SUM A ANNUAL REPORT 2015 - Fundamental Analysis AR 31... · fields (“Buzachi Fields”) located...

www.sumatec.com

SUMATEC RESOURCES BERHAD(428355-D)

Level 15-2, Bangunan Faber Imperial CourtJalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia

Tel : 603-2692 4271Fax : 603-2732 5388

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ANNUAL REPORT 2015


VisionTHE lEading Malaysian indEpEndEnT oil & gas opEraTor focusEd on

dEVEloping proVEn oil & gas assETs.

MissionTHrougH innoVaTion, EfficiEncy and safETy wE will iMproVE THE pErforMancE of THE coMpany’s oil and gas assETs.

19th annualgEnEralMEETing

oVErViEw01 Code of Business Conduct02 About Us 03 Corporate Structure04 Chairman’s Statement08 Managing Director’s Review 10 Five-Year Financial Highlights11 Share Price Chart12 Board of Directors’ Profile16 Financial Calendar17 Corporate Information

goVErnancE18 Statement on Corporate Governance31 Audit Committee Report37 Statement on Risk Management and Internal Control43 Other Additional Compliance Information46 Statement on Directors’ Responsibility

financial rEViEw47 Financial Statements

oTHEr inforMaTion120 Analysis of Shareholdings123 Analysis of Warrant Holdings129 List of Properties130 Notice of Annual General Meeting

• Proxy Form

conTEnTs

will be held at 11.00 am on Thursday 2 June 2016 at Concorde 1, Level 2, Concorde Hotel Shah Alam, 3, Jalan Tengku Ampuan Zabedah,40100 Shah Alam, Selangor

AnnuAl RepoRt 2015 1

codE of BusinEss conducT

BusinEss

SUMATEC will achieve high standards of efficiency by committing to:

► Always seek growth opportunities► Promote innovation throughout our operations► Be flexible and take measured business risks

without compromising safety► Free and fair competition for all suppliers► Maintain transparency in the way we conduct

operations► Protect our staff and operations through appropriate

policies and regulations► Refrain from accepting/offering improper payments,

gifts or engaging in bribery or any form of corrupt business practices

► Expect similar standards from our partners and contractors

EMployEEs

SUMATEC understands that the performance of employees as a collective and/or individual is key to the success of the company.

We therefore aim to achieve maximum work satisfaction and performance by committing to:

► Respect and promote employees’ rights► Offer rewarding working conditions► Provide a safe and healthy working environment► Realise each employee’s individual potential

through training and job promotion► Respect the cultural diversity of our employees► Ensure equal opportunity without discrimination

HosT counTriEs

We will respect and earn the respect of the countries in which we operate. This is integral to our successful performance.

Wherever we operate, we are committed to:

► Observe local laws and rules► Respect the sovereignty of the state

local coMMuniTiEs

To ensure that communities benefit from our presence, we are committed to:

► Engage in local employment and national succession planning

► Practice transfer of skills and knowledge from foreign staff to local

► Conduct local community projects to improve their health, education and / or welfare through corporate social responsibility programs

► Respect local society and their traditions► Minimise impact on local community that may be

caused by our operations

The Group, which completed its financial and business restructuring plan in November 2013,

saw itself entering the upstream sector via a joint investment agreement with Markmore

Energy (Labuan) Limited and CaspiOilGas LLP to develop the Rakushechnoye Oil and Gas Field in West Kazakhstan (“Rakushechnoye

Field”).

Rakushechnoye Field has a 2P Oil and Gas reserve of 139.4 million barrels of oil equivalent

(as certified by SRK Consulting (Australasia) Pty Ltd in May 2014).

In realising its vision to be a leading Malaysian Independent Oil and Gas operator, Sumatec

will continue to look for opportunities to acquire and develop new and under-performing oil

and gas fields. Our target assets will be mainly onshore and with certified proven reserves, as

this reduces the capital cost of infrastructure required and also eliminates the risk of no show

of hydrocarbon. We will only select the assets that provide maximum return for shareholder

investment through short term production enhancement and long term sustainable

production growth.

Sumatec Resources Berhad (SUMATEC-1201) is listed on the Main Market of Bursa Securities.

aBouTus

SuMAteC ReSouRCeS BeRHAD (428355-D) 2


corporaTE sTucTurE

SUMATEC CORPORATION SDN BHD

100% SUMATEC PETROLEUM DEVELOPMENT SDN BHD

(Registered in the Republic of Kazakhstan)100% SUMATEC OIL AND GAS LLP

100% SUMATEC DEVELOPMENT SDN BHD

SUMATEC RESOURCES BERHAD

100%


cHairMan’ssTaTEMEnT

DEAR SHAREHOLDERS,

On behalf of the Board of Directors, I am pleased to

present the Annual Report of Sumatec Resources Berhad

(“Sumatec” or “our Company”) for the financial year ended

31 December 2015.


cHairMan’s sTaTEMEnTconT’d

opEraTing landscapE

2015 continued to be a challenging year for the oil and gas industry. The Brent crude price failed to make a meaningful recovery during the year despite registering a high of USD66.80 in early May of 2015. Fear of prolonged oversupply situation following OPEC’s reluctance to cut production, Iran’s oil re-entering the export market subsequent to the removal of its sanctions and the anticipated slowdown in major economies, have forced Brent crude price to continue to slide and close the year at around USD40.00 per barrel.

Artificial lifting pump on well 115

Pipelines connecting the wells to the central processing facility

Total net assets of the Group increased by RM40.3 million or 6.6% during the year to close at RM650.88 million as at 31 December 2015, and net assets per share improved to 18.6 sen from 17.5 sen previously.

proposEd rigHTs issuE and acquisiTion of 100% sHarEs in BornEo EnErgy oil and gas liMiTEd

As mentioned in last year’s Annual Report, our Company signed a Share Purchase Agreement (“SPA”) on 8 September 2014 with Abu Talib Abdul Rahman and Dr. Murat Safin for the proposed acquisition of 100% equity interest in Borneo Energy Oil and Gas Limited (“Borneo Energy”) (“Proposed Acquisition”).

The weak oil price has put a lot of pressure on the economies of oil producing nations, and certainly oil and gas companies around the world. The challenging landscape has not only caused industry players to rethink their expansion policy and capital expenditure strategy, but also having to take drastic actions to reduce operating costs so as to ensure sustainability and going concern.

In response to the market situation, our Company too has embarked on a cost reduction exercise across the Group during the year. Additionally, investments in field development projects planned for 2015, including new well drilling programs, have been deferred to 2016 and beyond, pending the recovery in the oil price.

financial pErforMancE

The Group registered revenue of RM62.6 million compared to RM81.1 million last year. In line with the lower revenue, Group profit before tax for the current year was RM38.4 million compared to RM53.5 million last year. Consequently earnings per share was lower at 1.09 sen compared to 1.50 sen in the previous year. The lower revenue and profit before tax for the year is reflective of the general slowdown in the oil and gas industry.



Borneo Energy is a 100% beneficiary of the participating interest in Buzachi Neft LLP (“Buzachi”), an independent upstream oil and gas company involved in the exploration, production and trading of oil and natural gas. Buzachi currently has two 25-year subsoil use contracts, valid until November 2026, for the exploration and production of oil and gas in Karaturun Vostochnyi and Karaturun Morskoi fields (“Buzachi Fields”) located on the northern shore of Mangistau Oblast, Western Kazakhstan. The combined 2P certified reserves of the Buzachi Fields are 68.8 million barrels of oil.

Due to the sharp drop in the oil price subsequent to the signing of the SPA, the purchase consideration was revised down from the initial price of USD350 million to USD290 million through a supplemental agreement signed on 9 January 2015. Further, under the Third Supplementary SPA dated 2 February 2016, the Vendors agreed to extend the completion date of the Proposed Acquisition to 22 August 2016, and to defer payment for USD75 million of the balance cash portion over an extended period of four years starting from 31 December 2016. The proposed rights issue as approved by the shareholders at the extraordinary general meeting in April 2015 of six (6) rights shares for every five (5) ordinary shares held, if issued at the minimum price of RM0.14 per share will raise at least RM488 million. This will be sufficient to fund the Proposed Acquisition under the revised payment term, as well as to meet the initial working capital requirement of Buzachi.

The application to Bursa Securities for an extension of time to 22 August 2016 for the completion of the proposed rights issue was made on 4 February 2016.

The Proposed Acquisition, once completed, is an important milestone for our Company as it is well in line with our Company’s vision to replenish or increase our oil and gas reserve to maintain production substantially in the years to come. Upon successful completion, Buzachi is expected to contribute stable and sustainable recurring income to our Company in the foreseeable future.

proposEd priVaTE placEMEnT

Pursuant to the shareholders’ mandate given to the Board at the last annual general meeting for the issuance of shares under Section 132D of the Companies Act 1965, our Company announced on 11 November 2015 that it had obtained the approval from Bursa Securities for the listing and quotations of up to 348.269 million shares to be issued under a private placement to independent investors. Issue price of the shares was fixed at RM0.14 per share on 12 April 2016.

oVErsEas projEcT funding froM EXiM Bank

On 31 March 2016, our Company accepted the offer for overseas project funding facility of USD125 million from EXIM Bank (“EXIM OPF Facility”). The EXIM OPF Facility is earmarked to fund working capital, capital expenditure at Rakushchnoye Field and acquisition of new oil and gas assets. This funding has huge significance to our Company’s operations. With the EXIM OPF Facility, our Company no longer needs to rely just on internal funds and shareholders’ funding to support the operations and further investments in Rakuschechnoye Field. With the EXIM OPF Facility, our Company is now better positioned to quickly ramp up oil production from Rakuschechnoye Field and be ahead of the oil price recovery curve.

corporaTE social rEsponsiBiliTy

Whilst the Board recognizes that sustainable business practices will lead to robust business growth in the long run, during this challenging operating environment, the Board made a conscious decision to focus only on sustainable practices that are of high priority and have immediate impact on business if they are not complied with. On that score, all matters relating to regulatory compliance and employees’ health, safety and welfare at workplace are of utmost importance. Hence, our Company continuously monitors the effectiveness of measures put in place to ensure compliances in the abovementioned areas.

fuTurE ouTlook

The United States Energy Information Administration (EIA) has projected that Brent crude oil price will average USD38 per barrel in 2016 and USD50 per barrel in 2017. The outlook on Brent prices remains to be highly uncertain. The global oil production is expected to remain high - averaging between 95 million to 97 million barrels per day throughout 2016. The oversupply environment will continue to persist if OPEC and major non-OPEC members could not reach an agreement on production scale down. On the backdrop of

Rakushechnoye and Buzachi Fields in Kazahkstan


continued challenging environment in the immediate term, the management and the Board will be prudent and cautious in drawing up the Group’s business plans for the coming financial year 2016. In the absence of a sustained recovery in oil prices, our Company will most likely maintain the same level of operational activities in the remaining period of 2016. Having said that, the Board however remains bullish on the potential of our oil and gas assets to deliver sustainable growth to our shareholders in the long-term. Rakushechnoye


Field has 43 million bbl1 of 2P oil reserves, of which almost 22 million bbl is accrued to our Company under the Joint Investment Agreement signed in March 2012 with Markmore Energy (Labuan) Limited and CaspiOilGas LLP. Upon successful completion of the Proposed Acquisition of Borneo Energy, our Company will be entitled to the profit on the combined 2P oil reserves of 90.3 million bbl and gas reserves of 96.4 million boe2, with up to 10 years remaining under the respective exploration and production contracts, as illustrated in the table below:

2p reserves sumatec’s oil sub- share reserves surface field oil/ of oil accrued to contract condensate gas Total reserves sumatec valid (million bbl) (million boe) (million boe) (%) (million bbl) until

Rakushechnoye 43.0 96.4 139.4 50%3 21.5 August 2025 Buzachi 68.8 0.0 68.8 100% 68.8 November 2026 Total 111.8 96.4 208.2 90.3

Note:1 bbl = barrel2 boe = barrel of oil equivalent3 Under the Gas Development and Production Agreement, the Group will be paid a producer’s fee at the rate of USD0.75 per ‘000 standard cubic feet of gas produced, whilst the profits on oil reserves are to be shared between our Company and CaspiOilGas LLP based on 50:50 sharing ratio.

With the EXIM OPF Facility, we are now even more confident that the Rakushechnoye Field’s gas reserves commercialisation program can be implemented according to schedule. It is anticipated that the gas revenue contribution will provide stability to our Group income in the future since the price of gas is not expected to be as volatile as compared to oil prices.

acknowlEdgEMEnT

On behalf of the Board of Directors, I would like to take this opportunity to express our immense appreciation to our shareholders, vendors, suppliers, business associates, regulatory authorities and government agencies in Malaysia and Kazakhstan for their unwavering support throughout the year. We are also grateful to our senior management team and employees for their commitment, hard work and dedication to the Group.

On 31 December 2015 we bid farewell to Mr. Christopher Dalton, the previous Chief Executive Officer of the Company, who has decided to pursue other interests. We thank him for his past contributions. The Board is pleased to re-designate Mr. Chan Yok Peng as the Managing Director of our Company effective from 4 January 2016. With his vast experience in the

oil and gas industry, I am confident that Mr. Chan together with the rest of the employees will be able to deliver value to our shareholders and stakeholders. I wish to also thank my fellow Board members for their guidance and support in steering our Company during a very challenging year. A special thank goes to Datuk Mohd Nasir bin Ahmad who has decided not to seek re-election at this AGM due to his other commitments. Being a chartered accountant and member of the Audit Committee, Datuk Mohd Nasir has contributed significantly in supporting the Board to discharge its responsibilities specifically in the areas of financial reporting, risk management, internal controls and compliances.

This will be my final letter to all shareholders since I will be retiring and am not seeking re-appointment at this coming AGM. It has been a great pleasure to serve as the Chairman of the Board. I wish the Company all the best and pray that it will gain greater success in all its business endeavours in the future.

Tan sri abu Talib othmanChairman13 April 2016


ManagingdirEcTor’s rEViEw

The crash in global oil prices in the summer of 2014 and the low oil price environment that persisted throughout 2015 has impacted our Company in as far as the progress of the development and exploitation of oil & gas from Rakushechnoye Field. I am pleased to present to you my review of the Group’s operations duringthe financial year ended 31 December 2015.

DEAR SHAREHOLDERS,

2015 in FOcuS

fiEld dEVElopMEnT and oil producTion acTiViTiEs aT rakusHEcHnoyE fiEld

We mentioned in our Annual Report last year that for 2015, the plan was to develop up to 10 new wells in the Triassic zone whereby approximately 40% of the planned capital expenditure in 2015 would be spent on drilling new oil wells and the remaining 60% on appraisal wells for natural gas and gas condensate reserves, which are contained in the deeper reservoir zones. However, with the persisting low oil prices, we have decided to defer the above plans to 2016 and beyond so as to preserve the value of the hydrocarbon reserves that we have in the Field.

As a result, our field activities had been limited to a minimum level of monitoring and supervising of oil production operations throughout the year.


Managing dirEcTor’s rEViEwconT’d

pHasE 2 of gas dEVElopMEnT and producTion agrEEMEnT

In December 2013, our Company signed a Gas Development and Production Agreement with Markmore Energy (Labuan) Limited (“MELL”) whereby we are entrusted to develop and deliver to MELL the gas development, implementation and production plan that will meet the minimum supply of 120 Million Standard Cubic Feet of gas per day from Rakushechnoye Field.

During the year, we carried out the following activities as stipulated under Phase 2 of the agreement:

• We supervised the preparation of the technical specifications and engineering designs for the various surface facilities (gas separation facility, LPG plant, pipeline), the site survey, the preparation of tender documents for environmental studies and process facilities;

• We reviewed and reassessed field development strategy including gas utilization programs, and identifying possible locations for new gas wells;

• We engaged with the various committees of the Government of Kazakhstan on permits and licenses application; and

• We engaged in negotiation with identified parties on gas sales and offtake arrangement.

Phase 2 work is to be carried out over a period of 24 months from 1 January 2015 to 31 December 2016.

cosT rEducTion iniTiaTiVEs

Across the Group cost reduction initiatives have resulted in the lower cash operating expenses for the financial year ended 31 December 2015 of RM18.9 million compared to RM21.5 million in the previous year.

wEakEning of ringgiT Malaysia

As at 31 December 2015, Ringgit Malaysia weakened by 22.86% and closed at RM4.30 to USD1.00, compared to RM3.50 at the end of 2014. Resulting from the revaluation of USD denominated receivables, the Group has recognised an unrealised gain on foreign exchange in its income statement of RM21.4 million this year compared to RM7.1 million last year.

dE-pEgging of kazakHsTan TEngE (kzT)

The de-pegging of KZT on 20 August 2015 by the Government of Kazakhstan saw an immediate devaluation of the KZT on that day by more than 30% from KZT188 to KZT255 against the US dollar. KZT continued to devalue and closed on 31 December 2015 at KZT341, a total depreciation of 81%. Accordingly, KZT has lost value against Ringgit Malaysia by 52% when the rate closed at KZT79.33 to RM1.00 as at 31 December 2015 as opposed to KZT52.20 a year earlier. As a result, the Group recognised a RM2.7 million functional currency translation difference on foreign operation in other comprehensive income for the year.

unLOcking ASSEt VALuE FOR FutuRE gROwtH

We believe that this low oil price storm will soon pass and when the oil price recovers, the market will not wait for no one. We also believe that our Company is now more resilient and better prepared to face the challenges of the future having gone through this experience at the very early stage of our upstream oil and gas venture.

Despite the two-year setback on operations caused by the low oil price situation, we remain very positive on the potential upside presented by Rakushechnoye Field. The Field which covers an area of approximately 354.45 km2, has 2P oil and gas reserves of 43 million bbl and 96.4 million boe (or 578.4 billion cubic feet) respectively. There is still some 9.5 years remaining under the subsurface use contract that is expiring in August 2025, which will give us sufficient time to realise reasonable return on our initial investment made under the Joint Investment Agreement.

Furthermore, we have secured a USD125 million loan facility from EXIM Bank in March 2016 which we intend to utilise part of it for the monetization of the large volume of natural gas and condensate reserves in the Field. To reach the gas and condensate reservoir, new and deeper wells need to be drilled and a gas pipeline need to be put in place to carry the produced gas to the National gas pipeline for sale to the Kazakh state gas company. The operator fee to be charged for the gas production from the Field is expected to provide a stable source of revenue for the Group in the future.

In the immediate term, Sumatec aims to stay lean with a view towards keeping costs at an optimum level, and maintaining the current level of activities.

We thank you, all our valued shareholders, for your support and patience with us. We certainly look forward to your continued support as we bring our Company to greater heights in the future.

james chan yok pengManaging Director

Oil heating tank at the processing facility


fiVE-yEar financial HigHligHTs

2011 2012 2013 2014 2015 key financial data statement of comprehensive income: Revenue RM’000 10,771 1,543 - 81,117 62,583 Earnings/ (Loss) Before Interest, Tax, Depreciation & Amortisation RM’000 15,122 (36,460) 87,576 61,729 63,007 Profit/ (Loss) After Taxation RM’000 (66,682) (105,448) 64,259 48,904 37,859 Profit/ (Loss) Attributable to Equity Holders RM’000 (73,632) (99,735) 73,599 48,904 37,828 statement of financial position: Share Capital RM’000 75,027 75,027 431,896 487,577 490,146 Shareholders’ Equity RM’000 (38,096) (137,831) 426,782 610,591 650,880 Total Assets RM’000 684,708 551,475 453,675 681,396 695,456 Net Assets RM’000 38,106 (67,311) 426,584 610,561 650,880 Total Borrowings RM’000 531,517 82,238 17,953 22,635 22,530 Cash And Cash Equivalents RM’000 1,474 71 4,835 1,384 895 ratio analysis: Basic Earnings/ (Loss) Per Share sen (35.90) (46.53) 12.58 1.50 1.09 Net Assets Per Share RM 0.18 (0.31) 0.14 0.18 0.19 Gearing Ratio times NM NM 0.04 0.04 0.03 Return on Shareholders’ Equity % NM NM 17 8 6 Valuation: Market Capitalisation RM’000 46.1 39.7 848.4 714.0 437.6

Note:NM: Not Meaningful

REVENUE(RM’000)

81,11762,583

01,543

10,771

2014 2015201320122011

PFOFIT/(LOSS) AFTER TAXATION(RM’000)

TOTAL ASSETS (RM’000)

NET ASSETS PER SHARE (RM)

SHAREHOLDERS’ EQUITY(RM’000)

BASIC EARNINGS/(LOSS) PER SHARE (sen)

1.50

12.58

(46.53)(35.90)1.09

2014 2015201320122011

0.18

610,591

0.19

2014 2015

650,880

2014 2015

0.14

426,782

2013

2013

(0.31)

2012

(137,831)

2012

0.18

2011

(38,096)

2011

48,90464,259

(105,448)(66,682)

681,396

453,675

551,475

684,708

37,859

2014 2015201320122011

695,456

2014 2015201320122011


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Board of dirEcTors’ profilE

Tan sri aBu TaliB Bin oTHManindEpEndEnT non-EXEcuTiVE dirEcTorAGE 78, MALAYSIAN

position in the company• Appointed as Independent Non-Executive Director :

13 January 2014• Appointed as Chairman : 17 February 2014• Chairman of Nomination and Remuneration

Committees

Qualification• Barrister-at-law, Lincoln’s Inn, United Kingdom

working Experiences• He started his career with Judicial and Legal Service

of the Goverment of Malaysia. He served in various capacities in the service including the Attomey-General of Malaysia. He retired from service in 1993.

directorship in public companies• IGB Corporation Berhad• CYL Corporation Berhad• MUI Continental Berhad • KAF Investment Funds Berhad

cHan yok pEngManaging dirEcTorAGE 64, MALAYSIAN

position in the company• Redesignated as Managing Director : 4 January 2016• Appointed as a Non-Independent Non-Executive

Director from 17 February 2014 to 3 January 2016• Member of Remuneration and ESOS Committees• Appointed as member of Investment and Quality

Health Safety & Environment Risk Committees on 4 January 2016

Qualification• Bachelor of Mechanical Engineering (Honours),

University of Malaya• Diploma in Accounting and Finance, Chartered

Association of Certified Accountants (“ACCA”), United Kingdom

working Experiences• 1977-1979 : Started as a Project Engineer with Jurong

Engineering Pte Ltd (Singapore)• 1979-1980 : Joined FELDA as an Assistant Mill

Manager• 1980-1984 : Joined ESSO Production Malaysian

Incorporated.• 1984-1985 : Moved to Tenaga Waja Sdn. Bhd.• 1985 : He started his own business (Sumatec

Corporation Sdn. Bhd.)• 2003 - 2013 : Managing Director of Sumatec

Resources Berhad

directorship in public companies• NIL


Board of dirEcTors’ profilEconT’d

daTo’ aHMad joHari Bin Tun aBdul razakindEpEndEnT non-EXEcuTiVE dirEcTorAGE 62, MALAYSIAN


10 July 2014

Qualification• Bachelor of Laws, University of Kent, United Kingdom• Barrister-at-Law, Lincoln’s Inn, United Kingdom• Advocate and Solicitor, High Court Malaya

working Experiences• Partner of legal firm, Messrs Shearn Delamore & Co.

in the Corporate and Commercial Department• He also heads the Competition Law Practice Group in

Messrs Shearn Delamore & Co.

directorship in public companies• Ancom Berhad• Daiman Development Berhad• Hong Leong Industries Berhad• Deutsche Bank (Malaysia) Berhad (non-listed)• Daiman Golf Berhad (non-listed)

MicHaEl liM HEE kiangindEpEndEnT non-EXEcuTiVE dirEcTorAGE 68, MALAYSIAN


23 January 2014• Chairman of Audit Committee• Member of Nomination and Remuneration

Committees

Qualification• Bachelor of Laws with Honours, Victoria University of

Wellington, New Zealand• Master of Laws with Distinction, Victoria University of

Wellington, New Zealand

working Experiences• 1973 : Admitted to practise law in the Supreme Court

of New Zealand• 1974 : Practising law in the High Court of Borneo,

Kuching and the High Court of Brunei• 1975-1997 : Lecturer in the Law Faculty of University

Malaya• 1978 : Joined Messrs Shearn Delamore & Co.• 1979-2010 : Became partner in Messrs Shearn

Delamore & Co. until his retirement on 1 January 2010

• He is currently a consultant with the legal firm, Messrs Jeff Leong, Poon & Wong

directorship in public companies• DKSH Holdings (Malaysia) Berhad• Selangor Properties Berhad• Paragon Union Holdings Berhad• Hektar Real Estate Investment Berhad



daTuk MoHd nasir Bin aHMadindEpEndEnT non-EXEcuTiVE dirEcTorAGE 62, MALAYSIAN


13 January 2014• Chairman of the ESOS Committee• Member of the Audit Committee

Qualification• Master of Business Administration (Finance),

Universiti Kebangsaan Malaysia• Chartered Accountant with the Malaysian Institute of

Accountants (“MIA”)• Fellow of the ACCA UK

working Experiences• 1979 : Started as a Trainee Accountant and holding

various positions in the Finance Division of Tenaga Nasional Berhad (“TNB”)

• 1993 : Seconded to TNB’s subsidiary company, Malaysia Transformer Manufacturing Sdn. Bhd. as Financial Controller

• 1994 : Appointed as Chief Executive Officer (“CEO”) of Malaysia Transformer Manufacturing Sdn. Bhd.

• 2000 : Joined Sharikat Permodalan Kebangsaan Berhad as its CEO

• 2001-2011 : Appointed as CEO of Perbadanan Usahawan Nasional Berhad

• August 2011-July 2013 : President of MIA• September 2013 : Member of the ACCA (UK) Council• Chairman of UKM Holdings Sdn. Bhd., a member of

the Board of Universiti Kebangsaan Malaysia and the Board of Trustee of Yayasan Canselor UNITEN

directorship in public companies• Bina Darulaman Berhad• MIMOS Berhad (non-listed)• SIRIM Berhad• CIMB Group Holdings Berhad• CIMB Bank Berhad • Media Prima Berhad and Group

MoHaMad Bin isMailindEpEndEnT non-EXEcuTiVE dirEcTorAGE 65, MALAYSIAN


15 August 2013• Chairman of the Quality Health Safety & Environment

Risk Committee• Member of the Audit and Investment Committees

Qualification• Bachelor of Science (Chemistry), University of Malaya

working Experiences• 1977-2005 : Started his career as a Reservoir

Engineer (Exploration and Production Department) with PETRONAS and later on assumed various positions in the PETRONAS Group of Companies, both locally and abroad

• 2006 : Appointed as Vice President (Business Development) of Bergesen Worldwide Offshore, a public listed company based in Oslo, Norway

• 2010 : He started his own business




daTuk cHE MokHTar Bin cHE aliindEpEndEnT non-EXEcuTiVE dirEcTorAGE 62, MALAYSIAN


13 January 2014• Chairman of Investment Committee• Member of Nomination and ESOS Committees

Qualification• Bachelor of Arts (Political Science and Public

Administration), Victoria University of Wellington, New Zealand

• Bachelor of Law, Victoria University of Wellington, New Zealand

working Experiences• 1980-1982 : Served as Magistrate in Kuala Lumpur,

Kajang and Sepang• 1983-1985 : Partner of legal firm, Messrs Mian Lee &

Partners• He then set up his own legal firm, known as Messrs

Che Mokhtar & Ling• He is also a Director of Mass Rapid Transit

Corporation Sdn. Bhd and Notary Public appointed by the Attorney General


wan kaMaruddin BindaTo’ Biji sura @ wan aBdullaHnon-indEpEndEnT non-EXEcuTiVE dirEcTorAGE 60, MALAYSIAN

position in the company• Appointed as Executive Vice Chairman : 27 August

2003• Re-designated as a Non-Independent Non-Executive

Director: 17 February 2014• Member of Quality Health Safety & Environment Risk

and Investment Committees

Qualification• Bachelor of Science Degree in Mechanical

Engineering, Brighton Polytechnic, United Kingdom

working Experiences• Started as an Engineer with Tenaga Nasional Berhad

where he worked in the operations and turbine maintenance department

• Joined Sarawak Shell and involved in Upstream Project Development and Implementation

• Seconded to Shell Malaysia Trading as the Project Manager for the PETRONAS/Shell joint-venture Multi Product Pipeline and Klang Valley Distribution Project


Notes:• None of the Directors has any family relationship with any other

Director and/or major shareholder nor conflict of interest in business arrangement involving the Company.

