss on foreign exchange Operating profit/(loss) before working capital changes

26,843 1,053,166 (30,999 ) - 11,366,128 7,969,637 (571,196 ) 2,329 1,183,946 - –––––––––––––– 9,773,546

26,843 1,337,212 (1,672,428 ) (20,685 ) 10,027,205 (147,090 ) 13,830 949,267 75,000 –––––––––––––– (3,377,991 )

Decrease in inventories 840,000 Decrease/(increase) in amount due from customers for contract work 26,738,278 Decrease in receivables 1,393,464 (Decrease)/increase in payables (6,639,452 ) Decrease in amount due to related companies (16,528,785 ) –––––––––––––– Cash generated from operations 15,577,051

(3,017,038 ) 21,269,153 27,048,467 (18,617,418) –––––––––––––– 23,305,173

Interest paid Interest received Taxation refunded Net cash generated from operating activities Cash Flows From Investing Activities

(7,969,637) 571,196 1,293,269 –––––––––––––– 9,471,879 ––––––––––––––

Purchase of property, plant and equipment (i) Proceeds from disposal of property, plant and equipment Additional investment in subsidiaries Proceeds from disposal of other investments Proceeds from disposal of subsidiaries and associates Net dividends received Net cash (used in)/generated from investing activities

(5,519,306 )

(267,507 )

31,000 (6,902,757 ) 37,499 49,000 - –––––––––––––– (12,304,564 ) ––––––––––––––

1,278,870 (149,000 ) 532,834 15,100 –––––––––––––– 1,410,297 ––––––––––––––

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

50

-

(10,027,205) 147,090 1,630,009 –––––––––––––– 15,055,067 ––––––––––––––

Zecon Berhad annual report 2008

Company Cash Flow Statement for the year ended 31 December 2008

Note Cash Flows From Financing Activities

2008 RM

2007 RM

Repayment of term loan Repayment of hire purchase payables Repayment from bankers’ acceptances and revolving credit facilities Proceeds from drawdown of term loan Proceeds from issuance of shares Proceeds from issuance of warrants Dividends paid Increase in fixed deposits pledged Net cash generated from/(used in) financing activities Net increase in cash and cash equivalents

(13,745,521 ) (9,748,616 )

(5,486,374 ) (1,602,916 )

(11,609,400 ) 70,000,000 - - - (26,714,378 ) –––––––––––––– 8,182,085 –––––––––––––– 5,349,400

(19,776,600 ) 8,336,800 10,074,368 4,416,854 (2,433,102 ) (4,079,631 ) –––––––––––––– (10,550,601 ) –––––––––––––– 5,914,763

Cash and cash equivalents at the beginning of the year 26 Cash and cash equivalents at the end of the year

(676,763 ) –––––––––––––– 4,672,637 ============

(6,591,526 ) –––––––––––––– (676,763 ) ============

During the year, the Company acquired property, plant and equipment by the following means: (i) 2008 RM Cash Hire purchase and finance lease arrangements

5,519,306 - –––––––––––––– 5,519,306 ============

2007 RM 267,507 –––––––––––––– 267,507 ============

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

51

Notes to the Financial Statements - 31 December 2008 1.

Corporate Information



The Company is a public limited liability company, incorporated and domiciled in Malaysia and is listed on the Second Board of Bursa Malaysia Securities. The registered office is located at 8th Floor, Menara Zecon, No. 92, Lot 393, Section 5, KTLD, Jalan Satok, 93400 Kuching, Sarawak.



The principal activities of the Company are foundation engineering, civil engineering and building contracting works and their related activities. The principal activities of the subsidiaries are disclosed in Note 17 to the financial statements. There have been no significant changes in the nature of the principal activities of the Group and of the Company during the financial year.

2.

The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directors on 28 April 2009. Significant Accounting Policies 2.1

Basis of preparation



The financial statements comply with the provisions of the Companies Act, 1965 and Financial Reporting Standards (“FRSs”) in Malaysia.



At the beginning of the current financial year, the Group and the Company had adopted new and revised FRSs which are mandatory for the current financial year as described fully in Note 2.3. The financial statements of the Group and of the Company have also been prepared on a historical basis. The financial statements are presented in Ringgit Malaysia (RM). 2.2

Summary of Significant Accounting Policies (a)

Subsidiaries and Basis of Consolidation (i)

Subsidiaries



Subsidiaries are entities over in which the Group has ability to control the financial and operating policies so as to obtain benefits from their activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group has such power over another entity.



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



Intra-group transactions, balances and resulting unrealised gains are eliminated on consolidation and the consolidated financial statements reflect external transactions only. Unrealised losses are eliminated on consolidation unless costs cannot be recovered.



52

The gain or loss on disposal of a subsidiary company is the difference between the net disposal proceeds and the Group’s share of its net assets together with any unamortised balance of goodwill and exchange differences.

(ii)

Basis of Consolidation



The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the balance sheet date. The financial statements of the subsidiaries are prepared for the same reporting date as the Company.



Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. In preparing the consolidated financial statements, intragroup balances, transactions and unrealised gains or losses are eliminated in full. Uniform accounting policies are adopted in the consolidated financial statements for like transactions and events in similar circumstances.

Zecon Berhad annual report 2008

Notes to the Financial Statements - 31 December 2008 2.

Significant Accounting Policies (contd.) 2.2

Summary of Significant Accounting Policies (contd.) (a)

Subsidiaries and Basis of Consolidation (contd.) (ii)

Basis of Consolidation (contd.)



Acquisitions of subsidiaries are accounted for using the purchase method. The purchase method of accounting involves allocating the cost of the acquisition to the fair value of the assets acquired and liabilities and contingent liabilities assumed at the date of acquisition. The cost of an acquisition is measured as the aggregate of the fair values, at the date of exchange, of the assets given, liabilities incurred or assumed, and equity instruments issued, plus any costs directly attributable to the acquisition.



Any excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities represents goodwill. Any excess of the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition is recognised immediately in profit or loss.



Minority interests represent the portion of profit or loss and net assets in subsidiaries not held by the Group. It is measured at the minorities’ share of the fair value of the subsidiaries’ identifiable assets and liabilities at the acquisition date and the minorities’ share of changes in the subsidiaries’ equity since then.

(b)

Associates



Associates are entities in which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but not in control or joint control over those policies.



Investments in associates are accounted for in the consolidated financial statements using the equity method of accounting. Under the equity method, the investment in associate is carried in the consolidated balance sheet at cost adjusted for post-acquisition changes in the Group’s share of net assets of the associate. The Group’s share of the net profit or loss of the associate is recognised in the consolidated profit or loss. Where there has been a change recognised directly in the equity of the associate, the Group recognises its share of such changes. In applying the equity method, unrealised gains and losses on transactions between the Group and the associate are eliminated to the extent of the Group’s interest in the associate. After 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 associate is equity accounted for from the date the Group obtains significant influence until the date the Group ceases to have significant influence over the associate.



Goodwill relating to an associate 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, liabilities and contingent liabilities over the cost of the investment is excluded from the carrying amount of the investment and is instead 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.



When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any longterm interests that, in substance, form part of the Group’s net investment in the associate, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.



The most recent available financial statements of the associates are used by the Group in applying the equity method. Where the dates of the audited financial statements used are not coterminous with those of the Group, the share of results is arrived at from the last audited financial statements available and management financial statements to the end of the accounting period. Uniform accounting policies are adopted for like transactions and events in similar circumstances.



In the Company’s separate financial statements, investments in associates are stated at cost less impairment losses.



On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is included in profit or loss.

53

Notes to the Financial Statements - 31 December 2008 2.

Significant Accounting Policies (contd.) 2.2

Summary of Significant Accounting Policies (contd.) (c)

Jointly Controlled Entities



The Group has an interest in a joint venture which is a jointly controlled entity. A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control, and a jointly controlled entity is a joint venture that involves the establishment of a separate entity in which each venturer has an interest.



Investments in jointly controlled entities are accounted for in the consolidated financial statements using the equity method of accounting as described in Note 2.2(b).



In the Company’s separate financial statements, investments in jointly controlled entities are stated at cost less impairment losses.



On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is included in profit or loss.

(d)

Intangible Assets (i)

Goodwill



Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Following the initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is not amortised but instead, it is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

(ii)

Toll Concession



Zecon Toll Concessionaire Sdn. Bhd. (“ZTCSB”),a wholly-owned subsidiary of the Company, has entered into a Concession Agreement with the State Government of Sarawak on the 17 July 1998. In this agreement, the State Government of Sarawak commissioned ZTCSB under a privatization Scheme to design, build, operate and maintain a dual three lane carriageway (Second Kuching Bridge crossing) over the Sarawak River in Kuching, Sarawak.



As part of the consideration of the construction agreement, the State Government of Sarawak granted ZTCSB the right to collect toll for the usage over the Second Kuching Bridge for a period up to 2037 and a further 19 years at the option of the State Government of Sarawak.



The Group considers the cost of the toll concession as the amount forgone in respect of the consideration receivable from the State Government of Sarawak under the Concession Agreement, and is amortised over the concession period based on the following formula: Traffic volume to date –––––––––––––––––––––––––– X Estimated total traffic volume of the concession period



54

Cost of toll concession less

Accumulated amortisation

The information on traffic volume is derived based on independent traffic consultant’s reports and the carrying value of the toll concession is subject to an annual review.

Zecon Berhad annual report 2008

Notes to the Financial Statements - 31 December 2008 2.

Significant Accounting Policies (contd.) 2.2

Summary of Significant Accounting Policies (contd.) (e)

Property, Plant and Equipment and Depreciation



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



Subsequent to recognition, property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses.



Certain items of property, plant and equipment of the Group and of the Company have not been revalued since 1999. The directors have not adopted policy of regular revaluations of such assets and no later valuation has been recorded. As permitted under the transitional provisions of IAS 16 (Revised): Property, Plant and Equipment, these assets continue to be stated at their 1999 valuation less accumulated depreciation. The above transitional provisions are available only on the first application of the MASB Approved Accounting Standard IAS 16 (Revised): Property, Plant and Equipment which is effective for periods ending on or after 1 September 1998. By virtue of this transitional provision, an entity that had recorded its property, plant and equipment at valued amounts but had not adopted a policy of revaluation has been allowed to continue carrying those assets on the basis of their previous revaluations subject to continuity in its depreciation policy and the requirement to write down the assets to their recoverable amounts for impairment adjustments. The transitional provisions will remain in force until and unless the entity chooses to adopt a revaluation policy in place of cost policy. When that happens, FRS 116 (which supersedes IAS 16) would require revaluations to be carried out at regular intervals. Any revaluation surplus is credited to the revaluation reserve included within equity, except to the extent that it reverses a revaluation decrease for the same asset previously recognised in the income statement, in which case the increase is recognised in the income statement to the extent of the decrease previously recognised. A revaluation deficit is first offset against unutilised previously recognised revaluation surplus in respect of the same asset and the balance is thereafter recognised in the income statement. Upon disposal or retirement of an asset, any revaluation reserve relating to the particular asset is transferred directly to retained earnings.



Depreciation of property, plant and equipment is provided for on a straight-line basis to write off the cost of each asset to its residual value over the estimated useful life at the following annual rates: % Buildings 2 Plant, machinery and equipment 10 - 15 Motor vehicles 20 Office furniture, fittings, equipment and renovation 10 - 33 1/3

Work-in-progress is not depreciated as these assets are not available for use.



The residual values, useful life and depreciation method are reviewed at each financial year-end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of property, plant and equipment.



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

Land Held For Development And Development Costs (f) (i) Land held for development

Land held for development consists of land where no development activities have been carried out or where development activities are not expected to be completed within the normal operating cycle. Such land is classified within non-current assets and is stated at cost less any accumulated impairment losses.



Land held for development is reclassified as development costs at the point when development activities have commenced and where it can be demonstrated that the development activities can be completed within the normal operating cycle.

55

Notes to the Financial Statements - 31 December 2008 2.

Significant Accounting Policies (contd.) 2.2

Summary of Significant Accounting Policies (contd.) (f)

(ii)

Property development costs



Property development costs comprise all costs that are directly attributable to development activities or that can be allocated on a reasonable basis to such activities.



When the financial outcome of a development activity can be reliably estimated, property development revenue and expenses are recognised in the income statement by using the stage of completion method based on certification by professional architects. The stage of completion is determined by the proportion that property development costs incurred for work performed to date bear to the estimated total property development costs.



Where the financial outcome of a development activity cannot be reliable estimated, property development revenue is recognised only to the extent of property development costs incurred that is probable will be recoverable, and property development costs on properties sold are recognised as an expense in the period in which they are incurred.



Any expected loss on a development project, including costs to be incurred over the defects liability period, is recognised as an expense immediately.



Property development costs not recognised as an expense are recognised as an asset, which is measured at the lower of cost and net realisable value.



The excess of revenue recognised in the income statement over billings to purchasers is classified as accrued billings within trade receivables and the excess of billings to purchasers over revenue recognised in the income statement is classified as progress billings within trade payables.

(g)

Construction Contracts



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



Where the outcome of a construction contract cannot be reliably estimated, 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 probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.



56

Land Held For Development And Development Costs (contd.)

When the total of costs incurred on construction contracts plus, recognised profits (less recognised losses), exceeds progress billings, the balance is classified as amount due from customers on contracts. When progress billings exceed costs incurred plus, recognised profits (less recognised losses), the balance is classified as amount due to customers on contracts.

(h)

Impairment of Non-financial Assets



The carrying amounts of assets, other than investment property, construction contract assets, property development costs, inventories, deferred tax assets and non-current assets (or disposal groups) held for sale, are reviewed at each balance sheet date 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, intangible assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated at each balance sheet date or more frequently when indicators of impairment are identified.

Zecon Berhad annual report 2008

Notes to the Financial Statements - 31 December 2008 2.

Significant Accounting Policies (contd.) 2.2

Summary of Significant Accounting Policies (contd.) (h)

Impairment of Non-financial Assets (contd.)



For the purpose of impairment testing of these assets, recoverable amount is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. If this is the case, recoverable amount is determined for the cash-generating unit (CGU) to which the asset belongs to. Goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s CGUs, or groups of CGUs, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units.



An asset’s recoverable amount is the higher of an asset’s or CGU’s fair value less costs to sell 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. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses recognised in respect of a CGU or groups of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to those units or groups of units and then, to reduce the carrying amount of the other assets in the unit or groups of units on a pro-rata basis.



An impairment loss is recognised in profit or loss in the period in which it arises, unless the asset is carried at a revalued amount, in which case the impairment loss is accounted for as a revaluation decrease to the extent that the impairment loss does not exceed the amount held in the asset revaluation reserve for the same asset.



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, unless the asset is carried at revalued amount, in which case, such reversal is treated as a revaluation increase.

(i)

Inventories



Inventories are stated at the lower of cost and net realisable value and are valued on a first-in-first-out basis. In arriving at the net realisable value due allowance is made for all damaged, obsolete and slow-moving items.



Cost of work-in-progress and finished goods include cost of raw materials, direct labour and attributable production overheads. Cost of raw materials and factory supplies include expenses incurred in bringing them to their present location and condition. The cost of unsold properties comprises cost associated with the acquisition of land, direct costs and appropriate proportions of common cost.

(j)

Leases (i)

Classification



A lease is recognised as a finance lease if it transfers substantially to the Group all the risks and rewards incidental to ownership. Leases of land and buildings are classified as operating or finance leases in the same way as leases of other assets and the land and buildings elements of a lease of land and buildings are considered separately for the purposes of lease classification. All leases that do not transfer substantially all the risks and rewards are classified as operating leases, with the following exceptions: -

Property held under operating leases that would otherwise meet the definition of an investment property is classified as an investment property on a property-by-property basis and, if classified as investment property, is accounted for as if held under a finance lease; and

-

Land held for own use under an operating lease, the fair value of which cannot be measured separately from the fair value of a building situated thereon at the inception of the lease, is accounted for as being held under a finance lease, unless the building is also clearly held under an operating lease.

57

Notes to the Financial Statements - 31 December 2008 2.

Significant Accounting Policies (contd.) 2.2

Summary of Significant Accounting Policies (contd.) (j)

58

Leases (contd.) (ii)

Finance Leases - the Group as Lessee



Assets acquired by way of hire purchase or finance leases are stated at an amount equal to the lower of their fair values and the present value of the minimum lease payments at the inception of the leases, less accumulated depreciation and impairment losses. The corresponding liability is included in the balance sheet as borrowings. In calculating the present value of the minimum lease payments, the discount factor used is the interest rate implicit in the lease, when it is practicable to determine; otherwise, the Group’s incremental borrowing rate is used. Any initial direct costs are also added to the carrying amount of such assets.



