IBEX PICTURES ENTERTAINMENT SDN BHD CONNECT ......[200301016513 (618933-D)] CONNECT SECURITY...

[200301016513 (618933-D)]CONNECT SECURITY SOLUTION SDN BHDIBEX PICTURES ENTERTAINMENT SDN BHD

RAPID CONN (SHENZHEN) CO LTD

RAPID CONN INC

RAPID CONN (S) PTE LTD

Level 16, BO1-A, Menara 2,No. 3, Jalan Bangsar, KL Eco City,59200 Kuala Lumpur, Malaysia.Tel: +6 03 2202 3399 Ext: 1613Fax: +6 03 2202 2244

No. 12, Long Shan Road, 6th Lane, Luo Tian Social DistrictYan Luo Street, Bao An DistrictShenzhen City 518105, ChinaTel: +86 755 2972 6660Fax: +86 755 2972 6744

SHENZHEN RAPID POWER CO LTD2-4 Floor, B Building, Tongfuhanhaida Creative Zone10th, Jiangfu Road, XinZhuang Area, MaTian TownGuangMing district, Shenzhen City, ChinaTel: +86 755 3321 0968Fax: +86 755 3321 0969

Tel: +1 949 951 1020 Fax: +1 949 951 8265

4012 Ang Mo Kio Ave 10 #03-07Tech Place 1 Singapore 569628Tel: +65 6841 4517 Fax: +65 6841 4519

[200301016513 (618933-D)]

W W W. C O N N E C T C O U N T Y. C O M

Level 16, BO1-A, Menara 2,No. 3, Jalan Bangsar, KL Eco City,

59200 Kuala Lumpur, Malaysia.Tel: +6 03 2202 3399 Ext: 1613

Fax: +6 03 2202 2244

CO

NNECTC

OUNTY HO

LDINGS BERHAD

[200301016513 (618933-D)]

ANNUAL REPO

RT 2019

ANNUAL REPORT

2019

25172 Arctic Ocean Dr, Suite 106,Lake Forest, CA 92630, USA

Corporate InformationCorporate Profile and StructureChairman’s StatementBoard of Directors’ ProfilesKey Senior Management’s (Corporate) ProfilesStatement on Management Discussion and AnalysisCorporate Governance Overview StatementSustainability StatementAudit Committee ReportStatement on Risk Management and Internal ControlAdditional Compliance InformationStatement of Directors’ Responsibility for Preparing the Financial StatementsDirectors’ ReportStatement by DirectorsStatutory DeclarationIndependent Auditors’ Report to the MembersStatements of Comprehensive IncomeStatements of Financial PositionConsolidated Statement of Changes in EquityCompany Statement of Changes in EquityStatements of Cash FlowsNotes to the Financial StatementsStatistics of ShareholdingsStatistics of WarrantholdingsNotice of Annual General MeetingAdministrative Guide for Annual General MeetingProxy Form Enclosed

2357

121426374449555657626263676971737580

155159163167

TA B L E O F C O N T E N T S

CONNECTCOUNTY HOLDINGS BERHAD [Registration No. 200301016513 (618933 - D)]

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CORPORATEINFORMATION

AUDITORS

Moore Stephens Associates PLT 201304000972 (LLP0000963-LCA)Chartered Accountants (AF002096)Unit 3.3A, 3rd Floor, Surian TowerNo. 1, Jalan PJU 7/3Mutiara Damansara47810 Petaling JayaSelangor Darul EhsanTel : +603-7724 1033Fax : +603-7733 1033

SHARE REGISTRAR

Securities Services (Holdings) Sdn. Bhd.Level 7, Menara MileniumJalan DamanlelaPusat Bandar DamansaraDamansara Heights50490 Kuala LumpurWilayah PersekutuanTel : +603-2084 9000Fax : +603-2094 9940 / +603-2095 0292

FORM OF LEGAL ENTITY

Incorporated in Malaysia on the 18 June 2003 as a private limited company

Converted to a public limited company on 19 December 2003

REGISTRATION NUMBER

200301016513 (618933-D)

REGISTERED OFFICE

Level 7, Menara MileniumJalan DamanlelaPusat Bandar DamansaraDamansara Heights50490 Kuala LumpurWilayah PersekutuanTel : +603-2084 9000Fax : +603-2094 9940 / +603-2095 0292

BUSINESS OFFICE

Level 16, BO1-A, Menara 2No. 3, Jalan BangsarKL Eco City59200 Kuala LumpurWilayah PersekutuanTel : +603-2202 3399 Ext. 1613Fax : +603-2202 2244

STOCK EXCHANGE LISTING

ACE Market ofBursa Malaysia Securities BerhadBursa Code : 0102Reuters Code : 0102.KLBloomberg Code : CCHB MKDate of Listing : 20 October 2005

PRINCIPAL BANKER

Malayan Banking Berhad

CORPORATE WEBSITE

http://www.connectcounty.com

COMPANY SECRETARY

Chua Siew ChuanSSM PC No. 201908002648MAICSA 0777689

Cheng Chia PingSSM PC No. 202008000730MAICSA 1032514

AUDIT COMMITTEE

Thong Mei Mei (Chairperson)Lim Bee SanMajor General Dato’ Mamat Ariffin Bin Abdullah(Appointed w.e.f. 29 March 2019)

NOMINATION COMMITTEE

Major General Dato’ Mamat Ariffin Bin Abdullah (Chairman)(Appointed w.e.f. 29 March 2019)Lim Bee SanThong Mei Mei

REMUNERATION COMMITTEE

Lim Bee San (Chairperson)Major General Dato’ Mamat Ariffin Bin Abdullah(Appointed w.e.f. 29 March 2019)Thong Mei Mei

RISK MANAGEMENT COMMITTEE

Ang Chuang Juay (Chairman)Thong Mei MeiLim Yew Chai

BOARD OF DIRECTORS

MAJOR GENERAL DATO’ MAMAT ARIFFIN BIN ABDULLAHIndependent Non-Executive Chairman (Appointed w.e.f. 20 March 2019)

ANG CHUANG JUAYExecutive Deputy Chairman

LIM BEE SAN Independent Non-Executive Director

THONG MEI MEI Independent Non-Executive Director

VIVEK A/L SASHEENDRANIndependent Non-Executive Director (Appointed w.e.f. 1 April 2020)

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CORPORATEPROFILE AND STRUCTURE

ConnectCounty Holdings Berhad (“the Company”) is an investment holding company headquartered in Kuala Lumpur, Malaysia. The Company’s divisions are operating in China, United States of America (“USA”) and Singapore, which are collectively known as the Rapid Conn Group (“RCG”). The Company also has subsidiaries in Malaysia, namely Connect Security Solution Sdn. Bhd. (“CSS”) and IBEX Pictures Entertainment Sdn. Bhd. (“IBEX”).

RCG consists of Rapid Conn Inc. (“RCI”), Rapid Conn (S) Pte. Ltd. (“RCS”), Rapid Conn (Shenzhen) Co. Ltd. (“RCC”), Shenzhen Rapid Power Co. Ltd. (“RCP”) and Shenzhen Rapid Resin Co. Ltd. (“RCR”). RCP is an associate company of RCC whereas RCR is a sub-subsidiary of the Company, being majority owned by RCC.

The RCG is an integrated provider of interconnect solutions. The principal activities are designing, manufacturing, sales and services of cables, connectors, injection moulded cable harnesses and related products. It also includes manufacture and sales of high-end cable extrusion, thermoplastic and elastomer materials.

The advanced interconnect and cable solution serve customers ranging from small and medium sized companies to large multinational corporations and caters for diverse industries and application globally. Our key industries include connected homes and offices (i.e. set-top boxes and broadband), smart connected devices (i.e. mobile and wearables), white goods (i.e. kitchen appliances), automotive, interactive kiosks and security, medical and others.

* RCP became an associate company following the transfer of shares approved by the State Administration of Industry

and Commerce of China on 8 January 2019.

# IBEX was incorporated on 22 March 2019.


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A key aspect of the RCG’s business model is offering vertically integrated services and enrooting to providing our customers vertically integrated solutions. Our advanced interconnect and cable solutions cater for diverse industries and applications globally. The manufacturing operations and research and development activities are undertaken by RCC, a highly automated Shenzhen-based plant. Research and development activities are also undertaken by the USA-based company, RCI, which also provides customisation for its customers within its own portfolio on an ad-hoc basis.

As an integrated provider of interconnect solutions, we provide solutions covering:

1. Synchronisation of both supply and demand along the lines of production in order to improve production lead time. This is achieved by reducing RCG’s overall reliance on suppliers for raw materials and critical component parts by way of vertical integration;

2. Value-added products and services where we enhance industry standard cables and connectors in terms of additional features, improved product performance and product quality; and

3. Customisation of products where we provide product development inclusive of conceptualisation, design, prototyping, tool building, testing, debugging and tooling, all of which are undertaken based on our customers’ requirements.

CSS in 2018 started its cybersecurity business covering information technology security consultation, technical assistance on operating computers, training programs and related services.

The Company also incorporated a wholly-owned subsidiary, IBEX on 22 March 2019 for potential business opportunity.

For more information on the RCG, please visit its official website at http://www.rapidconn.org.

CORPORATE PROFILE AND STRUCTURE (cont’d)

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CHAIRMAN’SSTATEMENT

We involve in interconnect business producing cable connection. An interconnect is a cable connection that seamlessly connects two (2) or more devices and it consists of two (2) main components namely cable assembly and connectors.

The Company and its subsidiaries (“the Group”) have strong presence in its core market, the Connected Homes and Offices industry. Despite continued market challenges, we are able to secure the market share in Smart Connected Devices, Automotive and White Goods industries.

FINANCIAL PERFORMANCE OVERVIEW

In FYE 2019, the Group’s revenue was amounted to RM52.6 million or represented a decrease of 47.2% as compared to RM99.6 million in the financial year ended 31 December 2018 (“FYE 2018”).

Revenue in China and Singapore segments recorded a drop of 66.7%. and 68.3% respectively. The decline in revenue was mainly due to the derecognition of Shenzhen Rapid Power Co. Ltd. (“RCP”) from being a subsidiary to an associate and the slow-down of orders from customers who took the apprehensive view amid on-going global trade tension.

Other factors contributed to the decline in revenue were price competition in the market and continuous pressure to lower our prices due to end users’ expectation.

The Group’s gross profit decreased to RM8.1 million in FYE 2019 in tandem with declining revenue. Consequently, we recorded a loss before tax (“LBT”) of approximately RM6.5 million in FYE 2019 with a lower other-expenses, as compared to profit before tax of RM9.9 million in FYE 2018.

Other expenses in FYE 2019 reduced by approximately RM3.1 million mainly due to the write-off of plant and equipment, intangible asset as well as higher allowance for impairment loss on trade and other receivables in FYE 2018, despite higher allowance loss on amount due from associate in FYE 2019.