• None of the Directors has been convicted for any offences for the past ten (10) years other than traffic offences, if any.

• Directors’ interests in securities of the Company are disclosed on page 49 of the Annual Report.


financial calEndar

24 fEBruary

2015announcEMEnT

of THE unaudiTEd consolidaTEd

rEsulTs for THE fourTH quarTEr

EndEd 31 dEcEMBEr 2014

26 May 2015

announcEMEnT of THE unaudiTEd

consolidaTEd rEsulTs for THE firsT

quarTEr EndEd 31 MarcH 2015

25 augusT

2015announcEMEnT


rEsulTs for THE sEcond quarTEr

EndEd 30 junE 2015


24 noVEMBEr

2015announcEMEnT


rEsulTs for THE THird quarTEr EndEd 30

sEpTEMBEr 2015

24 fEBruary

2016announcEMEnT


rEsulTs for THE fourTH quarTEr

EndEd 31 dEcEMBEr 2015

28 april 2016

noTicE of annual gEnEral MEETing and issuancE of annual

rEporT for THE financial yEar EndEd

31 dEcEMBEr 2015

2 junE 2016

ninETEEnTH annual gEnEral MEETing


Corporate InformatIon

prInCIpaL offICerSChan Yok pengManaging Director (effective from 4 January 2016)

Christopher Layton DaltonChief Executive Officer (resigned effective from 31 December 2015)

roshidah Binti abdullahChief Financial Officer

aUDIt CommItteemichael Lim Hee Kiang Chairman Datuk mohd nasir bin ahmad mohamad bin Ismail

remUneratIon CommItteetan Sri abu talib bin othman Chairmanmichael Lim Hee Kiang Chan Yok peng

nomInatIon CommItteetan Sri abu talib bin othman Chairmanmichael Lim Hee KiangDatuk Che mokhtar bin Che ali

eSoS CommItteeDatuk mohd nasir bin ahmad ChairmanDatuk Che mokhtar bin Che ali Chan Yok pengChristopher Layton Dalton(resigned effective from 31 December 2015)

InVeStment CommItteeDatuk Che mokhtar bin Che ali ChairmanWan Kamaruddin bin Dato’ Biji Sura @ Wan abdullah mohamad bin Ismail Christopher Layton Dalton (resigned effective from 31 December 2015)Chan Yok peng (appointed on 4 January 2016)

QHSe rISK CommItteemohamad bin Ismail ChairmanWan Kamaruddin bin Dato’ Biji Sura @ Wan abdullah Christopher Layton Dalton (resigned effective from 31 December 2015)Chan Yok peng (appointed on 4 January 2016)

CompanY SeCretarIeSLim Seck Wah (MAICSA 0799845)m. Chandrasegaran a/l S. murugasu (MAICSA 0781031)

reGIStereD offICeLevel 15-2Bangunan Faber Imperial CourtJalan Sultan Ismail50250 Kuala Lumpurtel : 603-2692 4271fax : 603-2732 5388e-mail: [email protected]

prInCIpaL pLaCe of BUSIneSSSuite 22.02, Level 22The Gardens North TowerMid Valley City, Lingkaran Syed Putra59200 Kuala Lumpur

SHare reGIStrarMega Corporate Services Sdn BhdLevel 15-2Bangunan Faber Imperial CourtJalan Sultan Ismail50250 Kuala Lumpurtel: 603-2692 4271fax: 603-2732 5388e-mail: [email protected]

aUDItorSMessrs SJ Grant ThorntonChartered AccountantsLevel 11Sheraton Imperial CourtJalan Sultan Ismail50250 Kuala Lumpur

SoLICItorSSignum Law FirmShearn Delamore & Co.Bahari & Bahari

prInCIpaL BanKerSAlliance Bank Malaysia BerhadAl-Rajhi Banking & Investment Corporation (Malaysia) BerhadCIMB Bank BerhadMalayan Banking Berhad

StoCK eXCHanGe LIStInGMain MarketBursa Malaysia Securities BerhadStock name : SUMATECStock Code : 1201

BoarD of DIreCtorS

tan SrI aBU taLIB BIn otHman Independent Non-Executive Director

CHan YoK penG Managing Director

Dato’ aHmaD JoHarI BIn tUn aBDUL razaK Independent Non-Executive Director

mICHaeL LIm Hee KIanG Independent Non-Executive Director

DatUK moHD naSIr BIn aHmaD Independent Non-Executive Director

moHamaD BIn ISmaIL Independent Non-Executive Director

DatUK CHe moKHtar BIn CHe aLI Independent Non-Executive Director

Wan KamarUDDIn BIn Dato’ BIJI SUra @ Wan aBDULLaH Non-Independent Non-Executive Director


Statement on Corporate GoVernanCe

The Board of Directors of the Company (“The Board”) is committed to ensure the high standards of corporate governance and the establishment and implementation of a proper framework and controls that are in line with the principles and best practices pursuant to the Malaysian Code of Corporate Governance 2012 (“The Code”) and Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) (“MMLR”).

The Board recognises the importance of good corporate governance as it underpins the Group’s objective to achieve sustainable growth in its businesses in the long run. The Board will continuously evaluate the status of the Company and Group’s corporate governance practices and procedures with a view to adopt and implement the best practices of The Code wherever applicable.

The Board is pleased to report herein the manner in which the Company has applied the principles of The Code and the extent to which it has complied with the best practices of The Code throughout the financial year ended 31 December 2015 and to the date of this statement.

I. BoarD CHarter

The Board Charter which was established on 17 February 2014, outlines the manner in which the Board’s constitutional powers and responsibilities will be exercised and discharged, having regard to principles of good corporate governance, international best practices and applicable laws and regulations.

The Charter includes an overview of:• Board structure, composition and appointment process;• Board’s independence policy;• Board’s roles and responsibilities including authorities reserved for the Board;• Director’s ethics and conduct;• Delegation of duties to the management and Board Committees; and• Board processes including conduct of meetings and Board’s performance assessment.

The Board Charter will be reviewed on an annual basis to ensure that it remains consistent with the Board’s objectives and current laws and practices.

II. roLeS anD reSponSIBILItIeS of tHe BoarD

The Board is responsible in promoting and protecting the interests of shareholders and stakeholders of the Company and the Group by overseeing and appraising the Company’s strategies, policies and performance. It plays a key role in charting the strategic direction of the Group and in ensuring the effective execution of these strategies by management. Specifically, the Board’s key objectives are:

• To oversee the conduct of the Group’s businesses, including the formulation of strategy and performance objectives, in conformance with the Company’s values and governance framework, including establishing and observing high ethical standards;

• To approve and monitor the progress of major capital expenditure, fund-raising, acquisitions and divestitures;• To fulfil statutory and fiduciary responsibilities by monitoring the operational, financial and risk management

processes of the Group;• To ensure compliance with environment, safety, health and other relevant legislations governing its oil and gas

operations;• To ensure the adequacy and effectiveness of system of internal controls and risk management framework;• To review and evaluate the performance of the Chief Executive Officer/ Managing Director (“CEO/MD”) periodically,

his or her compensation package and ensure succession planning for the CEO/MD is in place; and• To provide sufficient information to shareholders at the general meetings on the Company’s performance and major

developments affecting its state of affairs.


II. roLeS anD reSponSIBILItIeS of tHe BoarD cont’d

MattersspecificallyreservedfortheBoardinclude:

• Appointment of a Chairman;• Appointment and removal of CEO/MD, Chief Financial Officer and Chief Operating Officer;• Appointment and removal of Company Secretary;• Appointment of Directors to fill a vacancy or as an additional Director;• Establishment of Board Committees, their membership and delegated authorities;• Appointment, re-appointment or removal of the Company’s external auditors (on the recommendation of the Audit

Committee);• Approval of dividends;• Approval of quarterly and annual financial statements;• Approval of strategic plan and budget, at least annually;• Significant changes to organisation structure;• Approval of major capital expenditure, acquisitions and divestitures in excess of authority levels delegated to

management;• Approval of major related party transactions;• Major financing facilities;• Calling of meetings of the shareholders;• Determining the form and operation of the Company’s various equity plans;• Determination of the Company’s hedging policy; • Approval of Limits of Authority (“LOA”) of the Company; and• Any other specific matters nominated by the Board from time to time.

The Board has also established various Board Committees, namely the Audit Committee, Nomination Committee, Remuneration Committee, ESOS Committee, Investment Committee and Quality Health Safety and Environment (“QHSE”) Risk Committee to examine specific issues within their respective terms of reference as approved by the Board. The Committees report to the Board with their recommendations. The ultimate responsibility for decision making, however, lies with the Board as a whole. The roles and responsibilities of these Committees are spelt out in the subsequent sections of this report.

SeparationbetweentheChairmanandtheCEO/MD

The Board recognizes that having separate individuals as Chairman and CEO/MD of the Company will contribute towards more effective functioning of the Board and it allows for better dynamics for check and balance between the Board and management. The Board Charter provides that the Chairman of the Board shall at all times be separate from the CEO/MD.

The Chairman of the Board is responsible for:

• Chairing meetings of the Board and of the shareholders;• Providing leadership to the Board and ensuring that the Board operates effectively as a group and is able to fulfil its

fiduciary obligations; • Ensuring that Board decisions have been implemented by management; and • Promoting constructive and respectful relationship between the Board and management.

The CEO/MD has the overall responsibility of executing the Group’s strategies and plans as approved by the Board and driving the Group’s performance towards achievement of its vision and mission. In carrying out his duties, the CEO/MD is expected to display strong leadership qualities especially in managing cross cultural operations and is able to rally the support of all key stakeholders to ensure smooth running of the day-to-day-operations of the Group.

Statement on Corporate GoVernanCeCOnT’D



SeparationbetweentheChairmanandtheCEO/MDcont’d

The Board has delegated its authority to the CEO/MD and Senior Management as specified in the Company’s LOA. These include authorities for:

• Acquisition of assets;• Incurring of capital expenditure for oil field operations;• Incurring of operating expenses;• new acquisitions, investments and divestiture;• Hiring and compensation policy for employees;• Banking operations and payment; and• Making press releases and announcement to Bursa.

The CEO/MD and the Senior Management remain accountable to the Board for the authority that is delegated to them.

CodeofEthicsandConduct

The Board has made a commitment to create a corporate culture within the Company and the Group to operate the business in an ethical manner and to uphold the highest standards of professionalism and exemplary corporate conduct in relation to interactions with the Company’s stakeholders.

In addition to the Group’s code of conduct which is applicable to all employees and directors of the Company and the Group, Board members are also expected to conform to the Director’s code of ethics and conduct (“Director’s Ethics”). The Director’s Ethics provide guidelines on the manner in which Directors should conduct themselves in fulfilling and discharging their fiduciary duties, specifically:

• Directors will act at all times with honesty and integrity and will observe the highest standards of ethical behavior;• Directors will ensure that no decision or action is taken that has the effect of prioritizing their personal interests over

the Company’s interests;• Directors are expected to declare their respective shareholdings, direct or indirect if any, in the Company and

related companies;• Directors are expected to also declare their interest, direct or indirect, in contracts or proposed contracts with the

Company or subsidiary companies. The Directors concerned are to abstain from deliberating and voting in respect of these transactions or in matters affecting their personal, business or professional interests;

• Directors will be expected to participate in all induction and orientation programs and any continuing education or training arranged for them;

• The Board shall assess the training needs of its members from time to time and shall ensure that they have access to appropriate continuing education programs to update their knowledge and enhance their skills to sustain active participation at Board deliberation;

• The Board collectively, and each Director individually, has the right to seek independent professional advice, subject to the approval of the Chairman, or the Board as a whole;

• The Directors shall devote time and effort to attend meetings and to know what is required of the Board and each of its members, and to discharge those functions effectively; and

• Directors shall limit their directorship of companies to a number which they can sufficiently devote their time and maintain effectiveness. All Directors are to notify the Chairman of the Board prior to their accepting any new directorship. Likewise the Chairman shall also notify the Board if he has new directorship or significant commitments outside of the Company.




PromotingSustainability

The Board has taken steps to ensure that the Group’s strategies will promote sustainability, particularly with respect to environmental, social and governance aspects of the business.

AccesstoInformation

The Board is supplied with relevant information and reports on financial, operational, corporate, regulatory, business development and audit matters, by way of Board reports for decisions to be made on an informed basis and effective discharge of Board’s responsibilities.

Good practices have been observed for timely dissemination of meeting agenda, including the relevant Board and Board Committee papers to all Directors prior to the Board and Committee meetings, to give effect to Board decisions and to deal with matters arising from such meetings. Any Director may request matters to be included in the agenda. Urgent papers may be presented and tabled at meetings under supplemental agenda. The issues are deliberated and discussed thoroughly by the Board prior to decision making. All deliberations, discussions and decisions of the Board are minuted and recorded accordingly.

In addition, the Board members are updated on the Company’s activities and its operations on a regular basis. All Directors have access to all information of the Company on a timely basis, in an appropriate manner and quality necessary to enable them to discharge their duties and responsibilities.

Presentations and briefings by the Management of the Group and external advisers, where applicable, are also held at Board Meetings to advise the Board and furnish relevant information and clarification for the Board to arrive at a considered decision. Members of the Board, either collectively or individually, have the right to seek independent professional advice on any matter raised by management for consideration by the Board. The relevant Board members will be required to obtain the approval from the Chairman and upon approval, proceed with the engagement of the independent advisor. The cost of such engagement shall be borne by the Company.

CompanySecretaries

The Company Secretaries are responsible for advising the Board on issues relating to compliance with the relevant laws, rules, procedures and regulations, as well as best practices of governance. They are also responsible for advising the Board of their obligations and duties to disclose their interests in securities, ensures compliance with Board policies and procedures. They brief the Board on the proposed contents and timing of material announcements to be made to regulators.

The Board have unrestricted access to the advice and services of qualified, experienced and competent Company Secretaries to enable them to discharge their duties effectively. The Board is regularly updated and advised by the Company Secretaries on statutory and regulatory requirements, and the resultant implications of any changes therein to the Company.

The Company Secretaries attend all Board and Board Committees meetings and ensures that meetings are properly convened, and that accurate and proper records of the proceedings and resolutions passed are taken and maintained accordingly. The appointment and removal of the Company Secretaries, if any, are decided and agreed by the Board as a whole.



III. BoarD StrenGtH anD effeCtIVeneSS

CompositionoftheBoard

During the financial year under review, the Board comprises one (1) Independent non-Executive Chairman, two (2) non-Independent non-Executive Directors and five (5) Independent non-Executive Directors. This is far exceeding the requirements of Paragraph 15.02 of the MMLR that requires at least one-third (1/3) of the Board members to be independent directors. On 4 January 2016, Mr. Chan Yok Peng, the non-Independent non-Executive Director, was redesignated to the position of Managing Director of the Company.

The Board is of the opinion that the current size and composition of the Board is well-balanced, with their diverse background and areas of specialisation, collectively bringing with them a wide range of experience and expertise in areas such as legal, finance, oil & gas and business operations to reflect the Board’s commitment to ensure the effective stewardship and control of the Company and the Group. A brief description of the background of each director is set out on pages 12 to 15 of this Annual Report.

The Board has set up six (6) board committees to assist the Board in discharging its responsibilities effectively. They are the Audit Committee, nomination Committee, Remuneration Committee, ESOS Committee, QHSE Risk Committee and Investment Committee.

AuditCommittee

The details on the Audit Committee are included in the Audit Committee Report as disclosed on pages 31 to 36 of this Annual Report.

NominationCommittee-SelectionandAssessmentofDirectors

A nomination Committee established on 17 February 2014 with specific terms of reference by the Board, comprises exclusively of Independent Non-Executive Directors as follows:

1. Tan Sri Abu Talib bin Othman - Chairman (Independent non-Executive Chairman); 2. Mr. Michael Lim Hee Kiang - Member (Independent non-Executive Director); and 3. Datuk Che Mokhtar bin Che Ali - Member (Independent Non-Executive Director).

The Nomination Committee is primarily responsible for recommending suitable appointments to the Board, taking into consideration the Board structure, size, composition and the required mix of expertise and experience which a Director should bring to the Board. It assesses the effectiveness of the Board as a whole, the Board Committees and the contribution of each Director to the Board.

The final decision on the appointment of a candidate recommended by the nomination Committee rests with the whole Board. The Board is entitled to the services of the Company Secretary who would ensure that all appointments are properly made upon obtaining all necessary information from the incoming director.

During the financial year, the nomination Committee met once and was attended by all members, to assess and recommend appointment of new Board members, to assess the balance composition of Board members based on merits, Directors’ contribution and Board effectiveness.

The performance and effectiveness of the Board, Board Committees and contribution by individual directors to the Board were assessed in 2015 using evaluation survey questionnaires covering performance criteria that the Board determines as important to its effectiveness. The results of the questionnaires are complied with a report for the Chairman, which is then presented to the Nomination Committee and then to the Board for evaluation and consideration.



III. BoarD StrenGtH anD effeCtIVeneSS cont’d

NominationCommittee-SelectionandAssessmentofDirectorscont’d

The Board believes that diversity at the Board level is important as it helps to enhance overall Board effectiveness. Board diversity encompasses, among other things, the varied skills, background, knowledge, subject-matter expert, industry experience, age and gender brought in by any member or prospective member to the Board. At this stage of the Company’s life, the Board considers skills, industry experience and knowledge to be the main criteria for new director nomination consideration.

The Board believes that the current mix of skills and experience of its respective Board members is sufficient for the discharge of its duties and responsibilities effectively.

AppointmentandRe-electionofDirectors

In accordance with Article 87.1 of the Articles of Association of the Company, at every Annual General Meeting (“AGM”), one-third (or the number nearest to one-third) of the Directors shall retire from office by rotation and may offer themselves for re-election. The Articles of Association also provide that all Directors are subject to retirement by rotation at least once in every three (3) years and shall be eligible for re-election. An election of the retiring Directors shall take place every year.

Any person appointed as a Director, either to fill a casual vacancy or as an addition to the existing Directors, shall hold office only until the conclusion of the next AGM, and shall be eligible for re-election but shall not be taken into account in determining the directors who are to retire by rotation at that meeting.

The names of Directors who are due for re-election and/or re-appointment have been identified and disclosed in the Notice of the AGM and the particulars of these Directors are disclosed on pages 12 to 15 of the Annual Report. The Board is satisfied that the Directors, who are required to stand for re-election and re-appointment at the AGM, will continue to demonstrate the necessary commitment to be fully effective members of the Board and therefore recommend for their re-election and/or re-appointment.

RemunerationCommittee-Directors’Remuneration

The Remuneration Committee comprises of Non-Executive Directors as follows:

1. Tan Sri Abu Talib bin Othman - Chairman (Independent non-Executive Chairman); 2. Mr. Michael Lim Hee Kiang - Member (Independent non-Executive Director); and 3. Mr. Chan Yok Peng - Member (Managing Director).

The Remuneration Committee, established on 17 February 2014, has been entrusted by the Board to determine that the levels of remuneration are sufficient to attract and retain Directors who have the quality required to provide stewardship to the Group. The Remuneration Committee is entrusted under its terms of reference to assist the Board, amongst others, to recommend to the Board the remuneration of the Executive Directors, if any, and that of the CEO/MD, Chief Operating Officer and Chief Financial Officer. In the case of non-Executive Directors, the level of remuneration shall reflect the experience and level of responsibilities undertaken by the Non-Executive Directors concerned. In all instances, the deliberations are conducted with the Directors concerned abstaining from discussions on their individual remuneration.




RemunerationCommittee-Directors’Remunerationcont’d

During the financial year under review, the Committee met twice and were attended by all members.

Details of Directors’ remuneration for the financial year ended 31 December 2015 are as follows:

executive non-executive Directors Directors (rm) (rm)

Fees - 499,200 Salary - - Meetings allowance - 146,000 Benefits-in-kind - -

total - 645,200

The number of Directors whose remuneration falls into the following bands is as follows:

executive non-executive Directors Directors

RM50,000 and below - 1 RM50,001 – RM100,000 - 5 RM101,000 – RM150,000 - 2

ESOSCommittee

The ESOS Committee has a delegated authority to administer the ESOS and to decide on all relevant matters incidental thereto in accordance with the ESOS Bye-Laws including, but not limited to, the power to determine the criteria for eligible employees, the entitlement for eligible employees and the granting of options to such eligible employee.

The ESOS Committee comprises of:

1. Datuk Mohd nasir bin Ahmad - Chairman (Independent non-Executive Director); 2. Datuk Che Mokhtar bin Che Ali - Member (Independent non-Executive Director); 3. Mr. Chan Yok Peng - Member (Managing Director); and 4. Mr. Christopher Layton Dalton - Member (Chief Executive Officer) - resigned on 31 December 2015.

The ESOS Committee shall recommend ESOS allocations to Directors and the CEO for approval by the Board as a whole with the relevant individual Director and the CEO abstaining in respect of his individual allocation and subject to the approval of the shareholders of the Company at a general meeting.

The ESOS Committee shall be vested with such powers and duties as are conferred upon it by the Board including the powers:

• To administer the ESOS and to grant Options in accordance with the Bye-Laws;• To recommend to the Board to establish, amend and revoke Bye-Laws, rules and regulations to facilitate the

implementation of the Scheme; • To construe and interpret the provisions hereof in the best interest of the Company; and

• Generally, to exercise such powers and perform such acts as are deemed necessary or expedient to promote the best interest of the Company.




ESOSCommitteecont’d

Subject to the foregoing, the ESOS Committee shall exercise its discretion in such manner as it deems fit.

As at 31 December 2015, a total of 58,090,000 ESOS options allocated to the employees of the Company remains unexercised.

Below is the summary of movement in the outstanding ESOS during the Financial Year:

SUmateC reSoUrCeS BerHaD empLoYeeS’ SHare optIon SCHeme (“eSoS”)

Lapsed/ Balance Unexercised as at 1 January 2015 Granted forfeited exercised as at 31 December 2015

84,640,000 35,300,000 (43,500,000) (18,350,000) 58,090,000

The ESOS Committee meets as and when necessary and can also make decisions by way of circular resolutions.

InvestmentCommittee

The Investment Committee is responsible for assisting the Board to ensure that all Company’s proposals for investments in new businesses are sufficiently and thoroughly evaluated from all aspects including, but not limited to, risks, technical qualifications, pricing and financial returns, and resources.

The Investment Committee Charter will be reviewed on an annual basis to ensure that it remains consistent with the Board’s objectives and best practices. The Investment Committee meets as and when required.

The members of the Investment Committee comprise of:

1. Datuk Che Mokhtar bin Che Ali - Chairman (Independent non-Executive Director); 2. Encik Wan Kamaruddin bin Dato’ Biji Sura @ Wan Abdullah - Member (non-Independent non-Executive Director); 3. Encik Mohamad bin Ismail - Member (Independent non-Executive Director); 4. Mr. Christopher Layton Dalton - Member (Chief Executive Officer) - resigned on 31 December 2015; and 5. Mr. Chan Yok Peng - Member (Managing Director) - appointed on 4 January 2016.

During the financial year under review, the Committee did not convene any meeting.

QHSERiskCommittee

The QHSE Risk Committee is responsible with a delegated authority to administer and be responsible for assuring continuous compliance by the Company with all applicable quality, safety, health and environmental laws and regulations vested in management of the Company.

The members of the QHSE Risk Committee comprise of:

1. Encik Mohamad bin Ismail - Chairman (Independent non-Executive Director);2. Encik Wan Kamaruddin bin Dato’ Biji Sura @ Wan Abdullah - Member (non-Independent non-Executive Director); 3. Mr. Christopher Layton Dalton - Member (Chief Executive Officer) - resigned on 31 December 2015; and

4. Mr. Chan Yok Peng - Member (Managing Director) - appointed on 4 January 2016.

The Committee did not have any meeting in 2015.



IV. InDepenDenCe of tHe BoarD

The Independent Non-Executive Directors are of high credibility, caliber and have the necessary skill and experiences to carry sufficient weight in Board decisions. The Independent non-Executive Directors bring to bear objective and independent views, advice and judgment which are particularly important in ensuring that the strategies proposed by the Management are fully discussed and examined, and take account of the long term interests, not only of the Group, but also of shareholders, stakeholders and the many communities in which the Company conduct its business.

Under Paragraph 3.2 of The Code, any director should not hold office in the capacity of an independent director for more than 9 years. Currently, none of the six (6) independent directors has served on the Board for more than nine (9) years. The tenure of nine (9) years, however, is not the conclusive criteria in determining Board member’s ability to exercise independent judgment. The Board also considers whether the director is independent of management and free of any business or other relationships that could, or reasonably perceived to, materially interfere with the exercise of his unfettered or independent judgment. Family ties and cross directorships may also be relevant in considering interests and relationships which may compromise independence of directors. The Board follows the “independent director” criteria prescribed by the MMLR in assessing the independence of directors.

Upon completion of the nine (9) years as independent director, the independent director may continue to serve the Board after being re-designated as non-independent director. However, should the Board wish to retain the director as an independent director beyond the nine (9) years, the Board shall seek shareholders’ approval subject to provision of strong justification for such an extension.

V. CommItment of DIreCtorS

Board meetings are scheduled in advance at the beginning of the new financial year to enable directors to plan ahead and fit the year’s meeting into their own schedules. The Board meets at least quarterly with additional meetings convened as and when necessary.

Board and Board Committee papers which are prepared by the Management, provide the relevant facts and analysis to facilitate the Board to make informed decision. The meeting agenda, the relevant reports and Board papers are furnished to Directors and Board Committee members within reasonable time ahead of the meetings to allow the Directors ample opportunity to peruse the papers for effective discussion and decision making during meetings.

At the quarterly Board meetings, the Board reviews the business performance of the Group and discusses major operational and financial issues. The reports of the Audit Committee, nomination Committee, Remuneration Committee, ESOS Committee, Investment Committee and QHSE Risk Committee are also presented and discussed at Board meetings. All pertinent issues discussed at Board meetings in arriving at the decisions are properly recorded by the Company Secretary by way of minutes of meetings.



V. CommItment of DIreCtorS cont’d

BoardMeetingsandAttendance

During the financial year ended 31 December 2015, the Board of Directors met twelve (12) times.

Details of the Board attendance at the meetings for financial year ended 31 December 2015 are set out below:

Director attendance %

tan Sri abu talib bin othman 12 out of 12 100 Independent Non-Executive Director encik Wan Kamaruddin bin Dato’ Biji Sura @ Wan abdullah 10 out of 12 83 Non-Independent Non-Executive Director mr. Chan Yok peng 10 out of 12 83 Non-Independent Non-Executive Director mr. michael Lim Hee Kiang 10 out of 12 83 Independent Non-Executive Director encik mohamad bin Ismail 11 out of 12 92 Independent Non-Executive Director

Datuk Che mokhtar bin Che ali 11 out of 12 92 Independent Non-Executive Director Datuk mohd nasir bin ahmad 8 out of 12 67 Independent Non-Executive Director Dato’ ahmad Johari bin tun abdul razak 10 out of 12 83 Independent Non-Executive Director Directors’Training-ContinuingEducationProgrammes

The Board is mindful of the importance for its members to undergo continuous training to enhance their skills and knowledge, and to keep abreast with the relevant changes in laws, regulation and industry business environment, and the impact such changes have on the Group to enable them to discharge their duties more effectively.