Lease payments are apportioned between the finance costs and the reduction of the outstanding liability. Finance costs, which represent the difference between the total leasing commitments and the fair value of the assets acquired, are recognised in the profit or loss over the term of the relevant lease so as to produce a constant periodic rate of charge on the remaining balance of the obligations for each accounting period.



The depreciation policy for leased assets is in accordance with that for depreciable property, plant and equipment, as disclosed in Note 2.2(e).

(iii)

Operating Leases - the Group as Lessee



Operating lease payments are recognised as an expense on a straight-line basis over the term of the relevant lease. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis.



In the case of a lease of land and buildings, the minimum lease payments or the up-front payments made are allocated, whenever necessary, between the land and the buildings elements in proportion to the relative fair values for leasehold interests in the land element and buildings element of the lease at the inception of the lease. The up-front payment represents prepaid land lease payments and are amortised on a straight-line basis over the lease term.

(iv)

Operating Leases - the Group as Lessor



Assets leased out under operating leases are presented on the balance sheet according to the nature of the assets. Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.

(k)

Income Tax



Income tax on the profit or loss for the year comprises current and deferred tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the year and is measured using the tax rates that have been enacted at the balance sheet date.



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



Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is recognised as income or an expense and included in the profit or loss for the year, except when it arises from a transaction which is recognised directly in equity, in which case the deferred tax is also recognised directly in equity, or when it arises from a business combination that is an acquisition, in which case the deferred tax is included in the resulting goodwill or the amount of any excess of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over the cost of the combination.

Zecon Berhad annual report 2008

Notes to the Financial Statements - 31 December 2008 2.

Significant Accounting Policies (contd.) 2.2

Summary of Significant Accounting Policies (contd.) (l)

(m)

Employee Benefits (i)

Short term benefits



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

(ii)

Defined contribution plans



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

(iii)

Equity compensation benefits



The Zecon Berhad Employees’ Share Option Scheme (ESOS) allows the Group’s employees to acquire shares of the Company. No compensation cost or obligation is recognised. When the options are exercised, equity is increased by the amount of the proceeds received.

Foreign Currencies (i)

Functional and presentation currency



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

(ii)

Foreign currency transactions



In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency (foreign currencies) are recorded in the functional currencies using the exchange rates prevailing at the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are translated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not translated.



Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are included in profit or loss for the period except for exchange differences arising on monetary items that form part of the Group’s net investment in foreign operation. Exchange differences arising on monetary items that form part of the Group’s net investment in foreign operation, where that monetary item is denominated in either the functional currency of the reporting entity or the foreign operation, are initially taken directly to the foreign currency translation reserve within equity until the disposal of the foreign operations, at which time they are recognised in profit or loss. Exchange differences arising on monetary items that form part of the Group’s net investment in foreign operation, where that monetary item is denominated in a currency other than the functional currency of either the reporting entity or the foreign operation, are recognised in profit or loss for the period. Exchange differences arising on monetary items that form part of the Company’s net investment in foreign operation, regardless of the currency of the monetary item, are recognised in profit or loss in the Company’s financial statements or the individual financial statements of the foreign operation, as appropriate.

59

Notes to the Financial Statements - 31 December 2008 2.

Significant Accounting Policies (contd.) 2.2

Summary of Significant Accounting Policies (contd.) (m)

Foreign Currencies (contd.) (ii)

Foreign currency transactions (contd.)



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 directly in equity. Exchange differences arising from such non-monetary items are also recognised directly in equity.

(iii)

Foreign operations



The results and financial position of foreign operations that have a functional currency different from the presentation currency (RM) of the consolidated financial statements are translated into RM as follows: -

Assets and liabilities for each balance sheet presented are translated at the closing rate prevailing at the balance sheet date;

-

Income and expenses for each income statement are translated at average exchange rates for the year, which approximates the exchange rates at the dates of the transactions; and

-

All resulting exchange differences are taken to the foreign currency translation reserve within equity.

(n)

Revenue Recognition



Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

(o)

(i)

Property development



Revenue from sale of properties is accounted for by the stage of completion method as described in Note 2.2(f ).

(ii)

Construction contracts



Revenue from construction and other contracts is accounted for by the percentage of completion method as described in Note 2.2(g).

(iii)

Toll revenue



Toll revenue is accounted for as at when toll is chargeable for the usage of the Second Kuching Bridge crossing.

(iv)

Sale of goods



Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer.

(v)

Dividend income



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

(vi)

Interest income



Interest income is recognised on a time proportion basis that reflects the effective yield on the asset.

Routine Maintenance Costs Routine maintenance costs on the toll bridge shall be charged to the income statement when incurred.

60

Zecon Berhad annual report 2008

Notes to the Financial Statements - 31 December 2008 2.

Significant Accounting Policies (contd.) 2.2

Summary of Significant Accounting Policies (contd.) (p) Financial Instruments

Financial instruments are recognised in the balance sheet when the Group has become a party to the contractual provisions of the instrument.



Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual agreement. Interest, dividends and gains and losses relating to a financial instrument classified as a liability, are reported as expense or income. Distributions to holders of financial instruments classified as equity are recognised directly in equity. Financial instruments are offset when the Group has a legally enforceable right to offset and intends to settle either on a net basis or to realise the asset and settle the liability simultaneously. (i)

Cash and cash equivalents



For the purposes of the Cash Flow Statement, cash and cash equivalents include cash on hand and at bank, deposits at call and short term highly liquid investments which have an insignificant risk of changes in value, net of bank overdrafts.

(ii)

Other non-current investments



Non-current investments other than investments in subsidiaries, associates and jointly controlled entities are stated at cost less impairment losses. On disposal of an investment, the difference between net disposal proceeds and its carrying amount is recognised in the profit or loss.

(iii)

Receivables



Receivables are carried at anticipated realisable values. Bad debts are written off when identified. An estimate is made for doubtful debts based on a review of all outstanding amounts as at the balance sheet date.

(iv)

Payables



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

(v)

Interest-bearing borrowings



All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs. After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method.

(vi)

Equity instruments



Ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the period in which they are declared.



The transaction costs of an equity transaction are accounted for as a deduction from equity, net of tax. Equity transaction costs comprise only those incremental internal costs directly attributable to the equity transaction which would otherwise have been avoided.



The consideration paid, including attributable transaction costs on repurchased ordinary shares of the Company that have not been cancelled, are classified as treasury shares and presented as a deduction from equity. No gain or loss is recognised in profit or loss on the sale, re-issuance or cancellation of treasury shares. When treasury shares are reissued by resale, the difference between the sales consideration and the carrying amount is recognised in equity.

(vii)

Derivative financial instruments



Derivative financial instruments are not recognised in the financial statements.

61

Notes to the Financial Statements - 31 December 2008 2.

Significant Accounting Policies (contd.) 2.2

2.3

Summary of Significant Accounting Policies (contd.) (q) Provisions

Provisions are recognised when the Group has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount can be made. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. Where the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as finance cost.

(r)

Borrowing costs



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



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

Changes in accounting policies and effects arising from adoption of new and revised FRSs On 1 January 2008, the Group and the Company adopted the following revised FRS, Amendment to FRS and Interpretations: FRS 107 : Cash Flow Statements : Construction Contracts FRS 111 FRS 112 : Income Taxes FRS 118 : Revenue FRS 120 : Accounting for Government Grants and Disclosure of Government Assistance FRS 134 : Interim Financial Reporting FRS 137 : Provisions, Contingent Liabilities and Contingent Assets Amendment to FRS 121 : The Effects of Changes in Foreign Exchanges Rates - Net investments in a Foreign Operation IC Interpretation 1 : Changes in Existing Decommissioning, Restoration and Similar Liabilities IC Interpretation 2 : Members’ Shares in Co-operative Entities and Similar Instruments IC Interpretation 5 : Rights to Interests arising from Decommissioning, Restoration and Environment Rehabilitation Funds : Liabilities arising from Participating in a Specific Market - Waste Electrical and Electronic IC Interpretation 6 Equipment IC Interpretation 7 : Applying the Restatement Approach under FRS 1292004 Financial Reporting in Hyperinflationary Economies IC Interpretation 8 : Scope of FRS 2 The revised FRS, Amendment to FRS and Interpretations above do not have significant impact on the financial statements of the Group or of the Company.

62

Zecon Berhad annual report 2008

Notes to the Financial Statements - 31 December 2008 2.

Significant Accounting Policies (contd.) 2.4

Standards and Interpretations issued but not yet effective (contd.) At the date of authorisation of these financial statements, the following new FRS and Interpretations were issued but not yet effective and have not been applied by the Group and the Company: Effective for financial periods beginning FRS and Interpretations on or after FRS 4 : Insurance Contracts : Financial Instruments : Disclosures FRS 7 FRS 8 : Operating Segments : Financial Instruments : Recognition FRS 139 and Measurement IC Interpretation 9 : Reassessment of Embedded Derivatives IC Interpretation 10 : Interim Financial Reporting and Impairment

1 January 2010 1 January 2010 1 July 2009 1 January 2010 1 January 2010 1 January 2010

The new FRS and Interpretations above are expected to have no significant impact on the financial statements of the Group or of the Company upon their initial application except for the changes in disclosures arising from the adoption of FRS 8. The Group and the Company are exempted from disclosing the possible impact, if any, to the financial statements upon the initial application of FRS 7 and FRS 139. 2.5

Significant accounting estimate and judgement (a)

Key source of estimate uncertainty



Property development



The Group recognises property development revenue and expenses in the income statement by using the stage of completion method. The stage of completion is determined by the proportion that property method development costs incurred for work performed to date bear to the estimated total property development costs.



Significant judgement is required in determining the stage of completion, the extent of the property development costs incurred, the estimated total property development revenue costs, as well as the recoverability of the development projects. In making the judgement, the Group evaluates based on past experience by relying on the work of specialist.



Depreciation of property, plant and equipment



Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives. Management estimates the useful lives of the property, plant and equipment to be within 3 to 10 years. Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised.



Deferred tax assets



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

63

Notes to the Financial Statements - 31 December 2008 3. Revenue Construction contracts Toll concession Property development Others 4. Cost of Sales

2008 RM

Group

2007 RM

Company 2008 2007 RM RM

147,755,075 9,195,921 - 221,773 –––––––––– 157,172,769 =========

37,971,914 8,612,397 31,850,000 126,846 ––––––––– 78,561,157 ========

124,126,108 - - - –––––––––– 124,126,108 =========

39,025,100 ––––––––– 39,025,100 ========

126,360,788 2,360,038 - 352,806 –––––––––– 129,073,632 =========

35,694,743 2,234,936 19,261,041 118,119 ––––––––– 57,308,839 ========

114,902,880 - - - –––––––––– 114,902,880 =========

36,838,758 ––––––––– 36,838,758 ========

Interest income 761,620 Gross dividend income (Note 7) - Others 11,872,660 ––––––––– 12,634,280 ======== Finance Costs 6. 2008 RM Interest expense on:

207,761 20,685 20,085,058 ––––––––– 20,313,504 ========

571,196 - 7,941,563 ––––––––– 8,512,759 ========

147,090 20,685 4,074,908 ––––––––– 4,242,683 ========

Construction contract costs Toll concession Property development Others 5. Other Income

Bank borrowings Hire purchase and finance lease liabilities Interest paid to subsidiaries Total interest expense Less: Interest capitalised in qualifying assets: Costs of construction contracts (Note 22) Interest expense (Note 7) 7.

Group

Company

2007 RM

2008 RM

2007 RM

16,391,490

17,475,265

7,973,544

11,295,420

339,257 - ––––––––– 16,730,747

415,528 - ––––––––– 17,890,793

237,233 106,122 ––––––––– 8,316,899

356,807 106,122 ––––––––– 11,758,349

(3,435,677) ––––––––– 13,295,070 ========

(2,502,341) ––––––––– 15,388,452 ========

(347,262) ––––––––– 7,969,637 ========

(1,731,144) ––––––––– 10,027,205 ========

Profit/(Loss) Before Taxation

The following amounts have been included in arriving at profit/(loss) before taxation: Group Company 2008 2007 2008 2007 RM RM RM RM Employee benefits expense (Note 8) 8,804,509 6,180,323 3,867,251 4,208,683 Non-Executive Directors’ remuneration (Note 9) 374,500 69,300 374,500 69,300 Amortisation of toll concession (Note 16) 176,412 264,017 - Amortisation of prepaid land lease payments (Note 14) 26,843 26,843 26,843 26,843 Auditors’ remuneration Statutory audit - current year 135,500 128,404 60,000 60,000 - under/(over) provision in prior year 7,900 (1,300) 4,600 Depreciation of property, plant and equipment (Note 13) 1,278,437 2,789,759 1,053,166 1,337,212 Gain on disposal of subsidiaries (Note 17(a)) (673,608) (15,957,601) - Gross dividend income (Note 5) - (20,685) - (20,685)

64

Zecon Berhad annual report 2008

Notes to the Financial Statements - 31 December 2008 7.

Profit/(Loss) Before Taxation (contd.)



The following amounts have been included in arriving at profit/(loss) before taxation: (contd.)

Hire of plant and machinery Impairment in value of investments in associate Interest expense (Note 6) Interest income Loss on disposal of other investments Loss on foreign exchange Management fee paid Management fee received Property, plant and equipment written-off Provision for doubtful debts Provision for stocks obsolescence Reversal of provision for doubtful debts Gain on disposal of property, plant and equipment Rental expense for land and buildings Rental income from land and buildings

2008 RM

Group 2007 RM

2008 RM

Company 2007 RM

-

13,277

-

13,277

9,292,832 13,295,070 (761,620)

- 15,388,452 (207,761)

11,366,128 7,969,637 (571,196)

10,027,205 (147,090)

2,329 4,409 12,342 (128,519)

13,830 74,326 5,642 (29,341)

2,329 - 12,342 (60,000)

13,830 75,000 5,642 -

1,600 5,882,687 382,399

- 1,509,388 -

- 1,183,946 -

949,267 -

-

(362,475)

-

-

(30,999)

(1,938,678)

(30,999)

(1,672,428)

908,222

728,970

636,432

661,136

(118,342) ========

(213,672) =======

(158,452) ======

(213,071) =======

8. Employee Benefits Expense

2008 RM

2007 RM

2008 RM

2007 RM

Salaries, allowances, bonus and wages Directors’ remuneration Provident fund contributions Social security costs

5,913,949 2,133,889 700,370 56,301 –––––––– 8,804,509 =======

3,544,387 2,183,580 413,845 38,511 –––––––– 6,180,323 =======

1,727,464 1,925,641 199,923 14,223 –––––––– 3,867,251 =======

1,800,392 2,183,580 209,524 15,187 –––––––– 4,208,683 =======

Group

Company

Number of employees at the end of the year 288 202 55 59 ======= ======== ======= ======= Included in employee benefits expense of the Group and of the Company are Executive Directors’ remuneration amounting to RM2,133,889 (2007: RM2,183,580) and RM1,925,641 (2007: RM2,183,580) respectively as further disclosed in Note 9.