OPERATIONS OVERVIEW

The Group has been undertaking various initiatives and measures to increase our market penetration of interconnect products for the automotive and white goods industries which are more lucrative through various initiatives covering operations and production processes, increasing investments in research and development activities and implementing appropriate marketing strategies.

We have also implemented various cost reduction initiatives such as rightsizing by scaling down a number of production workers, temporary salary reductions for certain level of management personnel, sub-leasing premises which are not only reduce costs but also generate additional funding for maintaining progressive automation in its manufacturing processes.

We have expanded into cable extrusion operations which is the backward integration strategy that enable us to be more self-reliant to ensure the consistency of high product quality while keeping the costs low and manageable, and reliability of delivery.

In addition, the Group plans to expand the coverage and accessibility of our services in the European market by reaching into the local market of the European countries. We intend to set up office(s) in Europe to provide better after sales services to its existing customers, as well as secure new customers.

On behalf of the Board of Directors, I am pleased to present to you the Annual Report and the Audited Financial Statements of

ConnectCounty Holdings Berhad (“CCHB” or “the Company”) for the financial year ended 31 December 2019 (“FYE 2019”).


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The Group will continue to invest in research and development activities to bolster our competitiveness via an expanded range of product designs and applications. We plan to enhance the product development of wire harnesses and to expand the range of designs and applications for different products within the automotive, medical and white goods industries as wire harnesses for these industries are expected to generate higher contribution.

For more details on the Group’s financial performance and operations, including its various strategic and marketing initiatives, please refer to the Statement on Management Discussion and Analysis in this Annual Report.

CORPORATE DEVELOPMENT

Diversification plan is our essential long-term strategy to achieve consistent returns over time and reduce overall risk to the Company. We are always looking into new business opportunity and will make stakeholders informed should it be any material development.

The Company’s wholly-owned subsidiary, Rapid Conn (Shenzhen) Co. Ltd. (“RCC”) had disposed of 31% of the equity interests in RCP to the existing business partner. Increase in equity participation is our plan to retain the partner’s expertise and knowledge in the fast-changing technology and environment. Upon the disposal, RCP had ceased to be an indirect subsidiary of the Company and in turn, becomes an associate company. The transfer of shares was approved by the State Administration of Industry and Commerce of the People’s Republic of China on 8 January 2019 and the notification on the approval was received by RCC on 9 January 2019.

APPRECIATION

On behalf of the Board of Directors, I wish to extend my gratitude to all our valued customers, suppliers, financiers, business associates, government authorities and shareholders for their continuing support, co-operation and confidence in the Group. I would also like to convey my sincere appreciation and thanks to my fellow Directors (past and present), the Management and staff for their dedication and commitment to the Company.

Major General Dato’ Mamat Ariffin AbdullahIndependent Non-Executive Chairman29 May 2020

CHAIRMAN’S STATEMENT (cont’d)

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BOARD OF DIRECTORS’ PROFILES

MAJOR GENERAL DATO’ MAMAT ARIFFIN BIN ABDULLAHIndependent Non-Executive ChairmanMalaysian, Male, aged 71

Date of Appointment as Director : 20 March 2019

Length of Service since the Date : 1 year 2 monthsof Appointment (as at 29 May 2020)

Board Committee(s) Served on : • Chairman of the Nomination Committee (Appointed w.e.f. 29 March 2019) • Member of the Audit Committee (Appointed w.e.f. 29 March 2019) • Member of the Remuneration Committee (Appointed w.e.f. 29 March 2019)

Academic/ Professional Qualification(s) and : • Masters of Sciences in Training and Human Resources fromCertification(s) Leicester University, United Kingdom • Diploma in Strategic Studies from Armed Forces Defense College, Kuala Lumpur • Management Development Programme from Wolfson College, University of Cambridge

Present Directorship(s) in Other Public Listed : Niland Non-Listed Public Companies Family Relationship with any Director and/or : No family relationship with any Director and/or major shareholder of Major Shareholder of the Company ConnectCounty Holdings Berhad

Working Experience and Occupation:

Major General Dato’ Mamat served the Malaysian Army for 37 years and retired in June 2005. His last appointment in the Malaysian Army was the Commanding General of the Army Logistics Command (ALC).

Upon his retirement from the Malaysian Army, Lembaga Tabung Angkatan Tentera (LTAT) appointed him as an Independent Non-Executive Director of Affin Fund Asset Management Berhad on 18 April 2012. Whilst serving at Affin Asset Management Fund Berhad, he was also appointed as Chairman of the Audit Committee. Due to the merger of Affin Fund Asset Management Berhad with Hwang Asset Management Berhad, he had resigned from the position in June 2014.

Earlier in July 2011, he was appointed as an Independent Non-Executive Director of Sterling Progress Berhad, a public listed company and was subsequently appointed to the Board as an Independent Non-Executive Chairman. In addition, he was also appointed as a member of the Audit Committee and Remuneration Committee. However, he retired from the Board after he was appointed by the government as Grand Chamberlain of Istana Negara on 14 December 2016.

As Grand Chamberlain at Istana Negara, he was given the trust and responsibility by the Malaysian government to serve KDYMM Seri Paduka Baginda Yang di-Pertuan Agong XV, Sultan Muhammad V on all matters pertaining to the ceremonies and protocols.

At the same time, he had also served with distinction under DYMM Sultan Nazrin Muizzudin Shah Ibni-Almarhum Sultan Azlan Muhibuddin Shah Almagfur-Lah, Timbalan Yang di-Pertuan Agong from 2 November 2018 until 31 December 2018.

After serving KDYMM Seri Paduka Baginda Yang Di-Pertuan Agong XV for more than 2 years, he had submitted his resignation as Grand Chamberlain on 14 January 2019.

Major General Dato’ Mamat was appointed as the Head of Ceremony at Kelantan Palace in April 2019. Currently, he is also an Independent Non-Executive Director of Boustead Petroleum Marketing Sdn. Bhd., a subsidiary of Boustead Holdings Berhad, a public listed company.

Time Committed:

Major General Dato’ Mamat was appointed on 20 March 2019. During his tenure of office, Major General Dato’ Mamat attended all four (4) Board of Directors’ Meetings of the Company held in the financial year ended 31 December 2019.


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BOARD OF DIRECTORS’ PROFILES (cont’d)

ANG CHUANG JUAYExecutive Deputy ChairmanSingaporean, Male, aged 62

Date of Appointment as Director : 18 August 2003

Length of Service since the Date : 16 years 9 monthsof Appointment (as at 29 May 2020)

Board Committee(s) Served on : Chairman of the Risk Management Committee

Academic/ Professional Qualification(s) and : Bachelor Degree in Engineering from the National University of Certification(s) Singapore



Mr. Ang began his career with Wearnes Technology as the Head of its Printed Circuit Board assembly operations. He remained with the Company for six (6) years throughout which he obtained extensive exposure in surface mount technology, floppy disk drive (“FDD”) and hard disk drive operation. He was seconded to Taiwan to head the production unit and was subsequently sent to China to set up the FDD operation. He also worked as the Managing Director of a United Kingdom (“UK”) information technology (“IT”) company based in Singapore specialising in networking.

After the takeover of the UK IT company by another firm, he became a consultant to NS-Tech Co. Ltd. His talents and natural drive were spotted by the founding member of NS-Tech Co. Ltd. and was roped in to assist in the expansion into the United States of America and set up a presence in Singapore. Not satisfied with merely being a subcontractor for Original Equipment Manufacturer and with his mind firmly set on working in the forefront technology with multinational companies, he decided to pursue his own goals and visions by divesting his interests in NS-Tech Co. Ltd. and thereafter, formed ConnectCounty Holdings Berhad.

Time Committed:

Mr. Ang attended all five (5) Board of Directors’ Meetings of the Company held in the financial year ended 31 December 2019.

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LIM BEE SANIndependent Non-Executive DirectorMalaysian, Female, aged 51

Date of Appointment as Director : 19 July 2016


Board Committee(s) Served on : • Chairperson of the Remuneration Committee • Member of the Audit Committee • Member of the Nomination Committee

Academic/ Professional Qualification(s) and : • BA (Hons) Law, Accounting & Finance from Oxford BrookesCertification(s) University, United Kingdom • Barrister-at-Law from Middle Temple, London



Ms. Lim had previously practiced in two (2) legal firms as a legal assistant from years 1996 to 1999. She became a partner of a legal firm from 2000 to 2006. She is the Founding Partner of Messrs. The Law Chambers of Yeap & Lim which was established since 2006.

Time Committed:

Ms. Lim attended all the five (5) Board of Directors’ Meetings of the Company held in the financial year ended 31 December 2019.


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THONG MEI MEIIndependent Non-Executive DirectorMalaysian, Female, aged 52

Date of Appointment as Director : 27 November 2017


Board Committee(s) Served on : • Chairperson of the Audit Committee • Member of the Nomination Committee • Member of the Remuneration Committee • Member of the Risk Management Committee

Academic/ Professional Qualification(s) and : • Diploma in Commerce (Management Accounting), Tunku Abdul Certification(s) Rahman University College, Kuala Lumpur • Member of the Malaysian Institute of Accountants (“MIA”) • Associate member of Chartered Institute of the Management Accountants (“ACMA”), United Kingdom



Ms. Thong is a Chartered Accountant with ACMA. She has 27 years’ experience in financial management reporting and general accounting, including 12 years in senior management position leading the finance function.

She had worked for various organisations, including GlaxoSmithKline (GSK), Avon Cosmetics, Bristol-Meyers (Mead Johnson Nutrition), Coca-Cola and PricewaterhouseCoopers (PwC), Hong Leong Credit Berhad and Navis Capital Group.

She is highly recognised for the ability to strategic business partnering roles and proactive for continuous change actions to drive business growth. During her 27 years of experiences, she had supervised up to a team of 26 across different markets in the cluster environment.

Time Committed:

Ms. Thong attended four (4) out of five (5) Board of Directors’ Meeting of the Company held in the financial year ended 31 December 2019.


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VIVEK A/L SASHEENDRAN Independent Non-Executive DirectorMalaysian, Male, aged 34

Date of Appointment as Director : 1 April 2020

Length of Service since the Date : 1 monthof Appointment (as at 29 May 2020)

Board Committee(s) Served on : Nil

Academic/ Professional Qualification(s) and : • Diploma in Law, Help University College, Kuala LumpurCertification(s) • LLB (Hons), Northumbria University, Newcastle Upon Tyne, England

Present Directorship(s) in Other Public Listed : Vad Ventures Berhadand Non-Listed Public Companies Family Relationship with any Director and/or : No family relationship with any Director and/or major shareholder of Major Shareholder of the Company ConnectCounty Holdings Berhad


Mr. Vivek started his career as an Account Manager with SaiKris Consultancy Sdn. Bhd. in 2008 and left in 2010. From 2012 to 2014, he assumed the role as Chief Operation Officer of Array Infinite Sdn. Bhd., an Information Technology (“IT”) based company, to handle the company’s operations and its business development.