Except as disclosed below, other directors have not attended any training programme during the year due to their tight schedules and other commitments.



V. CommItment of DIreCtorS cont’d

Directors’Training-ContinuingEducationProgrammescont’d

Details of programmes attended by directors are as follows:

Director name of Seminars / training programmes attended organiser

Tan Sri Abu Talib bin Othman : Focus Group session for Board Directors on Bursa Malaysia Berhad Corporate Governance Disclosure Amongst Listed Issuers

: IGB Board Session – PriceWaterhouseCoopers PriceWaterhouseCoopers Budget Session 2015

Datuk Che Mokhtar bin Che Ali : The Interplay between CG, NFI and Investment Decision Securities Industry - What Boards of Listed Companies Need to Know Development Corporation

: CG Breakfast Series with Directors: Future of Auditors Bursa Malaysia Reporting - The Game Changer for Boardroom

: Sustainable Symposium Bursa Malaysia Mr. Michael Lim Hee Kiang : Planning Approval Permits for Property Development Desa Konsult Sdn Bhd in Malaysia and Supporting Legislations

: Board Chairman Series Part 2: Leadership Excellence Iclif Leadership & from the Chair Governance jointly held with Bursa Malaysia Berhad

: Laws regarding Approvals for Property Development Christopher & Lee Ong

Datuk Mohd Nasir bin Ahmad : Personal Impact Training ACCA UK

: Chairing Meetings ACCA UK

: Advanced Risk Management MINDA : Bursa Listing Committee Retreat Bursa Malaysia : Annual Management Summit CIMB : Internal Audit Workshop MIMOS

Dato’ Ahmad Johari bin : Economic Outlook & Issues: Global and Domestic Wholesale Banking, Tun Abdul Razak Macroeconomic Outlook AmBank (M) Berhad

Throughout the current financial year, all Directors received updates and briefings, particularly on regulatory requirements and changes to the Malaysian Financial Reporting Standards that would affect the Group’s financial statements.



VI. InteGrItY In fInanCIaL reportInG

It is the Board’s commitment to present a balanced and meaningful assessment of the Group’s financial performance and prospects at the end of each reporting period and financial year, primarily through the quarterly announcement of Group’s results to Bursa Securities, as well as the annual financial statements of the Company and the Group. A statement by the Directors of their responsibilities in the preparation of financial statements is set out on page 46 of this Annual Report.

In assisting the Board to discharge its duties in financial reporting, the Board has established an Audit Committee, comprising wholly of Independent non-Executive Directors. One of the key responsibilities of the Audit Committee in its specific terms of reference is to ensure that the financial statements of the Group and Company comply with applicable financial reporting standards in Malaysia. Such financial statements comprise the quarterly financial results announced to Bursa Securities and the annual statutory financial statements.

In assessing the independence of external auditors, the Audit Committee requests for written assurance by the external auditors, confirming that they are, and have been, independent throughout the conduct of the audit engagement with the Company in accordance with the independence criteria set out by the International Federation of Accountants and the Malaysian Institute of Accountants.

The Audit Committee report is disclosed on pages 31 to 36 of this Annual Report.

VII. rISK manaGement anD InternaL ControL

The Board’s Statement on Risk Management and Internal Control is set out on pages 37 to 42 of this Annual Report.

VIII. WHIStLeBLoWInG poLICY

In order to strengthen corporate governance practices across the Group, a whistleblowing policy was established to encourage employees to report suspected and/or known misconduct, wrongdoings, corruption, fraud, waste and/or abuse involving resources of the Company.

All concerns raised via the whistleblowing channels will be treated fairly and properly. The Group’s Whistleblowing Policy also includes provisions to safeguard the confidentiality of the whistleblower, ensure no retaliation against the whistleblower if he or she has acted in good faith and measures to avoid abuse of the policy for purposes of making false or malicious allegations.

IX. tImeLY anD HIGH QUaLItY DISCLoSUre

The Board is aware of the need to establish corporate disclosure policies and procedures to enable comprehensive, accurate and timely disclosures relating to the Company and its subsidiaries to be made to the regulators, shareholders and stakeholders. On this basis, the Board authorises the CEO/MD to be responsible to ensure compliance with the corporate disclosure requirements as stipulated in the MMLR, and to disclose material information to regulators, shareholders and stakeholders on a timely basis.

As recommended by the Code, the Company will seek to leverage on the latest and most innovative information technology available to promote more efficient and effective ways to communicate with both its shareholders and stakeholders. The Company has made available on its website, the Company’s Annual Reports, announcements to Bursa Securities, media releases and news, a Corporate Governance section and presentations made to shareholders and analysts.

Specific contact details are provided on the Company’s website to address queries from shareholders and other public at www.sumatec.com.



X. reLatIonSHIp WItH SHareHoLDerS anD InVeStorS

Shareholderparticipationatgeneralmeeting

In addition to the quarterly financial reports and annual report, AGM remains the principal forum for communication and interaction between the Board and Senior Management with the shareholders.

The shareholders are encouraged to participate in the proceedings and raise any questions relating to the proposed resolutions as well as the Company’s business operations and affairs. The Chairman, Board of Directors and Senior Management will respond to shareholders’ question on matters pertaining to the Group’s performance and seek to explain concerns raised by the shareholders. The External Auditors are also present to provide their professional and independent clarification, if required, on issues highlighted by the shareholders.

The Notice to the AGM together with Form of Proxy are circulated to the shareholders at least twenty one (21) days before the date of the AGM, which gives shareholders sufficient time to prepare themselves to attend the AGM or to appoint a proxy to attend and vote on their behalf. Each item of special business included in the Notice to the AGM is accompanied by an explanatory statement for the proposed resolution to facilitate the full understanding and evaluation of issues involved. The outcome of the AGM was announced to Bursa Securities on the same day as the meeting.

Communicationandengagementwithshareholders

The Board recognises the importance of being transparent and accountable to the Company’s investors and has maintained various channels of communication with investors and shareholders. These include the quarterly announcements on financial results to Bursa Securities, relevant announcements and circulars when necessary, and the Annual and Extraordinary General Meetings. Investors and shareholders may also access online Investor Relation section, News and Media via the Company’s website at www.sumatec.com.

The Group’s website is updated from time to time to provide current and comprehensive information about the Group.

InvestorandMediaRelations

The Company engages with the investment community, whenever appropriate, to share our strategy and vision and to discuss our operations and business whilst ensuring timely and fair dissemination of information. The Board values the relationship the Company has with investors and communication with them is important to the Board and management.

The key spokesperson for the Company’s investor relations activities is the CEO/MD, who engages with research analysts and fund managers directly. Additionally, the Company calls for media briefings to update members of the press on major announcements made by the Company or on business operation matters.

This Statement on Corporate Governance was approved by the Board of the Company on 29 March 2016.



The Board of Directors of the Company is pleased to present the report on the Audit Committee of the Board for the financial year ended 31 December 2015. The Audit Committee Report provides insights into the manner in which the Audit Committee discharged its functions for the Group in 2015.

1. CompoSItIon

The Board has established the Board Audit Committee with members as follows:

name Designation

Mr. Michael Lim Hee Kiang Independent non-Executive Director (Chairman) Datuk Mohd Nasir bin Ahmad Independent Non-Executive Director (Member)

Encik Mohamad bin Ismail Independent Non-Executive Director (Member)

In compliance with the Malaysian Code on Corporate Governance 2012 and Paragraph 15.09 (1)(b) of the MMLR, all three (3) members of the Audit Committee are Independent non-Executive Directors which fulfill the criteria of independence as defined in the MMLR.

Datuk Mohd Nasir bin Ahmad is a member of the Malaysian Institute of Accountants and also a Fellow of the ACCA, United Kingdom. In this regard, the Company is in compliance with Paragraph 15.09(c)(ii) under the MMLR.

2. meetInGS

The Audit Committee held seven (7) meetings during the financial year 2015. The details of each member’s attendance at the Audit Committee meetings are as follows:

number of % name meetings attended attendance

Mr. Michael Lim Hee Kiang 6/7 85%

Datuk Mohd nasir bin Ahmad 7/7 100%

Encik Mohamad bin Ismail 7/7 100%

The Chief Executive Officer, the Chief Financial Officer and the Internal Audit Manager attended all meetings upon invitation by the Audit Committee. Representatives of the external auditors also attended the relevant Audit Committee meetings on invitation by the Committee.

aUDIt CommIttee report


3. SUmmarY of aCtIVItIeS During the financial year 2015, the Audit Committee carried out the following activities in accordance with its terms of

reference:

(i) Reviewed the quarterly unaudited financial statements of the Group to recommend to the Board for approval;

(ii) Reviewed the annual audited financial statements of the Group and the Company with the external auditors prior to submission to the Board of Directors for their approval;

The review of the financial statements was, inter-alia, to ensure compliance with:

• Provisions of the Companies Act, 1965; • MMLR; • Applicable approved accounting standards in Malaysia; and • Other legal and regulatory requirements.

In reviewing the annual audited financial statements, the Audit Committee discussed with the management and the external auditors the accounting principles and standards that were applied and their judgment of the items that may affect the financial statements as well as issues and reservations arising from the statutory audit, if any;

(iii) Reviewed the Audit Plan for the financial year ended 31 December 2015 and assessed the independence of the external auditors by obtaining a written declaration from the external auditors of their independence, and confirming that external auditors have taken all steps to ensure compliance with the 5-yearly partner’s rotation policy. Sought confirmation from the management on non-audit services provided by the external auditors during the financial year for potential conflict of interest situation;

(iv) Met with the external auditors without the presence of management to discuss matters relating to the audit and preparation of the financial statements;

(v) Reviewed and discussed the internal audit reports on a quarterly basis with the management and the internal auditor;

(vi) Reviewed the Internal Audit Plan and assessed the adequacy of the scope, functions, competency and resources

of the internal audit function;

(vii) Reviewed the statement on compliance with the Malaysian Code on Corporate Governance, Audit Committee report and Statement on Risk Management and Internal Control for inclusion in the Company’s Annual Report;

(viii) Discussed the implications of any latest changes and pronouncements on the Company and the Group issued by the statutory and regulatory bodies;

(ix) Reviewed all related party transactions entered into by the Company or group companies to ensure the terms of these transactions are reasonable, at arm’s length and not to the detriment of the minority shareholders. This included the review of the circular to shareholders for the proposed renewal of shareholders’ mandate for recurrent related party transactions, and the procedures for related party transactions; and

(x) Reviewed the basis of allocation and granting of the ESOS during the year to ensure compliance with the ESOS By-Laws.

aUDIt CommIttee reportCOnT’D


4. InternaL aUDIt fUnCtIon

The Group has an established in-house Internal Audit function carried out by the Internal Audit Department (“IAD”). All internal audit activities during the financial year were conducted by IAD. There were no area of the internal audit functions which were outsourced.

The IAD is headed by the Internal Audit Manager, Mr. Chew Choon Meng, who reports functionally to the Audit Committee, and administratively to the CEO/MD to allow an appropriate degree of independence from operations of the Group. The activities of the IAD are guided by the Internal Audit Charter that defines the roles, responsibilities, accountability and scope of work of the IAD. This is to enable the Internal Audit function to remain relevant in the context of challenges faced by and opportunities presented to the Company against the backdrop of uncertain business and global economic environment.

The IAD will also conduct investigation and special reviews at the instruction of the Audit Committee and at the request by Management.

The total operation costs of the department for 2015 was RM110,000 (2014: RM8,000).

5. termS of referenCe The Terms of Reference of the Audit Committee are contained in the Audit Committee Charter approved by the Board. (i) membership

The Audit Committee members shall be appointed by the Board of Directors and shall comprise of a minimum of three members, exclusively non-executive and the majority shall be independent directors. Currently, the members of the Audit Committee are all Independent Non-Executive Directors.

Further, at least one member of the Audit Committee shall be a member of the Malaysian Institute of Accountants

or if he is not a member, he must have at least three years’ working experience and;

(a) have passed the examinations specified in Part I of the First Schedule of the Accountants Act, 1967; or (b) is a member of one of the associations of accountants specified in Part II of the said schedule; or

(c) has a degree/masters/doctorate in accounting or finance and at least three years’ post qualification experience in accounting or finance; or

(d) is a member of a professional accountancy organization which has been admitted as full member of the International Federation of Accountants and at least three years post qualification experience in accounting or finance; or

(e) at least seven years of experience being a chief financial officer of a corporation or having the function of being primarily responsible for the management of the financial affairs of a corporation.

no alternate director shall be appointed as a member of the Audit Committee. The terms of office and performance of the members are reviewed once a year to determine whether the members have carried out their duties in accordance with their terms of reference.

(ii) Chairman

The Chairman of the Committee shall be an Independent Non-Executive Director. (iii) Quorum

The quorum of the Committee shall be two members, both of whom are to be Independent Directors.



5. termS of referenCe cont’d

(iv) meetings and minutes

The Audit Committee meets on scheduled basis at least once every quarter. At least once a year, the Committee has explicit right to convene meetings with both the Internal and External Auditors without the presence of management.

Other than in circumstances which the Chairman of the Audit Committee considers inappropriate, the Chief Executive Officer and Chief Financial Officer attend all meetings of the Audit Committee to make known their views on any matter under consideration by the Audit Committee, or which in their opinion, should be brought to the attention of the Audit Committee.

The Audit Committee may, as and when necessary, invite both external and internal auditors of the Company, solicitors or such other independent advisors to attend the meetings to provide further information or details on matters that are being discussed and deliberated.

The Company Secretary shall be the Secretary of the Audit Committee and will record, prepare and circulate the minutes of the meetings and ensure that the minutes of the meeting are properly kept and produced for inspection if required. The Audit Committee shall report to the Board and its minutes tabled and noted by the Board.

(v) authority

The Audit Committee is authorised by the Board to review any activity within the Audit Committee’s terms of reference and may seek any information the Audit Committee requires from any Director or member of management, and all employees of the Group are required to comply with the requests made by the Audit Committee.

The Audit Committee shall obtain external professional advice and secure the attendance of external parties with relevant experience and expertise if it considers this necessary, the expenses of which will be borne by the Company.

In the event that any member of the Audit Committee need to seek external professional advice in furtherance of his or her duties, he or she shall first consult with and obtain approval of the Chairman of the Audit Committee.

The Audit Committee shall have direct communication channels and be able to convene meetings with the external auditors without the presence of the management, whenever deemed necessary.

(vi) responsibilities and Duties

The responsibilities and duties of the Audit Committee are:

(a) FinancialReporting

• To engage in the pro-active oversight of the Company’s financial reporting and disclosure processes and overseeing and reviewing the outputs of the process as a basis for recommendation to and adoption by the Board.

• To review the quarterly and annual financial statements of the Company, focusing particularly on:- any significant changes to accounting policies and practices;- significant adjustments arising from the audits;- compliance with applicable Financial Reporting Standards and other legal and regulatory

requirements; and- the going concern assumption.

• To ensure management processes and procedures in place are designed to verify the existence and effectiveness of accounting and financial systems of internal control which relate to financial risk management.




(vi) responsibilities and Duties cont’d

(b) ExternalAudit

• To review the external auditors’ audit plan, nature and scope of the audit plan, audit report, evaluation of internal controls and co-ordination of the external auditors;

• To review with the external auditors the Statement on Risk Management and Internal Control of the Group for inclusion in the Annual Report;

• To review any matters concerning the appointment, re-appointment, audit fee and any questions of resignation or dismissal of the external auditors;

• To review the performance, effectiveness and objectivity of the external auditors;

• To review and evaluate factors related to the independence of the external auditors and assist them in preserving their independence;

• To be advised of significant use of the external auditors in performing non-audit services within the Group, considering both the types of services rendered and the fees, such that their position as auditors are not deemed to be compromised; and

• To review the external auditors’ findings arising from audits, particularly any comments and responses in management letters as well as the assistance given by the employees of the group in order to be satisfied that appropriate action is being taken.

(c) InternalAudit

• To be satisfied that the strategies, plans, manpower and organisation for the internal auditing are communicated down through the Group; and

• To review and approve the appointment and dismissal of senior internal audit personnel. (d) RelatedPartyTransactions

• To review related party transactions and conflict of interest situations that may arise within the Group including any transaction, procedure or course of conduct that may raise questions on management integrity;

• To ensure that related party transactions have been conducted on the normal commercial terms at an arm’s length basis, on terms which are not more favourable to the related party than those generally available to the public; and

• To ensure that the internal control procedures relating to related party transactions are sufficient and have been complied with.




(vi) responsibilities and Duties cont’d

(e) InternalControlandRiskManagement

• To consider annually the Risk Management Framework adopted within the Group and to be satisfied that the methodology employed allows the identification, analysis, assessment, monitoring and communication of risks in a regular and timely manner that will allow the Group to minimise losses and maximize opportunities;

• To ensure that there is a sound system of internal control in place, effectively administered and regularly monitored;

• To cause reviews to be made on the extent of compliance with established internal policies, standards, plans and procedures;

• To obtain assurance that proper plans for control have been developed prior to the commencement of major areas of change within the Group; and

• To recommend to the Board steps to improve the system of internal control derived from the findings of the internal and external audits and from the consultations of the Audit Committee itself.

(f) Reports

• To prepare the annual Audit Committee report to the Board which includes the composition of the Audit Committee, its terms of reference, number of meetings held, a summary of its activities and existence and activities of internal audit services for inclusion in the Annual Report; and

• To review the Board’s statement on compliance with the Malaysian Code of Corporate Governance for inclusion in the Annual Report.

(g) ESOS

• As per Paragraph 8.17(2) of MMLR, the Audit Committee will review and verify any allocation of share options under the Company ESOS, to ensure compliance with the allocation criteria determined by the ESOS Committee.

(h) InvestigationunderWhistleblowingPolicy

• To oversee the investigations of all cases brought up under the Whistleblowing Policy, from receipt of cases through investigation to closure.

• To review the Whistleblowing Policy of the Group once in every three (3) years to ensure relevancy and effectiveness.

(i) OtherMatters

• To act on any other matters as may be directed by the Board.

The Audit Committee Report is made in accordance with the resolution of the Board of Directors on 29 March 2016.



The Company has compiled with Principle 6 of the Malaysian Code of Corporate Governance 2012 that requires the Board of Directors to set up a sound risk management framework and internal controls system.

Further, in accordance with Paragraph 15.26(b) of the MMLR, the Board hereby presents the Statement on Risk Management and Internal Control that was prepared in conformance to the “Statement on Risk Management and Internal Control - Guidelines for Directors of Listed Issuers” which outlines the processes to be adopted by the Board in reviewing the competence and effectiveness of risk management and internal control of the Company during the current financial year.

Board responsibility

The Board of Directors acknowledges the importance of sound risk management practices and internal control to safeguard shareholders’ investments and the Group’s assets. The Board therefore affirms its overall responsibility for the Group’s system of risk management and internal control which includes the establishment of an appropriate control environment and framework, as well as reviewing its adequacy and integrity. In discharging its responsibilities, the Board is assisted by the following Board and management committees:

• Audit Committee The Audit Committee considers the adequacy of the risk management and internal control framework, receives and

reviews report on the risk management issues from the Enterprise Risk Management (ERM) Committee, considers the input of the QHSE Risk Committee, and reviews reports from internal and external audits on the adequacy and effectiveness of internal control and risk management system.

• QHSE Risk Committee The QHSE Risk Committee reviews report on HSE, geological and technical risks and assesses the adequacy of

management risk treatment plans related to those risks.

• ERM Committee The ERM Committee, led by the CEO/MD, identifies and assesses risks faced by the Group, and thereafter designs and

implements appropriate internal controls to mitigate the likelihood and impact of those risks.

The Board realises that since there are inherent limitations in any system of internal controls, the internal control system of the Company and the Group is designed to manage and minimise the impact of key risks that may impede the achievement of the Group’s business objectives, rather than completely eliminate them. Accordingly, the internal control system can only provide reasonable but not absolute assurance against material misstatement, fraud or loss.

risk management

The Board recognises that risk is an integral and unavoidable component of its business and is characterised by threats and opportunities. Therefore during the year, the risk management organisation structure was affirmed and the ERM Committee was set up to develop the ERM Framework for the Group.

Statement on rISK manaGement anD InternaL ControL


risk management cont’d

The components of the ERM Framework are as represented in the following diagram:

ENTERPRISE RISK MANAGEMENT FRAMEWORK

RISK CULTURE, BEHAVIOUR AND CODE OF CONDUCT

SYSTEM AND TOOLS

ManagementInformation

Governancestructure

Incidents andloss events

Roles &responsibilities

Policies,procedures,guidelines

RiskCommittees

7.RiskMitigation

Plans

1. Establishcontext -businessobjectives

2. RiskAppetite and

ToleranceRisk profiles&

quantificationanalysis

Predictorevents

COMMUNICATION, EDUCATION, TRAINING AND GUIDANCE

3. IdentifyRisks

4. AnalyseRisks

5. EvaluateRisks

6. Treat Risks RiskAssessment

Process

The Group risk culture and expected behavior are defined in the Group’s Code of Conduct. All employees have been briefed of the Code of Conduct upon joining the Group.

The risk management organization structure for the Group is as below:

Board Of Directors

Report

AuditReport Check

Internal Audit ERM Secretariat

Audit Committee(Financial, Strategic Risks)

QHSE Risk Committee(QHSE, Geological, Technical

Risk)

Managing Director

Enterprise Risk Management Committee- MD- CFO- COO/Country Head- HSE Director- Head of Function/Division

Department/Project/Operational Risk Owners

Statement on rISK manaGement anD InternaL ControLCOnT’D


risk management cont’d The governance structure spells out the various committees, their respective roles and responsibilities and the Group policies, procedures and guidelines in risk management.

In developing the Group risk register, the ERM Committee goes through the 7-step risk assessment process starting with establishing the business objectives and reinforcing the Board risk appetite and risk tolerance. All risks that may have impact on the business objectives are then identified and analysed in terms of their likelihood of occurrence and if they do occur, the impact they have on the Group’s business objectives.

The ERM Committee uses the following risk evaluation matrix to assess each individual risk identified:

LIKELIHOOD

IMPACTRemote

Catastrophic 5

1 2 3 4 5

Moderate (5)

Low (4)

Low (3)

very low (2)

very low (1) very low (2) Low (3) Low (4)

low (4)

Moderate (8)

Moderate (6) Moderate (9)

Moderate (6) Moderate (8) Moderate (10)

Moderate (5)

High (12) High (16)

High (12) High (15)

Critical (20)

Moderate (10) High (15) Critical (20) Critical (25)

4

3

2

1

Major

Moderate

Minor

Insignificant

Unlikely PossibleHighly

Likely

Almost

Certain

There are four different strategies the Group employs in treating the risks and developing the risk mitigation plans for the risks identified.

LIKELIHOOD

IMPACT

Transfer/Share

High

TolerateReduce

(preventivecontrols)

Reduce/Terminate/

Avoid

Low

Low High



risk management cont’d

As illustrated in the risk treatment strategy diagram, where a particular risk has high impact and very likely to occur, the ERM Committee may choose to either avoid or terminate the activity giving rise to the risk, or put in place a risk mitigation plan. For risks where the likelihood is high but the impact is low, the ERM Committee may implement additional controls to reduce the likelihood of the risks occurring. In a situation where the risk has high impact on the business objectives but low likelihood of occurring, the ERM Committee may recommend for the risk to be transferred to or shared with third parties, such as insurance company, contractor or joint venture partner. The fourth possible treatment is to accept or tolerate risks which have low impact and low likelihood of occurring.

The results of the risk identification, assessment and mitigation plans are documented in the Group risk register. The risk register will be communicated and shared across the Company and the Group, allowing the relevant risk owners to track the progress of risk mitigation plans. It also allows the management to flag new risks and to make suggestions on the course of action to be taken to address new risks as they arise.

As part of the review and monitoring process, management will ensure adequate tools and processes are put in place to capture actual incidents and loss events to further enhance risk profiling and quantification analysis. To enhance the risk management process, management will take steps to identify leading indicators and predictor events for these risks which will allow management to detect and predict changes in the environment that could impact the achievement of business objectives and hence, take prompt action as appropriate.

Quality Health Safety and environment management System

The nature of the Group’s operations in the development and production of hydrocarbons, including handling of fuel and other inflammable materials, exposes our employees to a wide range of health, safety and environmental risks. The causes of these risks could be accidents, technical failure, malfunctioning, blow-outs and explosions, fires, oil and gas spills, pollutants emissions and toxic emissions.

In addition the Group is also exposed to geological risks including unexpected drilling conditions, pressure or irregularities in formations, equipment failures or other negative events that could potentially cause casualties, environmental damages and consequently could have an adverse material impact on the Group’s future growth prospects, results of operations and liquidity as well as reputation.

The environmental laws enforced by the Government of Kazakhstan impose various restrictions and prohibitions, including control and limits to the emissions of pollutant substances that can be released into air, water and soil; limiting gas flaring and venting; and prescribing the correct management of waste. Any breach of environmental, health and safety laws by the employees of the Group, exposes the Group to potential criminal and civil liabilities.

Consequent thereto, the Company has implemented the Quality Health Safety and Environment Management System (“QHSEMS”) that includes clear requirements on the following:

i) Provide and maintain safe and healthy environment, working condition, equipment and systems of works in the workplace;ii) Provide adequate control of the QHSE risks arising from the operations; andiii) Continuously improve the Group’s business processes such that they fully comply with the regulatory requirements and

international standards.

The QHSEMS details out, among others, the procedures for site emergency response plan and site medical emergency evacuation plan to be activated during emergency situations. There are also clear procedures set out for reporting of incidents and accidents occurring at workplace. The management has communicated the QHSEMS not only to all employees of the Group, but also to the employees of its business partner, CaspiOilGas LLP and of the contractors working in the Rakushechnoye Oil and Gas Field.

The Group will continue to enhance its overall risk management system to ensure that all possible risks that impact the Group’s achievement of it business objectives are identified, assessed and dealt with timely and in the most appropriate manner.



Code of Conduct

The Group’s Code of Conduct demands that all employees in the Group maintain the highest ethical standards in carrying out its business activities. This is important and necessary as the Company’s corporate image should be built on solid foundation of integrity and strong ethics. The Code of Conduct is designed to assist employees to conduct business transactions professionally, honestly and with integrity, and comply with the laws and regulations that apply to the Group’s businesses. All employees have been briefed on the Group’s Code of Conduct and any breach to the Code may result in disciplinary action taken on the employee, including termination of employment. Further, all employees have confirmed their receipt and understanding of the Group’s Code of Conduct.

System of Internal Control

(i) financial reporting and Controls

The Group has in place a series of policies, practices and controls in relation to the financial reporting and consolidation process, which are designed to address key financial reporting risks, including risks arising from changes in the business or accounting standards. The Chief Financial Officer is required to confirm that all information relevant to the Group audit has been provided to the Directors and that reasonable steps have been taken to ensure full disclosure in response to requests for information from the external auditor. The integrity of the Group’s financial reporting is further supported by a number of processes and steps to provide assurance over the completeness and accuracy of the content including, review and recommendation by the Audit Committee and review and approval by the Board.

(ii) Clear and Structured reporting Lines

The Group has a well-defined organisation structure that is aligned to its business requirements and also to ensure check and balance through segregation of duties. Clear reporting lines and authority limits govern the approval process, driven by Limits of Authority approved by the Board. All key strategic, business and investment plans are approved and monitored by the Board. Papers to the Board for approval of both financial and non-financial matters including cash flow forecasts, business strategies, corporate exercise, and any other key matters are written in a succinct and clear manner and are submitted to the Board in sufficient time to allow Board of Directors to make informed decisions.