65

Notes to the Financial Statements - 31 December 2008 9. Directors’ Remuneration Group Company 2008 2007 2008 2007 RM RM RM RM

Executive Directors’ remuneration Fees Other emoluments Non-Executive Directors’ remuneration Fees Other emoluments Total Directors’ remuneration (Note 37)

82,400 2,051,489 ––––––— 2,133,889 ––––——

99,961 2,083,619 —––––— 2,183,580 —––––—

82,400 1,843,241 –––––––– 1,925,641 ––––––––

99,961 2,083,619 –––––––– 2,183,580 ––––––––

105,700 268,800 –––––— 374,500 ––––—— 2,508,389 =======

69,300 - —––––— 69,300 ––––––— 2,252,880 =======

105,700 268,800 –––––––– 374,500 –––––––– 2,300,141 =======

69,300 –––––––– 69,300 –––––––– 2,252,880 =======





The details of remuneration by Directors of the Company during the year are as follows:

Executive: Salaries, bonus and other emoluments Fees Defined contribution plan Non-Executive: Fees Other emoluments

2008 RM

Group 2007 RM

2008 RM

Company 2007 RM

1,831,133 82,400 220,356 ––––—— 2,133,889

1,885,163 99,961 198,456 –––—––– 2,183,580

1,622,885 82,400 220,356 –––––––– 1,925,641

1,885,163 99,961 198,456 –––––––– 2,183,580

105,700 268,800 ––––—— 2,508,389 =======

69,300 - ––––—–– 2,252,880 =======

105,700 268,800 –––––––– 2,300,141 =======

69,300 - –––––––– 2,252,880 =======

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

66

Number of directors Range of remuneration

2008

Executive 2007

Below 50,000 RM50,001 - RM100,000 RM100,001 - RM150,000 RM150,001 - RM200,000 RM200,001 - RM250,000 RM250,001 - RM300,000 RM300,001 - RM350,000 RM600,001 - RM750,000

- - - - 2 1 2 1 ====

- - - 1 - 3 - 1 ====

Non-Executive 2008 2007 2 5 - - - - - - ====

3 ====

Zecon Berhad annual report 2008

Notes to the Financial Statements - 31 December 2008 10. Income Tax Expense

Group 2008 RM

2007 RM

2008 RM

Current income tax: Malaysian income tax 2,350,155 3,310,444 90,000 Overprovision in prior years (2,283,187) (58) (1,779,575) –––––––– –––––––– –––––––– 66,968 3,310,386 (1,689,575) –––––––– –––––––– –––––––– Deferred tax (Note 31): Under/(over)provision in prior years Relating to origination and reversal of temporary differences Relating to changes in tax rates Total income tax expense

Company 2007 RM 5,585 –––––––– 5,585 ––––––––

37,000

(236,000)

-

(236,000)

236,810 (8,000) –––––––– 265,810 –––––––– 332,778 =======

- (8,000) ––––––––– (244,000) ––––––––– 3,066,386 ========

- - –––––––– - –––––––– (1,689,575) =======

–––––––– (236,000) –––––––– (230,415) =======



Domestic income tax is calculated at the Malaysian statutory tax rate of 26% (2007: 27%) of the estimated assessable profit for the year. The domestic statutory tax rate will be reduced to 25% from the current year’s rate of 26% with effect from the year of assessment 2009. The computation of deferred tax as at 31 December 2008 has reflected these changes.



Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions. During the current financial year, the income tax rate applicable to the subsidiary in Australia is 30%.



A reconciliation of income tax expense applicable to profit/(loss) before taxation at the statutory income tax rate to income tax expense at the effective income tax rate of the Group and of the Company is as follows:

Group

2008 RM

2007 RM

Profit before taxation

1,343,461 =======

7,291,510 ========

Taxation at Malaysian statutory tax rate of 26% (2007: 27%) Effect of income subject to tax rate of 20% (2007: 20%) Effect of expenses not deductible for tax purposes Effect of changes in tax rates on opening balance of deferred tax Income not subject to tax Deferred tax assets not recognised on unabsorbed capital allowances and business losses Under/(over)provision of deferred tax in prior years Overprovision of income tax expense in prior years Effect of utilisation of previously unabsorbed capital allowances Income tax expense for the year

349,300 (67,727) 3,149,438 (3,484) (842,025) 110,877 37,000 (2,283,187) (117,414) –––––––– 332,778 =======

1,968,707 (77,974) 3,532,962 483,088 (4,395,323) 2,237,293 (236,000) (58) (446,309) –––––––– 3,066,386 =======

Loss before taxation

(11,226,308) ========

(13,967,145) ========

Taxation at Malaysian statutory tax rate of 26% (2007: 27%) Effect of expenses not deductible for tax purposes Income not subject to tax Deferred tax assets not recognised on unabsorbed capital allowances and business losses Overprovision of deferred tax in prior years Overprovision of income tax expense in prior years Income tax expense for the year

(2,918,840) 1,870,570 - 1,138,270 - (1,779,575) –––––––– (1,689,575) =======

(3,771,129) 974,423 (44,898) 2,847,189 (236,000) –––––––– (230,415) =======



Company

67

Notes to the Financial Statements - 31 December 2008 10.

Income Tax Expense (contd.)



Tax losses and unabsorbed capital allowances are analysed as follows:

Group Company 2008 2007 2008 2007 RM RM RM RM (i) Unutilised tax losses carried forward (Note 31) 18,565,000 28,170,000 9,336,000 17,248,000 ======== ======== ======== ======= (ii) Unabsorbed capital allowances carried forward (Note 31) 9,906,000 6,351,000 7,418,000 4,656,000 ======= ======= ======= ======= The unutilised tax losses and unabsorbed capital allowances of the Group and of the Company are available for offsetting against future taxable profits subject to no substantial change in shareholdings under the Income Tax Act, 1967 and guidelines issued by the Tax Authority. 11.

Earnings Per Share



(a)

Basic



Basic earnings per share amounts are calculated by dividing profit for the year attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares in issue during the financial year. 2008 2007 RM RM Profit attributable to ordinary equity holders of the Company 1,009,674 4,177,720 ======= ======== Weighted average number of ordinary shares in issue

110,060,450 =========

112,305,841 ========

Basic earnings per share for: Profit for the year (b) Diluted

2008 Sen

2007 Sen

0.92 ====

3.72 ====



For the purpose of calculating diluted earnings per share, the profit for the year attributable to ordinary equity holders 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, and share options granted to employees. 2008 2007 RM RM Profit attributable to ordinary equity holders of the Company 1,009,674 4,177,720 ======= ========

68

Weighted average number of ordinary shares in issue

110,060,450 =========

111,567,933 ========

Diluted earnings per share for: Profit for the year

2008 Sen

2007 Sen

0.92 ====

3.74 ====

Zecon Berhad annual report 2008

Notes to the Financial Statements - 31 December 2008 12. Dividends Dividends Dividends in respect of year recognised in year 2008 2007 2008 2007 RM RM RM RM

Recognised during the year:

Interim dividend for 2008: Nil (2007: 3% less 27% taxation, on 111,100,550 ordinary shares (2.19 sen net per ordinary share)) - ======= 13.

2,443,102 =======

- =======

2,443,102 =======

Property, Plant and Equipment

Office furnitures, Plant, machinery Motor fittings, equipment Buildings and equipment vehicles and renovation RM RM RM RM Group

Total RM

2008 Cost At 1 January 2008 5,915,507 28,397,439 6,663,557 6,304,430 Additions 736,000 11,011,781 3,419,780 2,464,684 Disposals - - (229,714) (2,400) Transfers - (114,000) 114,000 - –––––––– ––––––––– ––––––––– ––––––––– At 31 December 2008 6,651,507 39,295,220 9,967,623 8,766,714 –––––––– ––––––––– ––––––––– ––––––––– Accumulated depreciation and impairment

47,280,933 17,632,245 (232,114) ––––––––– 64,681,064 –––––––––



At 1 January 2008 Depreciation charge for the year

648,100 115,224

12,689,940 1,988,378

4,329,355 1,327,361

3,884,256 878,867

21,551,651 4,309,830

115,224 -

224,355 1,764,023

459,695 867,666

479,163 399,704

1,278,437 3,031,393

Disposals Transfers At 31 December 2008 Net carrying amount

- - –––––––– 763,324 ––––––––

- (19,950) ––––––––– 14,658,368 –––––––––

(229,713) 19,950 ––––––––– 5,446,953 –––––––––

(800) - ––––––––– 4,762,323 –––––––––

(230,513) ––––––––– 25,630,968 –––––––––

At 31 December 2008

5,888,183 =======

24,636,852 ========

4,520,670 =======

4,004,391 =======

39,050,096 ========



Recognised in income statement (Note 7) Capitalised in construction costs (Note 22)

69

Notes to the Financial Statements - 31 December 2008 13. Property, Plant and Equipment (contd.) Plant, machinery Motor Buildings and equipment vehicles RM RM RM Group

Office furnitures, fittings, equipment and renovation Total RM RM

2007 Cost At 1 January 2007 Additions Disposals Disposal of subsidiaries (Note 17(a)) At 31 December 2007

30,659,723 744,080 (107,756) (2,898,608) ––––––––– 28,397,439 –––––––––

8,770,162 791,087 (948,153) (1,949,539) ––––––––– 6,663,557 –––––––––

6,924,944 836,443 (68,801) (1,388,156) ––––––––– 6,304,430 –––––––––



Accumulated depreciation and impairment



At 1 January 2007 Depreciation charge for the year

54,616,485 2,371,610 (3,470,859) (6,236,303) ––––––––– 47,280,933 ––––––––

732,917 164,999

10,846,234 3,818,025

5,737,740 1,389,222

4,098,391 781,649

21,415,282 6,153,895

164,999 -

957,752 2,860,273

997,138 392,084

669,870 111,779

2,789,759 3,364,136

Disposals Disposal of subsidiaries (Note 17(a)) At 31 December 2007 Net carrying amount

(249,816) - –––––––– 648,100 ––––––––

(66,824) (1,907,495) –––––––– 12,689,940 –––––––––

(919,865) (1,877,742) ––––––––– 4,329,355 –––––––––

(43,388) (952,396) ––––––––– 3,884,256 –––––––––

(1,279,893) (4,737,633) ––––––––– 21,551,651 –––––––––

At 31 December 2007

5,267,407 =======

15,707,499 ========

2,334,202 =======

2,420,174 =======

25,729,282 ========



70

8,261,656 - (2,346,149) - –––––––– 5,915,507 ––––––––

Recognised in income statement (Note 7) Capitalised in construction costs (Note 22)

Zecon Berhad annual report 2008

Notes to the Financial Statements - 31 December 2008 13. Property, Plant and Equipment (contd.) Vessels Office furnitures Plants, machinery and Motor fittings, equipment Buildings and equipment dredging vehicles and renovation Total RM RM RM RM RM RM Company

2008



Cost

At 1 January 2008 5,915,507 23,544,726 1,400,000 4,489,677 Additions 736,000 4,600,440 - 70,500 Disposals - - - (229,714) –––––––– ––––––––– ––––––––– –––––––– At 31 December 2008 6,651,507 28,145,166 1,400,000 4,330,463 –––––––– ––––––––– ––––––––– –––––––– Accumulated depreciation

4,030,492 112,366 - –––––––– 4,142,858 ––––––––

39,380,402 5,519,306 (229,714) ––––––––– 44,669,994 –––––––––

At 1 January 2008 Depreciation charge for the year Recognised in income statement (Note 7) Capitalised in construction costs (Note 22)

648,100 115,224

10,593,022 721,280

595,000 210,000

3,483,599 515,941

2,976,427 317,655

18,296,148 1,880,100

115,224

1,276

210,000

443,661

283,005

1,053,166

-

720,004

-

72,280

34,650

826,934

Disposals At 31 December 2008 Net carrying amount

- –––––––– 763,324 ––––––––

- –––––––– 11,314,302 ––––––––

- –––––––– 805,000 ––––––––

(229,713) –––––––– 3,769,827 ––––––––

- –––––––– 3,294,082 ––––––––

(229,713) ––––––––– 19,946,535 –––––––––

At 31 December 2008 2007

5,888,183 =======

16,830,864 ========

595,000 =======

560,636 =======

848,776 =======

24,723,459 ========

8,261,656 - (2,346,149) –––––––– 5,915,507 ––––––––

23,544,726 - - ––––––––– 23,544,726 –––––––––

1,400,000 - - ––––––––– 1,400,000 –––––––––

4,580,175 156,892 (247,390) –––––––– 4,489,677 ––––––––

3,919,877 110,615 - –––––––– 4,030,492 ––––––––

41,706,434 267,507 (2,593,539) ––––––––– 39,380,402 –––––––––

732,917 164,999

7,794,266 2,798,756

385,000 210,000

2,955,051 751,200

2,544,121 432,306

14,411,355 4,357,261

164,999

588

210,000

562,391

399,234

1,337,212

-

2,798,168

-

188,809

33,072

3,020,049

Disposals (249,816) - - (222,652) –––––––– –––––––– –––––––– –––––––– At 31 December 2007 648,100 10,593,022 595,000 3,483,599 –––––––– –––––––– –––––––– –––––––– Net carrying amount

- –––––––– 2,976,427 –––––––––

(472,468) ––––––––– 18,296,148 –––––––––

At 31 December 2007

1,054,065 ========

21,084,254 ========

Cost



At 1 January 2007 Additions Disposals At 31 December 2007 Accumulated depreciation

At 1 January 2007 Depreciation charge for the year



Recognised in income statement (Note 7) Capitalised in construction costs (Note 22)

5,267,407 =======

12,951,704 ========

805,000 =======

1,006,078 =======

71

Notes to the Financial Statements - 31 December 2008 13.

Property, Plant and Equipment (contd.)



(a)

During the financial year, the Group and the Company acquired property, plant and equipment at aggregate costs of RM17,632,245 (2007: RM2,371,610) and RM5,519,306 (2007: RM267,507), respectively, of which RM993,938 (2007: RM781,418) and RM Nil (2007: RM Nil), respectively, were acquired by means of hire purchase and finance lease arrangements. Net carrying amounts of property, plant and equipment held under hire purchase and finance lease arrangements are as follows: 2008 RM

Group 2007 RM

2008 RM

Company 2007 RM

4,027,356 1,862,820 ––––––––– 5,890,176 ========

13,296,831 1,742,342 ––––––––– 15,039,173 ========

3,643,731 374,410 ––––––––– 4,018,141 ========

12,869,582 787,747 ––––––––– 13,657,329 ========

Plant, machinery and equipment Motor vehicles

Details of the terms and conditions of the hire purchase and finance lease arrangements are disclosed in Note 28.



Certain buildings of the Group and of the Company, with net carrying amounts of RM1,646,807 (2007: RM1,681,970), are pledged for borrowings as disclosed in Note 27.

Prepaid land lease payments 14. Group/Company 2008 2007 RM RM At 1 January Amortisation for the year (Note 7) At 31 December Analysed as:

1,222,716 (26,843) –––––––– 1,195,873 =======

1,249,559 (26,843) –––––––– 1,222,716 =======

Long term leasehold land Short term leasehold land

595,156 600,717 –––––––– 1,195,873 =======

608,666 614,050 –––––––– 1,222,716 =======

15.

Land Held for Property Development and Developments Costs



(a)

Land Held for Property Development

Group 2008

Long-term Leasehold Land RM

Total RM

Cost

At 1 January/31 December 2008

72

Short- term Freehold Land RM

1,159,125 –––––––––

125,152,361 ––––––––––

126,311,486 ––––––––––



Accumulated impairment losses



At 1 January/31 December 2008

-

-

-

Carrying amount at 31 December 2008

–––––––– 1,159,125 =======

–––––––––– 125,152,361 =========

–––––––––– 126,311,486 =========

Zecon Berhad annual report 2008

Notes to the Financial Statements - 31 December 2008 15.

Land Held for Property Development and Developments Costs (contd.)



(a)

Land Held for Property Development (contd.)

Group

2007



Cost

At 1 January 2007 Disposal At 31 December 2007 Accumulated impairment losses

Short- term Freehold Land RM

1,159,125 - ––––––––– 1,159,125 –––––––––

Long-term Leasehold Land RM

Total RM

143,069,401 (17,917,040) –––––––––– 125,152,361 ––––––––––

144,228,526 (17,917,040) –––––––––– 126,311,486 ––––––––––

At 1 January/31 December 2007 - - –––––––– –––––––––– –––––––––– Carrying amount at 31 December 2007 1,159,125 125,152,361 126,311,486 ======= ========= ========= Leasehold land with carrying values of RM33,714,909 (2007: RM33,714,909) have been pledged as security for banking facilities granted to the Group (Note 27).