Currently, he is holding multiple roles in various companies.

With his finance and legal background, he joined Artha Synergy Sdn. Bhd. and its group of companies as a Managing Director since 2010, managing business operations, finance and legal, as well as human resources matters of the organisation.

He serves as a Senior Advisor and Managing Director of VAD Capital Sdn. Bhd. since 2012, a company in banking outsource industry and licenced by OCBC Bank (Malaysia) Berhad. Mr. Vivek rebranded this company in 2016 to become a turnaround specialist to serve multi-national companies and government-linked companies based in Malaysia.

Mr. Vivek joined Living Minds Sdn. Bhd. as a Managing Director since 2014, a unique marketing solution service provider in Malaysia. In 2019, Mr. Vivek set up Present Iron Foot Sdn. Bhd. to enhance business of Living Minds Sdn. Bhd., which is primarily involved in sports marketing.

Since 2017, Mr. Vivek sits on the Board of Directors of VAD Ventures Berhad to manage the growth, finance, legal and all operations of the group in various countries. The group involved in IT products and services, turnaround finance advisory, sports marketing and vessel operations. In 2018, he serves as a Non-Executive Director of VAD Ventures (SG) Pte Ltd, to facilitate management and international trading activities of VAD Ventures Berhad.

Time Committed:

Mr. Vivek was appointed on 1 April 2020, and therefore, he has not attended any Board of Directors’ Meeting of the Company held in the financial year ended 31 December 2019.

NOTES:

1. CONFLICT OF INTEREST None of the Directors of the Company has any conflict of interest with the Company.

2. CONVICTIONS FOR OFFENCES AND PUBLIC SANCTION OR PENALTY IMPOSED BY THE RELEVANT REGULATORY BODIES DURING THE FINANCIAL YEAR

None of the Directors has any conviction for offences within the past five (5) years, other than traffic offence, if any, nor any public sanction or penalty imposed by the relevant regulatory bodies during the financial year ended 31 December 2019.

BOARD OF DIRECTORS’ PROFILE (cont’d)


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ANG CHUANG JUAYExecutive Deputy Chairman

The Senior Management team is headed by the Mr. Ang who is the de facto Chief Executive Officer of the Company and its subsidiaries. He is also leading the marketing function of the Rapid Conn group of companies.

Please refer to page 8 for the profile of Mr. Ang.

BALAJI RAGHUNATHANVice President, Group Engineering and Research & DevelopmentVice President of Operations, Rapid Conn Inc.Indian National, United States of America (“USA”) Permanent Resident, Male, aged 44

Date of Employment: Directorship held:28 June 2004 Rapid Conn Inc. (“RCI”), USA

Qualification(s)/Certification(s): 1. Bachelor in Mechanical Engineering, Vellore Institute of Technology, India 2. Masters in Industrial Engineering, State University, USA

Working Experience:

Mr. Balaji Raghunathan graduated with a Bachelor Degree in Mechanical Engineering from the Vellore Institute of Technology, Tamil Nadu, India in 1996. He graduated with honours, which earned him a Silver Medal award from the University. In 1999, he went on for further studies and completed his Masters in Industrial Engineering with special focus on Production Systems from the State University of New York, Buffalo, New York, USA and graduated in 2001.

Mr. Balaji started his career in 1996 working for a leading automotive turbo charger manufacturing company in India. He gained valuable knowledge in manufacturing process and operations during his first three (3) years before opting to pursue his Master Degree in the USA. During that time, Mr. Balaji was an intern at General Motors automotive plant in Buffalo, New York. He further honed his skills in manufacturing technologies in the world’s largest engine manufacturing plants of General Motors.

Upon graduation, Mr. Balaji started as a supplier and a process and quality control engineer for Hughes Network Systems, Maryland, USA in 2001. He left Hughes in 2004 to join RCI, USA. His skills were recognised quickly by the Management and he was appointed as the RCI’s Vice President of Operations in 2008.

KEY SENIOR MANAGEMENT’S (CORPORATE) PROFILES

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LIM HUANG FEECorporate Quality AssuranceOperation Director, Rapid Conn(ShenZhen) Co Ltd, (“RCC”)Malaysian, Male, aged 41

Date of Employment: Qualification(s)/Certification(s):2 January 2012 1. Diploma in Mechanical Engineering, Tunku Abdul Rahman University College, Kuala Lumpur 2. Qualified Internal Auditor of ISO 9001, ISO 14001, ISO 13485, IATF 16949 by SGS 3. Six Sigma Green Belt Certificate

Working Experience:

Mr. Lim Huang Fee has over nineteen (19) years of experience in the field of quality management. In 2001, as a technician of measurement laboratory, he started his career with Univac Precision Engineering Pte Ltd (Singapore) dealing with plastic injection molding and mold fabrication for consumer, automotive and medical industries. Subsequently in 2005, he was promoted as a department head to lead the measurement laboratory of group company, Munivac Sdn. Bhd. (Malaysia).

He was a Quality Assurance (“QA”) Engineer in 2007 before becoming as a QA Manager of Hong Foong Plastic Industries Pte Ltd (Singapore). Mr. Lim was trained in six sigma green belt and completed the required project. In 2009 and 2010, he become a qualified Internal Auditor of ISO 9001, ISO 14001, ISO 13485, IATF 16949.

In 2012, Mr. Lim joined RCI as a role of quality engineer. Later in 2013, he was promoted to be the Corporate Quality Manager and also involved in factory operation assisted the then general manager. Acknowledging his sound management skills, as well as his experience and technical knowledge in the sector, the management appointed him as an Operation Director of RCI in 2019 under the Company’s succession planning.

LIM YEW CHAIGroup AccountantMalaysian, Male, aged 49

Date of Employment: Qualification(s)/Certification(s):3 July 2017 1. Professional Degree from Chartered Institute of Management Accountant (“CIMA”), United Kingdom (“UK”) 2. Diploma in Commerce (Management Accounting), Tunku Abdul Rahman University College, Kuala Lumpur 3. Member of the Malaysian Institute of Accountants (“MIA”) 4. Associate member of CIMA, UK

Working Experience:

Mr. Lim Yew Chai has over twenty-four (24) years of experience in the field of accounting and finance, which includes financial audits, taxation, management accounting and costing, financial planning and forecasting, enterprise resources planning, treasury management and fund raising.

He started his career with an audit firm in Kuala Lumpur, and subsequently worked for various local commercial enterprises and overseas-based multi-nationals companies with businesses ranging from manufacturing, project development and trading.

Prior to his appointment in the Company, Mr. Lim spent a total of eleven (11) years in a few public listed companies mainly attached to the corporate office which he assumed the role of Assistant-Vice-President and Group Accountant in listing exercise, corporate finance, acquisition, risk management and group reporting. Presently, he is also a member of the Risk Management Committee of the Company.

NOTES:

Save as disclosed above, none of the key senior management has:1. any directorship in public companies and listed issuers;2. any family relationship with any directors and/or major shareholders of the Company;3. any conflict of interest with the Company;4. any conviction for offences (other than traffic offences) within the past five (5) years; and5. any public sanction or penalty imposed by the relevant regulatory bodies during the financial year under review.

KEY SENIOR MANAGEMENT’S(CORPORATE) PROFILES (cont’d)


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FINANCIAL PERFORMANCE REVIEW

The Company and its subsidiaries’ (“Group”) revenue and gross profit for the financial year ended 31 December 2019 (“FYE 2019”) had decreased as compared to financial year ended 31 December 2018 (“FYE 2018”). The revenue was recorded at RM52.6 million, a 47.2% decrease as compared to RM99.6 million in FYE 2018. Whereas the gross profit declined to RM8.1 million from RM11.5 million in FYE 2018.

The Group’s 5-Year Revenue and Gross Profit Trend

FYEMalaysia

RM’000China

RM’000Singapore

RM’000USA

RM’000

Group Revenue

RM’000

Group Gross Profit

RM’000

Weighted Average

(Forex Rate)

RM:USD1

Gross Profit

Margin%

2019 - 14,894 5,498 32,223 52,615 8,113 4.14 : 1 15.422018 200 44,786 17,353 37,302 99,641 11,467 4.04 : 1 11.512017 - 43,658 26,790 51,715 122,163 18,415 4.30 : 1 15.072016 - 20,946 25,230 35,535 81,711 16,923 4.14 : 1 20.712015 - 12,314 21,106 31,457 64,877 15,771 3.90 : 1 24.31

STATEMENT ON MANAGEMENT DISCUSSION AND ANALYSIS

52,615

99,641

122,163

81,711

64,877

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

20192018201720162015

Group Revenue RM'000

Revenue

The decrease in revenue at Group level can be seen at all segments. Rapid Conn (Shenzhen) Co. Ltd. (“RCC”) in China recorded a decrease of 66.7% over the preceding year, while Rapid Conn Inc. (“RCI”) in United States of America (“USA”) and Rapid Conn (S) Pte Ltd. (“RCS”) in Singapore recorded a decrease of 68.3% and 13.6% respectively.

The revenue from China segment had declined mainly due to the lower contribution of approximately 82% which was driven by derecognition of a subsidiary namely Shenzhen Rapid Power Co. Ltd. (“RCP”) since end of FYE 2018.

Other factors lead to the decline were, for example, keen competition in the interconnect market from diversified manufactures and highly specialised manufactures, and continuous global trade tension resulting lower orders received as customers took the apprehensive view about the market.

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STATEMENT ON MANAGEMENT DISCUSSION AND ANALYSIS (cont’d)

FINANCIAL PERFORMANCE REVIEW (Cont’d)

Revenue (Cont’d)

We are facing continuous pressure to lower our prices. Due to the evolving innovation in the industry, our customers experience pressure to reduce their prices to meet consumer expectations. As a result, component suppliers are generally expected to lower the prices. This factor continues to pose a challenge to the Group and it is being addressed by several strategic initiatives currently undertaken by the Group, such as the vertical integration, automation and cost reduction programs.

Nevertheless, the Group has taken necessary action to increase its market share in Automotive and White Goods sector despite continued market challenges.

Gross Profit and Gross Profit Margin

The Group’s gross profit recorded a decrease to RM8.1 million in FYE 2019, despite an increase in gross profit margin at 15.4% in FYE 2019 from 11.5% in FYE 2018.

The decrease in gross profit was mainly attributable to lower revenue in FYE 2019. The increase in gross profit margin, however, was due to overhead saving related to derecognition of RCP which became an associate besides the cost saving from product mix and the cost reduction programs implemented in the FYE 2019.