(iii) policies and procedures

Documented internal policies and procedures on human resource and financial management activities are in place to ensure compliance with internal controls and relevant laws and regulations. Key human resource policies and procedures include performance management, disciplinary matters, recruitment and selection, learning and development, leave and grievance matters. These policies and procedures are reviewed and updated regularly. Briefings or trainings are provided to employees, business associates and contractors, as and when necessary. The Group will continue to develop and document additional policies and procedures whenever necessary in order to enhance the effectiveness of the Group’s internal control system.

(iv) Business performance review and reporting

The Management provides the Board with regular updates on the corporate activities as well as the progress of work activities within the Group. The Management together with the Board review issues covering, but not restricted to strategy, performance, resources and standards of business conduct at least once every quarter. A reporting system to monitor the Group’s performance has been put in place and will continue to be enhanced in the future.

(v) Information and Communication

The Board of Directors and the Principal Officers of the Company are informed in advance by the company secretary before the commencement of each closed period, in which they are not allowed to deal in the listed securities of the Company as long as they are in possession of material and price-sensitive information, in order to avoid any insider trading activity.




System of Internal Control cont’d

(vi) tender award System

Purchases of works goods and services by a sub-soil surface user for sub-soil operations in Kazakhstan are governed by Decrees of the Government of Republic of Kazakhstan No. 134 and 133 which specify the procedures for procurements under tender, request for quotation and single source situation. The Group monitors and ensures that purchases of goods, works and services for the sub-soil operations in the Rakushechnoye Oil and Gas Field comply with the procurement rules at all times. All procurements are carried out through the Government’s electronic procurement portal. Sub-soil users and their Contractors must comply with these Government procurement procedures. Tender specifications have been reviewed and endorsed by our technical team before uploading into the procurement portal. The technical evaluation, financial evaluation and negotiation of terms with approved suppliers have been carried out by our team. In this manner, we ensure that the award of contracts for sub-soil operations are carried out in a manner that is transparent to all parties and at the best terms to the Group.

Whistleblowing

The whistleblowing policy is described in the Statement on Corporate Governance on page 29 of the Annual Report.

assurance from management

Based on the information and assurance provided by the Managing Director and the Chief Financial Officer, the Board is satisfied that the system of internal control for the financial year under review was generally satisfactory. Measures are in place and continually being taken to ensure the ongoing adequacy and effectiveness of internal controls to safeguard the Group’s assets and hence shareholders’ investment.

Conclusion

The Statement on Risk Management and Internal Control has been prepared in accordance with the Statement on Risk Management and Internal Controls: Guidelines for Directors of Listed Issuers issued under the MMLR.

For the financial year under review and up to the date of issuance of the financial statements, the Board is satisfied with the adequacy and effectiveness of the Group’s system of risk management and internal control. No material losses, contingencies or uncertainties have arisen from any inadequacy or failure of the Group’s system of internal control that would require separate disclosure in the Company’s Annual Report.

Going forward, the Board will continue to monitor all risks faced by the Group including taking appropriate mitigating actions in its efforts to enhance the system of internal control.

review of this Statement

As required by Paragraph 15.23 of the MMLR, the External Auditors have reviewed this Statement on Risk Management and Internal Control. Their review was performed in accordance with Recommended Practice Guide 5 (Revised) issued by the Malaysian Institute of Accountants. Based on their review, the External Auditors have reported to the Board that nothing has come to their attention that causes them to believe that this Statement is inconsistent with their understanding of the process the Board has adopted in the review of the adequacy and integrity of internal control system of the Group. In the review exercise, the External Auditors did not consider whether the processes to deal with material internal control aspects could remedy the problems and did not form an opinion on the effectiveness of the Group’s risk and control procedures.

This Statement is made in accordance with the resolution of the Board of the Company dated 29 March 2016.


The following information is provided in conformance with the MMLR:

materIaL ContraCtS InVoLVInG DIreCtorS’ anD maJor SHareHoLDerS’ IntereStS

i. reCUrrent reLateD partY tranSaCtIonS

Pursuant to the Company’s Regularisation Plan which was completed on 21 November 2013, the Company entered into recurrent transactions listed below, which involves the Company’s initiative to restore its position to a stronger financial footing via the Joint Investment Agreement (“JIA”) dated 8 March 2012 entered into between Sumatec, Markmore Energy (Labuan) Limited (“MELL”) and CaspiOilGas LLP (“COG”) for the appointment of Sumatec to carry out the operations related to the production of oil and gas from the Rakushechnoye Oil and Gas Field, and subsequently the Joint Investment Agency Agreement (“JIAA”) dated 2 August 2013, which was entered into between Sumatec, COG and Sumatec Oil and Gas LLP (“SOG”), for the appointment of SOG as the agent to manage and provide the oversight on the oil production operations for Sumatec and COG.

a) Operator’s service fee from the oil production operation at Rakushechnoye Oil and Gas Field as stipulated under the JIA;

b) Royalty payable by Sumatec to COG for every barrel of oil sold from the Rakushechnoye Oil and Gas Field as stipulated under the JIA. Up to USD40.0 million worth of royalty payable will be deducted against the cash performance guarantee paid under the JIA; and

c) Agency fee charged by SOG to COG for managing and providing the oversight on the oil production activities and operations at Rakushechnoye Oil and Gas Field under the JIAA.

On 10 December 2013, the Company entered into a Gas Development & Production Agreement (“GDPA”) with MELL for the development of gas resources at the Rakushechnoye Oil and Gas Field (“Proposed Gas Development”) to develop and deliver to MELL the gas development, implementation and production plan that will meet the minimum supply requirement of 120 Million Standard Cubic Feet of gas per day to a commercial off-taker by 2017. The Company will charge MELL a fee of USD45 million over three years from January 2014 to December 2016 for works to be carried out under the gas development and gas implementation plan stage. Once supply of gas to the off taker commences, the Company will charge an operator fee of USD0.75 per thousand standard cubic feet of gas supplied at well heads. All capital expenditure and operational costs in the field are cost recoverable from MELL under the same terms as per the JIA. As part of the Group operations streamlining and efficiency enhancement initiative, the Company later in november 2014, novated its rights responsibilities and undertakings under the GDPA to its wholly-owned subsidiary, Sumatec Corporation Sdn Bhd.

The existing directors of MELL are Tan Sri Dato’ Seri Halim Saad (“TSHS”) and Abu Talib Bin Abdul Rahman. MELL is a wholly-owned subsidiary of Markmore Sdn Bhd (“Markmore”), a company principally involved in investment holding. The directors of Markmore are TSHS and Abu Talib Bin Abdul Rahman. TSHS owns 99.99% equity stake in Markmore. COG is effectively a wholly-owned subsidiary of MELL.

TSHS is a substantial shareholder, holding 24.25% equity interest in the Company.

otHer aDDItIonaL CompLIanCe InformatIon


materIaL ContraCtS InVoLVInG DIreCtorS’ anD maJor SHareHoLDerS’ IntereStS cont’d

ii. otHer reLateD partY tranSaCtIonS

On 8 September 2014, the Company executed the share purchase agreement (“SPA”), which was subsequently amended via Supplemental SPA, Second Supplemental SPA and Third Supplemental SPA, with Abu Talib Bin Abdul Rahman and Dr Murat Safin (“Vendors”) for the proposed acquisition of 100% of the issued and paid up capital in Borneo Energy Oil & Gas Ltd (“Proposed Acquisition”). The purchase consideration of USD290.0 million is to be satisfied via the followings:

(i) Deposit of USD30,000,000 (approximately RM96,510,000), which was paid upon signing of the SPA on 8 September 2014;

(ii) Balance of cash payment of USD105,000,000 (approximately RM367,500,000) on completion; (iii) Deferred payment of USD75,000,000 over 4 years from 2016 as per the following table:

payment 31.12.2016 31.12.2017 31.12.2018 31.12.2019 total due date USD’ million USD’ million USD’ million USD’ million USD’ million

Amount 5.0 17.5 17.5 35.0 75.0

(iv) The remaining USD80,000,000 (approximately RM280,000,000) to be satisfied via the issuance of 1,217,391,305 new Sumatec Shares to the Vendors at an issue price of RM0.23 per share (“Consideration Shares”) on completion.

In exchange for the USD30,000,000 Deposit paid by the Company on 8 September 2014, MELL vide its letter dated 8 September 2014, issued a Guarantee to the Company as the principal debtor to guarantee the following:

(i) To pay and satisfy the full amount of the Deposit to the Company if the SPA is not completed in accordance with the provisions of the SPA as varied by the Supplemental SPA, the Second Supplemental SPA and the Third Supplemental SPA; and

(ii) To pay and satisfy all costs and expenses incurred by Sumatec in relation to or arising from the payment of the Deposit by the Company to the Vendors if the SPA is not completed in accordance with the provisions of the SPA and as varied by the Supplemental SPA, the Second Supplemental SPA and the Third Supplemental SPA.

Under the Guarantee, the Company shall be entitled to withhold any sum payable by the Company to MELL until the date of completion of the SPA. In the event the Proposed Acquisition is not completed or the SPA is terminated for any reason whatsoever, the Company shall be entitled to set-off the full sum of the Deposit and all other monies which may be owing by MELL to the Company under the Guarantee and any other costs or expenses incurred by the Company in connection with the Guarantee, the SPA and/or arising from the termination thereof against the total amount of the Company’s indebtedness, without waiver or limitation of any other rights or remedies the Company may have against the Vendors under the SPA, and/or against the Guarantor under the Guarantee.

Also pursuant to the SPA, one of the Vendors, namely Abu Talib bin Abdul Rahman will undertake an offer for sale of up to 684,782,609 Consideration Shares (“Offer Shares”) to be held by him upon the completion of the Proposed Acquisition, to TSHS (or his nominated parties) at an offer price of RM0.23 per Sumatec Share (“Proposed Offer for Sale”).

The Proposed Acquisition is deemed as a related party transaction as TSHS, being a major shareholder of the Company, will be acquiring the Offer Shares under the Proposed Offer for Sale. Additionally, Abu Talib Bin Abdul Rahman is a director and shareholder of Markmore. TSHS is also the director and 99.99% shareholder of Markmore. Separately as mentioned above, MELL has also issued the Guarantee to the Company for the purpose of the Proposed Acquisition.

The completion of the Proposed Acquisition has been extended to 22 August 2016. The Company on 4 February 2016 submitted an application to Bursa Securities for an extension of time to complete the proposed rights issue to 22 August 2016.

Save as disclosed above, there was no other related party transaction entered by the Company during the financial year.

otHer aDDItIonaL CompLIanCe InformatIonCOnT’D


SHare BUY-BaCKS

During the financial year, there were no share buy-backs by the Company.

optIon, WarrantS or ConVertIBLe Loan SeCUrItIeS

a. Warrants

The details and salient terms of Warrants A and Warrants B are disclosed in Note 16 to the Financial Statements on pages 93 to 95 of the Annual Report.

none of the Warrants A were exercised during the financial year and Warrants A that remain unexercised as at 31 December 2015 are 118,753,197.

During the financial year, 75 Warrants B were exercised at the exercise price of RM0.175 per warrant. Warrants B that remain unexercised as at 31 December 2015 are 567,521,683.

b. employee Share options Scheme (“eSoS”)

During the financial year, 43,500,000 existing ESOS options were forfeited.

In October 2015, 35,300,000 new ESOS options were granted at the exercise price of RM0.143 per share and of this, 18,350,000 ESOS options were subsequently exercised.

Further details on the ESOS are disclosed in the Directors’ Report on pages 50 to 51 of the Annual Report.

Save as disclosed above, there was no other exercise or grant of option, warrants or convertible securities during the financial year ended 31 December 2015.

DepoSItorY reCeIptS proGramme

The Company did not sponsor any depository receipts programme during the financial year.

non-aUDIt feeS

The non-audit fees incurred for services rendered by the external auditors for the financial year was RM48,000.

ImpoSItIon of SanCtIonS/penaLtIeS

There were no sanctions and/or penalties imposed on the Company and its Subsidiaries, Directors or Management by the relevant regulatory bodies during the financial year.

VarIatIon In reSULt

There were no material variations between the audited results for the financial year ended 31 December 2015 and the unaudited results previously released for financial year then ended.

profIt GUarantee

There were no profit guarantees issued during the financial year.

StatUS of UtILISatIon of proCeeDS

There were no proceeds raised from corporate proposals during the financial year ended 31 December 2015.

otHer aDDItIonaL CompLIanCe InformatIonCOnT’D


Statement of DIreCtorS’ reSponSIBILItYFOR PREPARATIOn OF FInAnCIAL STATEMEnTS

The Companies Act, 1965 (“Act”) requires the Directors to prepare financial statements for each financial year in accordance with the Malaysian Financial Reporting Standards issued by the Malaysian Accounting Standards Board, the provisions of the Act and the Main Market Listing Requirements of Bursa Malaysia, and to lay these before the Company at its Annual General Meeting.

The Directors are responsible for ensuring that the financial statements provide a true and fair view of the financial position of the Group and the Company as at 31 December 2015 and of their financial performance and cash flows for the financial year ended 31 December 2015. The Act also requires the Directors to keep such accounting and other records in a manner that enables them to sufficiently explain the transactions and financial position of the Company and the Group and to prepare true and fair financial statements and any documents required to be attached, as well as to enable such accounting records to be audited conveniently and properly.

In undertaking the responsibility placed upon them by law, the Directors have relied upon the Group’s system of internal control to provide them with reasonable grounds to believe that the Group’s accounting records, as well as other relevant records, have been maintained by the Group in a manner that enables them to sufficiently explain the transactions and financial position of the Group. This also enables the Directors to ensure that true and fair financial statements and documents required by the Act to be attached, are prepared for the financial year to which these financial statements relate.

The Directors are also satisfied that the financial statements have been prepared on the basis that:

• Appropriate and relevant accounting policies have been consistently applied;• Judgments and estimates made are prudent and reasonable; and• The Group and the Company will continue to operate as a going concern.

Incorporated on pages 48 to 119 of this Annual Report are the financial statements of the Group and the Company for the financial year ended 31 December 2015.

FINANCIAL STATEMENTS

48 Directors’ Report

54 Statement by Directors and Statutory Declaration

55 Independent Auditors’ Report

57 Statements of Financial Position

59 Statements of Profit or Loss and Other Comprehensive Income

60 Statements of Changes in Equity

63 Statements of Cash Flows

65 Notes to the Financial Statements

SUMATEC RESOURCES BERHAD (428355-D) 48

The Directors hereby submit their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 December 2015.

PRINCIPAL ACTIVITIES

The principal activities of the Company are that of investment holding and engaged in the upstream oil operation.

The principal activities of its subsidiary companies are disclosed in Note 4 to the Financial Statements.

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

FINANCIAL RESULTS

Group Company RM RM Net profit for the financial year 37,858,646 35,876,975

Attributable to: Owners of the Company 37,827,815 35,876,975 Non-controlling interests 30,831 -

37,858,646 35,876,975

RESERVES AND PROVISIONS

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

DIVIDENDS

There were no dividends proposed, declared or paid by the Company since the end of the previous financial year.

DIRECTORS

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

Tan Sri Abu Talib bin Othman Datuk Che Mokhtar bin Che Ali Datuk Mohd Nasir bin Ahmad Wan Kamaruddin bin Dato’ Biji Sura @ Wan Abdullah Chan Yok PengMohamad bin Ismail Michael Lim Hee Kiang Dato’ Ahmad Johari bin Tun Abdul Razak

DIRECTORS’ REPORT

AnnUAl REpORT 2015 49

DIRECTORS’ INTERESTS

According to the Register of Directors’ Shareholdings, the interests and deemed interests in the shares and options over shares of the Company of those who were Directors as at year end are as follows:

Number of ordinary shares of RM0.14 each At At 1.1.2015 Bought Sold 31.12.2015

Direct interest Wan Kamaruddin bin Dato’ Biji Sura @ Wan Abdullah 700,000 - (700,000) -Dato’ Ahmad Johari bin Tun Abdul Razak 39,174,900 - - 39,174,900 Deemed interest Chan Yok Peng * 185,483,179 - (113,000,000) 72,483,179

Number of Warrants B At At 1.1.2015 Bought Sold 31.12.2015

Deemed interest Chan Yok Peng * 83,932,271 - (67,932,271) 16,000,000

* deemed interest by virtue of his shareholdings in Tekad Mulia Sdn. Bhd.

Other than those disclosed above, none of the other Directors in office at the end of the financial year held any interest in the shares and options over shares of the Company or its related corporations during the financial year.

DIRECTORS’ BENEFITS

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

Since the end of the previous financial year, no Director has received or become entitled to receive any benefits (except as disclosed in Notes 22 and 27 to the Financial Statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which the Director is a member, or with a company of which the Director has a substantial financial interest.

ISSUE OF SHARES AND DEBENTURES

During the financial year, the Company issued:

(a) 18,350,000 ordinary shares of RM0.14 each arising from the exercise of employee share options at exercise price of RM0.143 per share for a total cash consideration of RM2,624,050; and

(b) 75 ordinary shares of RM0.14 each pursuant to the conversion of 75 warrants 2013/2018 at RM0.175 per share for a total cash consideration of RM13.

DIRECTORS’ REPORTCONT’D


ISSUE OF SHARES AND DEBENTURES (continued)

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

There was no issuance of debentures during the financial year.

OPTIONS GRANTED OVER UNISSUED SHARES

No options were granted to any person to take up unissued share of the Company during the financial year apart from the issue of options pursuant to the Employee Share Options Scheme (“ESOS”), Warrants 2011/2021 (“Warrants A”) and Warrants 2013/2018 (“Warrants B”).

ESOS

The ESOS is governed by the by-laws which were approved by the shareholders at the Eighth Annual General Meeting held on 24 June 2005. On 18 April 2007, the Company implemented ESOS after approvals were obtained from the relevant authorities and was in force for a period of 5 years. The ESOS which originally expired on 17 April 2012, has been extended for another 5 years to 16 April 2017.

The salient features and other terms of the ESOS are as follows:

(a) The ESOS Committee appointed by the Board of Directors to administer the ESOS, may from time to time grant options to eligible employees of the Group to subscribe for new ordinary shares of RM0.14 each in the Company;

(b) The eligibility of a Director or employee of the Group to participate in the ESOS shall be at the discretion of the ESOS Committee, who shall take into consideration factors such as years of service and performance track record;

(c) The total number of shares to be issued under ESOS shall not exceed in aggregate 15% of the issued and fully paid-up share capital of the Company at any point of time during the tenure of the ESOS and out of which not more than 50% of the shares shall be allocated, in aggregate, to Directors and senior management. In addition, not more than 10% of the shares available under the ESOS shall be allocated to any individual Director or employee who, either singly or collectively through his/her associates, holds 20% or more in the issued and paid-up share capital of the Company;

(d) The option price shall not be at a discount of more than 10% from the 5-days weighted average market price of the shares of the Company preceding the date of offer and shall in no event be less than the par value of the share of the Company of RM0.14;

(e) The number of outstanding options to subscribe for shares or the option price or both may be adjusted following any issue of additional shares by way of rights issues, bonus issues or other capitalisation issue carried out by the Company while an option remains unexercised; and

(f) The new shares allotted upon any exercise of the option shall rank pari passu in all respects with the existing ordinary shares of the Company except that the new shares so issued will not rank for any rights, dividends, allotments and/or other distributions, the entitlement date of which is prior to the date of allotment of the new ordinary shares.



OPTIONS GRANTED OVER UNISSUED SHARES (continued)

ESOS (continued)

As at 31 December 2015, the options offered to take up unissued ordinary shares of the Company of RM0.14 each and the option prices are as follows:

Number of option over ordinary shares of RM0.14 each Expiry Option At AtGrant date date price 1.1.2015 Granted Exercised Forfeited 31.12.2015 18.4.2007 16.4.2017 RM0.35 40,000 - - - 40,00027.12.2013 16.4.2017 RM0.244 64,600,000 - - (23,500,000) 41,100,00026.3.2014 16.4.2017 RM0.244 20,000,000 - - (20,000,000) -12.10.2015 16.4.2017 RM0.143 - 35,300,000 (18,350,000) - 16,950,000

During the financial year, eligible employees of the Group and the Company who have been granted with share options are as follows:

Number of option over ordinary shares of RM0.14 each At At 1.1.2015 Granted Exercised Forfeited 31.12.2015 Albina Berisheva 600,000 - - - 600,000Anelya Baitleuova 200,000 - - - 200,000Aslan Tuleshev 800,000 - - - 800,000Azamat Chukenov 300,000 - - - 300,000Bakhityar R. Jexenbiyen 1,200,000 - - (1,200,000) -Christopher Layton Dalton 20,000,000 - - (20,000,000) -Faridah Binti Azmat 440,000 400,000 (150,000) - 690,000Jaafar Bin Jonid 100,000 200,000 (50,000) - 250,000Kaisar Kossayev 800,000 - - - 800,000Kamala Kee Rudra 400,000 2,000,000 (700,000) - 1,700,000Lessya Kotovskaya 1,200,000 - - - 1,200,000Looi Yow Cheong 600,000 500,000 (500,000) - 600,000Mukanova Bayan-Slu 800,000 - - (800,000) -Norrida Binti Suli 200,000 400,000 (150,000) - 450,000Olzhas Saipolla 1,200,000 - - - 1,200,000Peng Ng Leng - 8,000,000 (6,000,000) - 2,000,000Roshidah Binti Abdullah 20,000,000 - - - 20,000,000Sagadiyev Bekzhan 300,000 - - - 300,000Sam Elliot Harvey 12,000,000 8,000,000 (3,400,000) - 16,600,000Shobana MohanaSundram 1,200,000 4,000,000 (4,000,000) - 1,200,000Siti Salwa Binti Abd Hamid 400,000 400,000 (150,000) - 650,000Syahirah Akmal Binti Mahdom 400,000 400,000 (150,000) - 650,000Tubagus Reggie Rachman 1,400,000 - - (1,400,000) -Wan Ismail Bin Hamid 100,000 - - (100,000) -Zulkifly Bin Mohamad 20,000,000 - - (20,000,000) -Chew Choo Meng - 4,000,000 (1,350,000) - 2,650,000Hooi Woi Loon - 3,000,000 (750,000) - 2,250,000Lozman Ahmad - 4,000,000 (1,000,000) - 3,000,000 84,640,000 35,300,000 (18,350,000) (43,500,000) 58,090,000



OPTIONS GRANTED OVER UNISSUED SHARES (continued)

Warrants A and Warrants B

The details and salient terms of Warrants A and Warrants B are disclosed in Note 16 to the Financial Statements.

Details of Warrants B issued to Directors are disclosed in the section of Directors’ Interests in this report.

OTHER STATUTORY INFORMATION

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

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

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

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

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

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

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

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

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

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

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

In the opinion of the Directors:-

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

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

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



SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR AND AFTER THE REPORTING DATE

Significant events during the financial year and after the reporting date are disclosed in Note 33 to the Financial Statements.

AUDITORS

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

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

....................................................................... )TAN SRI ABU TALIB BIN OTHMAN ) ) ) ) ) ) ) DIRECTORS ) ) ) ) )…………………………………………….. )CHAN YOK PENG )

Kuala Lumpur13 April 2016



STATEMENT BY DIRECTORS AND STATUTORY DECLARATION

STATEMENT BY DIRECTORS

In the opinion of the Directors, the financial statements set out on pages 57 to 118 are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2015 and of their financial performance and cash flows for the financial year then ended.

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

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

.................................................................... ....................................................................TAN SRI ABU TALIB BIN OTHMAN CHAN YOK PENG

Kuala Lumpur13 April 2016

STATUTORY DECLARATION

I, Roshidah Binti Abdullah, being the Officer primarily responsible for the financial management of Sumatec Resources Berhad, do solemnly and sincerely declare that to the best of my knowledge and belief, the financial statements set out on pages 57 to 118 and the supplementary information set out on page 119 are correct and I make this solemn declaration conscientiously believing the same to be true and by virtue of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by )the abovenamed at Kuala Lumpur in )the Federal Territory this day of )13 April 2016 ) ........................................................…………...... ROSHIDAH BINTI ABDULLAH

Before me:

Commissioner for Oaths


INDEPENDENT AUDITORS’ REPORTTO THE MEMBERS OF SUMATEC RESOURCES BERHAD

Report on the Financial Statements

We have audited the financial statements of Sumatec Resources Berhad, which comprise statements of financial position as at 31 December 2015 of the Group and of the Company, statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the financial year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 57 to 118.

Directors’ Responsibility for the Financial Statements

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

Auditors’ Responsibility

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

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

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

Opinion

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


INDEPENDENT AUDITORS’ REPORTTO THE MEMBERS OF SUMATEC RESOURCES BERHADCONT’D

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 subsidiary companies of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.

(b) We have considered the accounts and the auditors’ report of the subsidiary company of which we have not acted as auditors, which are indicated in Note 4 to the Financial Statements.

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

(d) The auditors’ reports on the accounts of the subsidiary companies did not contain any qualification or any adverse comment under Section 174 (3) of the Act.