(b)

Development Costs

Group

Leasehold Land RM



2008



Cumulative development costs

Development Costs RM

Total RM

At 1 January 2008 Costs incurred during the year At 31 December 2008 Cumulative costs recognised in income statement

4,837,174 - –––––––– 4,837,174 ––––––––

5,134,228 3,995,891 ––––––––– 9,130,119 –––––––––

9,971,402 3,995,891 ––––––––– 13,967,293 –––––––––

At 1 January/31 December 2008

- ––––––––

- –––––––––

–––––––––

Development costs at 31 December 2008

4,837,174 =======

9,130,119 ========

13,967,293 ========



2007 Cumulative development costs

At 1 January 2007 4,837,174 Costs incurred during the year - –––––––– At 31 December 2007 4,837,174 –––––––– Cumulative costs recognised in income statement

3,332,476 1,801,752 ––––––––– 5,134,228 –––––––––

8,169,650 1,801,752 ––––––––– 9,971,402 –––––––––

At 1 January/31 December 2007

- ––––––––

- –––––––––

–––––––––

Development costs at 31 December 2007

4,837,174 =======

5,134,228 =======

9,971,402 ========

73

Notes to the Financial Statements - 31 December 2008 16. Intangible Assets Goodwill RM Group

Toll Concessions RM

Total RM



Cost



At 1 January 2007

3,519,040

13,117,032

16,636,072



Disposal of partial interest in subsidiary

(338,751)

-

(338,751)

At 31 December 2007

––––––––– 3,180,289

––––––––– 13,117,032

––––––––– 16,297,321

Disposal of partial interest in subsidiary At 31 December 2008

(352,217) –––––––– 2,828,072 ––––––––

- ––––––––– 13,117,032 –––––––––

(352,217) ––––––––– 15,945,104 –––––––––



Accumulated amortisation and impairment



At 1 January 2007

-

666,089

666,089

Amortisation (Note 7) At 31 December 2007

- ––––––– -

264,017 ––––––– 930,106

264,017 ––––––– 930,106

Amortisation (Note 7) At 31 December 2008

- ––––––– - –––––––

176,412 –––––––– 1,106,518 ––––––––

176,412 –––––––– 1,106,518 ––––––––

At 31 December 2007

3,180,289 =======

12,186,926 ========

15,367,215 ========

At 31 December 2008

2,828,072 =======

12,010,514 ========

14,838,586 ========



Net carrying amount

17. Investment in Subsidiaries Company 2008 2007 RM RM Unquoted shares at cost 55,544,905 48,691,148 ======== ======== Details of the subsidiaries are as follows: Proportion of ownership Country of interest Name of subsidiaries incorporation Principle activities 2008 2007 % % Held by the Company Zecon Toll Concessionaire Sdn. Bhd.* Malaysia Zecon Water Corporation Sdn. Bhd.* Malaysia Zecon Land Sdn. Bhd.* Malaysia Zecon Geotechnical Malaysia Services Sdn. Bhd.*

74

Operation and maintenance of toll 100 bridge and collection of toll revenue

100

Water related services

100

100

Property development

100

100

Foundation engineering and piling

100

100

Zecon Berhad annual report 2008

Notes to the Financial Statements - 31 December 2008 17. Investment in Subsidiaries (contd.) Proportion of ownership Country of interest Name of subsidiaries incorporation Principle activities 2008 2007 % % Held by the Company

Zecon Resources Sdn. Bhd.*

Malaysia

Property development

96

96



Teknik PS Sdn. Bhd.*

Malaysia

Dormant

55

55

Zecon International Limited* Zecon Piling Sdn. Bhd.* Zecon Mutiara Sdn. Bhd.*

British Virgin Islands

Foundation engineering and construction

100

100

Malaysia

Dormant

100

100

Malaysia

Construction of medium and low cost houses

100

100

70

70

51

100

100

51

Zecon Dredging Sdn. Bhd.* Malaysia Sand, dredging, earthworks and services Zecon Energy Sdn. Bhd.* Malaysia Energy management and other energy related services Zecon Assets Sdn. Bhd.* Malaysia Management, maintenance (formerly known as and rental services in Zecon-Esec Engineering Sdn. Bhd.) relation to machineries, motor vehicles and hardware of every descriptions

Zecon Australia Pty. Ltd.** Zecon Construction Sdn. Bhd.* Zecon Construction (Sarawak) Sdn. Bhd.* Zecon Designtech Sdn. Bhd.*

Australia

Dormant

100

100

Malaysia

Dormant

51

51

Malaysia

Dormant

100

100

Malaysia

Dormant

100

-

Zecon Fab Sdn. Bhd.**

Malaysia

Dormant

51

-

Matang Highway Sdn. Bhd. *

Malaysia

Special purpose vehicle for financing purposes

100

-



Zecon MidEast Ltd. *

Labuan

Dormant

100

-



Zecon (Saudi Arabia) International Limited *

Labuan

Dormant

100

-



75

Notes to the Financial Statements - 31 December 2008 17. Investment in Subsidiaries (contd.) Proportion of ownership Country of interest Name of subsidiaries incorporation Principle activities 2008 2007 % % Held through subsidiaries:

Subsidiary of Zecon Resources Sdn. Bhd.



Sarmax Sdn. Bhd.*



Subsidiary of Teknik PS Sdn. Bhd.



Subsidiary of Zecon Mutiara Sdn. Bhd.

Malaysia

Dormant

Malaysia

Dormant

100

100

Agrowell Quarry Sdn. Bhd.*

Malaysia

Dormant

100

100

Zecon Designtech Sdn. Bhd.*(i)

Malaysia

Dormant

-

50

TPS Medicare Sdn. Bhd.*

50.1

50.1



Subsidiary of Zecon Land Sdn. Bhd.



IR Concept (M) Sdn. Bhd.*

Malaysia

Supplier of electrical or electronic equipment and services

-

100

Zecon Designtech Sdn. Bhd.*(ii)

Malaysia

Dormant

-

50

-

100

51

51

-

100

100

100

100

-

100

-

100

-



ZPM Satu Sdn. Bhd.* Malaysia Property sales and management Zecon Petra Jaya Sdn. Bhd.* Malaysia Property development Zalpoint Tanah Putih Sdn. Bhd.* Malaysia Property development Zecon Demak Jaya Sdn. Bhd.* Malaysia Property development Subsidiary of Zecon International Ltd. IR Concept (M) Sdn. Bhd.* Malaysia Supplier of electrical or electronic equipment and services ZPM Satu Sdn. Bhd.* Malaysia Property sales and management Zalpoint Tanah Putih Sdn. Malaysia Property development Bhd.*

76



* * *

Audited by Ernst & Young, Malaysia Audited by firms of auditors other than Ernst & Young



(i)

The remaining 50% is held by Zecon Land Sdn. Bhd.

(ii)

The remaining 50% is held by Zecon Mutiara Sdn. Bhd.



During the year, the Company acquired additional investments in certain subsidiaries. Accordingly, the investments increased by RM6,902,198 as a result of the increase in the issued and paid-up ordinary share capital of those subsidiaries.

Zecon Berhad annual report 2008

Notes to the Financial Statements - 31 December 2008 17.

Investment in Subsidiaries (contd.)



(a)

Disposal of subsidiaries



On 19 September 2008, the Group disposed of its 49% equity interest in Zecon Energy Sdn. Bhd. for a total consideration of RM49,000 by way of cash. The subsidiary is reported as part of the others segment.



On 19 December 2007, the Group disposed of its 100% equity interest in Zecon Engineering Works Sdn. Bhd. for a total consideration of RM1,000,000 by way of cash. The subsidiary was previously reported as part of the construction segment.



On 31 December 2007, the Group disposed of its 49% equity interest in Zecon Petra Jaya Sdn. Bhd. for a total consideration of RM17,600,000 by way of cash. The subsidiary is reported as part of the property development segment.



On 24 July 2007, the Group disposed of its 100% equity interest in Zecon Energy International Limited for a total consideration of RM570,000 by way of cash. The subsidiary was previously reported as part of the others segment.

Property, plant and equipment Land held for development Receivables Cash and bank balances Payables Amount due to bankers Lease payables Amount due to customers for contract works Amount due to related companies Deferred tax liability Net (liabilities)/assets disposed Attributable goodwill Total disposal proceeds Gain on disposal to the Group Disposal proceeds settled by: Cash

(b)

2007 RM

10,476 - 37,697 - (28,833) - - - (996,165) - ––––––––– (976,825) 352,217 ––––––––– (624,608) 49,000 –––––––––

1,498,670 16,520,306 90,665,549 123,813 (67,260,805) (991,900) (70,001) (20,018,834) (15,756,150) (1,837,000) ––––––––– 2,873,648 338,751 ––––––––– 3,212,399 19,170,000 –––––––––

673,608 ========

15,957,601 ========

49,000 =====

19,170,000 ========

49,000 - –––––– 49,000 =====

19,170,000 870,376 ––––––––– 20,040,376 ========



Cash inflow arising on disposals:

Cash consideration Cash and cash equivalents of subsidiaries disposed Net cash inflow of the Group

2008 RM

Acquisition of subsidiaries



On 16 June 2008, the Company acquired additional 49 ordinary shares of RM1.00 each, representing 49% of the total issued and paid-up capital in Zecon Esec-Engineering Sdn Bhd (Zecon-Esec) for a total cash consideration of RM49.00 only. With the said acquisition, Zecon Esec is a wholly-owned subsidiary of the Company. On 12 August 2008, Zecon-Esec changed its name to Zecon Assets Sdn Bhd.



On 17 June 2008, the Company acquired 510 ordinary shares of RM1.00 each, representing 51% of the equity interest in Zecon Fab Sdn Bhd (formerly known as Zecon Utilities Sdn Bhd) for a total consideration of RM510.00 only, and the net cash inflow arising from such acquisition is RM477.

77

Notes to the Financial Statements - 31 December 2008 18. Investment in Associates Group Company 2008 2007 2008 2007 RM RM RM RM Quoted shares in Malaysia, at cost Unquoted shares at cost Shares of post-acquisition reserves Impairment in value of investment

12,366,128 175,000 ––––––––– 12,541,128 604,312 ––––––––– 13,145,440 (12,366,128) ––––––––– 779,312 ========

12,366,128 175,000 ––––––––– 12,541,128 (1,719,358) ––––––––– 10,821,770 (1,000,000) ––––––––– 9,821,770 ========

12,366,128 175,000 ––––––––– 12,541,128 - ––––––––– 12,541,128 (12,366,128) ––––––––– 175,000 ========

12,366,128 175,000 ––––––––– 12,541,128 ––––––––– 12,541,128 (1,000,000) ––––––––– 11,541,128 ========

Group Company 2008 2007 2008 2007 RM RM RM RM Market value of quoted shares

- ========

2,604,388 ========

- ========

2,604,388 =======

Impairment in value of investment has been fully provided for the quoted shares due to the unfavourable market value and the delisting of the investment during the year. Details of the associates are as follows: Proportion Proportion of ownership of Name of Country of Principle interest voting entities incorporation activities 2008 2007 2008 2007 % % % % L.C.S. Trading Co. Sdn. Bhd. Malaysia

Trading in hardware, building materials and related products

35.0

35.0

35.0

35.0

Halifax Capital Berhad Malaysia Assembly and sale 25.5 25.5 25.5 25.5 of electrical and electronic products The summarised financial information of the Group’s investment in associates are: Group 2008 2007 RM RM Assets and liabilities Current assets 2,179,321 2,504,928 Non-current assets 476,224 4,656,104 –––––––– ––––––––– Total assets 2,655,545 7,161,032 ======= ======== Current liabilities Non-current liabilities Total liabilities Results Revenue Profit/(loss) for the year

78

1,822,030 18,491 –––––––– 1,840,521 =======

5,817,491 365,786 ––––––––– 6,183,277 ========

5,073,909 250,374 ========

8,761,135 (1,066,333) ========

Zecon Berhad annual report 2008

Notes to the Financial Statements - 31 December 2008 18.

Investment in Associates (contd.)



On 8 May 2007, one of the associates, Halifax Capital Berhad (“Halifax”) was classified as an affected listed issuer under the category of Amended Practice Note 17 by Bursa Malaysia Securities Berhad pursuant to Paragraph 8.14C and Paragraph 2.1(a) of Practice Note no. 17/2005 of the Listing Requirements.



Subsequently, on 25 July 2008, Halifax was delisted from the Main Board of the Bursa Malaysia Securities Berhad.

Investment in Jointly Controlled Entity 19. Group Company 2008 2007 2008 2007 RM RM RM RM

Unquoted share at cost 4,861,201 1 1 1 Share of post-acquisition reserves - - - ––––––––– –––––– –––––– –––––– 4,861,201 1 1 1 Less: Accumulated impairment losses - - - ––––––––– –––––– –––––– –––––– 4,861,201 1 1 1 ======== ===== ===== ===== Details of the jointly controlled entity are as follows: Proportion of ownership Country of interest Name of entity incorporation Principle activities 2008 2007 % % NS Water-Zecon JV Sdn. Bhd. Malaysia Dormant 50 50 Ramco-Zecon WLL Qatar Dormant 49

On 20 March 2008, a subsidiary of the Company entered into a joint venture agreement with Ramco Trading & Contracting WLL.



The Group’s aggregate share of the current assets, non-current assets, current liabilities, non-current liabilities, income and expenses of the jointly controlled entities is as follows: Group 2008 2007 RM RM Assets and liabilities Current assets/Total assets 950 950 ===== =====

Current liabilities/Total liabilities Results Expenses

8,456 =====

6,238 =====

1,486 =====

1,608 =====

79

Notes to the Financial Statements - 31 December 2008 20. Other Investments Group/Company 2008 2007 RM RM Quoted shares at cost Impairment in value of investment Unquoted shares at cost Subordinated Bonds Total Market value of quoted shares

80

241,325 =======

342,348 =======

Group

Company 2007 RM

2008 RM

2007 RM

2008 RM

- - - 5,586,939 - –––––––– 5,586,939 =======

93,230 268,779 20,390 6,426,939 70,282 –––––––– 6,879,620 =======

- - - 3,482,000 - –––––––– 3,482,000 =======

4,322,000 –––––––– 4,322,000 =======

2008 RM 268,582,693 23,267,762 –––––––––– 291,850,455

Company 2007 RM 151,523,264 16,132,039 –––––––––– 167,655,303

At cost:

Materials and supplies Finished goods Spare parts Properties held for sale Others 22.

1,556,571 (1,200,000) –––––––– 356,571 400,000 –––––––– 756,571 4,500,000 –––––––– 5,256,571 =======

The investment in bonds relates to the Subordinated Bonds (maturity date: 20 September 2010) issued under the Primary Collateralised Loan Obligation Programme as disclosed in Note 27 to the financial statements.

21. Inventories

316,743 - –––––––– 316,743 400,000 –––––––– 716,743 4,500,000 –––––––– 5,216,743 =======

Amount Due from/(to) Customers for Contract Work Group

Construction contract costs incurred to date Attributable profit

2008 RM 469,179,540 36,724,571 –––––––––– 505,904,111

2007 RM 340,031,534 17,356,592 –––––––––– 357,388,126



(477,188,443)

(186,666,668) (288,795,014) (138,688,518)

Value of payments in kind received under the Concession Agreement - land - toll concession

- - –––––––––– 28,715,668 =========

(123,482,968) (13,117,032) –––––––––– 34,121,458 =========

Amount due from customers for contract work Amount due to customers for contract work

45,245,011 (16,529,343) –––––––––– 28,715,668 =========

45,414,671 (11,293,213) ––––––––– 34,121,458 ========

Less: Progress billings

- - ––––––––– –––––––––– 3,055,441 28,966,785 ======== ========= 7,876,897 (4,821,456) ––––––––– 3,055,441 ========

28,966,785 ––––––––– 28,966,785 ========

Zecon Berhad annual report 2008

Notes to the Financial Statements - 31 December 2008 22. Amount Due from/(to) Customers for Contract Work (contd.) Group 2008 2007 RM RM Retention sum on contracts, included within trade payables (Note 29) 5,784,263 634,779 ======== ======== Retention sum on contracts, included within trade receivables (Note 23) 2,333,073 2,238,400 ======== ========

4,781,476 ========

174,774 ========

800,735 ========

800,735 ========

The costs incurred to date as construction contracts include the following charges made during the year:

Depreciation of property, plant and equipment (Note 13) Hire of equipment, plant and machinery Rental expense of buildings Interest expense (Note 6) Directors’ remuneration 23.

Company 2008 2007 RM RM

Group 2008 RM

2007 RM

3,031,393 2,611,894 157,940 3,435,677 471,200 =======

3,364,136 1,072,937 75,180 2,502,341 - =======

Company 2008 2007 RM RM 826,934 - - 347,262 262,951 =======

3,020,049 1,048,987 40,000 1,731,144 =======

25,262,019 4,027,489 (4,261,870) ––––––––– 25,027,638 800,735 ––––––––– 25,828,373 ========

16,462,512 7,116,784 (4,033,663) ––––––––– 19,545,633 800,735 ––––––––– 20,346,368 ========

Trade Receivables

Trade receivables Progress billings receivables Provision for doubtful debts Retention sums (Note 22) Trade receivables, net

108,231,439 4,899,116 (10,803,123) –––––––––– 102,327,432 2,333,073 –––––––––– 104,660,505 =========

75,321,471 7,994,915 (5,680,052) –––––––––– 77,636,334 2,238,400 –––––––––– 79,874,734 =========



Included in trade receivables of the Group and the Company is an amount of RM8,146,390 (2007: RM8,146,390) due from a company in which the close family members of a director of the Company have substantial financial interest.



The Group and the Company’s normal trade credit terms range from 30 to 90 days.



Other credit terms are assessed and approved on a case-by-case basis. The Group and the Company have significant concentration of credit risk that may arise from exposures to a single debtor or to groups of debtors. However, the Board does not consider this to pose significant credit risk to the Group and the Company.