15,771 16,923 18,415

11,467

8,113

24.3%

20.7%

15.1%11.5%

15.4%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

- 2,000 4,000 6,000 8,000

10,000 12,000 14,000 16,000 18,000 20,000

2015 2016 2017 2018 2019

Group Gross Profit Gross Profit Margin

Gross Profit (RM'000) & GP Margin (%)

Loss Before Tax

The Group recorded a loss before tax (“LBT”) of approximately RM6.5 million in FYE 2019, compared to FYE 2018 LBT of RM9.9 million. The derecognition of RCP which become an associate had contributed to curb the LBT, in terms of savings from operating expenses.

Despite the impairment loss on amount due from associate provided in FYE 2019, the Group recorded lower LBT mainly attributed to other expenses incurred in FYE 2018 such as:-1. Write-off equipment related to certain products which reached the final phase of the projects;2. Write-off certain assets which were damaged beyond repair; and3. Write-off assets related to the thermoplastic elastomers production which ceased operation due to loss of major

customers and stringent environmental requirements imposed.

Total expenses that had been written-off in FYE 2018 offset by impairment loss on amount due from associate in FYE 2019 was amounted to approximately RM3.1 million.


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FINANCIAL PERFORMANCE REVIEW (Cont’d)

Financial Position and Liquidity

The Group’s total assets and total liabilities as at the end of FYE 2019 were RM43.8 million and RM20.9 million respectively.

Total equity as at end of FYE 2019 was RM22.9 million or a decrease of RM7.8 million compared to FYE 2018. The decrease was mainly related to loss net of tax of RM6.3 million and fair value loss of equity investment of RM1.1 million beside the movement in ICPS-equity component and the foreign currency translation differences for foreign operation.

Cash and cash equivalents decreased by RM1.9 million. The main changes are as follows:-

• Additional cash was generated from operating profit before working capital changes. After movement in inventories, receivables and payables and also payment of interest and tax, the Group generated approximately RM2.1 million from operating activities. However, it was offset by:-

• Repayment of lease liabilities of RM3.5 million and • Purchase of plant and equipment of RM0.6 million.

BUSINESS DIRECTION OF THE GROUP

Core Business

We manufacture and market interconnect products and it can be seen in our proven track record of being in the business for more than twenty-two (22) years. An affirmation to our fine finished goods and outstanding sales and aftersales services are our top and faithful customers who have been staying with us over the years.

Leveraging on our experience and industrial expertise which we have accumulated over the years in the cable and interconnect business, it would be most prudent to harness our resources and core competencies as a springboard to expand sales and to increase market penetration, both demographically and regionally, as well as expand our core business into other industry sectors (i.e. automotive, white goods, wearables). We continue to maintain and grow our current market share in the Connected Homes & Offices segment, which is still our biggest revenue earner to date.

Vision and Mission

The Group’s vision statement below communicates, in a nutshell, our strategic objectives and business direction, and underscores the importance we place on great teamwork and commitment to succeed in the mindset of every employee of the subsidiaries operating within the Group:-

“To be a leading global interconnect solutions provider, harnessing the vast experience and expertise of our R&D team, offering the most innovative, yet cost effective, vertically integrated solutions at competitive pricing and quality”.

In order to realise our vision, we embrace and practise corporate mission and principles which give us a distinct competitive edge over our competitors in this highly dynamic and competitive market. Below are the Rapid Conn Group (“RCG”)’s 5-Value Principles:-

Rapid - In Our Daily TasksAnticipate - Being One Step AheadPride - In Everything We Do & Profitability DrivenInitiative & Innovative - Step Out of Comfort Zone & Think Out of the BoxDesire - To Be First in Technology & Market Penetration


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BUSINESS DIRECTION OF THE GROUP (Cont’d)

Restructuring and new development of organisation

The Company's wholly-owned subsidiary, RCC had disposed of 31% of the equity interests in RCP in 2018 from 80% to 49% to allow existing business partner to increase its equity participation. This is part of our plan to retain the strategic partner who is having the relevant expertise and knowledge in fast-changing markets and technologies. Consequential to the disposal, RCP has ceased to be an indirect subsidiary of the Company and in turn became an associate company. The transfer of shares was completed on 8 January 2019.

On 22 March 2019, the Company had incorporated a company namely IBEX Pictures Entertainment Sdn. Bhd. (“IBEX”) which was previously intended to venture into a business to develop, finance and produce screenplay, film, soundtrack and other media, talent management and business of merchandising in relation to film and music. However, Management had re-assessed the viability of the business and had decided to make IBEX dormant and to standby for future business opportunity.

Diversification Plan

Maintaining a diversified business is essential to our long-term strategy. A diversification strategy can help to achieve more consistent returns over time and reduce overall risk.

Management is always looking for new business opportunity and will keep the shareholders informed on any material development.

BUSINESS FOCUS AND STRATEGIC ACTION PLANS

Vertically Integrated Solutions Provider

Our RCG aim to be a fully vertically integrated solutions provider which give the benefits include:-

1. Eliminating intermediary in the business, thus raising profit margins and increasing profitability.2. Acquiring instant know-how of the supplier’s trade and their teams of experienced workforce, thus learning curve will

be minimised, while the utilisation of resources can be maximised.3. Inheriting valuable database of supplier’s list of customers which opens up opportunities of cross-selling.4. Gaining distinct competitive advantage over all our competitors in term of full integrated solutions.5. Benefiting our customers in term of value for money such as faster turnaround time, lower purchase price and lower

probability of quality issues occurring.

This business model is an important and distinct unique selling points that elevate us above our competitors in terms of attractive pricing, more efficient order processing and shorter lead time. This will be the Group’s strategic competitive advantage which will give us a clear competitive edge over our competitors in the interconnect industry and this is where the Group’s backward integration strategy plays a key role in this initiative.

Backward Integration

Backward integration is one form of vertical integration that enables a business to obtain control over its supplies and improve supply chain efficiency. Through increasing the cable extrusion capabilities in RCP, it become main part of the Group’s vertical integration strategy and it serve as strategic advantages over its competitors.

Through expansion into cable extrusion operations, we are more self-reliant resulted from backward integration which is to ensure the consistency in high product quality while keeping the costs low and manageable, and is able to provide better delivery process by reducing delivery lead times.



18

BUSINESS FOCUS AND STRATEGIC ACTION PLANS (Cont’d)

Backward Integration (Cont’d)

The diagram below illustrates the entire process that would be undertaken by a fully integrated cable house with the incorporation of RCP.

COPPER EXTRUSION

PLASTIC RESIN AND PLASTIC

COMPOUNDING CABLE EXTRUSION

CONNECTOR PRODUCTION

FINAL TESTING

CABLE ASSEMBLY

RCP’s business focuses solely on cable extrusion operations. It will provide raw cables to RCC, while at the same time, engage in external trade with its own portfolio of customers. Prior to RCP’s incorporation, the bulk of cable extrusion was outsourced to third parties. The Group will continue to invest to further enhance the technology behind this process as it intends to expand the current production of high-end cables such as HDMI, Universal Serial Bus (“USB”) 3.0, USB 3.1 and cables used in medical and automotive applications

Vertically Integrated Services

We offer complete vertically integrated services for in-house parts and sourcing services with following features and benefits:-

EXCELLENT SALES & CUSTOMER SUPPORT

SERVICES

ENGINEERING & PROTOTYPING

IN-HOUSE TOOLING SOLUTION

CAPABILITIES

GLOBAL SUPPLY CHAINS & LOGISTICS

MANAGEMENT

QUALITY ASSURANCE SYSTEM INNOVATION

MASS PRODUCTIONFULLY EQUIPPED

IN-HOUSE TESTING CAPABILITIES


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Vertically Integrated Services (Cont’d)

1. Excellent sales and customer support services – our sales team are fully supported by a superior team of customer support services personnel to ensure efficient and on-time processing of all orders and enquiries.

2. Engineering and prototyping – for customised solutions, our team of qualified and experienced engineers will meet the customers engineering design and prototyping needs.

3. In-house tooling solution capabilities – for some tooling to secure quicker sample response time.4. Fully equipped in-house testing capabilities – a range of testing capabilities & equipment will warrant all our products

to meet with all the necessary industry requirements and customer’s specifications.5. Mass production – trained production teams and a fully equipped plant with automated processes.6. Qualified assurance system innovation – our quality assurance (“QA”) team enforces stringent QA processes to

ensure 100% quality control pass rates.7. Global supply chain and logistics management – highly experienced logistics and customs personnel to assure quick

and timely delivery in minimum time and costs thus to relieve customer from excess inventories.

The Group’s interconnect strategic action plans will enable the Group to achieve the following:-

1. To harness our expertise in our core industry (Connected Homes & Offices), using it as our USPs to secure at least two (2) new customers in the same industry;

2. To grow new industries such as Smart Connected Devices, White Goods, Automotive, Medical, ATM, Kiosk & Security, while at the same time reduce the Group’s reliance on its core industry, i.e. Connected Homes & Offices, though we will still continue to develop and expand our business operations in our core business and expand our market share;

3. To achieve at least a 30% growth in the new industries, namely Smart Connected Devices, White Goods and Automotive.

Product Certification and Standard

1. MFi (Made For iPhone, iPad and iPod)

We have been MFi approved in mid-2015. It has opened up more project opportunities to supply Apple related accessories and we started some MFi projects since 2016.

2. USB 3.1 Type C

We are USB 3.1 Type C cables certified manufacturer to produce. The certification allows us to facilitate thinner and sleeker product designs, enhance usability and provide a growth path for performance enhancements for future versions of USB.

3. IATF 16949:2016

We have upgraded to IATF-16949:2016. It is a certification of our quality management system that is applicable to the manufacturing of connecting wires for products in Automotive Industry.

4. UL Cert No. E321220

Cable extrusion manufacturing.

5. UL Cert No. E257769

Cable assembly manufacturing.

6. HDMI, USB and Serial AT Attachment (“SATA”) standards

We are members of HDMI, USB and SATA and hence all our cable products comply with the standards.



20


Product Certification and Standard (Cont’d)

7. TIA/EIA 568b.2 Compliance

A Commercial Building Telecommunications Cabling Standard by the Telecommunications Industry Association (TIA).

8. Australia Cabling Standard AS/ACIF S008:2006 Compliance

Cable extrusion and assembly manufacturing standard for Australia and New Zealand market.