Other Reporting Responsibilities

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

Other Matters

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

.................................................................... ....................................................................SJ GRANT THORNTON DATO’ N.K. JASANI(NO. AF: 0737) (NO: 708/03/18 (J/PH))CHARTERED ACCOUNTANTS CHARTERED ACCOUNTANT Kuala Lumpur 13 April 2016


STATEMENTS OF FINANCIAL POSITIONAS AT 31 DECEMBER 2015

Group Company Note 2015 2014 2015 2014 RM RM RM RM

ASSETS Non-current assets Investment in subsidiary companies 4 - - 1,880,396 1,004,144 Investment in associate companies 5 - - - - Other investments 6 1 1 - - Property, plant and equipment 7 4,352,299 4,788,186 3,502,313 3,887,590 Intangible asset 8 301,406,652 301,869,381 301,406,652 301,869,381 Trade receivables 9 30,887,806 18,123,517 24,856,364 12,710,545 Other receivables 10 183,265,825 172,369,511 183,265,825 172,369,511 Total non-current assets 519,912,583 497,150,596 514,911,550 491,841,171 Current assets Trade receivables 9 54,897,976 62,917,200 - 10,486,200 Other receivables 10 96,884,593 97,052,383 96,867,702 96,800,618 Amount due from subsidiary companies 11 - - 14,865,474 13,560,293 Amount due from associate companies 12 5,635,497 5,635,497 5,635,497 5,635,497 Tax recoverable - 25,915 - - Fixed deposits with a licensed bank 13 230,000 230,000 - - Cash and bank balances 895,013 1,384,057 888,061 934,885 Total current assets 158,543,079 167,245,052 118,256,734 127,417,493 Non-current assets classified as held for sale 14 17,000,000 17,000,000 17,000,000 17,000,000 Total assets 695,455,662 681,395,648 650,168,284 636,258,664 EQUITY AND LIABILITIES EQUITY Equity attributable to owners of the Company: Share capital 15 490,146,356 487,577,346 490,146,356 487,577,346 Other reserves 16 327,111,780 329,378,434 329,734,253 329,283,223 Accumulated losses (166,377,750) (206,364,492) (212,315,608) (250,351,510) 650,880,386 610,591,288 607,565,001 566,509,059 Non-controlling interests - (30,770) - - Total equity 650,880,386 610,560,518 607,565,001 566,509,059


STATEMENTS OF FINANCIAL POSITIONAS AT 31 DECEMBER 2015CONT’D


LIABILITIES Non-current liabilities Deferred tax liabilities 17 1,023,000 331,000 1,023,000 331,000 Other payables 18 - 37,880,636 - 37,880,636 Total non-current liabilities 1,023,000 38,211,636 1,023,000 38,211,636 Current liabilities Trade payables 19 210,237 194,558 - - Other payables 18 20,518,976 9,293,439 18,757,220 8,402,472 Tax payable 293,474 500,000 293,474 500,000 Term loans 20 22,529,589 22,635,497 22,529,589 22,635,497 Total current liabilities 43,552,276 32,623,494 41,580,283 31,537,969 Total liabilities 44,575,276 70,835,130 42,603,283 69,749,605 Total equity and liabilities 695,455,662 681,395,648 650,168,284 636,258,664

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



STATEMENTS OF PROFIT OR LOSSAND OTHER COMPREHENSIVE INCOME

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015


Revenue 21 62,582,614 81,117,160 989,977 25,935,903 Direct cost (1,789,194) (1,986,155) (1,789,194) (778,959)Other income 21,916,645 16,501,436 70,841,047 14,789,271 Staff costs 22 (11,616,863) (17,284,324) (5,295,698) (9,821,625)Depreciation (727,528) (388,451) (676,923) (301,726)Administrative expenses (4,822,396) (8,128,314) (4,184,749) (7,067,990)Other expenses (11,671,428) (478,953) (8,501,149) (1,872,306)Finance costs 23 (15,490,260) (15,845,084) (15,020,862) (13,275,900) Profit before tax 38,381,590 53,507,315 36,362,449 7,606,668 Tax expenses 24 (522,944) (4,603,466) (485,474) (4,581,000) Net profit for the financial year 25 37,858,646 48,903,849 35,876,975 3,025,668 Other comprehensive income: Item that will be reclassified subsequently to profit or loss Foreign currency translation differences for foreign operation (2,717,684) 95,211 - - Total comprehensive income for the financial year 35,140,962 48,999,060 35,876,975 3,025,668 Profit for the financial year attributable to: Owners of the Company 37,827,815 48,903,849 Non-controlling interests 30,831 - Net profit for the financial year 37,858,646 48,903,849

Total comprehensive income for the financial year attributable to: Owners of the Company 35,110,131 48,999,060 Non-controlling interests 30,831 -

Total comprehensive income for the financial year 35,140,962 48,999,060

Earnings per share 26 Basic earnings per share (sen) 1.09 1.50 Diluted earnings per share (sen) 1.08 1.39


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


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565

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1 De

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650

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650

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

CONT’D


Attributable to owners of the Company Non-distributable Employee share Share Share Warrants options Capital Accumulated Total capital premium reserve reserve reserve losses equity RM RM RM RM RM RM RM

Company At 1 January 2014 431,895,520 86,578,990 142,608,740 3,809,366 17,186,556 (253,406,070) 428,673,102 Net profit/Total comprehensive income for the financial year - - - - - 3,025,668 3,025,668 Transactions with owners:

Private placement 43,203,440 74,063,041 - - - - 117,266,481 Share issuance expenses - (10,464,803) - - - - (10,464,803) Exercise of ESOS 12,460,000 9,256,000 - - - - 21,716,000 Conversion of warrants 18,386 4,596 (28,892) - - 28,892 22,982 Employee share options granted - - - 6,269,629 - - 6,269,629 Total transactions with owners 55,681,826 72,858,834 (28,892) 6,269,629 - 28,892 134,810,289 Transferred to share premium for ESOS exercised - 5,700,100 - (5,700,100) - - - At 31 December 2014 487,577,346 165,137,924 142,579,848 4,378,895 17,186,556 (250,351,510) 566,509,059 Net profit/Total comprehensive income for the financial year - - - - - 35,876,975 35,876,975 Transactions with owners:

Exercise of ESOS 2,569,000 55,050 - - - - 2,624,050Share issuance expenses - (1,950) - - - - (1,950) Conversion of warrants 10 3 (16) - - 16 13 Employee share options forfeited - - - (2,221,488) - 2,158,911 (62,577) Employee share options granted - - - 2,619,431 - - 2,619,431 Total transactions with owners 2,569,010 53,103 (16) 397,943 - 2,158,927 5,178,967 Transferred to share premium for ESOS exercised - 565,180 - (565,180) - - - At 31 December 2015 490,146,356 165,756,207 142,579,832 4,211,658 17,186,556 (212,315,608) 607,565,001

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



Group Company 2015 2014 2015 2014 RM RM RM RM

OPERATING ACTIVITIES Profit before tax 38,381,590 53,507,315 36,362,449 7,606,668 Adjustments for: Amortisation of intangible assets 462,729 230,619 462,729 230,619 Amount due from subsidiary companies written off - - 7,435 26,563 Bad debts written off - 31,200 - - Depreciation 727,528 388,451 676,923 301,726 Loss/(gain) from disposal of a subsidiary company 242 - (1) - Gain from disposal of property, plant and equipment (374) (73,978) - -Impairment loss on amount due from subsidiary companies - - - 14,914 Impairment loss on amount due from subsidiary companies no longer required - - (50,594,364) -Loss from subsidiary companies written off - 142,710 - - Interest expenses 15,490,260 15,845,084 15,020,862 13,275,900 Interest income (10,355) (287,210) (852,160) (287,210)Other investments written off - 32 - - Property, plant and equipment written off 5,586 1,973 5,585 - Reversal of provision for liquidated ascertained damages - (609,137) - - Share options granted under ESOS, net of amount forfeited 2,556,854 6,269,629 1,680,602 5,303,776 Unrealised (gain)/loss on foreign exchange (21,424,482) (7,092,560) (19,270,161) (4,713,400)Reversal/unwinding of discount on other payable 7,954,934 (7,954,934) 7,954,934 (7,954,934)Waiver of debts - (135,858) - - Operating profit/ (loss) before working capital changes 44,144,512 60,263,336 (8,545,167) 13,804,622 Receivables (9,162,333) (131,641,487) 6,689,472 (74,706,276)Payables (38,068,713) 41,622,336 (51,723,675) 41,189,427 Subsidiary company - - (1,120,349) (6,850,016) Cash used in operations (3,086,534) (29,755,815) (54,699,719) (26,562,243) Interest paid (2,458) (21,825) (2,004) (10,023)Interest received 10,355 287,210 10,126 287,210 Tax paid (11,555) (3,718,970) - (3,750,000) Net cash used in operating activities (3,090,192) (33,209,400) (54,691,597) (30,035,056)

STATEMENTS OF CASH FLOWSFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015



INVESTING ACTIVITIES Purchase of property, plant and equipment (Note A) (21,040) (1,536,960) (21,040) (1,470,784)(Outflow)/proceeds from disposal of subsidiary company, net of cash disposed (Note 4) (303) - 1 - Proceeds from disposal of property, plant and and equipment 378 193,183 - - Deposit paid - (96,510,000) - (96,510,000)Repayment from/(Advances to) subsidiary companies - - 52,043,699 (4,358,485) Net cash (used in)/from investing activities (20,965) (97,853,777) 52,022,660 (102,339,269)

FINANCING ACTIVITIES Net proceeds from issuance of shares 2,622,113 128,540,660 2,622,113 128,540,660 Net repayment of borrowings - (601,636) - - Repayment of finance lease payables - (310,542) - - Interest paid - (16,379) - - Net cash from financing activities 2,622,113 127,612,103 2,622,113 128,540,660 CASH AND CASH EQUIVALENTS Net decrease (489,044) (3,451,074) (46,824) (3,833,665)At beginning of financial year 1,384,057 4,835,131 934,885 4,768,550 At end of financial year 895,013 1,384,057 888,061 934,885 NOTE TO THE STATEMENTS OF CASH FLOWS: A. PURCHASE OF PROPERTY, PLANT AND EQUIPMENT

The Group and the Company acquired property, plant and equipment with aggregate cost of RM297,231 (2014: RM4,255,492) and RM297,231 (2014: RM4,189,316) respectively of which RM276,191 (2014:RM2,718,532) and RM276,191 (2014: RM2,718,532) respectively were remained unpaid as at reporting date. Cash payments of RM21,040 (2014: RM1,536,960) and RM21,040 (2014: RM1,470,784) for the Group and the Company respectively were made to purchase the property, plant and equipment.

STATEMENTS OF CASH FLOWSFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015CONT’D



NOTES TO THE FINANCIAL STATEMENTS31 DECEMBER 2015

1. GENERAL INFORMATION

The Company is a public limited liability company, incorporated and domiciled in Malaysia and is listed on the Main Market of Bursa Malaysia Securities Berhad. The registered office of the Company is located at Level 15-2, Bangunan Faber Imperial Court, Jalan Sultan Ismail, 50250 Kuala Lumpur. The principal place of business of the Company is located at Suite 22.02, Level 22, The Gardens North Tower, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur.

The principal activities of the Company are that of investment holding and engaged in the upstream oil operation. The principal activities of its subsidiary companies are disclosed in Note 4 to the Financial Statements. There have been no significant changes in the nature of these activities during the financial year.

The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the Directors passed on 13 April 2016.

2. BASIS OF PREPARATION

2.1 Statement of compliance

The financial statements of the Group and of the Company have been prepared in accordance with Malaysian Financial Reporting Standards (“MFRSs”), International Financial Reporting Standards (“IFRSs”) and the requirements of the Companies Act, 1965 in Malaysia.

2.2 Basis of measurement

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

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

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

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

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

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


NOTES TO THE FINANCIAL STATEMENTSCONT’D

2. BASIS OF PREPARATION (continued)

2.3 Functional and presentation currency

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

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

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

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

Initial application of the Amendments to MFRSs and IC Int did not have material impact to the financial statements.

2.5 Standards issued but not yet effective

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

MFRS effective 1 January 2016:MFRS 14*# Regulatory Deferral Accounts

Amendments to MFRSs effective 1 January 2016:MFRS 10* Consolidated Financial Statements: Investment Entities- Applying the Consolidation ExceptionMFRS 11*# Joint Arrangements: Accounting for Acquisitions of Interests in Joint OperationsMFRS 12* Disclosure of Interests in Other Entities: Investment Entities – Applying the Consolidation ExceptionMFRS 101 Presentation of Financial Statements: Disclosure InitiativeMFRS 116 Property, Plant and Equipment: Clarification of Acceptable Methods of AmortisationMFRS 101 Presentation of Financial Statements: Disclosure InitiativeMFRS 116*# Property, Plant and Equipment – Agriculture: Bearer PlantMFRS 127 Consolidated and Separate Financial Statements: Equity Method in Separate Financial StatementsMFRS 128 Investments in Associates and Joint Ventures: Investment Entities – Applying the Consolidation ExceptionMFRS 138 Intangible Assets: Clarification of Acceptable Methods of AmortisationMFRS 141*# Agriculture: Agriculture – Bearer PlantsAnnual Improvements 2012-2014 Cycle issued in November 2014

MFRS and Amendments to MFRS effective 1 January 2018:MFRS 9 Financial Instruments (International Financial Reporting Standards (“IFRS”) 9 issued by International Accounting Standards Board (‘IASB”) in July 2014)MFRS 15 Revenue from Contracts with CustomersAmendments to MFRS 7 Financial Instruments – Disclosure: Mandatory effective date of MFRS 9 and transitional disclosures.




2.5 Standards issued but not yet effective (continued)

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

Amendments to MFRS (deferred effective date to be announced by the MASB):Amendments to MFRS 10 Consolidated Financial Statements and MFRS 128 Investments in Associates and Joint Ventures: Sale or contribution of assets between an investor and its associate or joint venture

* Not applicable to the Company’s operations# Not applicable to the Group’s operations

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

MFRS 9 Financial Instruments

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

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

MFRS 15 Revenue from Contracts with Customers

MFRS 15 presents new requirements for the recognition of revenue, replacing the guidance of MFRS 11 Construction Contracts, MFRS 118 Revenue, IC Interpretation 13 Customer Loyalty Programmes, IC Interpretation 15 Agreements for Construction of Real Estates, IC Interpretation 18 Transfers of Assets from Customers, and IC Interpretation 131 Revenue – Barter Transaction Involving Advertising Activities. The principles in MFRS 15 provide a more structured approach to measuring and recognising revenue. It establishes a new five-step model that will apply to revenue arising from contracts with customers. Under MFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods of services to a customer.

The adoption of MFRS 15 will result in a change in accounting policy. The Group and the Company are currently assessing the impact of MFRS 15 and will adopt the new standard on the required effective date.

2.6 Significant accounting estimates and judgements

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




2.6.1 Estimation uncertainty

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

Useful lives of depreciable assets

Management estimates the useful lives of the property, plant and equipment to be within 5 to 55 years and reviews the useful lives of depreciable assets at the end of each of the reporting date. As at 31 December 2015, management assesses that the useful lives represent the expected utility of the assets to the Group and the Company. Actual results, however, may vary due to change in the expected level of usage and technological development, which may result in adjustment to the Group’s and the Company’s assets.

The carrying amount of the Group’s and of the Company’s property, plant and equipment at the end of the reporting period is disclosed in Note 7 to the Financial Statements.

A 20% difference in the expected useful lives of the property, plant and equipment from the management’s estimates would result in approximately 3% (2014: 1%) and 2% (2014: 10%) variance in the Group’s and the Company’s profit for the financial year respectively.

Amortisation of intangible asset

The intangible assets will be amortised based on the unit of production method using total proved and probable oil reserves estimated to be recoverable from the existing oil and gas field based on the current subsurface use contract. An impairment loss is recognised for the amount by which the carrying amount of the asset or cash-generating unit exceeds its recoverable amount. To determine the recoverable amount, management estimates expected future cash flows from each asset or cash-generating unit and determines a suitable interest rate in order to calculate the present value of those cash flows. In the process of measuring expected future cash flows, management makes assumptions about future operating results. Actual results, however, may vary due to change in the expected level of usage and technological development and the market demand, which may result in adjustment to the Group’s and the Company’s assets.

The carrying amount of the Group’s and of the Company’s intangible asset at the end of the reporting period is disclosed in Note 8 to the Financial Statements.

Impairment of non-financial assets

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

In most cases, determining the applicable discount rate involves estimating the appropriate adjustments to market risk and to asset-specific risk factors.




2.6.1 Estimation uncertainty (continued)

Impairment of loans and receivables

The Group and the Company assess at end of each reporting period whether there is any objective evidence that a financial asset is impaired. To determine whether there is objective evidence of impairment, the Group and the Company consider factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments.

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

Income taxes/ deferred taxation

Significant judgement is involved in determining the Group’s and the Company’s provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group and the Company recognise tax liabilities based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recognised, such difference will impact the income tax and deferred tax provisions in the period in which such determination is made.

Deferred tax assets are recognised for all unabsorbed business losses and unutilised capital allowances to the extent that it is probable that taxable profit will be available against which the business 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.

Employee share options

The Group and the Company measure the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. Estimating fair value for share-based payment transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the share options, volatility and dividend yield and making assumptions about them.

The assumptions and model used for estimating fair value for share-based payment transactions and the carrying amounts are disclosed in Note 22 to the Financial Statements.

Fair value of financial instruments

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



3. SIGNIFICANT ACCOUNTING POLICIES

3.1 Consolidation

3.1.1 Subsidiary companies

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

Investment in subsidiary companies is stated at cost less any impairment losses in the Company’s statement of financial position, unless the investment is classified as held for sale or distribution.

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

3.1.2 Basis of consolidation

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

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

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

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

3.1.3 Business combinations and goodwill

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

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date.



3. SIGNIFICANT ACCOUNTING POLICIES (continued)

3.1 Consolidation (continued)

3.1.3 Business combinations and goodwill (continued)

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

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed off, the goodwill associated with the operation disposed off is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed off in this circumstance is measured based on the relative values off the operation disposed off and the portion of the cash-generating unit retained.

3.1.4 Loss of control

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

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

3.1.5 Non-controlling interests

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

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




3.1 Consolidation (continued)

3.1.6 Associate companies

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

The Group’s investment in its associate companies are accounted for using the equity method. Under the equity method, investment in an associate company is carried in the statements of financial position at cost plus post acquisition changes in the Group’s share of net assets of the associate company since the acquisition date.

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

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

After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss on the Group’s investment in its associate companies. The Group determines at the end of the reporting date whether there is any objective evidence that the investment in the associate companies are impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the investment in associate companies and their carrying values and recognise the amount in the “share of profit of associate companies” in profit or loss.

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

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

3.2 Foreign currency translations

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




3.2 Foreign currency translations (continued)

3.2.1 Foreign currency transactions and balances

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

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

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

3.2.2 Foreign operations

The assets and liabilities of operations denominated in functional currencies other than RM are translated to RM at exchange rates at the end of the reporting date. The income and expenses of foreign operations are translated to RM at exchange rates at the date of the transactions.

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

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

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

3.3 Property, plant and equipment

All property, plant and equipment are measured at cost less accumulated depreciation and less any impairment losses. The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefits associated with the item will flow to the Group and the Company and the cost of the item can be measured reliably.

Cost includes expenditures that are directly attributable to the acquisition of the assets and any other costs directly attributable to bring the asset to working condition for its intended use. All other repair and maintenance costs are recognised in profit or loss as incurred.




3.3 Property, plant and equipment (continued)

Depreciation is recognised on the straight line method in order to write off the cost of each asset to its residual value over the estimated useful life. The property, plant and equipment are depreciated based on the estimated useful lives of the assets at the following annual rates:

Leasehold land 55 yearsBuildings 2%Computer equipment and software 20%Motor vehicles 20%Office equipment, furniture and fittings 10% - 20%Renovation 10%

Capital work-in-progress consists of computer software under installation for intended use. The amount is stated at cost. Assets under installation are not depreciated until they are completed and ready for their intended use.

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

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

3.4 Operating leases

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

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

3.5 Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortisation and any accumulated impairment losses.

The useful life of intangible assets is assessed to be finite. Intangible assets with finite life are amortised based on the unit of production method using total proved and probable reserves for capitalised acquisition costs and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite useful life is recognised in the profit or loss in the expense category consistent with the function of the intangible asset.

Gains or losses arising from derecognition of an intangible assets is measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the profit or loss when the asset is derecognised.




3.6 Financial instruments

3.6.1 Initial recognition and measurement

Financial assets and financial liabilities are recognised when the Group or the Company becomes a party to the contractual provisions of the financial instrument. Financial assets and financial liabilities are measured initially at fair values plus transactions costs, except for financial assets and financial liabilities carried at fair values through profit or loss, which are measured initially at fair values. Financial assets and financial liabilities are measured subsequently as described below.

3.6.2 Financial assets - categorisation and subsequent measurement

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

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

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

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

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

At the reporting date, the Group and the Company have not designated any financial assets at fair value through profit or loss and held-to-maturity investments. The Group and the Company carry only loans and receivables and available-for-sale financial assets on their statements of financial position.

Loans and receivables

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

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




3.6 Financial instruments (continued)

3.6.2 Financial assets - categorisation and subsequent measurement (continued)

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are either designated to this category or do not qualify for inclusion in any of the other categories of financial assets.

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

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

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

3.6.3 Financial liabilities - categorisation and subsequent measurement

After the initial recognition, financial liabilities are classified as:

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

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

At the reporting date, the Group and the Company carry only other liabilities measured at amortised cost on their statements of financial position.

Other liabilities measured at amortised cost

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

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

3.6.4 Offsetting of Financial Instruments

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




3.7 Cash and cash equivalents

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

Cash and cash equivalents restricted to be used to settle a liability of 12 months or more after the end of the reporting date are classified as non-current asset.

3.8 Non-current assets or disposal group held for sale and discontinued operations

Non-current assets or disposal group comprising assets and liabilities, that are expected to be recovered primarily through sale rather than through continuing use, are classified as held for sale.

A component of the Group is classified as discontinued operation when the criteria to be classified as held for sale have been met or it has been disposed of and such a component represents a separate major line of business or geographical area of operations, is part of a single co-ordinate major line of business or geographical area of operations or is a subsidiary company acquired exclusively with a view to resale.

Classification of the asset (or disposal group) as held for sale occurs only when the asset is available for immediate sale in its present condition subject only to terms that are usual and customary and the sale must be highly probable. Management must be committed to a plan to sell the assets which are expected to qualify for recognition as a completed sale within one year from the date of classification. Action required to complete the plan should indicate that it is unlikely that significant changes to the plan will be made or the plan will be withdrawn.

Immediately before classification as held for sale (or disposal group), the assets, or components of a disposal group, are remeasured in accordance with the Group’s accounting policies. Thereafter generally the assets, or disposal group, are measured at the lower of their carrying amount and fair value less costs to sell.

Liabilities are classified as held for sale and presented as such in the statements of financial position if they are directly associated with the disposal group.

Any impairment loss on a disposal group is first allocated to goodwill, and then to remaining assets and liabilities on pro rata basis, except that no loss is allocated to inventories, financial assets, deferred tax assets, employee benefit assets and investment property, which continue to be measured in accordance with the Group’s accounting policies. Impairment losses on initial classification as held for sale and subsequent gains or losses on remeasurement are recognised in profit or loss. Gains are not recognised in excess of any cumulative impairment loss.

In the statements of profit or loss and other comprehensive income of the reporting year, and of the comparable period of the previous year, income and expenses from discontinued operations are reported separately from income and expenses from continuing operations, down to the level of profit after tax, even when the Group retains a non-controlling interest in the subsidiary after the sale. The resulting profit or loss (after tax) is reported separately in the statements of profit or loss and other comprehensive income.

Intangible assets and property, plant and equipment once classified as held for sale are not amortised or depreciated. In addition, equity accounting of equity accounted associates ceases once classified as held for sale.




3.9 Impairment of assets

3.9.1 Non-financial assets

The Group and the Company assess at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group and the Company estimate the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (“CGU”) fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

In determining fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiary companies or other available fair value indicators.

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

Impairment losses of continuing operations are recognised in the profit or loss in those expense categories consistent with the function of the impaired asset.

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

3.9.2 Financial assets

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




3.9 Impairment of assets (continued)

3.9.2 Financial assets (continued)

Financial assets carried at amortised cost

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

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

The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the profit or loss.

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

Available-for-sale financial assets

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

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




3.10 Equity, reserves and distributions to owners

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

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

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

The warrants reserve is valued based on the closing price of the first trading day of the warrant. The issuance of the ordinary shares upon exercise of the warrants is treated as new subscription of ordinary shares for the consideration equivalent to the exercise price of the warrants.

Capital reserve arose from capital reduction.

Foreign currency translation differences arising on the translation of the Group’s foreign entity is included in foreign currency translation reserve.

Accumulated losses include all current and prior years’ accumulated losses.

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

3.11 Provisions

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

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

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




3.12 Employee benefits

3.12.1 Short term employee benefits

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

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

3.12.2 Defined contribution plans

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

Such contributions are recognised as expenses 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 subsidiary companies are also making contributions to their country’s statutory pension schemes.

3.12.3 Employee Share Options Scheme

The Employee Share Options Scheme (“the Scheme”) allows the Group’s and the Company’s employees to acquire shares of the Company. When the options are exercised, equity is increased by the amount of the proceeds received.

The fair value of the employee services received in exchange for the grant of the share option is recognised as an expense in the profit or loss over the vesting periods of the grant with a corresponding increase in equity. The fair value of share options is measured at grant date, taking into account, if any, the market vesting conditions upon which the options were granted but excluding impact of any non-market vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable on vesting date.

At each reporting date, the Group and the Company revise the estimates of the number of options that are expected to become exercisable on vesting date. It recognises the impact of the revision of original estimates, if any, in the profit or loss, and a corresponding adjustment to equity over the remaining vesting period. The equity amount is recognised in the share option reserve until the option is exercised, upon which it will be transferred to share premium, or until the option expires, upon which it will be transferred directly to accumulated losses.

3.13 Revenue

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




3.13 Revenue (continued)

3.13.1 Oil and gas services

Revenue is recognised upon the performance or service rendered.

3.13.2 Interest income

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

3.13.3 Rental income

Rental income is accounted for on a straight line basis over the lease term.

3.13.4 Management service fee

Management fees are recognised when services are rendered.

3.14 Borrowing costs

Borrowings costs are expensed in the year in which they are incurred. Borrowings costs consist of interest and other costs that the Group incurred in connection with the borrowing of funds.

3.15 Tax expenses

Tax expenses comprise current and deferred taxes. Current tax and deferred tax are recognised in profit or loss except to the extent that they relate to items recognised directly in equity or other comprehensive income.

3.15.1 Current tax

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

3.15.2 Deferred tax

Deferred tax is recognised using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities in the statements of financial position and their tax bases. Deferred tax is not recognised for the temporary differences arising from the initial recognition of goodwill, and the initial recognition of assets or liabilities in a transaction that is not a business combination and that does not affect the accounting or taxable profit. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the end of the reporting year.

The amount of deferred tax recognised is measured based on the expected manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the reporting date.

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




3.15 Tax expenses (continued)

3.15.2 Deferred tax (continued)

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

3.15.3 Goods and Services Tax

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

Expenses and assets are recognised net of the amount of GST except:

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

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

3.16 Operating segments

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

3.17 Contingencies

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




3.18 Related parties

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

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

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

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

(i) the entity and the Group are members of the same group; or(ii) one entity is an associate or joint venture of the other entity; or(iii) both entities are joint ventures of the same third party; or(iv) one entity is a joint venture of a third entity and the other entity is an associate of the third entity; or(v) the entity is a post-employment benefit plan for the benefits of employees of either the Group or an entity

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

management personnel of the entity; or(viii) the entity, or any member of a group of which it is a part, provides key management personnel services

to the Group or to the parent of the Group.

4. INVESTMENT IN SUBSIDIARY COMPANIES Company 2015 2014 RM RM

Investment costs: At cost: At 1 January 95,080,000 95,333,104Subsidiary companies written off - (253,104)Disposal of a subsidiary company (80,000) - At 31 December 95,000,000 95,080,000 Less: Impairment losses

At 1 January (95,080,000) (95,333,104)Written off 80,000 253,104 At 31 December (95,000,000) (95,080,000) - -Contributions to subsidiary company: ESOS granted to employees of subsidiary company 1,880,396 1,004,144

1,880,396 1,004,144



4. INVESTMENT IN SUBSIDIARY COMPANIES (continued)

Details of the subsidiary companies are as follows:

Effective Country ofName of company interest Principal activities incorporation 2015 2014 % %

(a) Sumatec Corporation Sdn. Bhd. 100 100 Oil and gas field Malaysia development services Held under Sumatec Corporation Sdn. Bhd. (i) Sumatec Petroleum Development 100 100 Dormant Malaysia Sdn. Bhd. (ii) Sumatec Development Sdn. Bhd. 100 100 Dormant Malaysia (b) Sumatec Oil and Gas LLP # 100 100 Oil and gas field Kazakhstan development services

(c) Perlis Bio-Power Sdn. Bhd. - 80 Dormant Malaysia

# Not audited by SJ Grant Thornton

Disposal of a Subsidiary Company

On 25 August 2015, the Company disposed of its 80% equity interest in Perlis Bio-Power Sdn. Bhd. (“PBP”) for a cash consideration of RM1.

The disposal of PBP gave rise to a gain of RM1 to the company.