Other Receivables 24. Other receivables Deposits Prepayments Amount due from joint ventures

Group

Company 2008 2007 RM RM

2008 RM

2007 RM

8,162,256 600,368 1,340,542

47,512,491 754,120 1,285,308

3,099,466 354,972 176,298

6,703,879 324,567 217,009

935,279 ––––––––– 11,038,445 ========

5,379,975 ––––––––– 54,931,894 ========

935,279 ––––––––– 4,566,015 ========

5,379,975 ––––––––– 12,625,430 ========

The Group and the Company have a significant exposure to a single debtor. However, the Board does not consider this to pose significant credit risk to the Group.

81

Notes to the Financial Statements - 31 December 2008 25.

Amount Due from/(to) Related Companies

Amount due from - subsidiaries - associates

Group 2008 RM

2007 RM

- 2,774,110 –––––––– 2,774,110

- 2,656,191 –––––––– 2,656,191

Company 2008 2007 RM RM 168,203,007 2,774,110 ––––––––– 170,977,117

94,418,659 2,656,191 ––––––––– 97,074,850

Amount due to subsidiaries - - (62,435,629) (5,062,147) –––––––– –––––––– ––––––––– ––––––––– 2,774,110 2,656,191 108,541,488 92,012,703 ======= ======= ======== ======== The amounts due from subsidiaries and associates are unsecured, interest-free and have no fixed term of repayment. The amount due to subsidiaries and associates are unsecured, interest-free and have no fixed term of repayment except for an amount of RM3,982,835 (2007: RM3,903,708) due to a subsidiary, which bears interest at 3.50% (2007: 3.50%) per annum. Cash and Bank Balances 26. Cash on hand and at banks Deposits with licensed banks Cash and bank balances

2007 RM

16,835,212 72,535,483 ––––––––– 89,370,695 ========

9,147,877 9,697,821 ––––––––– 18,845,698 ========

Company 2008 2007 RM RM 6,998,170 36,046,075 ––––––––– 43,044,245 ========

5,358,467 9,331,697 ––––––––– 14,690,164 ========



All deposits with licensed banks of the Group and of the Company are pledged to bankers as borrowings and bankers’ guarantees granted to the Group and the Company.



Included in the deposits with licensed banks is a Sinking Fund Account, amounting to RM35,216,254, created for the purpose of capturing the progressive monthly remittance of funds from the project revenue account. Such funds shall be utilised towards the repayment of the Sukuk Musharakah.



For the purpose of the cash flow statements, cash and cash equivalents comprise the following as at the balance sheet date:

Cash on hand and at banks Bank overdrafts (Note 27) Total cash and cash equivalents

82

Group 2008 RM

Group 2008 RM 16,835,212 (2,325,533) ––––––––– 14,509,679 ========

2007 RM 9,147,877 (6,035,230) ––––––––– 3,112,647 ========

Company 2008 2007 RM RM 6,998,170 (2,325,533) –––––––––– 4,672,637 ========

5,358,467 (6,035,230) ––––––––– (676,763) ========

Zecon Berhad annual report 2008

Notes to the Financial Statements - 31 December 2008 27. Borrowings Short-term borrowings

Group

Company 2008 2007 RM RM

2008 RM

2007 RM

178,974 357,787 5,108,737 –––––––––– 5,645,498

1,028,684 361,302 3,336,800 ––––––––– 4,726,786

178,974 357,787 5,108,737 ––––––––– 5,645,498

1,028,684 361,302 3,336,800 ––––––––– 4,726,786

35,000,000 993,880 23,830,000

- 3,518,230 20,780,000

35,000,000 993,880 -

3,518,230 11,000,000

2,134,521 –––––––––– 67,603,899 ––––––––––

2,391,051 –––––––––– 31,416,067 ––––––––––

1,630,036 ––––––––– 43,269,414 –––––––––

2,004,612 ––––––––– 21,249,628 –––––––––

1,331,653 3,500,000 1,395,000 ––––––––– 6,226,653 –––––––––– 73,830,552 =========

2,517,000 3,500,000 2,004,400 ––––––––– 8,021,400 –––––––––– 39,437,467 =========

1,331,653 3,500,000 1,395,000 ––––––––– 6,226,653 ––––––––– 49,496,067 ========

2,517,000 3,500,000 2,004,400 ––––––––– 8,021,400 ––––––––– 29,271,028 ========

Term loan (i) Term loan (ii) Term loan (iii) Term loan (iv)

981,327 78,188 5,000,000 - –––––––––– 6,059,515

1,154,806 368,942 5,000,000 14,200,000 ––––––––– 20,723,748

981,327 78,188 5,000,000 - ––––––––– 6,059,515

1,154,806 368,942 5,000,000 14,200,000 ––––––––– 20,723,748

Sukuk Musharakah Bai Bithaman Ajil Islamic Debt Securities Hire purchase payables (Note 28) Unsecured:

35,000,000 60,000,000 2,048,579 –––––––––– 103,108,094 ––––––––––

- 60,000,000 11,291,138 ––––––––– 92,014,886 –––––––––

35,000,000 - 956,439 ––––––––– 42,015,954 –––––––––

10,330,479 ––––––––– 31,054,227 –––––––––

45,000,000 –––––––––– 148,108,094 =========

45,000,000 –––––––––– 137,014,886 =========

45,000,000 ––––––––– 87,015,954 ========

45,000,000 ––––––––– 76,054,227 ========



Secured:

Term loan (i) Term loan (ii) Term loan (iii) Sukuk Musharakah Bank overdrafts Revolving credits Hire purchase payables (Note 28)

Unsecured:

Bank overdrafts Revolving credits Bankers’ acceptances

Long term borrowings



Secured:

Term loan (v)

83

Notes to the Financial Statements - 31 December 2008 27.

Borrowings (contd.)



Total borrowings

Bank overdrafts (Note 26) 2,325,533 6,035,230 2,325,533 6,035,230 Revolving credits 27,330,000 24,280,000 3,500,000 14,500,000 Bankers’ acceptances 1,395,000 2,004,400 1,395,000 2,004,400 Term loans 56,705,013 70,450,534 56,705,013 70,450,534 Sukuk Musharakah 70,000,000 - 70,000,000 Bai Bithaman Ajil Islamic Debt Securities 60,000,000 60,000,000 - Hire purchase payables (Note 28) 4,183,100 13,682,189 2,586,475 12,335,091 –––––––––– –––––––––– –––––––––– –––––––––– 221,938,646 176,452,353 136,512,021 105,325,255 ========= ========= ========= ========= Term loan (i) is secured by a deed of assignment over certain landed properties of the Company.

Term loan (ii) is secured by way of assignment of certain plant and machinery.



Term loan (iii) is secured by a way of assignment over contract proceeds receivable by the Company and a legal charge over the project and sinking fund accounts.



Term loan (iv) is secured by way of pledging the shares of a subsidiary, assignment over a designated account of a subsidiary and assignment of rights over specific agreement and certain landed properties. This security was subsequently discharged on 13 May 2008.



Term loan (v) is obtained under a Primary Collateralised Loan Obligation Programme and partly secured by Subordinated Bonds as disclosed in Note 20.



Sukuk Musharakah is secured by way of Memorandum of Charge over the Designated Accounts, assignment of the Company’s contractual rights, interest, title and benefit in the project including all proceeds arising there from and first ranking debenture comprising fixed and floating charge over the Trust Assets. A sinking fund account was created for the purpose of capturing the progressive monthly remittance of funds as disclosed in Note 26.



Bai Bithaman Ajil Islamic Debt Securities are secured by a security trust deed, a first ranking fixed and floating charge by way of debenture over all present and future assets, rights, interest and undertakings, a first ranking fixed charge over the designated accounts of a subsidiary and assignment of all the contractual benefits and rights over specified agreements and insurances.



The bank overdrafts of the Group and of the Company amounting to RM993,880 (2007: RM3,518,230) are secured by certain landed properties of a subsidiary.



The revolving credits of the Group and of the Company amounting to RM23,830,000 and RM Nil (2007: RM20,780,000 and RM11,000,000), respectively, are secured by certain landed properties of a subsidiary, pledge by way of Memorandum of Deposit over Fixed Deposit Receipt and assignment over contract proceeds receivable by the Company from its client in respect of the project financing.

28.

Hire Purchase Payables

Future minimum lease payments: Not later than 1 year Later than 1 year and not later than 2 years Later than 2 years and not later than 5 years

84

Group

Company

2008 RM

2007 RM

2008 RM

2007 RM

2,313,495 1,418,500 741,135 ––––––––– 4,473,130

2,742,890 2,098,790 9,402,514 ––––––––– 14,244,194

1,720,606 881,668 100,650 ––––––––– 2,702,924

2,270,592 1,711,393 8,735,340 ––––––––– 12,717,325

Zecon Berhad annual report 2008

Notes to the Financial Statements - 31 December 2008 28. Hire Purchase Payables (contd.) Less: Future finance charges Present value of finance lease liabilities Analysis of present value of finance lease liabilities: Not later than 1 year Later than 1 year and not later than 2 years Later than 2 years and not later than 5 years Less: Amount due within 12 months Due after 12 months

Group 2008 RM

Company 2008 2007 RM RM

2007 RM

(290,030) ––––––––– 4,183,100 ========

(562,005) ––––––––– 13,682,189 ========

(116,449) ––––––––– 2,586,475 ========

(382,234) ––––––––– 12,335,091 ========

2,134,521 1,343,815 704,764 ––––––––– 4,183,100 (2,134,521) ––––––––– 2,048,579 ========

2,391,051 1,948,372 9,342,766 ––––––––– 13,682,189 (2,391,051) ––––––––– 11,291,138 ========

1,630,036 858,419 98,020 ––––––––– 2,586,475 (1,630,036) ––––––––– 956,439 ========

2,004,612 1,613,752 8,716,727 ––––––––– 12,335,091 (2,004,612) ––––––––– 10,330,479 ========



The Group has finance leases and hire purchase contracts for various items of property, plant and equipment (see Note 13).



Other information on financial risks of hire purchase and future lease liabilities are disclosed in Note 38.

29. Trade Payables Group Company 2008 2007 2008 2007 RM RM RM RM Trade payables Due to subcontractors on contracts Retention sums (Note 22)

34,964,841 11,643,722 5,784,263 ––––––––– 52,392,826 ========

20,502,639 15,667,915 634,779 ––––––––– 36,805,333 ========

22,367,627 817,698 4,781,476 ––––––––– 27,966,801 ========



The normal trade credit terms granted to the Group and to the Company range from 30 to 90 days.

30.

Other Payables

Sundry payables Deposits Accruals

Group 2008 RM

2007 RM

3,786,809 253,292 3,081,836 ––––––––– 7,121,937 ========

7,637,866 261,552 3,958,364 ––––––––– 11,857,782 ========

13,727,251 15,667,915 174,774 –––––––– 29,569,940 =======

Company 2008 2007 RM RM 293,802 31,702 1,551,049 ––––––––– 1,876,553 ========

5,007,450 37,202 1,868,214 –––––––– 6,912,866 =======

85

Notes to the Financial Statements - 31 December 2008 31. Deferred Tax At 1 January Recognised in income statement (Note 10) Disposal of subsidiary (Note 17(a)) At 31 December

86

2007 RM

2008 RM

Company 2007 RM

(13,290,000) 265,810 - ––––––––– (13,024,190) ========

(11,209,000) (244,000) (1,837,000) ––––––––– (13,290,000) ========

- - - ––––––– - ======

236,000 (236,000) ––––––– ======

(14,046,237) 1,022,047 ––––––––– (13,024,190) ========

(13,500,000) 210,000 ––––––––– (13,290,000) ========

- - ––––––– - ======

––––––– ======

Presented after appropriate offsetting as follows:

Deferred tax assets Deferred tax liabilities

Group 2008 RM

The components and movements of deferred tax liabilities and assets during the financial year prior to offsetting are as follows:

Deferred tax liabilities of the Group:

Property plant and equipment RM

At 1 January 2008 Recognised in income statement At 31 December 2008

- 820,047 –––––––– 820,047 =======

210,000 (8,000) –––––––– 202,000 =======

210,000 812,047 –––––––– 1,022,047 =======

At 1 January 2007 Recognised in income statement Disposal of subsidiary (Note 17(a)) At 31 December 2007 Deferred tax liabilities of the Company: At 1 January and 31 December 2008 At 1 January 2007 Recognised in income statement At 31 December 2007 Deferred tax assets of the Group: Other payables RM

2,056,844 (219,844) (1,837,000) –––––––– - =======

465,925 (255,925) - –––––––– 210,000 =======

2,522,769 (475,769) (1,837,000) –––––––– 210,000 =======

- =======

- =======

=======

219,844 (219,844) –––––––– - =======

247,925 (247,925) –––––––– - =======

467,769 (467,769) –––––––– =======

Unused tax losses and unabsorbed capital allowances RM

Unabsorbed industrial building allowance RM

Total RM

Revaluation of land RM

Total RM

At 1 January 2008 Recognised in income statement At 31 December 2008

- - –––––––– - =======

- (546,237) –––––––––– (546,237) =========

(13,500,000) (13,500,000) - (546,237) –––––––––– –––––––––– (13,500,000) (14,046,237) ========= =========

At 1 January 2007 Recognised in income statement At 31 December 2007

(231,769) 231,769 –––––––– - =======

- - –––––––––– - =========

(13,500,000) (13,731,769) - 231,769 –––––––––– –––––––––– (13,500,000) (13,500,000) ========= =========

Zecon Berhad annual report 2008

Notes to the Financial Statements - 31 December 2008 31.

Deferred Tax (contd.)

Deferred tax assets of the Company: Unabsorbed Other industrial payables building allowance Total RM RM RM At 1 January and 31 December 2008 At 1 January 2007 Recognised in income statement At 31 December 2007

- ======

- ======

======

(231,769) 231,769 –––––––– - =======

- - –––––––– - =======

(231,769) 231,769 –––––––– =======

Deferred tax assets have no t been recognised in respect of the following items:



Group 2008 RM

2007 RM

Company 2008 2007 RM RM

Unutilised tax losses (Note 10) 18,565,000 28,170,000 9,336,000 17,248,000 Unabsorbed capital allowances (Note 10) 9,906,000 6,351,000 7,418,000 4,656,000 ––––––––– ––––––––– ––––––––– ––––––––– 28,471,000 34,521,000 16,754,000 21,904,000 ======== ======== ======== ======== As at 31 December 2008, the deferred tax assets are not recognised as it is not probable that future taxable profit will be available against which the unutilised tax losses and unabsorbed capital allowances can be utilised. The availability of the unutilised tax losses and unabsorbed capital allowances for offsetting against future taxable profit of the respective subsidiaries are subject to no substantial changes in shareholdings of those subsidiaries under Section 44(5A) and (5B) of Income Tax Act, 1967. 32.

Share Capital and Share Premium



Number of Ordinary Shares of RM1 Each Amount Share Capital Share Capital

(Issued and Fully (Issued and Fully Share Paid) Paid) Premium RM RM At 1 January 2008 and 31 December 2008 119,106,150 119,106,150 3,558,768 ========= ========= =======

At 1 January 2007

88,337,080

88,337,080

24,253,470

Ordinary shares issued pursuant to : Bonus Issue

22,084,270

22,084,270

(22,084,270)

Employees Share Option Scheme (“ESOS”) At 31 December 2007

8,684,800 –––––––––– 119,106,150 =========

8,684,800 –––––––––– 119,106,150 =========

1,389,568 –––––––– 3,558,768 =======



87

Notes to the Financial Statements - 31 December 2008 32. Share Capital and Share Premium (contd.) Number of Ordinary Shares of RM1 Each 2008 2007 Authorised share capital At 1 January/31 December



(i)





(ii)

500,000,000 =========

500,000,000 =========

Amount 2008 RM

500,000,000 =========

2007 RM

500,000,000 =========

Employees’ share option scheme (“ESOS”) The Zecon Berhad ESOS is governed by-laws approved by the shareholders at an Extraordinary General Meeting held on 15 February 2005. The ESOS was implemented on 22 March 2005 and is to be in force for a period of 5 years from the date of implementation. At 16 October 2007, a total of 8,684,800 new ordinary shares of RM1.00 has been issued and granted listing and quotation. Bonus issue

On 23 January 2007, the Company undertook a bonus issue of 22,084,270 new ordinary shares of RM1.00 each on the basis of one (1) new share for every four (4) existing shares held in the Company. The Bonus Issue has been granted listing and quotation on the Second Board of Bursa Malaysia Securities Berhad on 5 February 2007. 33. Other Reserves Asset Revaluation Foreign Reserve- Currency Freehold Translation Warrant Land Reserve Reserve Group RM RM RM At 1 January 2008 692,832 (6,880) 4,416,854

5,102,806

Foreign currency translation At 31 December 2008

At 1 January 2007



Foreign currency translation

Issue of warrants At 31 December 2007

- –––––––– 692,832 =======

4,409 ––––––– (2,471) ======

- –––––––– 4,416,854 =======

4,409 –––––––– 5,107,215 =======

692,832

(6,207)

-

686,625

-

(673)

-

(673)

- ––––––– 692,832 ======

- ––––––– (6,880) ======

4,416,854 –––––––– 4,416,854 =======

4,416,854 –––––––– 5,102,806 =======

Company

88

Total Reserves RM

Asset Revaluation Reserve- Warrant Freehold Land Reserve RM RM

Total Reserves RM

At 1 January and 31 December 2008

692,832 ======

4,416,854 =======

5,109,686 =======

At 1 January 2007 Issue of warrants At 31 December 2007

692,832

-

692,832

- ––––––– 692,832 ======

4,416,854 –––––––– 4,416,854 =======

4,416,854 –––––––– 5,109,686 =======

Zecon Berhad annual report 2008

Notes to the Financial Statements - 31 December 2008 33.