Quality Management Systems (“QMS”)

Our QMS practices are entrenched in our business policies and complement our manufacturing standard operating procedures. The QMS are strictly observed to consistently meet our customers’ requirements and gain greater customers’ satisfaction. The certifications and standards we have attained and followed are as follows:-

1. Quality Management System - ISO 9001:20152. Environment Management System - ISO 14001:20153. Automotive Industrial Quality Management System - IATF 16949:20164. Product Quality Control - IPC/WHMA-A6205. Corporate Social Responsibility Management System (“CSRMS”), and6. Hazardous Substance Control:- a. EU RoHS 2.0 - Restriction of Hazardous Substances b. China RoHs - Restriction of Hazardous Substances c. REACH - Registration, Evaluation, Authorisation and Restriction of Chemicals d. JIG - Joint Industry Guide-Material Composition Declaration for Electronic Products

For insights into the detail of our QMS, please refer to the Sustainability Statement in this Annual Report.

MARKET PENETRATION AND DEVELOPMENT

The Industry Landscape – 2019

We traditionally involve in the Connected Homes & Offices, Smart Connected Devises and White Goods industries, which covers e.g. home digital devices and networking devices. These formed about 94.1% revenue in 2019 compared to 88.6% in 2018.

In 2019, we gained higher sales in the lucrative industries in the Automotive. This was achieved through various initiatives covering training, certification, revamping current and setting up new production processes/lines and increasing investment in research and development activities as well as implementing the appropriate marketing strategies.

The table below illustrates the Group’s market composition and percentage contribution to revenue in terms of industry over a five (5)-years period. Despite continued market challenges, our highest revenue contribution remains from the Connected Home & Offices. Efforts was made to penetrate more in Automotive markets and the contribution of revenue by Automotive segment was slightly higher than White Goods segment.


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MARKET PENETRATION AND DEVELOPMENT (Cont’d)

The Industry Landscape – 2019 (Cont’d)

RAPID CONN INDUSTRY BREAKDOWN FOR FYE 2015-20192019 2018 2017 2016 2015

Industries % % % % %Connected Homes & Offices 85.4% 72.4% 84.0% 75.0% 71.0%Smart Connected Devices 5.2% 5.6% 6.4% 6.9% 9.0%White Goods 3.5% 10.6% 5.8% 9.7% 8.0%Automotive 4.1% 7.0% 2.0% 3.5% 2.0%Medical 0.6% 1.2% 0.5% 0.7% 1.0%Interactive Kiosks & Security 0.2% 0.5% 0.5% 2.8% 2.0%Others 1.0% 2.7% 0.8% 1.4% 7.0% 100% 100% 100% 100% 100%

Connected Homes & Offices

85.4%

Smart Connected Devices

5.2%

White Goods3.5%

Automotive4.1%

Medical0.6%

Interactive Kiosks & Security

0.2%Others1.0%

RAPID CONN GROUPBY INDUSTRIES (2019)

Despite challenges faced, we have various plans and strategies in place that will enable us to further increase market penetration in these markets, while at the same time, to enhance our credibility and visibility amongst major customers and key players in the interconnect and related markets. We are also working closely with the existing and potential customer that will maintain and further improve our market share.

SALES AND MARKETING STRATEGY

We continue to invest our resources in research and development for product innovation particularly in automotive segment, while keeping abreast of advances in technologies affecting the market and changing consumers’ tastes and requirements. This is vital as it may not only provide critical information that will guide us in crafting our marketing strategy, but will also influence our approach in the planning and implementation stages of automation along our production and assembly lines, which is a critical part of our cost reduction initiatives.

The Group is taking steps to improve and strengthen its customer relations management in order to further enhance its existing relationships with its key customers, while taking appropriate steps to improve its business ties with its other customers within its portfolio and seeking new customers to expand its market share in the various sectors in the cable and interconnect markets.



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SALES AND MARKETING STRATEGY (Cont’d)

Unique Selling Points

1. Vertically Integrated Services (“VIS”)

The VIS provides a “one-stop centre” for customers: enquiries, customising & designs, prototyping, tooling, mass production, logistic, warehousing and after-sales service.

2. Vertically Integrated Solutions Provider

This gives us a strategic competitive edge over our competitors as we are able to pass cost savings to customers in terms of attractive pricing. This will also result in more efficient order processing and enhance delivery process due to shorter lead time.

3. Highly Experienced R&D Team

With two strong R&D teams located in RCC, China and RCI, USA, we are able to sell our experience and capability to undertake in-house engineering design, customisation and product development.

In order to expand the range of designs and applications for different products within the Automotive, Medical and White Goods industries, the Group has planned to emphasise on the product development of an interconnect product, i.e. wire harness. The research and product development activities include cost for designing, tooling, prototyping and industry certificate application.

4. Warehousing Solutions

RCI, the Group’s subsidiary in USA is occupying an office cum warehousing space with a team of experience logistic personnel for prompt and uninterrupted product delivery. In addition, RCI also has second warehouse-center located strategically to provide better satisfaction in customer service.

Positioning

1. Rapid Conn is a global company with manufacturing facilities in China.

2. A global presence – sales offices are strategically located in USA, Singapore and China, to serve all time zones and all markets worldwide. As part of our regional expansion, we intend to set up office(s) in Europe to provide better after sales services to its existing customers, as well as secure new customers in the region.

3. We have the expertise to operate in the various industries mainly:-

a. Connected Homes & Offices b. Smart Connected Devices c. White Goods d. Automotive


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SALES AND MARKETING STRATEGY (Cont’d)

Marketing Tactics

1. Sales Representatives (“Reps”) & Strategic Partners

In addition to the existing sales headcount, RCG has developed a network of appointed reps and strategic partners in different subsidiaries.

a. Quarterly Statement of Activities & Commission to be sent out to reps and strategic partners as a monitoring tool to assess their performance.

b. Quarterly review of Reps & Strategic Partners performance to be conducted to sieve out barriers and give incentives to spur them to pursue more opportunities for RCG.

c. Expanding regionally via the recruitment of Reps and Strategic Partners and setting up of office(s) in Europe to provide better after sales services to its existing customers, as well as secure new customers.

2. Existing Customers

Much effort and time have been spent enhancing our business and working relationship with our existing customers. Thus, an aggressive campaign has been launched to maintain an even closer rapport with our customers so that we will continue to be in their preferred list of suppliers:-

a. To be alerted of new projects and to ensure that RCG is in the running for these new projects. b. To secure introductions or referrals to different departments or divisions.

RCG has managed to forge and maintained stellar relationships with some of our major customers for more than ten (10) years. As mentioned earlier, this is a testament to our major customers increasing confidence and trust in us, as they continue to support us unwaveringly throughout the years while we remain resolute in our commitment to service them to the best of our capabilities.

3. Electronic Manufacturing Services (“EMS”) Partners

Over the years, we have established a strong working relationship with major contract manufacturers in the EMS industry. As these EMS contractors service various OEMs, we benefit greatly either through referrals from them or sub-contracting jobs awarded by them.

COST REDUCTION PROGRAMS

We implemented additional cost reduction programs in 2019 which resulted in costs saving in our subsidiaries. Moreover, the costs savings attained could be passed on to the Group’s customers in the form of attractive pricing, which invariably helped the Group to maintain competitive advantage over its competitors. Cost reduction will also act as a buffer should customers request for (or insist on) lower prices during negotiations or at any point in time during the course of the business.

Additionally, apart from managing our cost drivers (i.e. labour costs, factory overheads), the Group maintains its costs reduction initiatives as is an ongoing effort:-

1. Reviewing employee efficiency programs on a periodic basis to ensure that the programs are up to date, relevant and in sync with corporate’s objectives. These programs are designed to improve skills and enhance productivity.

2. Reviewing and updating the production remuneration scheme for production workers, where the employees would be remunerated according to productivity.



24

COST REDUCTION PROGRAMS (Cont’d)

3. Progressive automation of our manufacturing processes – potentially new areas of automation both in terms of revenue generating machines and production lines are periodically under review. The inherent benefits of automation:-

a. Reduce overall manufacturing costs;b. Improve space utilisation;c. Reduce manufacturing turnaround time;d. Consider larger orders, particularly additional orders, without delaying and affecting quality and lead times

subject to the quantum of the order and any changes in the product specs requirement; ande. Enables multiple tasks in a particular process to be undertaken by a single machine (e.g. wire harnessing).

We have implemented automation in the following areas along our assembly lines:-

a. Wire harnessing – This activity consists of several tasks undertaken by different operators (i.e. assembly line workers) such as auto wire cut, wire strip, wire crimp and wire tin. These tasks were combined into a single activity and undertaken seamlessly by a single automated machine.

b. Wrapping – We have moved from manual wrapping wire activities to automated wrapping, which have enabled us to combine both automatic wrapping and tie activities into a single process. We have installed an additional machine with added testing function before wrapping process.

c. Soldering – This is one of the most labour-intensive process. It has been replaced by auto-soldering machine. Under manual soldering, a single production worker can only manage around 250 pieces per hour. In contrast, an automated soldering machine can easily achieve between 500 and 800 pieces per hour without operated by skilled worker.

d. Auto-Cutting, Stripping, Crimping & Dipping – Each of which is capable of performing the tasks of at least three production workers. This will not only save costs and increase productivity, but will also free up factory space and capacity

We have also automated certain key activities in the manufacturing of HDMI cables:-

a. Testing and Hanking;b. HDMI soldering; andc. HDMI metal casing.

4. Outsourcing of manufacturing activities (i.e. mainly production phases that are labour intensive) to contractors located in the inland provinces of China, where the costs of labour are considerably lower. In order to ensure that our contractors comply with our manufacturing and quality standards, and product specification requirements, we perform a comprehensive operations audit of their plant, and provide training to their employees if and when necessary. We also monitor them periodically to ensure compliance on their part.

5. Where feasible, it is part of our policy to perform re-engineering of products to increase the efficiency of material and labour consumption, which will not only save costs but is also consistent with our role in promoting EHS, an environmental sustainability of our Group.


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25

RISK FACTORS

Given the fact that we are a global company as our entire business operations, including our customers are located overseas, and we are constantly exposed to external risks, apart from the internal risks that are inherent not only in our industry but also in the business environment in which we operate.

Risks such as international trade tensions that affect the global economic growth, fluctuations in foreign exchange rates particularly the United States of America Dollar and commodity prices mainly the copper and PVC, local labour laws particularly those relating to workers compensation (i.e. wage rates, minimum wage, workers benefits, etc.), overtime, trade and custom laws and regulations (i.e. tariff rates), monetary policy, etc., all of which have the propensity to change from time to time. If these changes are unfavourable, the impact will adversely affect our business operations. The unfavourable conditions may even frustrate our planned initiatives that we have discussed earlier.

Other risks worth mentioning are that we are highly dependent on our customers whose majority customers are end- product consumers. Any changes in consumer tastes and preferences in their own markets, a downturn in overall demand due to the product’s end-of-life cycles and/or introduction of newer products in the market, or even stiff competition from their business rivals, will adversely affect them, which in turn will invariably affect us.