The effect of the disposal of PBP on the financial position of the Group as at the date of disposal was as follows:

Group 2015 RM

Net assets held for sale 304Non-controlling interests (61)Proceeds from disposal (1)

Loss on disposal of subsidiary 242

Net assets held for sale 304Proceeds from disposal (1)

Net cash outflow from disposal of subsidiary 303



5. INVESTMENT IN ASSOCIATE COMPANIES

Group and Company 2015 2014 RM RM

Unquoted shares, at cost 375,540 375,540Less: Impairment losses (375,540) (375,540)

- -

Details of associate companies are as follows:

Effective Country ofName of company interest Principal activities incorporation 2015 2014 % %

(a) Adinin Sumatec JV Sdn. Bhd. # 50 50 Dormant Brunei(b) ESE (Cambodia) Pte. Ltd.# 50 50 Dormant Republic of Cambodia(c) Sumatec (Middle East) LLC # 49 49 Dormant United Arab Emirates(d) Thai Polymix Co. Ltd. # 49 49 Dormant Thailand(e) UHP Engineering Sdn. Bhd.# 49 49 Dormant Malaysia

# Not audited by SJ Grant Thornton

6. OTHER INVESTMENTS


Available-for-sale financial assets At cost: - Unquoted shares 1 228,033 - -- Unquoted bonds - 2,000,000 - 2,000,000Written off - (2,000,032) - (2,000,000)

1 228,001 - -Less: Impairment losses

At 1 January (228,000) (2,228,000) - (2,000,000) Written off 228,000 2,000,000 - 2,000,000 At 31 December - (228,000) - -

1 1 - -



7. PROPERTY, PLANT AND EQUIPMENT

Computer Office Capital equipment furniture Leasehold work-in- and Motor and land Buildings progress software vehicles fittings Renovation TotalGroup RM RM RM RM RM RM RM RM

Cost At 1 January 2014 - 230,000 - 369,073 607,436 136,611 20,930 1,364,050Additions - - 1,081,954 3,100,562 - 72,976 - 4,255,492Disposals - - - (19,283) (602,358) (19,260) - (640,901)Written off - - - (167,827) - (73,172) - (240,999)Transferred from non-current assets held for sale 735,684 - - - - - - 735,684

At 31 December 2014 735,684 230,000 1,081,954 3,282,525 5,078 117,155 20,930 5,473,326Additions - - 276,191 21,040 - - - 297,231Disposals - - - (23,393) - - - (23,393)Written off - - - (11,117) - - - (11,117)Transfers - - (476,883) - - 88,785 388,098 -

At 31 December 2015 735,684 230,000 881,262 3,269,055 5,078 205,940 409,028 5,736,047

Accumulated depreciation At 1 January 2014 - 50,600 - 367,747 428,935 128,443 20,380 996,105Charge for the financial year - 4,600 - 302,323 60,236 20,748 544 388,451Disposals - - - (19,281) (484,093) (18,322) - (521,696)Written off - - - (167,787) - (71,239) - (239,026)Transferred from non-current assets held for sale 61,306 - - - - - - 61,306

At 31 December 2014 61,306 55,200 - 483,002 5,078 59,630 20,924 685,140Charge for the financial year 12,261 6,691 - 624,420 - 45,346 38,810 727,528Disposals - - - (23,389) - - - (23,389)Written off - - - (5,531) - - - (5,531)

At 31 December 2015 73,567 61,891 - 1,078,502 5,078 104,976 59,734 1,383,748

Net carrying amount At 31 December 2015 662,117 168,109 881,262 2,190,553 - 100,964 349,294 4,352,299

At 31 December 2014 674,378 174,800 1,081,954 2,799,523 - 57,525 6 4,788,186



7. PROPERTY, PLANT AND EQUIPMENT (continued)

Office Capital Computer equipment, work-in- equipment furniture and progress and software fittings Renovation TotalCompany RM RM RM RM RM

Cost At 1 January 2014 - - - - -Additions 1,081,954 3,100,562 6,800 - 4,189,316

At 31 December 2014 1,081,954 3,100,562 6,800 - 4,189,316Additions 276,191 21,040 - - 297,231Written off - (7,285) - - (7,285)Transfers (476,883) - 88,785 388,098 -

At 31 December 2015 881,262 3,114,317 95,585 388,098 4,479,262

Accumulated depreciation At 1 January 2014 - - - - -Charge for the financial year - 301,160 566 - 301,726

At 31 December 2014 - 301,160 566 - 301,726Charge for the financial year - 624,320 13,793 38,810 676,923Written off - (1,700) - - (1,700)

At 31 December 2015 - 923,780 14,359 38,810 976,949

Net carrying amount At 31 December 2015 881,262 2,190,537 81,226 349,288 3,502,313

At 31 December 2014 1,081,954 2,799,402 6,234 - 3,887,590

(i) The titles to two apartment units of the Group with net carrying amount of RM168,109 (2014: RM174,800) have yet to be issued by the relevant authorities.

(ii) The leasehold land of the Group with net carrying amount of RM662,117 (2014: RM674,378) is pledged to a bank as securities for banking facility granted to a subsidiary company.



8. INTANGIBLE ASSET


Development and extraction rights At cost: At 1 January/ 31 December 302,100,000 302,100,000 Less: Accumulated amortisation At 1 January (230,619) - Amortisation for the year (462,729) (230,619) At 31 December (693,348) (230,619)

At 31 December 301,406,652 301,869,381

On 8 March 2012, the Company entered into a Joint Investment Agreement (“JIA”) with Markmore Energy (Labuan) Limited (“MELL”) and CaspiOil Gas LLP (“COG”), a wholly-owned subsidiary company of MELL, whereby the Company acquired the rights to develop, extract and produce oil from the Rakushechnoye Oil and Gas Field in Kazakhstan. The development and extraction rights will be amortised based on the unit of production method using total proved and probable oil reserves estimated to be recoverable from the existing oil and gas field based on the current subsurface use contract.

MELL and COG are companies in which a major shareholder of the Company has control.

9. TRADE RECEIVABLES


Trade receivables 156,276,618 151,531,553 24,856,364 23,196,745Less: Impairment losses At 1 January /31 December (70,490,836) (70,490,836) - -

Net carrying amount 85,785,782 81,040,717 24,856,364 23,196,745Non-current (30,887,806) (18,123,517) (24,856,364) (12,710,545)

Current 54,897,976 62,917,200 - 10,486,200

Included in the abovementioned net carrying amount of the Group and of the Company are the amount owing from 2 (2014: 2) companies and 1 (2014: 1) company respectively in which a major shareholder of the Company has control. For one of the companies, the Group extended a 60 days (2014: 60 days) credit term whereas the other company’s repayment terms is bound by the JIA and the Joint Investment Agency Agreement for which payments are not due within the 12 months after the end of the current financial year.



10. OTHER RECEIVABLES


Non-current Performance deposit 125,325,194 126,651,660 125,325,194 126,651,660Other receivables 57,940,631 45,717,851 57,940,631 45,717,851

183,265,825 172,369,511 183,265,825 172,369,511

Current Deposits 96,658,153 96,662,913 96,655,603 96,660,363Prepayments 14,106 - - -Other receivables 9,681,449 9,858,585 8,030,246 7,958,402Less: Impairment losses

At 1 January (9,469,115) (9,626,023) (7,818,147) (7,818,147) Written off - 156,908 - - At 31 December (9,469,115) (9,469,115) (7,818,147) (7,818,147)

96,884,593 97,052,383 96,867,702 96,800,618

Total other receivables 280,150,418 269,421,894 280,133,527 269,170,129

Performance deposit paid under the JIA is to be set off against future royalty payable calculated based on volume of oil produced.

Non-current other receivables of the Group and the Company represent the advances provided to COG under the Investment Agreement signed on 2 August 2013 pursuant to the JIA, which is non-interest bearing and repayment will commence when COG’s production reaches cumulative 2 million barrels of crude oil.

Included in deposits is an amount of RM96,510,000 (2014: RM96,510,000) being refundable deposit paid for the proposed acquisition of 100% equity interest in Borneo Energy Oil and Gas Ltd and guaranteed by MELL as disclosed in Note 33(b) to the Financial Statements.



11. AMOUNT DUE FROM SUBSIDIARY COMPANIES

Company 2015 2014 RM RM

Amount due from subsidiary companies 34,184,999 83,598,152 Less: Impairment losses

At 1 January (70,037,859) (71,600,670) Impairment loss recognised - (14,914) Impairment loss no longer required due to repayment 50,594,364 - Written off 123,970 1,577,725 At 31 December (19,319,525) (70,037,859)

14,865,474 13,560,293

Included in the abovementioned balances is an amount of RM2,214,571(2014: RM2,164,743) which is trade in nature, unsecured, interest free and carries a credit period of 30 days (2014: 30 days).

Included in the abovementioned balances are advances to a subsidiary company amounting to RM12,650,061 (2014: RM6,710,277) which are unsecured, bear interest at 7% (2014: 7%) per annum and is repayable on demand.

The remaining amount due from subsidiary companies is non-trade in nature, unsecured, interest free and repayable on demand.

12. AMOUNT DUE FROM ASSOCIATE COMPANIES


Amount due from associate companies 7,469,630 7,469,630 5,635,497 5,635,497Less: Impairment losses (1,834,133) (1,834,133) - -

5,635,497 5,635,497 5,635,497 5,635,497

The amount due from associate companies is non-trade in nature, unsecured, interest free and repayable on demand.

13. FIXED DEPOSITS WITH A LICENSED BANK

Group

The fixed deposits are pledged to a licensed bank for bank guarantee facility granted to a subsidiary company.



14. NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE


Assets: Investment in an associate company 17,000,000 17,000,000

On 21 December 2012, the Company entered into a sale and purchase agreement with third parties to dispose its 51% equity interest, representing 64,496,272 ordinary shares of Semua International Sdn. Bhd. (“SISB”) for a total sales consideration of RM18,800,000, comprising its entire shipping division. The disposal is part of the debt settlement scheme with the CLO bondholders.

The assets and liabilities of SISB Group have been presented on the statements of financial position as disposal group classified as held for sale.

On 19 July 2013, the Company received RM1.8 million (“1st Tranche Consideration”), representing the disposal value of 2% equity interest in SISB from the purchaser.

The 2nd Tranche Consideration of RM17 million, representing the disposal value of the remaining 49% equity interest in SISB, together with interest thereon at the rate of 6% per annum (interest shall be payable half yearly) shall be paid within 24 months, or earlier, from 31 January 2013, i.e. the date the last approval was obtained from the CLO bondholders. However, the third parties were unable to fulfill the settlement obligation to the CLO bondholders.

Subsequently, the Company has entered into negotiation with a new third party for the disposal of 49% equity interest in SISB. As at 31 December 2015, the third party had paid RM3,965,093 towards the settlement obligation to CLO bondholders. The payment, disclosed as deposits received in Note 18 to the Financial Statements, has resulted in reduction of the term loans and interest accrued as at the end of the financial year.

The Directors expect the sale to be completed in 2016.

The 49% equity interest in SISB is pledged to CLO bondholders as security for banking facility granted to the Company.

15. SHARE CAPITAL

Group and Company Number of shares Amount Unit RM

Authorised:-Ordinary shares of RM0.14 each At 1 January 2014/At 31 December 2014/ 31 December 2015 7,142,857,143 1,000,000,000



15. SHARE CAPITAL (continued)

Group and Company Number of shares Amount Unit RM

Issued and fully paid:-Ordinary shares of RM0.14 each At 1 January 2014 3,084,968,000 431,895,520 Exercise of ESOS 89,000,000 12,460,000 Conversion of warrants 131,325 18,386 Private placement 308,596,000 43,203,440

At 31 December 2014 3,482,695,325 487,577,346 Exercise of ESOS 18,350,000 2,569,000 Conversion of warrants 75 10

At 31 December 2015 3,501,045,400 490,146,356

The holders of the ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restrictions and rank equally with regard to the Company’s residual assets.

16. OTHER RESERVES


Non-distributable:- Share premium At 1 January 165,137,924 86,578,990 165,137,924 86,578,990 Arising from issuance of ordinary shares 55,053 83,323,637 55,053 83,323,637 Transfer from employee share options reserve 565,180 5,700,100 565,180 5,700,100 Less: Share issuance expenses (1,950) (10,464,803) (1,950) (10,464,803)

At 31 December 165,756,207 165,137,924 165,756,207 165,137,924

Warrants reserve At 1 January 142,579,848 142,608,740 142,579,848 142,608,740Conversion of warrants (16) (28,892) (16) (28,892)

At 31 December 142,579,832 142,579,848 142,579,832 142,579,848

Employee share options reserve At 1 January 4,378,895 3,809,366 4,378,895 3,809,366Employee share options granted 2,619,431 6,269,629 2,619,431 6,269,629Exercise of ESOS (565,180) (5,700,100) (565,180) (5,700,100)Employee share options forfeited (2,221,488) - (2,221,488) -

At 31 December 4,211,658 4,378,895 4,211,658 4,378,895



16. OTHER RESERVES (continued)


Non-distributable (continued):- Capital reserve At 1 January/ 31 December 17,186,556 17,186,556 17,186,556 17,186,556

Foreign currency translation reserve At 1 January 95,211 - - - Foreign currency translation (2,717,684) 95,211 - -

At 31 December (2,622,473) 95,211 - -

Total other reserves 327,111,780 329,378,434 329,734,253 329,283,223

Share premium

Share premium represents the excess of the consideration received over the nominal value of shares issued by the Company. Any transaction costs associated with the issuing of shares are deducted from share premium. It is not to be distributed by way of cash dividends and its utilisation shall be in a manner as set out in Section 60 (3) of the Companies Act, 1965.

Warrants reserve

On 4 March 2011, the Company issued 107,182,110 Warrants A pursuant to the rights issue. Each Warrant A entitles the holder to subscribe for 1 new ordinary share at the exercise price of RM0.35 per share.

Warrants A were constituted under the Deed Poll dated 8 October 2010 and the Supplemental Deed Poll dated 23 February 2011 (“Deed Poll A”).

On 14 November 2013, the Company issued new shares and warrants pursuant to its rights issue with warrants exercise. Pursuant thereto, subject to adjustments in accordance with the Deed Poll A, the exercise price of the outstanding Warrants A was revised from RM0.35 to RM0.32 while an additional 11,574,887 Warrants A were listed and quoted on 21 November 2013.

None of the Warrants A were exercised during the financial year and Warrants A that remain unexercised as at 31 December 2015 are 118,753,197.

On 14 November 2013, the Company issued 567,653,083 Warrants B pursuant to the rights issue. Each Warrant B entitles the holder to subscribe for 1 new ordinary share at the exercise price of RM0.175 per share.

Warrants B were constituted under the Deed Poll dated 28 August 2013.

75 Warrants B were exercised during the financial year and Warrants B that remain unexercised as at 31 December 2015 are 567,521,683.



16. OTHER RESERVES (continued)

Warrants reserve (continued)

The warrants reserve arose from the allocation of fair value of Warrants A and Warrants B issued have been charged to accumulated losses.

The main features of the warrants are as follows:

(i) Each warrant entitles the registered holder at any time during the exercise period to subscribe for one new ordinary share of RM0.14 each in the Company at an exercise price of RM0.32 for Warrant A and RM0.175 for Warrant B.

(ii) The exercise price and the number of warrants are subject to adjustment in the event of alteration to the share capital of the Company in accordance with the provisions set out in the Deed Poll.

(iii) The warrants shall be exercisable at any time within the period commencing on and including the date of issue of the warrants until the last market day prior to the tenth anniversary for Warrant A and fifth anniversary for Warrant B of the respective dates of issue of the warrants.

(iv) All new ordinary shares to be issued arising from the exercise of the warrants shall rank pari passu in all respects with the then existing ordinary shares of the Company except that such new ordinary shares shall not be entitled to any dividends, rights, allotments and other distributions on or prior to the date of allotment of the new ordinary shares arising from the exercise of the warrants.

Employee share options reserve

Employee share options reserve represents the equity-settled share options granted to employees as detailed in Note 22 to the Financial Statements. The reserve is made up of the cumulative value of services received from employees recorded over the vesting period commencing from the grant date of equity-settled share options, and is reduced by the expiry or exercise of the share options.

Capital reserve

The capital reserve arose from the capital reduction in previous financial years which was used to offset RM104,502,558 of the Company’s accumulated losses at the date when the reduction of share capital became effective.

The remaining credit after off-setting amounting to RM17,186,556 was credited to the capital reserve of the Group and of the Company.

Foreign currency translation reserve

The translation reserve represents exchange difference arising from the translation of the financial statements of foreign operations whose functional currency is different from that of the Group’s presentation currency.

These reserves are not available for distribution as dividends.



17. DEFERRED TAX LIABILITIES


At 1 January 331,000 -Transferred from profit or loss (Note 24) 692,000 331,000

At 31 December 1,023,000 331,000

The deferred tax liabilities as at the end of the reporting date are made up of temporary differences arising from:


Property, plant and equipment 447,000 157,000Other 1,228,000 174,000Unabsorbed tax losses (642,000) -Unutilised capital allowances (10,000) -

1,023,000 331,000

As at reporting date, the deferred tax assets not recognised in the Group’s financial statements are made up of the temporary differences arising from:

Group 2015 2014 RM RM

Unabsorbed tax losses 14,337,000 71,483,000Others (2,803,000) (2,771,000)

11,534,000 68,712,000

The potential deferred tax assets of the Group have not been recognised in respect of these items as it is anticipated that the tax effects of such benefits will not be reversed in the near foreseeable future.

18. OTHER PAYABLES


Non-current Other payables - 37,880,636 - 37,880,636



18. OTHER PAYABLES (continued)


Current Other payables and accruals 16,553,883 8,993,439 14,792,127 8,402,472Deposits received 3,965,093 300,000 3,965,093 -

20,518,976 9,293,439 18,757,220 8,402,472

Total 20,518,976 47,174,075 18,757,220 46,283,108

Non-current payables of the Group and Company represent non-interest bearing advances, with no fixed term of repayment provided from a company in which a major shareholder of the Company has control.

Included in the current payables of the Group and Company is interest accrued of RM790,023 (2014: RM2,394,073) for CLO loans and the deposits received of RM3,965,093 (2014: RM Nil) is in relation to the disposal of SISB as detailed in Note 14 to the Financial Statements.

19. TRADE PAYABLES

Group

The normal trade credit terms granted by the trade payables range from 30 to 90 days (2014: 30 to 90 days).

20. TERM LOANS


Secured:- CLO loans - repayable within 12 months 22,529,589 22,635,497

The CLO loans are secured by way of 49% equity interest in SISB.

During the financial year, the Company entered into a new settlement agreement with CLO bondholders for the settlement of the term loans. Subsequent to the reporting date, the CLO bondholders have approved a further extension of final payment to 30 June 2016. The terms of the new settlement agreement are disclosed in Note 33(a) to the Financial Statements.

The CLO loans carry interest at the rate of 10% (2014: 6%) per annum.



21. REVENUE


Oil and gas income 62,582,614 81,117,160 - 23,771,160Management service fee - - 989,977 2,164,743

62,582,614 81,117,160 989,977 25,935,903

22. STAFF COSTS


Salaries, wages and other emoluments 8,162,101 10,059,785 2,846,028 3,656,088Non-executive Directors’ meeting allowance 146,000 187,000 146,000 187,000Directors’ fees 499,200 469,150 499,200 469,150Defined contribution plans and social security contributions 222,782 185,665 117,087 92,516Share options granted under ESOS 2,556,854 6,269,629 1,680,602 5,303,776Other benefits 29,926 113,095 6,781 113,095

11,616,863 17,284,324 5,295,698 9,821,625

Employee Share Options Scheme

On 18 April 2007, the Company granted share options to qualified key management personnel and employees to purchase shares in the Company under the ESOS approved by the shareholders of the Company on 24 June 2005 (“1st Tranche”). On 27 December 2013, the Company further granted share options to qualified senior management and employees (“2nd Tranche”). Under the 2nd Tranche, holders of vested options are entitled to purchase the Company’s shares at RM0.244 per share. Included in 2nd Tranche are share options granted to the Chief Executive Officer of the Company (“CEO”) which were approved by shareholders on 26 March 2014.

On 12 October 2015, the Company granted share options to qualified employees (“3rd Tranche”). Under the 3rd Tranche, holders of vested options are entitled to purchase the Company’s shares at RM0.143 per share.



22. STAFF COSTS (continued)

The vesting conditions related to the grants of the 2nd Tranche ESOS options are as follows:

Outstanding numberEmployees entitled Vesting conditions of options 2015 2014

Option granted to Achievement of the following: 16,440,000 33,840,000 senior management - 3 consecutive months of production at and employees 2,000 barrels per day; and (“Grant II”) - Uplift from PN17

Option granted to senior Achievement of the following: management and employees - Cumulative 2 million barrels sold; and 24,660,000 50,760,000 (“Grant III”) - Profit on oil of USD35 per barrel

41,100,000 84,600,000

The outstanding number of 3rd Tranche ESOS options (“Grant IV”) is 16,950,000 (2014: Nil) and there was no vesting condition attached.

The expiry date of Grant II, Grant III and Grant IV is on 16 April 2017.

A summary of the movements in the number of ESOS and the weighted average exercise prices (“WAEP”) is as follows:

Group 2015 2014 Number of Number of share option WAEP share option WAEP RM RM

Outstanding at 1 January 84,640,000 0.244 145,040,000 0.244Granted during the financial year 35,300,000 0.143 44,000,000 0.244Forfeited during the financial year (43,500,000) 0.244 (15,400,000) 0.244Exercised during the financial year (18,350,000) 0.143 (89,000,000) 0.244

Outstanding at 31 December 58,090,000 0.215 84,640,000 0.244

Exercisable at 31 December 16,990,000 40,000

The options outstanding at 31 December 2015 have exercise prices in the range of RM0.143 to RM0.35 (2014: RM0.244 to RM0.35) and a weighted average contractual life of 1.3 years (2014: 2.3 years).



22. STAFF COSTS (continued)

Employee Share Option Scheme (continued)

The fair value of services received in return for the share options granted is based on the fair value of share options granted, measured using Binomial option-pricing models, with the following inputs:

Grant II & III Grant IV to to senior senior Grant II & III management management to CEO and employees and employees RM RM RM

Fair value at grant date 0.1294 0.1294 0.0308

Weighted average share price 0.30 0.271 0.161Share price at grant date 0.30 0.280 0.165Weighted average volatility 55% 55% 59%Expected weighted average option life 3 years 3.3 years 1.5 yearsSub-optimal exercise factor N/A N/A N/AExpected dividends 0% 0% 0%Risk-free interest rate (based on Malaysian government bonds) 3.5% 3.5% 3.5%

23. FINANCE COSTS


Unwinding discount on financial assets 13,222,796 13,412,807 12,753,852 10,871,804Term loans interest 2,255,135 2,404,851 2,255,135 2,394,073Other charges 12,329 27,426 11,875 10,023

15,490,260 15,845,084 15,020,862 13,275,900

24. TAX EXPENSES


Current tax: - current year - 4,261,000 - 4,250,000- (Over)/underprovision in prior years (169,056) 11,466 (206,526) - Deferred tax liabilities (Note 17): - transferred to deferred tax liabilities 261,000 331,000 261,000 331,000- Underprovision in prior year 431,000 - 431,000 -

522,944 4,603,466 485,474 4,581,000



24. TAX EXPENSES (contnued)

Malaysian income tax is calculated at the statutory tax rate of 25% (2014: 25%) of the estimated assessable profits for the financial year.

A reconciliation of income tax expense applicable to profit before tax at the statutory tax rate to income tax expense at the effective tax rate of the Group and of the Company are as follows:


Profit before taxation 38,381,590 53,507,315 36,362,449 7,606,668 Tax at statutory rate of 25% 9,595,398 13,376,829 9,090,612 1,901,667Expenses not deductible for tax purposes 21,320,702 7,108,258 7,530,972 6,671,149Income not subject to tax (16,360,678) (3,551,487) (16,360,584) (3,991,816)Changes in tax rate 115,341 - - -Utilisation of deferred tax assets not recognised in prior years (14,409,763) (12,341,600) - -Underprovision in prior years 261,944 11,466 224,474 -

Tax at effective tax rate 522,944 4,603,466 485,474 4,581,000

The unabsorbed tax losses of the Group and the Company amounting to RM17,012,000 (2014: RM71,483,000) and RM2,675,000 (2014: RM Nil) respectively can be carried forward to offset against future taxable profits.

However, the above amounts are subject to the approval of Inland Revenue Board of Malaysia.

25. NET PROFIT FOR THE FINANCIAL YEAR

Net profit for the financial year has been determined after charging/(crediting), amongst others, the following items:


Charging/(crediting):- Auditors’ remuneration - statutory auditors 73,000 76,000 50,000 50,000 - other external auditors 75,300 244,101 - - - other services 48,000 244,600 48,000 234,800 Amortisation of intangible assets 462,729 230,619 462,729 230,619 Amount due from subsidiary companies written off - - 7,435 26,563 Bad debts written off - 31,200 - - Depreciation 727,528 388,451 676,923 301,726



25. NET PROFIT FOR THE FINANCIAL YEAR (continued)

Net profit for the financial year has been determined after charging/(crediting), amongst others, the following items (continued):


Charging/(crediting) (continued): Gain from disposal of property, plant and equipment (374) (73,978) - -Loss/(gain) from disposal of a subsidiary company 242 - (1) -(Gain)/loss on foreign exchange: - realised 2,770,973 (2,424) (378) (2,424)- unrealised (21,424,482) (7,092,560) (19,270,161) (4,713,400)Impairment loss on amount due from subsidiary companies - - - 14,914 Impairment loss on amount due from subsidiary companies no longer required - - (50,594,364) -Interest income - deposit interest income (10,355) (287,210) (10,126) (287,210)- subsidiary company - - (842,034) -- unwinding discount on financial liabilities - (7,954,934) - (7,954,934)- reversal of unwinding discount on financial liabilities 7,954,934 - 7,954,934 -Property, plant and equipment written off 5,586 1,973 5,585 -Loss from subsidiary companies written off - 142,710 - -Other investments written off - 32 - -Rental income - (48,000) - -Rental of office equipment 2,376 594 2,376 594 Rental of premises 597,344 742,518 242,367 271,110 Reversal of provision for liquidated ascertained damages - (609,137) - -Waiver of debts - (135,858) - -

26. EARNINGS PER SHARE

Basic earnings per share

Basic earnings per ordinary share is calculated by dividing net profit for the financial year attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares in issue during the financial year.



26. EARNINGS PER SHARE (continued)

Basic earnings per share (continued)


Profit attributable to ordinary equity holders of the Company 37,827,815 48,903,849

Weighted average number of ordinary shares in issue (unit) 3,485,682,719 3,259,336,816

Basic earnings per share (sen) 1.09 1.50

Diluted earnings per share

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, i.e., share options granted to employees and warrants.


Weighted average number of ordinary shares in issue (unit) 3,485,682,719 3,259,336,816Effect of warrants and ESOS (unit) 4,734,594 261,034,189

Weighted average number of ordinary shares (diluted) (unit) 3,490,417,313 3,520,371,005

Diluted earnings per share (sen) 1.08 1.39

27. RELATED PARTY DISCLOSURES

(a) Related party transactions


Management service fee charged to a subsidiary company - - 989,977 2,164,743Interest charged to a subsidiary company - - 842,034 -



27. RELATED PARTY DISCLOSURES (continued)

(a) Related party transactions (continued)


Oil and gas income charged to companies in which a major shareholder of the Company has control 62,582,614 81,117,160 - 23,771,160Royalty expense charged by a company in which a major shareholder of the Company has control 1,326,466 548,340 1,326,466 548,340

Related party transactions have been entered into in the normal course of business under normal trade terms.

(b) Key management personnel compensation

The key management personnel compensation is as follows:


Other key management personnel: Short term employees benefits 3,748,225 4,859,709 1,960,030 2,729,537Post-employment benefits 54,214 113,049 27,107 27,546Share options granted under ESOS - 5,130,456 - 5,130,456

3,802,439 10,103,214 1,987,137 7,887,539

Other key management personnel comprise staff of the Group and of the Company having authority and responsibility for planning, directing and controlling the activities of the Group and of the Company, either directly or indirectly.

The details of the terms and conditions of amounts due from/to related parties are disclosed in Notes 9, 10, 11, 12 and 18 to the Financial Statements respectively.

28. CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS

Contingent liabilities


Unsecured:- Corporate guarantee granted to associate companies held for sale (former subsidiary companies) 266,197,000 271,120,931

* The Board of Directors are of the opinion that the likelihood of the crystalisation of the above obligations probably will not require any outflow of resources and thus no provision is required.



28. CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS (continued)

Capital commitments


Capital expenditure Authorised and contracted for: - Property, plant and equipment 395,778 266,559

29. OPERATING SEGMENT

Business segment

The Group is essentially engaged in the management and oversight of the oil production operations at the Rakushechnoye Oil and Gas Field in Kazakhstan and the provision of a gas development, implementation and production plan for the same field.

Due to the interrelated nature of oil and gas production, and similar operational characteristics of managing the same field, management believes that it is overseeing a single reportable segment.

Management monitors the operating results of its business units separately for the purpose of decision making on resource allocation and performance assessment. Segment performance is measured by aggregating the operating results of these business units.

Transfer prices between business units are on an arm’s length basis in a manner similar to transactions with third parties.

Geographical information

The Group’s revenue and non-current assets information based on geographical location are as follows:

Revenue Non-current assets 2015 2014 2015 2014 RM RM RM RM

Malaysia 58,798,500 49,659,650 4,334,374 4,739,740Kazakhstan 3,784,114 31,457,510 515,578,209 492,410,856

62,582,614 81,117,160 519,912,583 497,150,596



29. OPERATING SEGMENT (continued)

Information about major customers

The following are major customers with revenue more than 10% of the Group’s revenue:

Group Revenue 2015 2014 RM RM

COG 3,784,114 23,771,160MELL 58,798,500 57,346,000

62,582,614 81,117,160

30. MATERIAL LITIGATIONS

Save as disclosed below, the Group is not engaged in any litigations, claims or arbitration, either as plaintiff or defendant, which has or will have material effect on the financial position of the Group, and the Directors are not aware of any proceedings, pending or threatened, against the Company and/or any of the Company’s subsidiary companies or of any facts likely to give rise to any proceedings which might materially affect the position or business of the Group:

Sumatec Corporation Sdn. Bhd. (“SCSB”) vs Greentech Chemical Sdn. Bhd. (formerly known as Himpunan Sari Sdn. Bhd.) (“GCSB”)

SCSB had on 18 March 2014 presented a petition to wind-up GCSB for its failure to pay RM10,299,285.90 to SCSB as at 20 June 2012 pursuant to a turnkey engineering, procurement, construction and commissioning contract to build a biodiesel plant at the Telok Kalong Industrial Estate in Terengganu. The petition was heard on 17 June 2014 where the Court ordered GCSB to be wound up. SCSB’s solicitors will file in a proof of debt in due course.

31. FINANCIAL INSTRUMENTS

Financial risk management

The Group and the Company are exposed to financial risks arising from their operations and the use of financial instruments. Financial risk management policies are established to ensure that adequate resources are available for the development of the Group’s business whilst managing its financial risks. The Group operates within clearly defined policies and procedures that are approved by the Board of Directors to ensure the effectiveness of the risk management process.



31. FINANCIAL INSTRUMENTS (continued)

Financial risk management (continued)

The main areas of financial risks faced by the Group and the Company and the policies in respect of the major areas of treasury activity are set out as follows:

(a) Credit risk

Credit risk is the risk of a financial loss to the Group and the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. It is the Group’s and the Company’s policy to enter into financial instruments with a diverse number of creditworthy counterparties. The Group and the Company do not expect to incur material credit losses on its financial assets or other financial instruments.

The Group’s and the Company’s objective is to seek continual revenue growth while minimising losses incurred due to increased credit risk exposure. The Group and the Company provide services only to recognised and creditworthy third parties. It is the Group’s and the Company’s policy that all customers are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis to ensure that the Group’s and the Company’s exposure to bad debts is not significant.

The areas where the Group and the Company are exposed to credit risk are as follows:

Receivables

As at the end of the reporting date, the maximum exposure to credit risk arising from receivables is limited to the carrying amounts in the statements of financial position.

With a credit policy in place to ensure that credit risk is monitored on an ongoing basis, management has taken reasonable steps to ensure that receivables that are past due but not impaired are stated at their realisable values. The Group uses aging analysis to monitor the credit quality of the receivables. Any receivables having significant balances past due more than credit terms granted are deemed to have higher credit risk, and are monitored individually.

Group 2015 2014 RM % RM %

Trade receivables by country: Malaysia 54,897,976 64 52,431,000 65Kazakhstan 30,887,806 36 28,609,717 35

85,785,782 100 81,040,717 100

Company 2015 2014 RM % RM %

Trade receivable by country: Kazakhstan 24,856,364 100 23,196,745 100

The Group’s and the Company’s trade receivables have significant credit risk exposure to two (2014: two) and one (2014: one) major customers respectively.





(a) Credit risk (continued)

Receivables (continued)

The ageing analysis of trade receivables is as follows:

Individually Gross impaired Net RM RM RM

Group 2015 Not past due 79,224,556 - 79,224,556Past due 1 – 60 days - - -Past due 61 – 120 days - - -Past due 121 – 365 days 6,561,226 - 6,561,226Past due more than 1 year 70,490,836 (70,490,836) -

156,276,618 (70,490,836) 85,785,782

2014 Not past due 41,717,467 - 41,717,467Past due 1 – 60 days - - -Past due 61 – 120 days 13,107,750 - 13,107,750Past due 121 – 365 days 26,215,500 - 26,215,500Past due more than 1 year 70,490,836 (70,490,836) -

151,531,553 (70,490,836) 81,040,717

Company 2015 Not past due 24,856,364 - 24,856,364

2014 Not past due 23,196,745 - 23,196,745

None of the Group’s and the Company’s trade and other receivables that are neither past due nor impaired have been renegotiated during the financial year.

The Group’s trade receivables of RM6,561,226 (2014: RM39,323,250) were past due but not impaired. These customers have no recent history of default and the Directors expect they are recoverable.





(a) Credit risk (continued)

Intercompany balances

The maximum exposure to credit risk is presented by their carrying amounts in the statements of financial position.

The Company provides unsecured advances to associate companies and subsidiary companies and monitors the results of the associate companies and subsidiary companies regularly.

As at the end of the reporting year, there was no indication that the net carrying amounts of the amounts due from associate companies and subsidiary companies are not recoverable.

Cash and cash equivalents

The credit risk for cash and cash equivalents is considered negligible, since the counterparties are reputable banks with high quality external credit ratings.

Financial guarantees

The maximum exposure to credit risk amounted to RM266,197,000 (2014: RM271,120,931), which represented the outstanding balances in banking facilities of the associate companies as at the reporting date.

The Company provides unsecured financial guarantees to banks in respect of banking facilities granted to certain associate companies held for sale. The Company monitors on an ongoing basis the results of the associate companies and repayments made by such associate companies.

(b) Liquidity and cash flow risks

Liquidity and cash flow risks are the risks that the Group and the Company will not be able to meet its financial obligations as they fall due, due to shortage of funds.

In managing its exposures to liquidity and cash flow risks arising principally from its various payables, loans and borrowings, the Group and the Company maintain a level of cash and cash equivalents and bank facilities deemed adequate by the management to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities as and when they fall due.

The Group and the Company aim to maintain a balance of sufficient cash and deposits and flexibility in funding by keeping diverse sources of committed and uncommitted credit facilities from various banks.





(b) Liquidity and cash flow risks (continued)

The Group’s and the Company’s non-derivative financial liabilities which have contractual maturities are summarised below:

Maturity Carrying Contractual Less than 2 to 5 amount cash flows 1 year years RM RM RM RM

Group 2015 Secured: Borrowings 22,529,589 23,319,612 23,319,612 - Unsecured: Trade payables 210,237 210,237 210,237 -Other payables 20,518,976 20,518,976 20,518,976 -

43,258,802 44,048,825 44,048,825 -

2014 Secured: Borrowings 22,635,497 25,029,570 25,029,570 - Unsecured: Trade payables 194,558 194,558 194,558 -Other payables 47,174,075 55,129,009 9,293,439 45,835,570

70,004,130 80,353,137 34,517,567 45,835,570

Company 2015 Secured: Borrowings 22,529,589 23,319,612 23,319,612 - Unsecured: Other payables 18,757,220 18,757,220 18,757,220 -

41,286,809 42,076,832 42,076,832 -

2014 Secured: Borrowings 22,635,497 25,029,570 25,029,570 - Unsecured: Other payables 46,283,108 54,238,042 8,402,472 45,835,570

68,918,605 79,267,612 33,432,042 45,835,570





(c) Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

The Group and the Company are exposed to foreign currency risk on contract revenue and costs that are denominated in a currency other than the functional currency of the Group and of the Company.

The currency giving rise to this risk is primarily US Dollar (“USD”). The Group’s and the Company’s exposure to foreign currency risk, based on carrying amounts as at the end of the reporting year is as follows:


Denominated in USD Trade receivables 79,754,340 75,627,745 24,856,364 23,196,745Other receivables 57,940,631 45,717,851 57,940,631 45,717,851Amount due from a subsidiary company - - 12,650,061 8,875,020

Other payables (4,867,751) (3,483,261) (4,867,751) (3,483,261)

132,827,220 117,862,335 90,579,305 74,306,355

Foreign currency sensitivity analysis:

The following table demonstrates the sensitivity of the Group’s and the Company’s profit for the financial year to a reasonably possible change in the USD against the functional currency of the Group, with all other variables held constant:

Profit for the year Group Company 2015 2014 2015 2014 RM RM RM RM

USD/RM - Strengthened 1% 1,328,272 1,178,623 905,793 743,064

- Weakened 1% (1,328,272) (1,178,623) (905,793) (743,064)

Exposure to foreign exchange rates varied during the financial year depending on the volume of overseas transactions. Nonetheless, the analysis above is considered to be representative of the Group’s and the Company’s exposure to foreign currency risk.

(d) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of the Group’s and the Company’s financial instruments will fluctuate because of changes in market interest rates.

The Group’s and Company’s fixed rate borrowings are exposed to a risk of change in their fair value due to changes in interest rates.





(d) Interest rate risk (continued)

The interest rate profile of the Group’s and the Company’s significant interest-bearing financial instruments, based on carrying amounts as at the reporting date were as follows:


Fixed rate instruments Financial asset Amount due from a subsidiary company - - 12,650,061 6,710,277

Financial liabilities Borrowings 22,529,589 22,635,497 22,529,589 22,635,497

The Group and the Company do not account for any fixed rate financial assets and liabilities at fair value through profit or loss. Therefore, a change in interest rates at the end of the reporting date would not affect profit or loss.

Fair values of financial instruments

The carrying amounts of financial assets of the Group and the Company at the reporting date approximate their fair values except as set out below:

Group Carrying Fair amount value RM RM

2015 Financial asset Other investments - Unquoted shares 1 * 2014 Financial asset Other investments - Unquoted shares 1 *

The carrying amounts of financial assets of the Group and the Company at the reporting date approximate their fair values due to their short term nature or immaterial impact on discounting.

* It was not practicable to estimate the fair value of the Group’s investment in unquoted shares due to the lack of comparable quoted prices in active market. In addition, it is impracticable to use valuation technique to estimate the fair value reliably due to significant variability in the inputs of the valuation technique. The Group has no plans to dispose of its investment in unquoted shares in the near future.




Fair value hierarchy

No fair value hierarchy has been disclosed as the Group and the Company do not have financial instruments measured at fair value.

32. CAPITAL MANAGEMENT

The Group’s and the Company’s objective when managing capital is to maintain a strong capital base and safeguard the Group’s and the Company’s ability to continue as going concerns, so as to maintain investors, creditors and market confidence and to sustain future development of the business.

The Group and the Company set the amount of capital in proportion to its overall financing structure, i.e. equity and financial liabilities. The Group and the Company manage the capital structure and make adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group and the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debts.

Total capital managed by the Group and the Company is the shareholders’ funds shown in the statement of financial position.

There were no changes in the Group’s approach to capital management during the financial year.

33. SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR AND AFTER THE REPORTING DATE

(a) CLO Settlement Agreement

On 28 May 2013, the Company entered into a settlement agreement with Kerisma Berhad, CapOne Berhad, Prima Uno Berhad (collectively known as “CLO bondholders”), Malaysian Trustees Berhad (“Trustee”), Hoe Leong Corporation Ltd (“HLCL”), Setinggi Holdings Limited (“Setinggi”) and Semua International Sdn. Bhd. (“SISB”) in relation to the Global CLO Settlement (“CLO Settlement Agreement”).

Pursuant to the CLO Settlement Agreement, the outstanding principal amount of RM56.0 million of the debts owing to the CLO bondholders shall be repaid by the Company as follows:

(i) RM18.8 million from the disposal of 51% equity interest in SISB. The details are disclosed in Note 14 to the Financial Statements;

(ii) RM12.1 million as dividend payment, to the Trustee, pursuant to the Assignment of Dividends. The amount had been assigned to SISB and SISB has paid RM5.9 million in 2013; and

(iii) New shares valued at RM25.1 million under the Scheme of Arrangement with Creditors, whereby each share shall have a par value of RM0.14 and the issue price will be at RM0.175 per share, to the Trustee for the benefit of the CLO bondholders. The transaction had been completed in 2013.



33. SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR AND AFTER THE REPORTING DATE (continued)

(a) CLO Settlement Agreement (continued)

The CLO bondholders agreed to waive any outstanding principal amount above RM56.0 million.

In 2014, HLCL, Setinggi and SISB were unable to fulfill the settlement obligations. Subsequently, the Company entered into a principal agreement with another third party for the disposal of 49% equity interest in SISB.

In addition, the Company entered into another settlement agreement with CLO bondholders on 6 March 2015 (“Third Settlement Agreement”) to settle the total outstanding sum as follows:

(i) An upfront amount of RM2,451,608 (which is equivalent to 10% of the outstanding amount as at 15 August 2014) to be deposited with the Trustee by 15 January 2015;

(ii) Interest accruing on RM22,635,497 calculated at 6% per annum from 16 August 2014 until 31 December 2014, amounting to RM513,484, to be paid not later than 15 March 2015;

(iii) RM22,064,476 shall be paid by 30 April 2015; and

(iv) Interest accruing on RM22,635,497 calculated at 10% per annum, for the period commencing from 1 January 2015 until 30 April 2015 for the actual number of days elapsed between 1 January 2015 until the date of actual payment of the amount, shall be paid by 30 April 2015.

A total sum of RM3,965,093 was paid by the new buyer to the CLO bondholders during the financial year, in accordance with the terms of the Third Settlement Agreement.

On 3 March 2016, the CLO bondholders approved an extension up to 31 March 2016 by outlining these conditions:

(i) Partial payment of RM500,000 for outstanding interest, which was subsequently paid by the Company; and

(ii) Interest calculated at 10% per annum on RM22,529,589 continues to be chargeable from 31 December 2015 until the date of actual payment.

On 30 March 2016, the Company has submitted a request for extension to 30 June 2016 for settlement, of which is pending approval from the CLO bondholders as at the date of the Financial Statements.

(b) Proposals

The Company had on 11 July 2014 entered into a Framework Agreement with Abu Talib Bin Abdul Rahman and Dr Murat Safin (“Vendors”) for the purpose of pursuing the proposed acquisition of 100% of the issued and paid up capital in Borneo Energy Oil & Gas Ltd (“Borneo Energy”), comprising 100 ordinary shares of USD1.00 each from the Vendors. Borneo Energy holds 100% participating interest in Buzachi Neft LLP (“Buzachi Neft”).

On 8 September 2014, the Company executed the share purchase agreement (“SPA”) with the Vendors for a purchase price of USD350.0 million to be satisfied by a combination of cash and ordinary shares in the Company (“Sumatec Shares”) (“Proposed Acquisition”).

In accordance with the SPA, the Company had to pay USD30,000,000 as a deposit and partial payment towards the purchase price, subject to the Vendors providing a guarantee from a third party to refund the total amount of the deposit in the event of non-completion of the sale and purchase in accordance with the terms set out in the SPA. Subsequent to MELL agreeing to provide the guarantee, the Company paid the deposit.




(b) Proposals (continued)

In addition, under the terms of the SPA, the Company shall acquire Borneo Energy and Buzachi Neft free from all indebtedness and encumbrances (including but not limited to borrowings, trade payables and tax liabilities).

In conjunction with the Proposed Acquisition, the Board of the Company proposes to undertake the following:

(i) Proposed renounceable rights issue of up to 2,298,582,440 new ordinary shares (“Rights Shares”) together with up to 2,298,582,440 free detachable warrants (“Rights Warrants”) at an indicative issue price of RM0.40 per Rights Share on the basis of one (1) Rights Share for every two (2) shares held together with one (1) Rights Warrants for every one (1) Rights Shares subscribed (“Proposed Rights Issue with Warrants”);

(ii) Proposed increase in the authorised share capital of the Company from RM1,000,000,000 comprising 7,142,857,143 ordinary shares to RM2,000,000,000 comprising 14,285,714,286 ordinary shares (“Proposed IASC”); and

(iii) Proposed amendments to the Memorandum and/or Articles of Association of the Company to facilitate the Proposed IASC (“Proposed Amendments”).

The listing application for the Proposed Acquisition and Proposed Rights Issue with Warrants has been submitted to Bursa Malaysia Securities Berhad (“Bursa Securities”) on 17 October 2014. Subsequently on 9 January 2015, the Company entered into a supplemental agreement with the Vendors to reduce the purchase price for the Proposed Acquisition by USD60,000,000 to USD290,000,000 (“Supplemental SPA”), to be satisfied entirely via the followings:

(i) Deposit of USD30,000,000 (approximately RM96,510,000), which was paid upon signing of the SPA on 8 September 2014;

(ii) Balance of cash payment of USD180,000,000 (approximately RM630,000,000); and

(iii) The remaining USD80,000,000 (approximately RM280,000,000) to be satisfied via the issuance of 1,217,391,305 new Sumatec Shares to the Vendors at an issue price of RM0.23 per share (“Consideration Shares”).

The revised terms for the other proposals are as follows:

(i) The Proposed Rights Issue with Warrants will be a renounceable rights issue of up to 5,517,521,495 new Rights Shares together with up to 2,758,760,747 Rights Warrants at an indicative issue price of RM0.20 per Rights Share on the basis of six (6) Rights Share for every five (5) ordinary shares held together with one (1) Rights Warrant for every two (2) Rights Shares subscribed; and

(ii) The Proposed IASC from RM1,000,000,000 comprising 7,142,857,143 ordinary shares to RM5,000,000,000 comprising 35,714,285,714 ordinary shares.





On 23 February 2015, Bursa Securities had approved the following:

(i) Admission to the Official List of the Main Market of Bursa Securities and the listing and quotation for up to 2,758,760,747 Rights Warrants to be issued together with the Rights Shares pursuant to the Proposed Rights Issue with Warrants;

(ii) Listing of and quotation for:

- 1,217,391,305 Consideration Shares to be issued pursuant to the Proposed Acquisition;- Up to 5,517,521,495 new Rights Shares to be issued pursuant to the Proposed Rights Issue with

Warrants;- Up to 2,758,760,747 new Sumatec Shares to be issued pursuant to the full exercise of the Rights

Warrants;- Up to 1,379,173 additional Warrants A pursuant to the Rights Adjustments;- Up to 6,591,070 additional Warrants B pursuant to the Rights Adjustments; and- Up to 7,970,243 new Sumatec Shares to be issued pursuant to the full exercise of additional Warrants

A and additional Warrants B.

On 8 April 2015, the shareholders of the Company at the Company’s Extraordinary General Meeting approved the Proposed Acquisition, Proposed Rights Issues with Warrants, Proposed IASC and Proposed Amendments.

On 14 August 2015, the Company announced that Bursa Securities had approved for the extension of time of six months from 23 August 2015 to 22 February 2016 for the Company to complete the implementation of the above proposals.

On 25 August 2015, the Company announced that Bank Negara Malaysia has approved the following:

(i) Payment for the total amount of USD127.4 million to Dr Murat Safin for the Proposed Acquisition; and

(ii) Remittance of funds amounting to USD124.9 million to Buzachi Neft as foreign currency lending in stages within thirty six (36) months from the date of the Rights Shares.

On 2 February 2016, the Company entered into a third supplemental agreement with the Vendors (“Third Supplemental SPA”) for the following:

(i) Extension of the deadline to 22 August 2016 (“New Cut-Off Date”) for the fulfilment of the Conditions Precedent and the payment by the Company of the Balance Cash Payment (“Extension”);





(ii) The Vendors have agreed to re-allocate the Purchase Price between themselves as follows:

Balance Purchase Price (Cash Portion USD million) Number of Share ConsiderationName Allocation Balance Final Portion Share (USD Cash Balance (USD (USD1.00: million) Deposit Payment Payment million) RM3.50)

Abu Talib bin Abdul Rahman 140 30 - 75 35 532,608,696Dr. Murat Safin 150 - 105 - 45 684,782,609

Total 290 210 80 1,217,391,305

The total purchase price payable by the Company for the Proposed Acquisition of USD290.0 million (including the number of Consideration Shares to be issued at an issue price of RM0.23 per share) remains unchanged.

(iii) The payment by the Company for Abu Talib bin Abdul Rahman’s portion of the Balance Cash Payment shall be deferred (“Deferred Payment”) in the following manner:

- Deferred Payment schedule as per following;

Payment due date USD million

31.12.2016 5.031.12.2017 17.531.12.2018 17.531.12.2019 35.0

Total 75.0

- Interest calculated at 5% per annum on any amount outstanding on the respective Deferred Payment dates for the full or any part of the calendar year; and

- During the Deferred Payment period and for as long the Deferred Payment remains outstanding, Abu Talib bin Abdul Rahman shall have the right to request for reports on the operation and financial position of Buzachi Neft.

The Deferred Payment is expected to alleviate the upfront financial commitment for the Company, and provide additional financial flexibility as the Deferred Payment can be funded through Buzachi Neft’s internally generated funds post completion of the Proposed Acquisition.





(iv) The Company will undertake to acquire Borneo Energy and Buzachi Neft free from all liabilities and encumbrances (including but not limited to borrowings, trade payables and tax liabilities). In view of the Extension and Buzachi Neft’s obligations under the work programs under the Subsurface Use Rights, the Company has agreed that any debt assumed by Buzachi Neft for the aforesaid purpose obtained prior to the Cut-off Date and Completion Date shall be the responsibility of Buzachi Neft provided that such debts does not exceed USD5.0 million (“Work Program Debts”).

The other changes to the terms of the SPA resulting from the variations/ modifications described above are as follows:

(i) In view of the Deferred Payment, the Retention Sum will no longer be applicable. Instead, the Company shall be allowed to set-off, from the Deferred Payment, an amount of up to USD10,000,000 (“Adjustment”) for the purpose of satisfying any unresolved tax and tax liabilities with the tax authorities in Kazakhstan as may be deemed required by the Company, upon written notification to Abu Talib bin Abdul Rahman. The Company is able to set-off such claims from the Adjustment within a period of twelve (12) months from the Completion Date and an automatic extension of twelve (12) months thereafter (“Set-off Period”).

(ii) Consequential amendments to the Conditions Precedent and Conditions Subsequent after taking into account the variations/modifications described above, conditions that have already been satisfied and to clarify certain terms therein.

(iii) Consequential amendments to the mechanics of completion after taking into account the Deferred Payment and Work Program Debts.

(iv) The Company has completed its legal due diligence on Borneo Energy and Buzachi Neft, the minimum net book value of Buzachi Neft as at the Pre-Completion Audit is no longer applicable.

Save as disclosed above, there are no other variations to the salient terms of the Proposed Acquisition, Proposed Rights Issues with Warrants, Proposed Offer for Sale, Proposed IASC and Proposed Amendments (collectively, the “Proposals”).

On 4 February 2016, the Company announced that it has submitted to Bursa Securities an application for further extension of time of six months up to 22 August 2016 to complete the implementation of the Proposals.

As at the date of the Financial Statements, the request is pending approval from Bursa Securities.

(c) Proposed Private Placement

On 23 October 2015, the Company announced the proposed private placement of up to 348,269,000 new ordinary shares of RM0.14 each in the Company, representing ten percent (10%) of the total issued and paid-up share capital of the Company, to independent third party investor(s) to be identified. On 11 November 2015, the Company announced that approval from Bursa Malaysia Securities Berhad for the listing and quotation of these new shares has been obtained.

(d) New Financing Facility

On 31 March 2016, the Company accepted an overseas project financing facility totalling USD125.0 million granted by Export-Import Bank of Malaysia Berhad (“Facility”). The Facility is to finance the Company’s working capital, capital expenditure for the Rakushechnoye Oil and Gas Field, and acquisition of oil and gas assets.



DISCLOSURE OF REALISED AND UNREALISED ACCUMULATED LOSSES

With the purpose of improving transparency, Bursa Malaysia Securities Berhad had on 25 March 2010, and subsequently on 20 December 2010, issued directive which require all listed corporations to disclose the breakdown of unappropriated profits or accumulated losses into realised and unrealised on Group and Company basis in the annual audited financial statements.

The breakdown of accumulated losses as at the reporting date has been prepared by the Directors in accordance with the directive from Bursa Malaysia Securities Berhad stated above and the Guidance on Special Matter No. 1 –Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures pursuant to Bursa Malaysia Securities Berhad Listing Requirements as required by the Malaysian Institute of Accountants are as follows:


Total accumulated losses of the Group - Realised loss (223,130,411) (293,980,758)- Unrealised gain 20,401,482 6,761,560 (202,728,929) (287,219,198)Consolidation adjustments 36,351,179 80,854,706 (166,377,750) (206,364,492)

Company 2015 2014 RM RM

Total accumulated losses of the Company - Realised loss (230,562,769) (254,733,910)- Unrealised gain 18,247,161 4,382,400 (212,315,608) (250,351,510)

The disclosure of realised and unrealised above is solely for complying with the disclosure requirements stipulated in the directive of Bursa Malaysia Securities Berhad and should not be applied for any other purposes.