Other Reserves (contd.)



The nature and purpose of each category of reserve are as follows:



(a)



(b)





(c)



Asset revaluation reserve The asset revaluation reserve is used to record increases in the fair value of freehold land and decreases to the extent that such decrease relates to an increase on the same asset previously recognised in equity. Foreign currency translation reserve The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign operations whose functional currencies are different from that of the Group’s presentation currency. It is also used to record the exchange differences arising from monetary items which form part of the Group’s net investment in foreign operations, where the monetary item is denominated in either the functional currency of the reporting entity or the foreign operation. Warrant reserve On 6 March 2007, the Company has issued renounceable right issue of 44,168,540 new Warrants (“Warrants”) at an issue price of RM0.10 per Warrant on the basis of one (1) new Warrant for every two (2) existing ordinary shares of RM1.00 each held in the Company. The Warrants were subsequently listed on the Second Board of Bursa Malaysia Securities Berhad on 13 March 2007.

34.

Retained Earnings



Prior to the year of assessment 2008, Malaysian companies adopted the full imputation system. In accordance with the Finance Act 2007 which was gazetted on 28 December 2007, companies shall not be entitled to deduct tax on dividend paid, credited or distributed to its shareholders, and such dividends will be exempted from tax in the hands of the shareholders (“single tier system”). However, there is a transitional period of six years, expiring on 31 December 2013, to allow companies to pay franked dividends to their shareholders under limited circumstances. Companies also have an irrevocable option to disregard the 108 balance and opt to pay dividends under the single tier system. The change in the tax legislation also provides for the 108 balance to be locked-in as at 31 December 2008 in accordance with Section 39 of the Finance Act 2008.



The Company did not elect for the irrevocable option to disregard the 108 balance. Accordingly, during the transitional period, the Company may utilise the credit in the 108 balance as at 31 December 2008 and 2007 to distribute cash dividend payments to ordinary shareholdings as defined under the Finance Act 2007.

35. Contingent Liabilities Unsecured corporate guarantees given to banks for credit facilities granted to subsidiaries

(a)



Group

Company

2008 RM

2007 RM

2008 RM

2007 RM

- ========

- ======

- ========

70,000,000 =========

On 12 April 2005, Zalpoint Tanah Putih Sdn. Bhd. (“ZTPSB”), a wholly-owned subsidiary of Zecon Land Sdn. Bhd. (“ZLSB”), which is in turn a wholly-owned subsidiary of the Company, was served with a Writ of Summons dated 30 March 2005 by Estatequest Sdn. Bhd. (“Sub-developer”), for damages on loss of profits totalling RM12,968,780, declaratory orders, interests and costs. According to the Sub-developer, ZTPSB had breached the Memorandum of Agreement (“MOA”) dated 19 August 1999 entered between ZTPSB and the said Sub-developer relating to, inter-alia, the charging of the land for the Tanah Putih Development Project (“Project”) by ZTPSB. The Sub-developer alleged that ZTPSB had failed to make partial redemption of the sub-lots or parcels allocated to the Sub-developer and as a result, they could not continue with the remaining development of the Project.



ZTPSB had instructed their solicitors, Messrs Reddi & Co Advocates, to vigorously defend the claim made by the Subdeveloper.



Under the Share Sale Agreement (“SSA”) entered between the vendors of ZTPSB (“Vendors”) and ZLSB dated 15 December 2003, the Vendors had provided an indemnity clause in the SSA, to hold ZLSB harmless from and against any damages, deficiencies, losses, costs, liabilities and expenses (including legal fees and disbursements) resulting from and arising out of any breach of presentations, warranties, covenants and agreements made by the Vendors.



In addition, counter-claims were made by ZTPSB on 12 May 2005 against both the Sub-developer and directors of the Subdeveloper for breach of contract and personal liability as guarantors, respectively.

The full trial has been disposed of on 13 April 2009 and the Court passed judgement on 24 April 2009 dismissing the Plaintiff’s claim.

89

Notes to the Financial Statements - 31 December 2008 36.

Segmental Reporting



(a)





90

(b)

Reporting format The primary segment reporting format is determined to be business segments as the Group’s risks and rates of return are affected predominantly by differences in the products and services produced. No geographical analysis has been prepared as the Group’s business interests are mainly located in Malaysia. The operating businesses are organised and managed separately according to the nature of the products and services provided, with each segment representing a strategic business unit that offers different products and services and different markets. Business segments



The Group comprises the following main business segments:



(i) (ii) (iii) (iv)



The directors are of the opinion that all inter-segment transactions having been entered into in the normal course of business and have been transacted on normal commercial terms.

Construction - piling works, foundation engineering and building construction; Property development - property holding and development; Toll concession - operation and maintenance of toll bridge and collection of toll revenue; and Others - management services.



36. Construction RM

Property development RM

Toll concession Others RM RM

Group Eliminations RM Total RM

Assets Segment assets 463,523,910 227,846,224 131,563,048 42,724,446 (391,344,527 ) Investments in associates 779,312 - - - - Unallocated assets Total assets Liabilities Segment liabilities/total liabilities 340,704,529 188,395,380 60,721,409 47,252,982 (335,785,780 ) ============ ============ ============ ============ ============ Other segment information Capital expenditure 16,735,274 4,198 153,792 738,981 - Depreciation 3,709,084 260,084 65,094 275,568 - Amortisation 26,843 - 176,412 - - Other significant non-cash expenses: Provisions 2,741,321 211,925 2,860,391 451,449 - Impairment in value of investment 9,292,832 - - - - ============ ============ ============ ============ ============

31 December 2008

6,265,086 9,292,832 ============

17,632,245 4,309,830 203,255

301,288,520 ============

474,313,101 779,312 2,828,072 –––––––––––––– 477,920,485 ============

31 December 2008 Revenue Sales to external customers 147,755,075 - 9,195,921 221,773 - 157,172,769 Inter-segment sales 150,104,699 - - 8,460 (150,113,159 ) –––––––––––––– –––––––––––––– –––––––––––––– –––––––––––––– –––––––––––––– –––––––––––––– Total revenue 297,859,774 - 9,195,921 230,233 (150,113,159 ) 157,172,769 ============ ============ ============ ============ ============ ============ Results Segment results 9,558,399 (526,835 ) 6,514,541 (1,157,948 ) - 14,388,157 –––––––––––––– –––––––––––––– –––––––––––––– –––––––––––––– –––––––––––––– Finance costs (13,295,070 ) Share of profit of associates 250,374 –––––––––––––– Profit before taxation 1,343,461 Income tax expense (332,778 ) –––––––––––––– Profit for the year 1,010,683 ============

Segmental Reporting (contd.)

Zecon Berhad annual report 2008

Notes to the Financial Statements - 31 December 2008

91

92



36. Construction RM

Property development RM

Toll concession Others RM RM

Group Eliminations RM

Assets Segment assets 300,290,239 218,455,921 191,525,093 2,761,773 (310,461,834 ) Investments in associates 9,821,770 - - - - Unallocated assets Total assets Liabilities Segment liabilities/total liabilities 194,668,716 179,605,156 121,828,948 6,135,873 (262,059,038 ) ============ ============ ============ ============ ============ Other segment information Capital expenditure 2,264,209 5,753 94,557 7,091 - Depreciation 5,763,083 265,186 35,156 90,470 - Amortisation 26,843 - 264,017 - - Other significant non-cash expenses: Provisions 1,049,388 - - 460,000 - ============ ============ ============ ============ ============

31 December 2007

Revenue Sales to external customers 37,971,914 31,850,000 8,612,397 126,846 - Inter-segment sales 21,399,467 - - - (21,399,467 ) –––––––––––––– –––––––––––––– –––––––––––––– –––––––––––––– –––––––––––––– Total revenue 59,371,381 31,850,000 8,612,397 126,846 (21,399,467 ) ============ ============ ============ ============ ============ Results Segment results (9,360,301 ) 27,611,169 6,042,267 (546,840 ) - –––––––––––––– –––––––––––––– –––––––––––––– –––––––––––––– –––––––––––––– Finance costs Share of loss of associates Profit before taxation Income tax expense Profit for the year

31 December 2007

Segmental Reporting (contd.)

1,509,388 ============

2,371,610 6,153,895 290,860

240,179,655 ============

402,571,192 9,821,770 3,180,289 –––––––––––––– 415,573,251 ============

(15,388,452 ) (1,066,333 ) –––––––––––––– 7,291,510 (3,066,386 ) –––––––––––––– 4,225,124 ============

23,746,295

78,561,157 –––––––––––––– 78,561,157 ============

Total RM

Notes to the Financial Statements - 31 December 2008

Zecon Berhad annual report 2008

Notes to the Financial Statements - 31 December 2008 37.

Significant Related Party Transactions



Significant related party transactions entered into by the Group and the Company are as follows: Company 2008 2007 RM RM (i)

Transactions with subsidiaries:



Income

Management fee income Rental income Expenditure

- 7,200 ============

481,153 7,200 ============

Sub-contract works extended Interest expense

124,272,782 106,122 ============

19,982,094 106,122 ============

(ii)

Transactions with companies in which the close family members of certain directors of the Company have substantial financial interests:

Expenditure

2008 RM

Consultancy services fee paid to Perunding KAZ Sdn. Bhd. (Note a) Travelling costs paid to Al-Quds Travel (Note a) Purchase of culverts and roofing pile from SCIB Concrete Manufacturing Sdn. Bhd. (Note b)

2007 RM

2008 RM

Company

2007 RM

-

22,000

-

-

12,272

4,778

12,272

3,974

718,701 ============

- ============

- ============

============

(a)

Datuk Hj. Zainal Abidin Bin Hj. Ahmad and Hj. Zainurin bin Hj. Ahmad have substantial financial interests in this company

(b)

Datuk Hj. Zainal Abidin Bin Hj. Ahmad has substantial financial interests in this company

(iii)

Compensation of key management personnel:



The remuneration of directors during the year were as follows:

Directors’ remuneration (Note 9)

Group

2008 RM

Group

2,508,389 ============

Company

2007 RM

2008 RM

2,252,880 ============

2,300,141 ============

2007 RM

2,252,880 ============

The directors are of the opinion that all the transactions above have been entered into in the normal course of business and have been established on terms and conditions that are not materially different from those obtainable in transactions with unrelated parties.

93

Notes to the Financial Statements - 31 December 2008 38.

94

Financial Instruments (a)

Financial risk management objectives and policies



The Group’s financial risk management policy seeks to ensure that adequate financial resources are available for the development of the Group’s businesses whilst managing its interest rate, foreign exchange, liquidity and credit risks. The Board reviews and agrees policies for managing each of these risks and they are summarised below. It is and has been throughout the year under review, the Group’s policy that no trading in derivative financial instruments shall be undertaken.

(b)

Interest rate risk



Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. As the Group has no significant interest-bearing financial assets, the Group’s income and operating cash flows are substantially independent of changes in market interest rates.



The Group’s interest-bearing financial assets are mainly short term in nature and have been mostly placed in fixed deposits or occasionally, in short term commercial papers.



The Group’s interest rate risk arises primarily from interest-bearing borrowings. Borrowings at floating rates expose the Group to cash flow interest rate risk. Borrowings obtained at fixed rates expose the Group to fair value interest rate risk. The Group manages its interest rate exposure by maintaining a mix of fixed and floating rate borrowings.

38.

Interest rate risk (contd.)

The following tables set out the carrying amounts, the effective interest rates range as at the balance sheet date and the remaining maturities of the Group’s and the Company’s financial instruments that are exposed to interest rate risk: More Interest Within 1 1 – 2 2 – 3 3 – 4 4 – 5 than 5 Note rate range Year Years Years Years Years Years Total % RM RM RM RM RM RM RM At 31 December 2008 Group Fixed rate Term loans 27 8.38% - 45,000,000 - - - - 45,000,000 Hire purchase and finance lease liabilities 28 2.33% - 7.75% 2,134,521 1,343,815 476,879 197,080 30,805 - 4,183,100 ============ ============ ============ ============ ============ ============ ============ ============ Floating rate Bank overdrafts 27 7.50% - 7.80% 2,325,533 - - - - - 2,325,533 Revolving credits 27 1.50% - 6.36% 27,330,000 - - - - - 27,330,000 Bankers’ acceptances 27 3.67% - 3.68% 1,395,000 - - - - - 1,395,000 Term loans 27 6.80% - 7.60% 5,645,498 5,227,872 160,584 172,278 184,824 313,957 11,705,013 Bai Bithaman Ajil Islamic Debt Securities 27 5.90% - 8.85% - 4,000,000 5,000,000 5,000,000 5,000,000 41,000,000 60,000,000 Sukuk Musharakah 27 4.80% - 5.40% 35,000,000 20,000,000 15,000,000 - - - 70,000,000 ============ ============ ============ ============ ============ ============ ============ ============ Company Fixed rate Term loans 27 8.38% - 45,000,000 - - - - 45,000,000 Hire purchase and finance lease liabilities 28 2.35% - 4.75% 1,630,036 858,419 98,020 - - - 2,586,475 Amount due to related company 25 3.50% 3,982,835 - - - - - 3,982,835 ============ ============ ============ ============ ============ ============ ============ ============ Floating rate Bank overdrafts 27 7.50% - 7.80% 2,325,533 - - - - - 2,325,533 Revolving credits 27 5.77% - 6.36% 3,500,000 - - - - - 3,500,000 Bankers’ acceptances 27 3.67% - 3.68% 1,395,000 - - - - - 1,395,000 Term loans 27 6.80% - 7.60% 5,645,498 5,227,872 160,584 172,278 184,824 313,957 11,705,013 Sukuk Musharakah 27 4.80% - 5.40% 35,000,000 20,000,000 15,000,000 - - - 70,000,000 ============ ============ ============ ============ ============ ============ ============ ============



(b)

Financial Instruments (contd.)

Zecon Berhad annual report 2008

Notes to the Financial Statements - 31 December 2008

95

38.

96

Interest rate risk (contd.)

Group





-

-

45,000,000

-

-

-

45,000,000

6,035,230 24,280,000 2,004,400 4,726,786

- - - 19,637,898

- - - 147,940

- - - 158,714

- - - 170,272

- - - 608,924

6,035,230 24,280,000 2,004,400 25,450,534

-

-

45,000,000

-

-

-

45,000,000

7.75% - 8.25% 6,035,230 - - - - - 6,035,230 5.88% - 7.05% 14,500,000 - - - - - 14,500,000 3.61% - 3.83% 2,004,400 - - - - - 2,004,400 3.48% - 8.50% 4,726,786 19,637,898 147,940 158,714 170,272 608,924 25,450,534 ============ ============ ============ ============ ============ ============ ============ ============

2.35% - 4.75% 2,004,612 1,613,752 624,107 8,092,620 - - 12,335,091 3.50% 3,903,708 - - - - - 3,903,708 ============ ============ ============ ============ ============ ============ ============ ============

8.38%

5.90% - 8.85% - - 4,000,000 5,000,000 5,000,000 46,000,000 60,000,000 ============ ============ ============ ============ ============ ============ ============ ============

7.75% - 8.25% 5.88% - 8.50% 3.61% - 3.85% 3.48% - 8.50%

2.33% - 7.75% 2,391,051 1,948,372 978,898 8,266,873 96,995 - 13,682,189 ============ ============ ============ ============ ============ ============ ============ ============

8.38%

Interest on financial instruments subject to floating interest rates is contractually repriced at intervals of less than 6 months except for term loans and floating rate loans which are repriced annually. Interests on financial instruments at fixed rates are fixed until the maturity of the instrument. The other financial instruments of the Group and the Company that are not included in the above tables are not subject to interest rate risks.