Despite the revenue from the Connected Homes & Offices which has always been our top market, the Group continues to expand its footprint in other industry sectors of the market such as Automotive, Smart Connected Devices (wearables) and White Goods, which will not only increase the Group’s revenue but also the profitability as these markets involves high margin products. This, in turn, will further increase our exposure to risks inherent in these industries as we continue to increase our presence in their respective markets.

The list of risk areas identified, which covers both internal and external risks, that may have an impact on our business should they occur, and our risk management process are set out in the Statement on Risk Management and Internal Control in this Annual Report.

OUTLOOK AND PROSPECT

While we continue to invest in exiting interconnect business contributed mainly in the home entertainment market, we have taken efforts to expend further into Automotive market. Moving forward, the Automotive market will be aimed as one of the main contributions from the interconnect market.

In addition, existing and emerging products are relied on interconnect solution in devices, smartphone, tablets and wearable such as health and fitness devices, smartwatches and smart eyewear. In this regard, we have been working with key players in this industry to specially design and customise cables for these smart connected devices to penetrate new markets as well as expand our current portfolio.

The coronavirus (“COVID-19”) outbreak in 2020 has brought considerable major economic disruption to the Group. Output contractions in China are being felt around the world. The Group’s performance for first quarter ended 31 March 2020 was impacted due to the spread of COVID-19. Our China factories are unable to resume production due to lock down in most of the villages and cities in China during the period. After riding out a supply shock that closed down our factories, we are bracing for a second wave demand shock as subsequent outbreaks in other economies hitting demand. Growth prospects remain highly uncertain. A longer lasting and more intensive COVID-19 outbreak around the world would weaken prospects considerably.

DIVIDEND POLICY

There is no dividend policy for the Group at the moment, however the Board strives to adopt a consistent approach in declaring dividends after considering various factors, such as future investment and working capital needs, profitability and liquidity of the Company



26

CORPORATE GOVERNANCE OVERVIEW STATEMENT

The Board of Directors (“Board”) recognises that corporate governance is of paramount importance in ensuring the Company is managed in the best interest of the shareholders.

The Board is pleased to present this Corporate Governance Overview Statement (“Statement”) to provide investors with an overview of the extent of compliance with three (3) Principles as set out in the Malaysian Code on Corporate Governance (“MCCG”) under the stewardship of the Board throughout the financial year ended 31 December 2019 (“FYE 2019”) and up to the latest practicable date of 29 May 2020 (“LPD”).

This Statement also serves to comply with Rule 15.25 of the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) (“ACE LR”).

The Corporate Governance Report for FYE 2019 (“CG Report 2019”) which sets out the application of each Practice is available for viewing in the Company’s corporate website at www.connectcounty.com.

PRINCIPLE A: BOARD LEADERSHIP AND EFFECTIVENESS

Part 1 - Board Responsibilities 1.0 Board’s Leadership on Objectives and Goals

1.1 Values and Standards

The Board is responsible for the leadership, oversight and the long-term success of the Company and its subsidiaries (“the Group”). The Board fully understands their collective responsibilities in guiding the business activities of the Group in reaching an optimum balance of a sound and sustainable business operation with an optimal corporate governance framework in order to safeguard shareholders’ value.

The Board has reserved certain items for its review as provided in its Board Charter. The Board has also delegated certain responsibilities to other Board Committees, which operate clearly within their respective defined Terms of Reference. Standing Board Committees include the Audit Committee, Nomination Committee, Remuneration Committee and Risk Management Committee. The Board receives reports at its meetings from the Chairman of each Board Committee on current activities. It is the general policy of the Company that all major decisions be considered by the Board as a whole.

The Board is responsible for the overall corporate governance, strategic direction, and corporate goals and therefore, monitors the achievement of these goals. It provides effective leadership and manages overall control of the Group’s affairs through the discharge of the following principal duties and responsibilities:-

(a) Reviewing and adopting a strategic plan for the Company;(b) Overseeing the conduct of the Company’s business;(c) Identification of principal risks and implementation of appropriate internal control and mitigation measures;(d) Succession planning;(e) Overseeing the development and implementation of a shareholder communications policy for the company;

and(f) Reviewing the adequacy and the integrity of the Group’s internal control systems and management

information systems.

1.2 The Chairman

Major General Dato’ Mamat Ariffin bin Abdullah (“Dato’ Mamat”) was appointed to the Board as an Independent Non-Executive Chairman with effect from 20 March 2019.

The Chairman is primarily responsible for overall matters of the Board and conduct of the Group.

The key roles and responsibilities of the Chairman are set out in the Board Charter of the Company which is available on its corporate website at www.connectcounty.com.

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PRINCIPLE A: BOARD LEADERSHIP AND EFFECTIVENESS (Cont'd)

Part 1 - Board Responsibilities (Cont'd)

1.0 Board’s Leadership on Objectives and Goals (Cont'd)

1.3 The Chairman and the Chief Executive Officer (“CEO”)

As at the LPD, the Board is chaired by Dato’ Mamat, who is an Independent Non-Executive Chairman, while Mr. Ang Chuang Juay is the Executive Deputy Chairman, the de-facto CEO of the Group.

The roles and responsibilities of the Chairman and the Executive Deputy Chairman are segregated and clearly defined in the Board Charter of the Company.

The Chairman is responsible for leading the Board while the Executive Deputy Chairman focuses on the business and day-to-day management of the Group.

1.4 Company Secretaries

The Board is supported by two (2) suitably qualified and competent Company Secretaries as follows:- • Ms. Chua Siew Chuan, FCIS • Mr. Cheng Chia Ping, ACIS

Both of the Company Secretaries possess valid Practicing Certificates issued by the Companies Commission of Malaysia and Malaysian Institute of Chartered Secretaries and Administrators (MAICSA) and are qualified to act as Company Secretaries under Section 235(2) of the Companies Act 2016.

All Directors have access to the advices and services of the Company Secretaries, who are responsible for providing advice on corporate governance best practices, ensuring that board procedures are followed and that applicable rules and regulations are complied with. The Company Secretaries would ensure that the deliberations at the Board’s and Board Committees’ meetings are well captured and minuted. The Company Secretaries also play a key role to facilitate communication between the Board and Management.

1.5 Circulation of Meeting Materials

Prior to each Board’s meeting, the agenda together with the detailed reports, relevant documentation and supplementary papers are circulated to the Directors at least three (3) business days in advance. This is to enable the Directors to obtain further explanations, where necessary, in order to be adequately informed before the meeting.

During the FYE 2019, the Minutes of meetings are circulated to the Directors in a timely manner after conclusion of the meetings.

2.0 Demarcation of Responsibilities

2.1 Board Charter

The Board has adopted a Board Charter which governs the conducts of the Company’s affairs. The Board Charter is applicable to all Directors of the Company and, amongst other things, provides that all Directors must avoid conflicts of interest between their private financial activities and their part in the conduct of company business.

The Board Charter is available on the Company’s website at www.connectcounty.com.

CORPORATE GOVERNANCE OVERVIEW STATEMENT (cont’d)


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Part 1 - Board Responsibilities (Cont'd)

3.0 Business Conduct

3.1 Code of Conduct and Ethics

The Board has adopted a Code of Conduct and Ethics for Directors (“the Code”) which sets forth the values, expectations and standards of business ethics and conduct to guide the Board, in attaining the best corporate governance practices as well as compliance with the relevant legislations.

The Code is established based on the principles in relation to the Board’s duty of care, integrity, responsibilities as well as corporate social responsibilities. It applies to both executive and non-executive Directors of the Company.

The Code has been entrenched into the Board Charter and is available on the Company’s website at www.connectcounty.com.

3.2 Whistle Blowing Policy

The Board has adopted a Whistle Blowing Policy since 19 November 2015.

This policy is also similarly applied to any vendors, partners, associates or any individuals, including the general public, in the performance of their assignment or conducting the business for or on behalf of the Company.

A copy of the Whistle Blowing Policy is available for viewing on the Company’s website at www.connectcounty.com.

Part 2 - Board Composition

4.0 Board’s Objectivity

4.1 Composition of the Board

As at the LPD, the Board comprises four (4) out of five (5) Independent Non-Executive Directors and it complies with Practice 4.1 of the MCCG which states that at least half of the Board comprises Independent Directors. The Board composition complies with Rule 15.02 of the ACE LR as follows:-

Name Designation

Major General Dato’ Mamat Ariffin bin Abdullah Independent Non-Executive Chairman (Appointed w.e.f. 20 March 2019) Ang Chuang Juay Executive Deputy Chairman Lim Bee San Independent Non-Executive Director Thong Mei Mei Independent Non-Executive Director Vivek a/l Sasheendran Independent Non-Executive Director (Appointed w.e.f. 1 April 2020)

4.2 Tenure of Independent Directors

There are no Independent Directors whose tenure exceeds a cumulative term of nine (9) years in the Company.


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Part 2 - Board Composition (Cont'd)

4.0 Board’s Objectivity (Cont'd)

4.3 Appointment of Board and Senior Management

In relation to appointment of Board member, the Board, vide the Nomination Committee (“NC”), would undergo the three-staged nomination process as follows:-

• Stage 1: Review of the potential candidates based on the criteria set • Stage 2: Board gaps review • Stage 3: Recommendation to the Board

The new appointment of senior management would be reviewed by the NC based on objective criteria, merit and with due regard for diversity in skills, experience, age, cultural background and gender.

4.4 Diversity of the Board and Senior Management Team

As at LPD, the Board consists of two (2) female Directors out of five (5) Directors, namely Ms. Lim Bee San and Ms. Thong Mei Mei, representing 40% of female representatives on Board, which has exceeded the target of at least 30% women Directors.

The Board is supportive of boardroom and senior management level gender diversity to promote constructive debates and add vibrancy to its decision-making process.

4.5 Source of Identifying New Directors

In identifying new Directors for appointment, the Board would consider recommendation from the existing Board members, management, or major shareholders.

In view of cost consideration and effectiveness, taking into account the operational requirement of the Group, the Board did not utilise independent sources to identify suitably qualified candidates.

Notwithstanding the above, all appointment of Directors would need to undergo the three-staged nomination process by the NC as mentioned in paragraph 4.3 above.

4.6 Nomination Committee

As at the LPD, the membership and meeting attendance of the NC are as follows:-

No. of meeting Members Designation/ attended / held during Directorate the financial year under review %

Major General Dato’ Mamat Chairman 1/1 100.0 Ariffin bin Abdullah (Independent Non- (Appointed w.e.f. 29 March 2019) Executive Chairman)

Lim Bee San Member 2/2 100.0 (Independent Non- Executive Director)

Thong Mei Mei Member 2/2 100.0 (Independent Non- Executive Director)



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4.0 Board’s Objectivity (Cont'd)

4.6 Nomination Committee (Cont'd)

The NC has undertaken the following activities in respect of FYE 2019:-

(i) Confirmed minutes of the preceding meetings.(ii) Reviewed and recommended to the Board, the re-election of the Directors who will be retiring at the

Sixteenth Annual General Meeting of the Company (“AGM”) held in 2019.(iii) Examined the current composition of the Board and the Board Committees.(iv) Reviewed the required mix of skills, experience, gender diversity and other qualities of the Board.(v) Reviewed the meeting attendance of the Board and members of the Board Committees for FYE 2019 and

reviewed the sufficiency of time commitment of the Directors in discharging their roles and responsibilities in the Company.