SHAREHOLDINGS ANALYSIS BY SIzE OF SHAREHOLDINGS

Authorised Capital : RM5,000,000,000.00Issued and fully paid-up capital : RM492,442,356.00Class of shares : Ordinary shares of RM0.14 eachVoting Rights : One vote per ordinary share

No. of % of No. of % ofSize of shareholdings shareholders shareholders shares shareholdings <100 173 0.67 4,808 0.00100 - 1,000 2,106 8.17 1,115,968 0.031,001 - 10,000 6,888 26.72 45,866,355 1.3110,001 - 100,000 12,680 49.20 549,563,923 15.62100,001 - < 5% issued shares 3,929 15.24 2,519,454,346 71.635% and above of issued shares 1 0.00 401,440,000 11.41

25,777 100.00 3,517,445,400 100.00

Substantial Shareholders

No. of shares held Direct DeemedName Interest % Interest % Halim Bin Saad 807,040,000 22.94 46,000,000* 1.31

* Deemed interest by virtue of his substantial shareholding in Markmore Sdn Bhd

Directors’ Shareholdings

No. of shares held Direct DeemedName Interest % Interest % Tan Sri Abu Talib Bin Othman - - - -Datuk Mohd Nasir Bin Ahmad - - - -Datuk Che Mokhtar Bin Che Ali - - - -Michael Lim Hee Kiang - - - -Mohamad Bin Ismail - - - -Wan Kamaruddin Bin Dato’ Biji Sura @ Wan Abdullah - - - -Chan Yok Peng - - 72,483,179* 2.06Dato’ Ahmad Johari Bin Tun Abdul Razak 39,174,900 1.11 - -

* Deemed interest by virtue of his substantial shareholding in Tekad Mulia Sdn Bhd

ANALYSIS OF SHAREHOLDINGSAS AT 18 MARCH 2016


ANALYSIS OF SHAREHOLDINGSAS AT 18 MARCH 2016

CONT’D

Directors’ Options Under Employee Share Option Scheme

Number Number of options of optionsName offered exercised Option price Tan Sri Abu Talib Bin Othman - - -Datuk Mohd Nasir Bin Ahmad - - -Datuk Che Mokhtar Bin Che Ali - - -Michael Lim Hee Kiang - - -Mohamad Bin Ismail - - -Wan Kamaruddin Bin Dato’ Biji Sura @ Wan Abdullah - - -Chan Yok Peng - - -Dato’ Ahmad Johari Bin Tun Abdul Razak - - -

30 Largest Shareholders as at 18 March 2016

No. Shareholders Shareholdings % 1. MIDF AMANAH INVESTMENT NOMINEES (TEMPATAN) SDN BHD 401,440,000 11.41 - AMANAH INTERNATIONAL FINANCE SDN BHD FOR HALIM BIN SAAD

2. MAYBANK NOMINEES (TEMPATAN) SDN BHD 106,900,000 3.04 - PLEDGED SECURITIES ACCOUNT FOR HALIM BIN SAAD

3. HALIM BIN SAAD 79,195,000 2.25

4. M & A NOMINEE (TEMPATAN) SDN BHD 77,731,000 2.21 - GENTING UTAMA SDN BHD FOR HALIM BIN SAAD

5. MAYBANK SECURITIES NOMINEES (TEMPATAN) SDN BHD 63,950,000 1.82 - PLEDGED SECURITIES ACCOUNT FOR HALIM BIN SAAD

6. MAYBANK NOMINEES (TEMPATAN) SDN BHD 55,540,000 1.58 - PLEDGED SECURITIES ACCOUNT FOR HALIM BIN SAAD

7. MAYBANK NOMINEES (TEMPATAN) SDN BHD 46,000,000 1.31 - PLEDGED SECURITIES ACCOUNT FOR MARKMORE SDN BHD

8. M & A NOMINEE (TEMPATAN) SDN BHD 42,000,000 1.19 - PLEDGED SECURITIES ACCOUNT FOR TEKAD MULIA SDN BHD

9. CIMSEC NOMINEES (TEMPATAN) SDN BHD 39,174,900 1.11 - CIMB BANK FOR AHMAD JOHARI BIN TUN ABDUL RAZAK

10. SITI HANIFAH BINTI S. ABDULLAH 37,600,000 1.07

11. MAYBANK NOMINEES (TEMPATAN) SDN BHD 29,672,085 0.84 - PLEDGED SECURITIES ACCOUNT FOR TEKAD MULIA SDN BHD


30 Largest Shareholders as at 18 March 2016 cont’d

No. Shareholders Shareholdings % 12. MAYBANK NOMINEES (TEMPATAN) SDN BHD 21,000,000 0.60 - PLEDGED SECURITIES ACCOUNT FOR INTER MERGER SDN BHD

13. M & A NOMINEE (TEMPATAN) SDN BHD 19,000,000 0.54 - INSAS CREDIT & LEASING SDN BHD FOR HALIM BIN SAAD

14. ABD RAHMAN BIN SOLTAN 16,449,900 0.47

15. BLUE OCEAN INTERGRATED SDN BHD 16,056,000 0.46

16. CIMSEC NOMINEES (TEMPATAN) SDN BHD 13,000,000 0.37 - CIMB FOR VERTICAL SOURCE SDN BHD

17. PELABURAN MARA BERHAD 13,000,000 0.37

18. TAN SOK GEK 12,165,000 0.35

19. PM NOMINEES (TEMPATAN) SDN BHD 11,500,000 0.33 - PLEDGED SECURITIES ACCOUNT FOR AZMAN BIN ISMAIL

20. RHB NOMINEES (TEMPATAN) SDN BHD 10,950,000 0.31 - PLEDGED SECURITIES ACCOUNT FOR GOUK SIEW MEE 21. KENANGA NOMINEES (TEMPATAN) SDN BHD 10,690,900 0.30 - PLEDGED SECURITIES ACCOUNT FOR LOH KIM KIONG

22. LEE CHONG LOO 10,000,000 0.28

23. ABDUL RASHID BIN ABDUL MANAF 10,000,000 0.28

24. MAYBANK SECURITIES NOMINEES (TEMPATAN) SDN BHD 10,000,000 0.28 - PLEDGED SECURITIES ACCOUNT FOR KRIZIK (MALAYSIA) SDN BHD

25. AMSEC NOMINEES (TEMPATAN) SDN BHD 10,000,000 0.28 - PLEDGED SECURITIES ACCOUNT FOR MORNING PARADISE SDN BHD

26. TENGKU AB MALEK BIN TENGKU MOHAMED 9,800,000 0.28

27. CIMSEC NOMINEES (TEMPATAN) SDN BHD 9,322,000 0.27 - PLEDGED SECURITIES ACCOUNT FOR CHAN FOONG CHENG

28. UOB KAY HIAN NOMINEES (ASING) SDN BHD 8,800,200 0.25 - EXEMPT AN FOR UOB KAY HIAN PTE LTD

29. BLUE OCEAN PREMIER SDN BHD 8,180,000 0.23

30. MAYBANK SECURITIES NOMINEES (TEMPATAN) SDN BHD 7,990,900 0.23 - PLEDGED SECURITIES ACCOUNT FOR ZULKIFLI BIN ISMAIL TOTAL 1,207,107,885 34.31

ANALYSIS OF SHAREHOLDINGSAS AT 18 MARCH 2016CONT’D


Shareholdings Analysis by Size of Warrant 2011/2021 (“Warrants A”) Holdings as at 18 March 2016

No. Warrants in Issue : 118,753,197Exercise Price of Warrants : RM0.32Expiry Date of Warrants : 03/03/2021No. of Warrant Holders : 2,810

No. of % of No. of % of Warrant Warrant Warrant WarrantSize of shareholdings Holders Holders Holdings Holdings <100 Warrant 444 15.80 21,866 0.02100 - 1,000 Warrant 256 9.11 128,834 0.111,001 – 10,000 Warrant 825 29.36 3,995,877 3.3610,001 – 100,000 Warrant 1,065 37.90 44,406,459 37.40100,001 - < 5% issued Warrant 220 7.83 70,200,161 59.11

2,810 100.00 118,753,197 100.00

Directors’ Warrant 2011/2021 Holdings

No. of shares held Direct DeemedName Interest % Interest % Tan Sri Abu Talib Bin Othman - - - -Datuk Mohd Nasir Bin Ahmad - - - -Datuk Che Mokhtar Bin Che Ali - - - -Michael Lim Hee Kiang - - - -Mohamad Bin Ismail - - - -Wan Kamaruddin Bin Dato’ Biji Sura @ Wan Abdullah - - - -Chan Yok Peng - - 59* ~Dato’ Ahmad Johari Bin Tun Abdul Razak - - - -

* Deemed interest by virtue of his substantial shareholding in Tekad Mulia Sdn Bhd~ Negligible

ANALYSIS OF WARRANT HOLDINGSAS AT 18 MARCH 2016


30 Largest Warrant 2011/2021 (“Warrants A”) Holders as at 18 March 2016

No. Warrannt holders Warrant holdings % 1. YEO CHIN KIANG 2,670,200 2.25

2. SOO YOKE MUN 2,600,000 2.19

3. TAN BOON HAR 2,219,131 1.87

4. TAN SOH GEK 1,730,440 1.46

5. WONG MEI LAN 1,500,000 1.26

6. LEE CHEE SENG 1,500,000 1.26

7. AHMAD SUHAIMEE BIN MOHAMMED YASSIN 1,449,300 1.22

8. HO LI HUA 1,261,800 1.06

9. CHOO BEE POH 1,200,000 1.01

10. MAYBANK NOMINEES (TEMPATAN) SDN BHD 1,100,000 0.93 - SHAN KAMAHL BIN MOHAMMAD

11. S CHANDRA BOSE 1,032,400 0.87

12. SIEW YAU WAI @ SIEW AH WHY 1,023,857 0.86

13. LOK WEI SEONG 1,000,000 0.84

14. RAMLEE BIN MD TAMIN 1,000,000 0.84

15. AFFIN HWANG NOMINEES (ASING) SDN BHD 994,500 0.84 - PLEDGED SECURITIES ACCOUNT FOR MOHAMED YAZID MERZOUK

16. SIAH BOON PAH 806,200 0.68

17. HISHAM BIN HUSSEIN 796,500 0.67

18. TEH KAI SING 692,500 0.58

19. GURMIT SINGH A/L SHAMIR SINGH 681,800 0.57

20. ABD HALIM BIN AHMAD 669,700 0.56

21. LEE TIANG HENG 650,000 0.55

ANALYSIS OF WARRANT HOLDINGSAS AT 18 MARCH 2016CONT’D


30 Largest Warrant 2011/2021 (“Warrants A”) Holders as at 18 March 2016 cont’d

No. Warrannt holders Warrant holdings % 22. TAN CHAI HONG 650,000 0.55

23. CITIGROUP NOMINEES (TEMPATAN) SDN BHD 640,000 0.54 - PLEDGED SECURITIES ACCOUNT FOR KHOR THING THIAM

24. YAP MUN HUAT 600,000 0.51

25. LAW CHUAN SZE 570,000 0.48

26. LIM KAN YEN 564,332 0.47

27. KWEK SIEW WAH 560,000 0.47

28. TAILAMI A/P PALANIANDY 554,000 0.47

29. OOI CHEE KEONG 540,000 0.45

30. AZLAN BIN YAHYA 500,000 0.42

TOTAL 31,756,660 26.74


CONT’D


Shareholdings Analysis by Size of Warrant 2013/2018 (“Warrants B”) Holdings as at 18 March 2016

No. Warrants in Issue : 567,521,683Exercise Price of Warrants : RM0.175Expiry Date of Warrants : 13/11/2018No. of Warrant Holders : 5,034

No. of % of No. of % of Warrant Warrant Warrant WarrantSize of shareholdings Holders Holders Holdings Holdings <100 Warrants 290 5.76 12,971 0.00100 - 1,000 Warrants 310 6.16 135,542 0.021,001 – 10,000 Warrants 1144 22.72 6,507,020 1.1510,001 – 100,000 Warrants 2305 45.79 103,300,558 18.20100,001 - < 5% issued Warrant 985 19.57 457,565,592 80.63

5,034 100.00 567,521,683 100.00

Directors’ Warrant 2013/2018 Holdings

No. of shares held Direct DeemedName Interest % Interest % Tan Sri Abu Talib Bin Othman - - - -Datuk Mohd Nasir Bin Ahmad - - - -Datuk Che Mokhtar Bin Che Ali - - - -Michael Lim Hee Kiang - - - -Mohamad Bin Ismail - - - -Wan Kamaruddin Bin Dato’ Biji Sura @ Wan Abdullah - - - -Chan Yok Peng - - 8,500,000* 1.50Dato’ Ahmad Johari Bin Tun Abdul Razak - - - -

* Deemed interest by virtue of his substantial shareholdings in Tekad Mulia Sdn Bhd



30 Largest Warrant 2013/2018 (“Warrants B”) Holders as at 18 March 2016

No. Warrannt holders Warrant holdings % 1. BLUE OCEAN INTERGRATED SDN BHD 15,514,000 2.73

2. LEE KOK CHUAN 13,799,000 2.43

3. MAYBANK NOMINEES (TEMPATAN) SDN BHD 8,500,000 1.50 - PLEDGED SECURITIES ACCOUNT FOR TEKAD MULIA SDN BHD

4. LOONG DING TONG 7,100,000 1.25

5. PAUZIAH BINTI MOHAMAD 7,040,300 1.24

6. RAMLEE BIN MD TAMIN 6,900,000 1.22

7. LANTAS MODAL SDN BHD 4,991,400 0.88

8. CHU CHEE KEONG 4,600,000 0.81

9. AFFIN HWANG NOMINEES (ASING) SDN BHD 4,140,000 0.73 - PLEDGED SECURITIES ACCOUNT FOR MOHAMED YAZID MERZOUK

10. WANG SUI SANG 4,000,000 0.70

11. BLUE OCEAN PREMIER SDN BHD 3,687,250 0.65

12. LEE MEE KUEN 3,500,000 0.62

13. HALIM BIN SAAD 3,033,900 0.53

14. KHOO ENG YEOW 3,000,000 0.53

15. CIMSEC NOMINEES (TEMPATAN) SDN BHD 3,000,000 0.53 - PLEDGED SECURITIES ACCOUNT FOR TEH TENG CHENG

16. RHB CAPITAL NOMINEES (TEMPATAN) SDN BHD 2,900,000 0.51 - PLEDGED SECURITIES ACCOUNT FOR TEO CHON SIN

17. ANNE LOKE 2,745,100 0.48

18. RHB CAPITAL NOMINEES (TEMPATAN) SDN BHD 2,400,000 0.42 - PLEDGED SECURITIES ACCOUNT FOR CHEN THAU MIN

19. BEH SIEW KHENG 2,400,000 0.42

20. AFFIN HWANG NOMINEES (TEMPATAN) SDN BHD 2,400,000 0.42 - PLEDGED SECURITIES ACCOUNT FOR LAU CHEE SING

21. SJ SEC NOMINEES (TEMPATAN) SDN BHD 2,400,000 0.42 - PLEDGED SECURITIES ACCOUNT FOR LEAN CHENG LIUNG


CONT’D


30 Largest Warrant 2013/2018 (“Warrants B”) Holders as at 18 March 2016 cont’d

No. Warrannt holders Warrant holdings % 22. LINK CHEONG WAH 2,200,000 0.39

23. TAM SU LEE 2,170,500 0.38

24. LAW CHUAN SZE 2,131,300 0.38

25. MAYBANK NOMINEES (TEMPATAN) SDN BHD 2,000,000 0.35 - PLEDGED SECURITIES ACCOUNT FOR KEK LIAN LYE

26. LYE WEE KEN 2,000,000 0.35

27. CHONG WENG SHIN 2,000,000 0.35

28. MAYBANK NOMINEES (TEMPATAN) SDN BHD 2,000,000 0.35 - SHAN KAMAHL BIN MOHAMMAD

29. KENANGA NOMINEES (TEMPATAN) SDN BHD 1,967,650 0.35 - PLEDGED SECURITIES ACCOUNT FOR LOH KIM KIONG

30. TEE KAI SHIANG 1,833,000 0.32

TOTAL 126,353,400 22.26



NET BOOK VALUE @ 31 APPROXIMATE DECEMBER DATE DESCRIPTION LAND AGE OF 2015 OF LAST LOCATION (EXISTING USE) TENURE AREA BUILDING RM’000 VALUATION Registered owner: SUMATEC CORPORATION SDN. BHD. 1 Parcel No. 2 units of Leasehold Parcel No. 16 years 168 28.12.2002 A4/2-47 & A4/2-48 C apartment 99 years AA/2-47 2nd Floor, Block A4 (unoccupied) (strata title (82.43 sq Lot No. PT 9332 not issued) meters) Title No. HS (D) 41817 Mukim and District of Klang Parcel No. Selangor A4/2-48 C (86.17 sq meters) 2 Lot 10751 Industrial land Leasehold 10,840 N/A 408 3.10.2013 Kawasan Perindustrian 60 years sq meters Bukit Tengah expiring on Mukim Kertih 19.08.2069 Kemaman, Terengganu

3 Lot 10752 Industrial land Leasehold 6,810 N/A 254 3.10.2013 Kawasan Perindustrian 60 years sq meters Bukit Tengah expiring on Mukim Kertih 19.08.2069 Kemaman, Terengganu

LIST OF PROPERTIESAS AT 31 DECEMBER 2015


NOTICE IS HEREBY GIVEN THAT the Nineteenth Annual General Meeting (“19th AGM”) of the Company will be held at Concorde 1, Level 2, Concorde Hotel Shah Alam, 3, Jalan Tengku Ampuan Zabedah, 40100 Shah Alam, Selangor on Thursday, 2 June 2016 at 11.00 a.m. for the following purposes:-

AGENDA

NOTICE OF ANNUAL GENERAL MEETING

AS ORDINARY BUSINESS

1. To receive the Audited Financial Statements of the Company for the financial year ended 31 December 2015 together with the Reports of the Directors and Auditors thereon.

2. To re-elect the Director, Mr Michael Lim Hee Kiang retiring in accordance with Article 87.1 of the Company’s Articles of Association, and being eligible, offered himself for re-election.

3. To re-appoint Messrs SJ Grant Thornton as Auditors of the Company and to authorise the Board of Directors to fix their remuneration.

AS SPECIAL BUSINESS

To consider and, if thought fit, pass the following resolutions, with or without modifications:-

4. Authority to Issue Shares by the Company pursuant to Section 132D of the Companies Act, 1965

“THAT pursuant to Section 132D of the Companies Act, 1965 and subject to the approvals from the relevant governmental and/or regulatory authorities, the Directors 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 in their absolute discretion deem fit, provided that the aggregate number of shares issued pursuant to this resolution does not exceed ten (10) per cent of the issued share capital of the Company thereat AND THAT the Directors be and are hereby empowered to obtain the approval from Bursa Malaysia Securities Berhad for the listing and quotation of the additional shares so issued AND THAT such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company.”

5. Proposed Renewal of Existing Shareholders’ Mandate for Recurrent Related Party Transaction(s) of a Revenue or Trading Nature (“Proposed Renewal of Shareholders’ Mandate”)

“THAT, subject to the provisions of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, approval be given to the Company and/or its subsidiary companies to enter into recurrent related party transactions of a revenue or trading nature (“Recurrent Related Party Transactions”) as set out in Section 2.3 the Circular to Shareholders dated 28 April 2016, subject to the following:-

(a) The Recurrent Related Party Transactions are undertaken in the ordinary course of

business which are necessary for the day-to-day operations on arm’s length basis, on normal commercial terms which are not more favourable to the related party than those generally available to the public and are not detrimental to the minority shareholders of the Company; and

(b) Disclosure is made in the annual report of the breakdown of the aggregate value of transactions conducted during the financial year.

Please refer to Note A

Ordinary Resolution 1





That such approval shall continue in force until:-

(a) The conclusion of the next Annual General Meeting (“AGM”) of the Company in 2017 following this AGM at which the Proposed Shareholders’ Mandate is passed, at which time it will lapse unless the authority is renewed by a resolution passed at the next AGM of the Company in 2017;

(b) The expiration of the period within which the next AGM of the Company in 2017 is

required to be held pursuant to Section 143(1) of the Companies Act, 1965 (“Act”) (but shall not extend to such extension as may be allowed pursuant to Section 143 (2) of the Act; or

(c) It is revoked or varied by resolution passed by shareholders of the Company in a general meeting.

whichever is the earliest; AND THAT the Directors of the Company be authorised to complete and do all such acts

and things (including executing all such documents as may be required) as they may consider expedient or necessary to give effect to the Proposed Renewal of Shareholders’ Mandate”.

6. To transact any other business of which due notice shall have been given in accordance with the Companies Act, 1965.

By Order of the BoardLIM SECK WAH (MAICSA NO. 0799845)M. CHANDRANSEGARAN A/L S. MURUGASU (MAICSA NO.0781031)Company Secretaries

Dated: 28 April 2016Kuala Lumpur

NOTICE OF ANNUAL GENERAL MEETINGCONT’D


Notes:-

A. This Agenda item is meant for discussion only as the provision of Section 169(1) of the Companies Act, 1965 do not require a formal approval of the shareholders and hence, is not put forward for voting.

B. Tan Sri Abu Talib Bin Othman who is due for retirement pursuant to Section 129(6) of the Companies Act, 1965 at this 19th AGM of the

Company and being eligible for re-appointment, does not wish to seek for re-appointment as Director of the Company. C. Datuk Mohd Nasir Bin Ahmad who is due for retirement in accordance with Article 87.1 of the Company’s Articles of Association at this

19th AGM of the Company and being eligible for re-election, does not wish to seek for re-election as Director of the Company. 1. Depositors whose names appear in the Record of Depositors as at 27 May 2016 shall be regarded as members of the Company entitled

to attend, speak and vote at this AGM.

2. A member entitled to attend and vote at the meeting is entitled to appoint one or more proxies. A proxy may but need not be a member of the Company and the provisions of Section 149(1)(a) and (b) of the Companies Act, 1965 shall not apply to the Company. Where a member appoints two (2) or more proxies to attend and vote at the meeting, the appointment shall be invalid unless he specifies the proportion of his shareholdings to be represented by each proxy.

3. Where a member of the Company is an authorised nominee as defined under the Securities Industry (Central Depositories) Act, 1991 (“SICDA”), it may appoint at least one (1) proxy but not more than two (2) proxies in respect of each securities account it holds which is credited with ordinary shares of the Company. The appointment of two (2) proxies in respect of any particular securities account shall be invalid unless the authorised nominee specifies the proportion of its shareholding to be represented by each proxy.

4. Where a member of the Company is an exempt authorised nominee (“EAN”) as defined under the SICDA which holds ordinary shares in the Company for multiple beneficial owners in one securities account (“omnibus account”), there is no limit to the number of proxies which EAN may appoint in respect of each omnibus account it holds. EAN is advised to list down the names of proxies and the particulars of their NRIC (both new and old) and attach it to the Form of Proxy.

5. The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorised in writing or if the appointer is a corporation, either under its common seal or under the hand of an attorney duly authorised.

6. The instrument appointing a proxy and the power of attorney or other attorney (if any), under which it is signed or notarially certified copy thereof, shall be deposited at the Registered Office of the Company at Level 15-2, Bangunan Faber Imperial Court, Jalan Sultan Ismail, 50250 Kuala Lumpur not less than forty-eight (48) hours before the time set for holding the Meeting or any adjournment thereof.

7. Explanatory Notes To Special Business 7.1 Ordinary Resolution 3 (Agenda 4)

The proposed Resolution 3 is to seek a renewal of mandate given by the shareholders. The resolution if duly passed, is primarily to give authority to the Board of Directors to issue and allot shares at any time in their absolute discretion and for such purposes as they consider would be in the interest of the Company without convening a general meeting. This authority, unless revoked or varied at a general meeting, will expire at the conclusion of the next AGM of the Company.

The Company continues to consider opportunities to broaden its earnings potential. If any of the expansion/ diversification

proposals involves the issue of new shares, the Directors, under certain circumstance when the opportunity arises, would have to convene a general meeting to approve the issue of new shares even though the number involved may be less than 10% of the issued capital.

In order to avoid any delay and costs involved in convening a general meeting to approve such issue of shares, it is thus

considered appropriate that the Directors be empowered to issue shares in the Company, up to any amount not exceeding in total 10% of the issued share capital of the Company for the time being, for such purposes. The renewed authority for allotment of shares will provide flexibility to the Company for the allotment of shares for the purpose of funding future investment, working capital and/ or acquisitions.

On 12 April 2016, the Adviser, M&A Securities Sdn Bhd had announced the price fixing of Private Placement of up to 348,269,000

New Ordinary Shares of RM0.14 in the Company, representing approximately 10% of the total issued and paid-up share capital of the Company to independent 3rd party investor(s) to be identified. Pursuant thereto, the Company had fixed the issue price of RM0.14 per Placement Share.

As at 20 April 2016, no shares have been issued and allotted by the Company since obtaining the said authority from its shareholders at the last Annual General Meeting held on 11 June 2015.

7.2 Ordinary Resolution 4 (Agenda 5)

Details of the Recurrent Related Party Transactions under the Proposed Renewal of Shareholders’ Mandate and Proposed New Shareholders’ Mandate are set out in the Circular to Shareholders dated 28 April 2016.

NOTICE OF ANNUAL GENERAL MEETINGCONT’D

SUMATEC RESOURCES BERHAD(Company No: 428355-D)(Incorporated in Malaysia)

PROXY FORM(Before completing this form please refer to the notes below)

I/We I/C No./Co. No./CDS A/C No. (Full name in block letters)

of (Full address)

being a member/members of SUMATEC RESOURCES BERHAD hereby appoint the following person(s):-

1.

2.

FIRST PROXY SECOND PROXYFOR AGAINST FOR AGAINST

ORDINARY BUSINESSORDINARY RESOLUTION

2.

1.

Dated this day of 2016 Signature/Common Seal

No. of ordinary shares held

or failing him/her, the Chairman of the Meeting as my/our proxy to vote for me/us on my/our behalf at the Nineteenth Annual General Meeting of the Company to be held at Concorde 1, Level 2, Concorde Hotel Shah Alam, 3, Jalan Tengku Ampuan Zabedah, 40100 Shah Alam, Selangor on Thursday, 2 June 2016 at 11.00 a.m. My/our proxy/proxies is to vote as indicated below:-

(Please indicate with a “√” or “X” in the space provided how you wish your vote to be cast. If no instruction as to voting is given, the proxy will vote or abstain from voting at his/her discretion. The first named proxy shall be entitled to vote on a show of hands).

To re-elect Mr Michael Lim Hee Kiang who is retiring pursuant to Article 87.1

3. Authority to Issue Shares by the Company pursuant to Section 132D of the Companies Act, 1965

To re-appoint Messrs SJ Grant Thornton as Auditors of the Compa-ny and to authorise the Board of Directors to fix their remuneration

Name of proxy, NRIC No. & Address No. of shares or % of shares to berepresented by proxy

4. Proposed Renewal of Existing Shareholders’ Mandate for Recurrent Related Party Transaction(s) of a Revenue or Trading Nature

ORDINARY BUSINESSORDINARY RESOLUTION

Notes :-

1. Depositors whose names appear in the Record of Depositors as at 27 May 2016 shall be regarded as members of the Company entitled to attend, speak and vote at this AGM.

2. A member entitled to attend and vote at the meeting is entitled to appoint one or more proxies. A proxy may but need not a member of the

Company and the provisions of Section 149(1)(a) and (b) of the Companies Act, 1965 shall not apply to the Company. Where a member appoints two (2) or more proxies to attend and vote at the meeting, the appointment shall be invalid unless he specifies the proportion of his shareholdings to be represented by each proxy.

3. Where a member of the Company is an authorised nominee as defined under the Securities Industry (Central Depositories) Act,

1991(“SICDA”), it may appoint at least one (1) proxy but not more than two (2) proxies in respect of each securities account it holds which is credited with ordinary shares of the Company. The appointment of two (2) proxies in respect of any particular securities account shall be invalid unless the authorised nominee specifies the proportion of its shareholding to be represented by each proxy.

4. Where a member of the Company is an exempt authorised nominee (“EAN”) as defined under the SICDA which holds ordinary shares

in the Company for multiple beneficial owners in one securities account (“omnibus account”), there is no limit to the number of proxies which EAN may appoint in respect of each omnibus account it holds. EAN is advised to list down the names of proxies and the particulars of their NRIC (both new and old) and attach it to this Form of Proxy.

5. The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorised in writing or if the

appointer is a corporation, either under its common seal or under the hand of an attorney duly authorised. 6. The instrument appointing the proxy and the power of attorney or other authority (if any) under which it is signed or notarially certified

copy thereof, shall be deposited at the Registered Office of the Company at Level 15-2, Bangunan Faber Imperial Court, Jalan Sultan Ismail, 50250 Kuala Lumpur not less than forty-eight (48) hours before the time set for holding the meeting or any adjournment thereof.

Please Fold Here

Please Fold Here

AFFIXSTAMP

The Company SecretariesSUMATEC RESOURCES BERHAD (428355-D)Level 15-2, Bangunan Faber Imperial CourtJalan Sultan Ismail50250 Kuala LumpurKuala Lumpur

www.sumatec.com


Level 15-2, Bangunan Faber Imperial CourtJalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia

Tel : 603-2692 4271Fax : 603-2732 5388

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ANNUAL REPORT 2015


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