Fixed rate Term loans 27 Hire purchase and finance lease liabilities 28 Floating rate Bank overdrafts 27 Revolving credits 27 Bankers’ acceptances 27 Term loans 27 Bai Bithaman Ajil Islamic Debt Securities 27 Company Fixed rate Term loans 27 Hire purchase and finance lease liabilities 28 Amount due to related company 25 Floating rate Bank overdrafts 27 Revolving credits 27 Bankers’ acceptances 27 Term loans 27

At 31 December 2007



The following tables set out the carrying amounts, the effective interest rates range as at the balance sheet date and the remaining maturities of the Group’s and the Company’s financial instruments that are exposed to interest rate risk (contd.): More Interest Within 1 1 – 2 2 – 3 3 – 4 4 – 5 than 5 Note rate range Year Years Years Years Years Years Total % RM RM RM RM RM RM RM



(b)

Financial Instruments (contd.)

Notes to the Financial Statements - 31 December 2008

Zecon Berhad annual report 2008

Notes to the Financial Statements - 31 December 2008 38.

Financial Instruments (contd.) (c) Foreign currency risk The Group is exposed to currency risk in respect of its foreign investments in subsidiaries. These are, however, not significant. (d)

Liquidity risk



The Group manages its debt maturity profile, operating cash flows and the availability of funding so as to ensure that refinancing, repayment and funding needs are met. As part of its overall liquidity management, the Group maintains sufficient levels of cash or cash convertible investments to meet its working capital requirements. In addition, the Group strives to maintain available banking facilities at a reasonable level to its overall debt position.

(e)

Credit risk



Credit risk, or the risk of counterparties defaulting, is controlled by the application of credit approvals, limits and monitoring procedures. Credit risk is minimised and monitored by limiting the Group’s associations to business partners with high creditworthiness. Trade receivables are monitored on an on-going basis via Group management reporting procedures.



The Group has significant exposure to certain individual customers or counter parties. However, this does not pose significant credit risk to the Group.



The Group does not have any other major concentration of credit risk related to any financial instruments.

(f)

Fair value



The carrying amounts of financial assets and liabilities of the Group and Company at the balance sheet date approximated their fair values except for the followings:

2008 2007 Note Carrying Fair Carrying Fair Amount value Amount value RM RM RM RM Group Hire purchase payables 28 4,183,100 4,187,045 13,682,189 13,682,189 ============ ============ ============ ============ Company Hire purchase payables 28 2,586,475 2,578,156 12,335,091 12,335,091 ============ ============ ============ ============

The methods and assumptions used by management to determine fair values of financial instruments other than those whose carrying amounts reasonably approximate their fair values are as follows: (i)

Hire purchase payables



The fair values of the hire purchase liabilities are estimated by discounting the future contractual cash flows at the current interest rate available to the Company for similar financial instruments.

97

Notes to the Financial Statements - 31 December 2008 39.

98

Significant events (a)

Proposed Disposal of Zecon Toll Concessionaire Sdn Bhd (“ZTCSB”)



On 5 June 2007, the Company announced the proposed disposal of the entire equity interest in ZTCSB to Halifax Capital Berhad (“Halifax”) comprising 1,000,000 ordinary shares of RM1.00 each for a total sale consideration of approximately RM106.19 million to be satisfied by the issuance of 50,000,000 new ordinary shares of RM0.10 each in Halifax and the remaining RM101.19 million as settlement of the outstanding amount due to ZTCSB by the Company and its subsidiaries (“Zecon Group”).



On 20 September 2007, the Company announced the revised sale consideration for the proposed disposal of the entire equity interest in ZTCSB to Halifax to be RM42.0 million to be satisfied by the issuance of 420,000,000 new ordinary shares of RM0.10 each in Halifax.



On 16 July 2008, MIDF Amanah Investment Bank Berhad (“MIDF”) on behalf of the Company has announced that the Board of Directors of the Company has decided to abort the Proposed Disposal.

(b)

Proposed Private Placement Of Up To Ten Percent (10%) Of The Issued And Paid-Up Share Capital Of The Company At A Price To Be Determined Later (“Proposed Private Placement”)



The Proposed Private Placement which was announced to Bursa Securities Malaysia Berhad (“Bursa”) on 29 August 2007, had been approved by the Securities Commission (“SC”) vide its letter dated 31 October 2007.



On 23 April 2008, the SC has approved an extension of time of six months from 1 May 2008 to 31 October 2008 for the implementation of the Private Placement.



On 30 October 2008, MIDF, on behalf of the Board of Directors of the Company (“Board”) has informed Bursa that the Board has decided to abort the Private Placement in view that the current market price of the ordinary shares of the Company is below its par value, making it unfeasible to implement the Private Placement.

(c)

Proposed Transfer Of The Listing Of And Quotation For The Entire Issued And Paid-Up Capital of Zecon From The Second Board To The Main Board of Bursa (“Proposed Transfer of Listing”)



On 24 March 2008, MIDF on behalf of the Company has announced to Bursa that the Board has decided to abort the Proposed Transfer of Listing.

(d)

Offer by Dawla Capital Sdn Bhd and Datuk Hj Zainal Abidin bin Hj Ahmad (collectively referred to as “the Joint Offerors” ) to Acquire Zecon Berhad’s Shares and Warrants



On 15 July 2008, the Company announced on the receipt of a Notice of Voluntary Offer (“Notice”) from MIDF, on behalf of Dawla Capital Sdn Bhd (“Dawla”) and Datuk Hj Zainal Abidin bin Hj Ahmad (“Datuk Zainal”) (“collectively known as “Joint Offerors”) to acquire:(i)

all the remaining ordinary shares of RM1.00 each in the Company which are not held by the Joint Offerors for a cash consideration of RM0.50 per share;

(ii)

all the new Company’s shares that may be allotted and issued pursuant to the exercise of the outstanding 2007/2017 warrants (“Warrant(s)” ) which are not held directly by the Joint Offerors for a cash consideration of RM0.50 each;

(iii)

all the new Company’s share that may be issued by the Company arising from the exercise of any outstanding options granted pursuant to the Company’s share option scheme for a cash consideration of RM0.50 per offer share; and

(iv)

all outstanding warrants in the Company which are not held directly by the Joint Offerors, for a cash consideration of RM0.01 per Warrant



(Collectively referred to as “the Offer”)



On 24 July 2008, the Company announced on the appointment of PM Securities Sdn Bhd (“PM Securities”) as the Independent Adviser to advise the Independent Directors, minority shareholders and minority warrant holders of the Company in relation to the Offer subject to the approval of the SC.



On 1 August 2008, the Company announced that SC had vide its letter dated 1 August 2008 approved the appointment of PM Securities as the Independent Adviser of the Company pursuant to the Offer.

Zecon Berhad annual report 2008

Notes to the Financial Statements - 31 December 2008 39.

Significant events (contd.) d)

Offer by Dawla Capital Sdn Bhd and Datuk Hj Zainal Abidin bin Hj Ahmad (collectively referred to as “the Joint Offerors” ) to Acquire Zecon Berhad’s Shares and Warrants (contd.)



On 5 August 2008, the Company announced that the Joint Offerors had, through MIDF, informing the Board that they have yet to receive clearance from the SC on the Offer Document.



On 8 August 2008, the Company announced that MIDF, on behalf of the Joint Offerors, advised the Board that the SC had vide its letter dated 7 August 2008, informing that the Offer Document is still pending its clearance. In relation to Paragraph 13(7) of the Malaysian Code on Take-Overs and Mergers 1998, the time frame for the dispatch of the Offer Document on or before 5 August 2008 is no longer applicable.



On 8 October 2008, the Company announced that it has been informed by the Joint Offerors that the Offer Document has been posted to the shareholders, warrant holders and the option holders of the Company’s Employees Share Option Scheme.



On 17 October 2008, the Company announced that the Independent Advice Circular in relation to the Offer has been dispatched to the shareholders of the Company.



On 29 October 2008, the Company received a press notice from MIDF, on behalf of the Joint Offerors, informing that the Joint Offerors and the persons acting in concert with the Joint Offerors collectively hold 52.53% of the issued and paidup share capital of the Company. Accordingly, the Offer has become unconditional as to the level of acceptances on 29 October 2008. In view of the above, the Offer shall remain open for acceptances until 12 November 2008 and all other terms and conditions of the Offer remain unchanged.



On 12 November 2008 (the closing date), the Joint Offerors and the persons acting in concert with the Joint Offerors collectively hold 62.86% of the issued and paid-up share capital of the Company.

99

Analysis Of Shareholdings - as at 28 April 2009 SHARE CAPITAL Authorised Capital : RM500,000,000.00 Issued and Paid up Capital : RM119,106,150.00 Class of Share : Ordinary Shares of RM1.00 each DISTRIBUTION OF SHAREHOLDINGS Size of Shareholdings

Number of Shareholders

Number of Shares

% of Shares

Less than 100 100 to 1,000 1,001 to 10,000 10,001 – 100,000 100,001 to less than 5% 5% and above

60 178 1,098 310 25 3

2,560 131,977 4,886,550 8,797,238 28,780,275 76,507,550

0.00 0.11 4.10 7.39 24.16 64.23

TOTAL

1,674

119,106,150

100.00

SUBSTANTIAL SHAREHOLDERS AS PER REGISTER OF SUBSTANTIAL SHAREHOLDERS

No. Name 1. 2. 3. 4.

Dawla Capital Sdn Bhd Inas Kapital Sdn Bhd Digital Network Sdn Bhd Datuk Haji Zainal Abidin bin Haji Ahmad

Direct Interest No. of Shares % 65,689,475 19,174,600 15,491,100 3,655,200

Deemed Interest No. of Shares %

55.15 16.10 13.01 3.07

- - - 65,689,475*

55.15

Note: * Deemed interested by virtue of his interest in Dawla Capital Sdn Bhd

DIRECTORS’ INTERESTS Direct

%

No. of Shares Held Indirect

%

THE COMPANY Datu’ Dr. Hatta bin Solhi Datuk Haji Zainal Abidin bin Haji Ahmad

0.02

-

-

3,655,200

3.07

65,689,475*

55.15

Datuk Dr. Haji Yusoff @ Josree bin Haji Yacob

-

-

-

-

Dato’ Haji Hamzah bin Haji Ghazalli

-

-

-

-

Dato’ Dr. Mohd Yahya bin Nordin

-

-

-

-

Dato’ Abdul Majit bin Ahmad Khan

-

-

-

-

Haji Zainurin bin Haji Ahmad

525,000

0.44

-

-

Hui Kok Yuan

250,000

0.21

-

-

Haji Abg Azahari bin Abg Osman

-

-

-

-

Jamil bin Jamaludin

-

-

-

-

Poh Lik Gan @ Poh Li Thong

40,000

0.04

-

-

Richard Kiew Jiat Fong

63,000

0.05

-

-

Haji Saini bin Haji Ali

-

-

-

-

Ng Weng Fatt

-

-

-

-

Note: * Deemed interested by virtue of his interest in Dawla Capital Sdn Bhd

100

20,000

Zecon Berhad annual report 2008

Analysis Of Shareholdings - as at 28 April 2009 DIRECTORS’ INTERESTS (contd.) Direct

%

No. of Shares Held Indirect

%

RELATED COMPANIES Teknik PS Sdn Bhd Datuk Haji Zainal Abidin bin Haji Ahmad

34,000

14.20

-

-

Zecon Construction Sdn Bhd Datuk Haji Zainal Abidin bin Haji Ahmad

49

49.00

-

-

Sarmax Sdn Bhd Datuk Haji Zainal Abidin bin Haji Ahmad

30,000

30.00

-

-

THIRTY (30) LARGEST SHAREHOLDERS No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13.

Name

Shareholding

%

Dawla Capital Sdn Bhd

37,596,300

31.57

MIDF Amanah Investment Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Dawla Capital Sdn Bhd

28,093,175

23.59

Digital Network Sdn Bhd

10,818,075

9.08

4,672,925

3.92

HLG Nominee (Tempatan) Sdn Bhd 4,500,000 Assar Asset Management Sdn Bhd for Assar Industri Sdn Bhd

3.78

CIMB Group Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Bolhassan bin Di @ Ahmad bin Di

4,500,000

3.78

CIMSEC Nominees (Tempatan) Sdn Bhd CIMB for Inas Kapital Sdn Bhd

3,000,000

2.52

Zainal Abidin bin Ahmad

2,967,875

2.49

RHB Capital Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Bolhassan bin Di @ Ahmad bin Di

2,000,000

1.68

Kenanga Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Bolhassan bin Di @ Ahmad bin Di

2,000,000

1.68

CIMSEC Nominees (Tempatan) Sdn Bhd CIMB Bank for Mohamad Safri bin Sharkawi

837,225

0.70

Kenanga Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Zainal Abidin bin Ahmad

597,700

0.50

Mayban Nominees (Tempatan) Sdn Bhd 587,100 Pledged Securities Account for Chee Kwok Fai

0.49

14. 15.

Zainurin bin Ahmad

525,000

0.44

Kenanga Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Hamni bin Juni

368,450

0.31

Mayban Securities Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Digital Network Sdn Bhd

101

Analysis Of Shareholdings - as at 28 April 2009 No. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26.

Name

Shareholding

RHB Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Chu Chee Keong

293,400

0.25

Hui Kok Yuan

250,000

0.21

UOBM Nominees (Asing) Sdn Bhd United Bank Nominees (Pte) Ltd for Gold Crystal Company Ltd

200,000

0.17

Law Lee Koon

197,000

0.17

Toh Beng

188,900

0.16

Lee Cher Keam

188,500

0.16

Mayban Securities Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Tan Sok Hui

160,000

0.13

Ong Keh Oon

148,000

0.12

Mayban Securities Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Kua Bee Keng

138,000

0.12

Low Siew Ean

122,000

0.10

Ong Kian Lim

120,000

0.10

27.

Khoo Lin

118,000

0.10

28.

Kuok Min Giat

100,200

0.08

29.

Mayban Securities Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Sewo Hee Yoong

100,000

0.08

100,000

0.08

105,487,825

88.56

30. Choong Thiam Fatt

102

%

TOTAL

Zecon Berhad annual report 2008

Analysis Of Warrant Holdings - as at 28 April 2009 No. of Warrants in issued Exercise Price of Warrants Expiry Date of Warrants Voting Rights

: : : :

44,168,540 RM1.06 05 March 2017 One Vote per warrant held

Size of warrant holdings

Number of warrant holders

Number of Warrants

% of Warrants

Less than 100 100 to 1,000 1,001 to 10,000 10,001 – 100,000 100,001 to less than 5% 5% and above

13 87 537 237 51 1

580 71,750 2,558,530 7,736,080 14,710,980 19,090,620

0.0 0.16 5.79 17.51 33.31 43.22

TOTAL

926

44,168,540

100.00

SUBSTANTIAL WARRANT HOLDERS AS PER REGISTER OF SUSTANTIAL WARRANT HOLDERS

No. Name 1. 2.

Dawla Capital Sdn Bhd Datuk Haji Zainal Abidin bin Haji Ahmad

Direct Interest No. of Warrants % 21,145,380 316,330

Deemed Interest No. of Warrants %

47.87 0.72

- 21,145,380*

47.87

Note: * Deemed interested by virtue of his interest in Dawla Capital Sdn Bhd

LIST OF DIRECTORS’ WARRANT HOLDINGS Direct 1.

Datuk Haji Zainal Abidin bin Haji Ahmad

2.

Datu Dr. Hatta bin Solhi

%

No. of Warrants Held Indirect

%

316,330

0.72

21,145,380*

47.87

8,000

0.02

-

-

Note: * Deemed interested by virtue of his interest in Dawla Capital Sdn Bhd THIRTY (30) LARGEST WARRANT HOLDERS No. 1.

Name

Warrant Holders

%

2.

MIDF Amanah Investment Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Dawla Capital Sdn Bhd

19,090,620

43.22

2,054,760

4.65

3.

Mohd Fauzi bin Mohd Anuar

932,900

2.11

4.

Lee Mee Kuen

891,600

2.02

5.

Mohd Hadifaar bin Yaacob

664,100

1.50

6.

Digital Network Sdn Bhd

633,000

1.43

7.

Kenanga Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Hamni bin Juni

615,500

1.39

8.