(vi) Reviewed the training programmes attended by the Board during FYE 2019 and training needs of the Directors for financial year ending 31 December 2020 ("FYE 2020").

(vii) Reviewed the length of service of each Independent Non-Executive Directors (“INED”) and assessed the independence of INEDs in accordance with Practice 4.2 of the MCCG.

(viii) Reviewed the term office and effectiveness of the Audit Committee as a whole for FYE 2019.(ix) Evaluated the effectiveness of the Board, as a whole, and the Committees of the Board for FYE 2019.(x) Evaluated the contribution and performance of each Individual Directors for FYE 2019.(xi) Reviewed and recommended to the Board, the re-election of the Directors who will be retiring at the

Seventeenth AGM to be held in 2020.

The Terms of Reference of the NC is available on the Company’s corporate website at www.connectcounty.com.

Directors’ Training

In order for the Group to remain competitive, the Board ensures that the Directors continuously enhance their skills and expand their knowledge to meet the challenges of the Board.

The Board has cultivated the following best practices:-

• All newly appointed Directors are to attend the Mandatory Accreditation Programme as prescribed by the ACE LR within the stipulated timeframe;

• All Directors are encouraged to attend talks, training programmes and seminars to update their knowledge on the latest regulatory and business environment;

• The Directors may be requested to attend additional training courses according to their individual needs as a Director or member of Board Committees on which they serve;

• The Directors are briefed by the Company Secretaries on the letters/circulars issued by Bursa Securities at every Board meeting; and

• The Directors are to undertake reconnaissance trip/ Board meetings at subsidiary(ies) of different jurisdiction to have a first-hand knowledge of the operations of the Group.

Upon assessing the training needs of the Directors, the Board recognised that continuing education would be the way forward in ensuring its members are continually equipped with the necessary skills and knowledge to meet the challenges ahead. The details on the continuing education programmes attended by the Directors are disclosed in the CG Report 2019.

2020 Training Needs

Upon review of the training needs of the Directors for the FYE 2020 and recognising the need to keep abreast with the fast changing business and regulatory environment, the NC has encouraged the Directors to continue to attend more than one (1) continuing education programme in FYE 2020, whereby it should be related to the industry-specific knowledge, corporate governance, MCCG or ACE LR.


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5.0 Overall Board Effectiveness

5.1 Annual Assessments

The NC had conducted the following annual assessments in respect of FYE 2019 and reported the same to the Board for notation:-

No. Subject Matters Evaluation Mechanism

(i) Term of office and effectiveness Assessment conducted by each NC member and of the Audit Committee results were compiled by the Company Secretaries and (ii) Effectiveness of the Board, as a whole, tabled at the NC meeting for review and the Committees of the Board

(iii) Contribution and performance of Conducted by way of self and peer assessment and each Individual Director results were compiled by the Company Secretaries and tabled at the NC meeting for review

Part 3 - Remuneration

6.0 Level and Composition of Remuneration of Directors and Senior Management

6.1 Remuneration Policy and Framework

The Board has adopted a formalised Remuneration Policy for Directors and Senior Management in November 2018.

This policy sets out the criteria to be used in recommending the remuneration package of Executive Directors and senior management of the Company which is in line with the best practice provisions of MCCG.

The Remuneration Policy for Directors and Senior Management is available on the Company’s corporate website at www.connectcounty.com.

6.2 Remuneration Committee

The Board has a Remuneration Committee to recommend to the Board the framework and remuneration packages of the Non-Executive Directors and Executive Directors, as well as senior management in all forms.

In respect of FYE 2019, the Remuneration Committee had undertaken the following activities:-

(a) Confirmed the minutes of the preceding meetings.(b) Reviewed and recommended the remuneration package for the Executive Director for the FYE 2019 and

FYE 2020.(c) Reviewed and recommended the Directors’ fees for the FYE 2019.(d) Reviewed and recommended the benefits payable to the Non-Executive Directors pursuant to Section

230(1)(b) of the Companies Act 2016.(e) Reviewed the remuneration package of the top five (5) senior management in respect of FYE 2019 and

2020.

The Terms of Reference of the Remuneration Committee is available for viewing on the Company’s corporate website at www.connectcounty.com.



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Part 3 - Remuneration (Cont'd)

7.0 Remuneration of Directors and Senior Management

7.1 Directors’ Remuneration

The details of the remuneration for Directors during the FYE 2019 are as follows:-

Company

Directors’Fees (RM)

Salaries

(RM)

Allowance

(RM)

Benefits-in-kind (RM)

OthersEmolu-ments

(RM)Total(RM)

Independent Non-Executive DirectorLim Bee San 24,000.00 - - - - 24,000.00Thong Mei Mei 36,000.00 - - - - 36,000.00Dato’ Mamat (Appointed w.e.f. 20 March 2019)

18,761.90 - - - - 18,761.90

Mok Shiaw Hang(Resigned w.e.f 29 March 2019)

6,000.00 - - - - 6,000.00

Ng Keok Chai(Appointed w.e.f. 20 March 2019 and resigned w.e.f. 29 May 2019)

3,921.33 - - - - 3,921.33

Subtotal 88,683.23 - - - - 88,683.23Executive DirectorAng Chuang Juay 12,000.00 - - - - 12,000.00Wong Pooi Fatt(Appointed w.e.f. 8 March 2019 and resigned w.e.f. 30 June 2019)

3,761.90 56,000.00 - - 7,027.80 66,789.70

Lee Su Lin(Appointed w.e.f. 8 March 2019 and resigned w.e.f. 30 June 2019)

3,761.90 56,000.00 - - 7,027.80 66,789.70

Subtotal 19,523.80 112,000.00 - - 14,055.60 145,579.40Non-Independent Non-Executive DirectorTan Sri Dato' Ahmad Fuzi bin Abdul Razak(Resigned w.e.f 8 March 2019)

4,571.43 - - - - 4,571.43

Chang Choon Ming(Resigned w.e.f 8 March 2019)

4,571.43 - - - - 4,571.43

Tan Sze Chong(Resigned w.e.f 8 March 2019)

4,571.43 - - - - 4,571.43

Subtotal 13,714.29 - - - - 13,714.29Total 121,921.32 112,000.00 - - 14,055.60 247,976.92


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7.0 Remuneration of Directors and Senior Management (Cont'd)

7.1 Directors’ Remuneration (Cont'd)

Group

Directors’Fees (RM)

Salaries

(RM)

Allowance

(RM)

Benefits-in-kind (RM)

OthersEmolu-ments

(RM)Total(RM)

Independent Non-Executive DirectorLim Bee San 24,000.00 - - - - 24,000.00Thong Mei Mei 36,000.00 - - - - 36,000.00Dato’ Mamat (Appointed w.e.f. 20 March 2019)

18,761.90 - - - - 18,761.90

Mok Shiaw Hang(Resigned w.e.f 29 March 2019)

6,000.00 - - - - 6,000.00


3,921.33 - - - - 3,921.33

Subtotal 88,683.23 - - - - 88,683.23Executive DirectorAng Chuang Juay 61,702.80 1,105,993.18 9,787.01 27,166.81 1,204,649.80Wong Pooi Fatt(Appointed w.e.f. 8 March 2019 and resigned w.e.f. 30 June 2019)

3,761.90 56,000.00 - - 7,027.80 66,789.70

Lee Su Lin(Appointed w.e.f. 8 March 2019 and resigned w.e.f. 30 June 2019)

3,761.90 56,000.00 - - 7,027.80 66,789.70

Subtotal 69,226.60 1,217,993.18 - 9,787.01 41,222.41 1,338,229.20Non-Independent Non-Executive DirectorTan Sri Dato' Ahmad Fuzi bin Abdul Razak(Resigned w.e.f 8 March 2019)

4,571.43 - - - - 4,571.43

Chang Choon Ming(Resigned w.e.f 8 March 2019)

4,571.43 - - - - 4,571.43

Tan Sze Chong(Resigned w.e.f 8 March 2019)

4,571.43 - - - - 4,571.43

Subtotal 13,714.29 - - - - 13,714.29Total 171,624.12 1,217,993.18 0.00 9,787.01 41,222.41 1,440,626.72



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7.0 Remuneration of Directors and Senior Management (Cont'd)

7.2 Remuneration of Top Five (5) Senior Management

The top five (5) senior management includes one (1) Executive Deputy Chairman, of which his detailed remuneration was disclosed in the table above.

Whilst for the remaining senior management, the Board is of that view that the disclosure on named basis would have adverse effect on the Company’s talent retention in the competitive industry. All senior management are remunerated based on their scope of duties and responsibilities.

The disclosure of the remuneration received by the senior management in the band of RM50,000/- were disclosed in the CG Report 2019, which can be downloaded from the Company’s corporate website at www.connectcounty.com.

PRINCIPLE B: EFFECTIVE AUDIT AND RISK MANAGEMENT

Part 1 - Audit Committee 8.0 Effective and Independent Audit Committee

8.1 Chairman of Audit Committee

As at the LPD, the Chairperson of the Audit Committee is Ms. Thong Mei Mei, an Independent Non-Executive Director, while the Board is chaired by Dato’ Mamat, an Independent Non-Executive Chairman. The Chairperson of the Audit Committee is not the Chairman of the Board.

8.2 Policy on Appointment of Former Key Audit Partner as Audit Committee Member

The Audit Committee did not adopt a policy that requires a former key audit partner to observe a cooling-off period of at least two (2) years before being appointed as a member of Audit Committee. However, the Board had revised the Terms of Reference of the Audit Committee to formalise the above requirement which is in line with Practice 8.2 of the MCCG.

8.3 Policies and Procedures to assess the Suitability, Objectivity and Independence of the External Auditors

The Audit Committee has adopted policies and procedures to assess the suitability, objectivity and independence of external auditors and that such assessment has been carried out annually.

The outcome of the assessment would form a basis for the Audit Committee in making recommendation to the Board on the re-appointment of the external auditors for the ensuing year at the Annual General Meeting.

8.4 Composition of Audit Committee

The composition of the Audit Committee complies with the composition requirements as set out in Rule 15.09 of ACE LR. The Company has adopted the Step-Up Practice 8.4 of the MCCG, whereby the Audit Committee comprises solely of Independent Directors.