OSK Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Pang Swee Chien

570,800

1.29

9.

Liew Yoke Ling

454,000

1.03

10.

Saw Guat Ngoh

431,200

0.98

Dawla Capital Sdn Bhd

103

Analysis Of Warrant Holdings - as at 28 April 2009 No. 11.

Name Ong Chai Kin

379,500

0.85

12.

Cheah Chee Liang

370,000

0.84

13.

Ong Ban Chuan

328,400

0.74

14.

Leong Hon Wah

277,500

0.63

15.

Ngoi Leong Ee

270,000

0.61

16.

HDM Nominees (Tempatan) Sdn Bhd UOB Kay Hian Pte Ltd for The Kee Hong

260,000

0.59

17.

Lee Kim Seng

230,000

0.52

18.

Yeap Mee Yoke

225,000

0.51

19.

Ng Boon Cheong @ Eng Boon Cheong

205,000

0.46

20.

CIMSEC Nominees (Tempatan) Sdn Bhd CIMB Bank for Hasnandi bin Mohamad Jennis

200,020

0.45

21.

Lam Pun Ying

200,000

0.45

22.

CIMSEC Nominees (Tempatan) Sdn Bhd CIMB Bank for Teh Chong Jin

200,000

0.45

23.

Affin Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Phua Sin Mo

200,000

0.45

24.

Zainal Abidin bin Ahmad

188,000

0.43

25.

Lee Soi Gek

182,600

0.41

26.

Tan Yeek Seng

175,000

0.40

27.

Abd Hazis bin Omar

172,600

0.39

28.

HLG Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Teo Ah Seng

171,100

0.39

29.

AIBB Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Phua Sin Mo

170,00

0.38

30.

Tan Yee Kong

168,000

0.38

30,908,200

69.95



104

Warrant Holders

TOTAL

%

Zecon Berhad annual report 2008

List of Properties LOCATION Area Tenure DESCRIPTION YEAR OF EXISTING ACQUISITION USE Lot 462, 463 & 464 , Block 15,

788.0

Leasehold (99 years),

Salak Land District,

hectare

Mixed Zone Land,

Residential

expiring in Year 2098

Development

Kuching, Sarawak

Leasehold Land

1999

Commercial &





Lot 4871, Block 18,

39.2

Leasehold (99 years),

Salak Land Disctrict,

hectare

Mixed Zone Land,

Residential

expiring in Year 2098

Development Commercial &

Kuching, Sarawak

Leasehold Land

Lot 742, Section 64,

7.9

Leasehold (99 years),

KTLD, Kuching,

hectare

Mixed Zone Land,

Sarawak

expiring in Year 2098

Lot 2260, Block 233,

7,831.0

Leasehold (60 years),

Kuching North Land

sq metre

Mixed Zone Land,

Leasehold Land

1999

1999

Leasehold Land

1988

Commercial &

Residential

Crown Land,

3.9

Leasehold (99 years),

Lot No. 10049, 16th Mile,

hectare

Mixed Zone Land,

Simanggang Road,

33,714,909

23,169,333

Development

expiring in Year 2048 1991

73,243,200

Residential



Leasehold Land

NET BOOK VALUE 31/12/2008 (RM)

Vacant Land

240,629

595,156

expiring inYear 2054

Kuching Town Land District Sublot No. 54, Lot 530

773.8

Leasehold (60 years),

of Block 6, Matang Land

sq metre

Mixed Zone Land,

District

Detached Lot

2005

Vacant Land

130,000

Residential

141,836

expiring inYear 2026



Sublot No.84, Title Lot 7907,

174.2

Leasehold (60 years),

Double-Storey

Pelita Heights, Kuching

sq metre

Mixed Zone Land,

Terrace House

Sarawak

1994

expiring in Year 2054

Lot No.9071, Section 64,

370.0

Leasehold (60 years),

Tabuan Dayak,

sq metre

Mixed Zone Land,

Kuching Sarawak

expiring in Year 2055

Parcel Nos 297-2-1 & 297-2-2

Strata Title

647.2

4-Storey

1995

Office Premise

458,881

Office Premises

1,598,978

Intermediate Shophouse Commercial Tower

2000

(Level 2) Riverbank Suites and sq metre Commercial Tower of Parent Lots 192, 193, 293 and 296 Section 48 KTLD Kuching Sarawak Private Lot No.5, 6 & 7

2,038.9

Leasehold (60 years),

Lot 1406-1463

sq metre

Mixed Zone Land

3-Storey Corner

2005

Office Premises

2,770,000

Shop Houses

1465 & Part of Lot 1472 of Block 14, Salak Land District





105

List of Properties

LOCATION Area Tenure DESCRIPTION YEAR OF EXISTING ACQUISITION USE Lot 948, Serian Town District 95.0

Leasehold (60 years),



sq metre

Mixed Zone Land

2-Storey Corner

Shop House

255.8

Strata Title

Apartments

2002

Vacant

NET BOOK VALUE 31/12/2008 (RM) 200,000

Unit 1 & 6, Level 3, Lot 3754, 3771 and 4598

2005

Corporate Use

2006

Vacant

512,000

(almalgamated into Lot 9645) sq metre all of Block 11 Muara Tebas Land District Parcel No. 6B, 6C, 6D, 6E & 10A 717.2 Lot 264 of Block 2,

Strata Title

Apartments

1,945,920

sq metre

Jalan Salak District Unit 1-1A, 1-2A, 1-9, 2-1, 4-1, 4-2, 5-9, 6-8, 6-9 of Block B6 & B7,

1,400.6

Jalan Kwong Lee Bank,

sq metre

Strata Title

Commercial

2002

Vacant

2,104,938

centre

Kuching Parcel No. 2A-11-2,

361.8

11th Floor Plaza Sentral

sq metre

Strata Title

Office suite

2006

Office Premise

1,646,807

Strata Title

Condominium

2008

Corporate Use

727,413

KL Building No. Block 2A, Lot 78, Section 70, Kuala Lumpur Parcel, A-20-01, Block A,

133.2

Level 20, Suasana

sq metre

Sentral Condominium, Jalan Stesen Sentral 5, KL Sentral, 50470, Kuala Lumpur

106



Zecon Berhad annual report 2008

Notice Of Annual General Meeting NOTICE IS HEREBY GIVEN THAT the Twenty-Fourth (24th) Annual General Meeting of Zecon Berhad (“Zecon” or “the Company”) will be held at Conference Room, 8th Floor, Menara Zecon, No. 92, Lot 393, Section 5 KTLD, Jalan Satok, 93400 Kuching, Sarawak on Thursday, 18th June 2009 at 11.30 a.m. for the following purposes: AGENDA 1.

To receive the Audited Financial Statements for the financial year ended 31 December 2008 and the Reports of the Directors and Auditors thereon.

2.

To approve the payment of Directors’ fees in respect of the financial year ended 31 December 2008 amounting to RM184,800-00.

3.

To re-elect/elect the following Directors who retire in accordance with following Articles of the Company’s Articles of Association and being eligible, offer themselves for re-election/election:-



a)

Article 87



i) Datu Dr. Hatta bin Solhi; ii) Datuk Haji Zainal Abidin bin Haji Ahmad; and iii) Haji Zainurin bin Haji Ahmad



Article 92

b)

4.

Resolution 1

i) Datuk Dr. Haji Yusof @ Josree bin Haji Yacob; ii) Richard Kiew Jiat Fong; and iii) Haji Saini bin Haji Ali

To re-appoint Messrs Ernst & Young as Auditors of the Company and to authorise the Directors to fix their remuneration for the ensuing year.

Resolution 2 Resolution 3 Resolution 4

Resolution 5 Resolution 6 Resolution 7 Resolution 8

As Special Business To consider and if thought fit, pass the following resolutions as Ordinary Resolution:5.

AUTHORITY TO ISSUE SHARES PURSUANT TO SECTION 132D OF THE COMPANIES ACT, 1965



“THAT pursuant to Section 132D of the Companies Act, 1965 and subject always to the approval of the relevant authorities, the Directors of the Company be and are hereby empowered to issue shares in the Company from time to time and upon such terms and conditions and for such purposes as the Directors may deem fit, including but not limited to such shares as may be issued pursuant to the Employees’ Share Option Scheme provided that the aggregate number of shares issued pursuant to this resolution does not exceed 10% of the issued share capital of the Company for the time being and that the Directors be and are also empowered to obtain the approval for the listing of and quotation for the additional shares so issued on the Bursa Malaysia Securities Berhad and that such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company.”

6.

PROPOSED RENEWAL OF SHAREHOLDERS’ MANDATE FOR RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE (“Proposed Renewal of Shareholders’ Mandate”)



“THAT, subject always to the Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”), the Company and its subsidiary companies shall be mandated to enter into the category of recurrent transactions of a revenue or trading nature and with those related parties under Section 2.3 of the Circular to shareholders dated 26 May 2009, provided that the transactions are in the ordinary course of business and are on terms not more favourable to the related parties than those generally available to the public and are not to the detriment of the minority shareholders of the Company.



THAT the authority conferred by the Proposed Renewal of Shareholders’ Mandate shall only continue to be in force until:-



a)

the conclusion of the next Annual General Meeting (“AGM”) of the Company, at which time it will lapse, unless by a resolution passed at that meeting, the authority is renewed;



b)

the expiration of the period within which the next AGM of the Company after the date it is required to be held pursuant to Section 143(1) of the Companies Act, 1965 (But shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Companies Act, 1965); or

Resolution 9

Resolution 10

107

Notice Of Annual General Meeting

c)

revoked or varied by resolution passed by the shareholders in general meeting,



whichever is earlier;



AND THAT the Directors of the Company and its subsidiaries be and are hereby authorised to complete and do such acts and things (including executing such documents as may be required) to give effect to the transactions contemplated and/or authorised by this Ordinary Resolution.”

7.

To transact any other ordinary business of which due notice shall have been given in accordance with the Company’s Articles of Association and the Companies Act, 1965.

By order of the Board

Koh Fee Lee (MAICSA 7019845) Lim Poh Yen (MAICSA 7009745) Company Secretaries Kuching Dated : 26 May 2009 Notes : 1.

Appointment of Proxy



i)

A member entitled to attend and vote at this meeting is entitled to appoint a proxy or proxies to attend and vote in his stead. A proxy need not be a member of the Company and provision of Section 149 (1) (b) of the Companies Act, 1965 shall not apply to the Company.



ii)

Where a member appoints more than one proxy, the appointment shall be invalid unless he specifies the proportion of his shareholdings to be represented by each proxy.



iii) The instrument appointing a proxy shall be in writing under the hand of the appointor or his attorney duly authorised in writing, or if the appointor is a corporation, either under its Common Seal or under the hand of an officer or attorney duly authorised.



iv) The instrument appointing a proxy must be deposited at the registered office of the Company at 8th Floor, Menara Zecon, No. 92, Lot 393, Section 5 KTLD, Jalan Satok, 93400 Kuching, Sarawak not less than forty-eight (48) hours before the time appointed for holding the meeting or any adjournment thereof.

2.

Explanatory Notes on Special Business



i)



The proposed Resolution 9, if passed, will empower the Directors to issue shares up to an aggregate amount not exceeding 10% of the issued share capital of the Company for the time being, for such  purposes  as the  Directors  consider would be in the interests  of the Company including but not limited to such shares as may be issued pursuant to the Employees’ Share Option Scheme approved at the Extraordinary General Meeting  held  on 15 February 2005.  This authority unless revoked or varied at a general meeting will expire at the next Annual General Meeting.



Ordinary Resolution 10 – Proposed renewal of shareholders’ mandate for recurrent related party transactions of a revenue or trading nature (“Proposed Renewal of Shareholders’ Mandate”)

ii)



108

Ordinary Resolution 9 – Authority to issue shares pursuant to Section 132D of the Companies Act, 1965

The proposed Resolution 10, if passed, will authorise the Company and its subsidiaries to enter into recurrent transactions pursuant to Paragraph 10.09 of the Listing Requirement of Bursa Malaysia Securities Berhad involving the interests of related parties, which are of a revenue or trading nature, subject to the transactions being carried out in the ordinary course of business and on terms not to the detriment of the minority shareholders of the Company. Further information on the Proposed Renewal of Shareholders’ Mandate is set out in the Circular to Shareholders dated 26 May 2009,which is despatched together with the Company’s Annual Report 2008.

Zecon Berhad annual report 2008

Statement Accompanying Notice of Annual General Meeting

pursuant to Paragraph 8.28(2) of the Listing Requirements of Bursa Malaysia Securities Berhad The Directors who are standing for re-election/election at the 24th Annual General Meeting are as follows:

Article 87



i) Datu Dr. Hatta bin Solhi ii) Datuk Haji Zainal Abidin bin Haji Ahmad iii) Haji Zainurin bin Haji Ahmad



Article 92



i) Datuk Dr. Haji Yusof @ Josree bin Haji Yacob ii) Richard Kiew Jiat Fong iii) Haji Saini bin Haji Ali

The details of the above Directors are set out in the Directors’ Biodata on pages 13 to 20 of this Annual Report and their shareholdings in the Company are set out in the Directors’ shareholdings which appear on page 100 of this Annual Report.

109

This page has been intentionally left blank

110

Zecon Berhad annual report 2008

ZECON BERHAD (134463-X) (Incorporated in Malaysia)

PROXY FORM No. of Shares

I/We (PLEASE USE BLOCK LETTERS)

NRIC No./Passport No./Company No. of being a member/members of ZECON BERHAD hereby appoint



NRIC No./Passport No./Company No. of or failing him/her, the Chairman of the meeting as my/our proxy to vote for me/us on my/our behalf at the Twenty-Fourth Annual General Meeting of the Company to be held at Conference Room, 8th Floor, Menara Zecon, No. 92, Lot 393, Section 5 KTLD, Jalan Satok, 93400 Kuching, Sarawak on Thursday, 18 June 2009 at 11.30 a.m and any adjournment thereof. My/Our proxy is to vote as indicated below :

RESOLUTIONS

1.

Payment of Directors’ fees

2.

Re-election of Director – Datu Dr. Hatta bin Solhi

3.

Re-election of Director – Datuk Haji Zainal Abidin bin Haji Ahmad

4.

Re-election of Director – Haji Zainurin bin Haji Ahmad

5.

Re-election of Director – Datuk Dr. Haji Yusof @ Josree bin Haji Yacob

6.

Re-election of Director – Richard Kiew Jiat Fong

7.

Re-election of Director – Haji Saini bin Haji Ali

8.

Appointment of Auditors and authorising Directors to fix their remuneration

9.

Authority to issue shares pursuant to Section 132D of the Companies Act, 1965

FOR

AGAINST

10. Proposed Renewal of Shareholders’ Mandate for Recurrent Related Party Transactions. Please indicate with “X” in the appropriate spaces how you wish your vote to be cast. If you do not indicate how you wish your proxy to vote on any resolution, the proxy shall vote as he thinks fit, or at his discretion, abstain from voting.

Signed this day of , 2009

Signature of Shareholder

Notes : 1)

A member entitled to attend and vote at this meeting is entitled to appoint a proxy or proxies to attend and vote in his stead. A proxy need not be a member of the Company and provision of Section 149 (1)(b) of the Companies Act, 1965 shall not apply to the Company.

2)

Where a member appoints more than one proxy, the appointment shall be invalid unless he specifies the proportions of his shareholdings to be represented by each proxy.

3)

The instrument appointing a proxy shall be in writing under the hand of the appointor or his attorney duly authorised in writing, or if the appointor is a corporation, either under its Common Seal or under the hand of an officer or attorney duly authorised.

4)

The instrument appointing a proxy must be deposited at the registered office of the Company at 8th Floor, Menara Zecon, No. 92, Lot 393, Section 5, KTLD, Jalan Satok, 93400 Kuching, Sarawak not less than forty-eight (48) hours before the time appointed for holding the meeting or any adjournment thereof.

111

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STAMP

ZECON BERHAD (134463-X) 8th Floor, Menara Zecon, No. 92 Lot 393, Section 5 KTLD, Jalan Satok, 93400 Kuching, Sarawak, Malaysia.

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Construction | Infrastructure | Property Development | Water Infrastructure | Toll Concession

Other Certifications, licenses and memberships include: Pusat Khidmat Kontraktor Class A Bumiputra Unit Pendaftaran Kontraktor Negeri Sarawak Construction Industries Development Board Grade G7 Master Builders Association Malaysia Federation of Public Listed Companies Sarawak Housing Developers Association Malaysian International Chamber of Commerce and Industry Registered Supplier of Equipment and Services to Petronas and its Subsidiaries