8.5 Necessary Skills Required by the Audit Committee Members

The members of the Audit Committee possess the relevant or related experience and expertise in the financial service industry to effectively carry out their duties and responsibilities. The members of the Audit Committee collectively have the necessary skills and experience and expertise in areas such as accounting and auditing, taxation, finance, legal, sales and marketing and information technology and investment.


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PRINCIPLE B: EFFECTIVE AUDIT AND RISK MANAGEMENT (Cont'd)

Part 2 - Risk Management and Internal Control Framework 9.0 Effective Risk Management and Internal Control Framework

The Board has adopted an Enterprise Risk Management Framework to manage its risk and opportunities.

The Board has adopted Step-Up Practice 9.3 of MCCG, where a Risk Management Committee is established to identify, evaluate, monitor and manage any relevant major risks faced by the Group so that the Group could achieve its business objectives. The Risk Management Committee reports to the Board directly.

As at the LPD, the Risk Management Committee is made up of the following members:-

Name Designation

Mr. Ang Chuang Juay Chairman (Executive Deputy Chairman) Ms. Thong Mei Mei Member (Independent Non- Executive Director) Mr. Lim Yew Chai Member (Group Accountant)

The Group has appointed an outsourced internal audit service provider, Enrichvision Resources Advisory Sdn. Bhd. (“Enrichvision”) to carry out the internal audit function for FYE 2019. The purpose of the internal audit function is to provide the Board, through the Audit Committee, reasonable assurance of the effectiveness of the system of internal control in the Group.

The internal controls are tested for effectiveness and efficiency in one (1) cycle for FYE 2019 by Enrichvision following the risk-based approaches. The reports of the internal audit findings were tabled for the Audit Committee’s review and deliberations, and the audit findings were then communicated to the Board.

The full features of the risk management and internal control framework are set out in the Statement on Risk Management and Internal Control in this Annual Report.

10.0 Effective Governance, Risk Management and Internal Control Framework

In order to ensure an effective governance, risk management and internal control framework within the Company, the Group has outsourced its internal audit function to Enrichvision. The outsourced internal auditors report directly to the Audit Committee and provide the Board with a reasonable assurance of adequacy of the scope, functions and resources of the internal audit function.

The internal audit function is independent and performs audit assignments with impartiality, proficiency and due professional care.

For the FYE 2019, Enrichvision has confirmed to the Audit Committee that all its engagement team personnel are free from any relationships or conflicts of interest, which could impair their objectivity and independence.



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PRINCIPLE (C): INTEGRITY IN CORPORATE REPORTING AND MEANINGFUL RELATIONSHIP WITH STAKEHOLDERS

Part 1 - Communication with Stakeholders 11.0 Continuous Communication between the Company and Stakeholders

The Company acknowledges the importance of the long-term commitment with the shareholders. The Board has adopted a Corporate Disclosure Policy that provides guidance as well as ensuring a consistent approach towards the Company’s communication with the shareholder. The Company adopts the practice comprehensive, timely and continuing disclosures of information to its shareholders and stakeholders.

A copy of the Corporate Disclosure Policy is available for viewing on the Company’s corporate website at www.connectcounty.com.

The Board has adopted the following measures with regards to communication with the Company’s shareholders:-

(i) Regular announcements to Bursa Securities;(ii) Corporate website;(iii) Annual reports;(iv) General meetings; and(v) Designated contact persons for enquiry.

The Company did not adopt the integrated reporting based on a globally recognised framework as the Company is not classified as “Large Company”.

Part 2 - Conduct of General Meetings

12.0 Engagement of the Board with the Shareholders

The Annual General Meeting is used as the main forum of dialogue for shareholders to raise any issues pertaining to the Company. As a good corporate governance practice, the Notice of the Sixteenth AGM held in 2019 was issued at least 28 days prior to the meeting.

All the members of the Board and Chairmen of the Board Committees were present at the AGM 2019 to address the shareholders’ enquiry and concerns.

KEY FOCUS AREAS AND FUTURE PRIORITIES

Looking ahead to FYE 2020, the Board and its respective Board Committees will:-

• Focus on major strategic issues to ensure sustainability and growth;

• Continue to monitor succession planning for the senior leadership team, to ensure a healthy pipeline of talent is emerging for future senior executive management;

• Consider other variety of approaches and independent sources to identify suitable candidate for appointment of Directors, should the need arise; and

• Continue to review the balance, experience and skills of the Board.

CONCLUSION

The Board is satisfied that, the Company complies substantially with the practices of the MCCG during the FYE 2019.

This Statement and CG Report 2019 are made in accordance with the resolutions passed by the Board on 29 May 2020.


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The Board of Directors (“Board”) views the commitment to sustainability and environmental, social and governance (“ESG”) performance as part of its broader responsibility to clients, shareholders and the communities in which it operates. The Board also acknowledges that effective management of material economic, environmental and social (“EES”) risks and opportunities of the Company and its subsidiaries (“the Group”) business environment can improve business performance and operational efficiencies and create sustainable value. This has led to the increase oversight by the Board over how the Group is managing its EES performance as part of its fiduciary obligation and accountability.

The Group believes that part of being a good company is the commitment to uphold management and development on the EES risks and opportunities. Aligned with the Group’s business strategy, we endeavour to manage our business through strengthening our operational efficiencies and creating sustainable value to look after the interests of our key stakeholders – from shareholders, investors, customers, suppliers to employees, as well as the community.

Sustainable practices have long been followed by the Group since its disclosure on Corporate Social Responsibility (“CSR”) Statement. We have migrated from the CSR Statement to the Sustainability Statement in line with Paragraph 30 of Appendix 9C and Guidance Note 11 of the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Malaysia Securities”), which requires the Group to prepare its Sustainability Statement in our Annual Report for the financial year ended 31 December 2019 (“FYE 2019”).

Our Sustainability Statement is prepared based on Bursa Malaysia Securities’ Sustainability Reporting Guide and its accompanying toolkits. We focus our sustainability efforts on issues that matter most to our stakeholders by categorising our material sustainability matters into three (3) pillars, i.e. Economic, Environment and Social.

ECONOMIC

The Group is committed to pursue economic growth to meet long-term value for the stakeholders. We focus not only on sustainability growth of existing core business, but also explore new strategic direction through diversification into new business.

Corporate Governance

The Company continues to be guided to ensure the long-term success of the core business and optimum balance of a sound and sustainable business operation with an optimal corporate governance framework in order to safeguard stakeholders’ value. This is through reviewing the Group’s strategic plans or budget, financial statements, dividend policy, risk management, significant acquisitions and disposals, investments in significant joint ventures, significant property transactions, significant capital expenditure, as well as opportunity of diversification.

For insights into the detail of sustainability on corporate governance in particular, please refer to the Corporate Governance Overview Statement in this Annual Report.

Core Business Strategies

As we are a global company facing the challenges in evolving economic, business and global political environments, the Company employs specific tactics to meet the ever-changing customer demands. These include vertical integration services and solutions, backward integration and strategically-located warehousing. The Group’s core market is from Connected Homes and Offices sector but we also emphasise the importance of increasing market share in Automotive and White Goods sector.

Product Innovation and Quality Management

Emphasising in product innovation, highly-experienced research and development team staying up-to-date with technologies affecting the market and consumers’ requirements allow the Company to collect critical information to formulate appropriate marketing strategy and to influence our approach in the planning and implementation stages of automation along production and assembly line. This is also an important part in implementing our cost reduction initiatives.

We continue to enhance and invest in research and development activities to bolster our competitiveness via an expanded range of product designs and applications.

SUSTAINABILITY STATEMENT


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ECONOMIC (Cont’d)

Product Innovation and Quality Management (Cont’d)

Our quality management system is certified as compliance with ISO 9001:2015. We possess manufacturing license, product licensing and are awarded with product certification to ensure that our products are having the highest level of quality. In addition, our quality management system is also assessed and registered against the provision of IATF 16949:2016 of automotive industrial quality management system. We are also adherent to the widely accepted industrial specification of products such as IPC/WHMA-A620, being the industry consensus standard for cable and wire harness fabrication and installation.

Diversification

Diversification plan is our long-term strategy not only to achieve growth to the Company but also to preserve capital and minimise risk of loss. The Company has been exploring potential business in 2019, being part of the Group’s corporate strategy planning.

For insights into the development, please refer to the Statement on Management Discussion and Analysis of this Annual Report.

ENVIRONMENT

The Group believes that it has a moral and social responsibility in contributing towards a greener environment. Thus, we are committed to identify, manage and minimise the environmental impact of its business operations and manufacturing activities through following actions.

Lesser Material Consumption, Wastage, Pollution and Energy Usage

Rapid Conn (Shenzhen) Co. Ltd. (“RCC”), being the manufacturing outfit of the Group, has re-engineered some of its products to increase the efficiency of material and labour consumption.

The Group has been progressively looking into potentially new areas for automating certain manufacturing processes along the assembly lines, thereby reducing the amount of material usage and wastage, as well as optimising the utilisation of labour resources.

We are also aware of the potential health risks caused by environmental pollution such as water, noise and air pollution. Emitted pollutants and compounds are collected and analysed. Reports shown that test of various investigated parameters ware passed.

The Group’s efforts to conserve the environment also see it following ongoing practices to conserve energy by controlling temperature setting of air-conditioning, maintaining the power plant at the optimum level, using lighting efficiently e.g. allow more natural light, switch off lights when not in use and minimise printing and using recycled papers.

Adherence to Laws, Regulations and Requirements

The Group complies with environmental regulatory and legal requirements through minimising the level of pollutants entering into the air and water from daily business operations.

The Group adopts Restriction of Hazardous Substances, or ROHS which practise hazardous substance control on the restriction of the use of certain hazardous substances in electrical and electronic equipment. The Group also complies REACH which is an authorisation procedure aiming to ban the use of substances of very high concern (SVHC), so as to substitute them by technically and economically feasible alternatives.

SUSTAINABILITY STATEMENT (cont’d)

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ECONOMIC (Cont’d)

Adherence to Laws, Regulations and Requirements (Cont’d)

In addition, we practise JIG, the Joint Industry Guide-Material Composition Declaration for Electronic Products’ guide which represents industry-wide consensus on the relevant materials and substances that shall be disclosed when those materials and substances are present in products that are incorporated into electrotechnical products. The Guide also benefits our customers by providing consistency and efficiency to the material declaration process and will promote the development of consistent data exchange formats and tools that will facilitate and improve data transfer along the entire global supply chain.

We follow the policies which are inherent to the corporate social responsibility management system (“CSRMS”). The guidelines encompass the compliance of environmental and labour regulations which cover the improvement of working conditions, protection of worker benefit and practice of social activities. We develop, maintain and implement it by referring to ISO9001: 2015 Quality Management Systems Requirements, ISO14001:2015 Environmental Management Systems (“EMS”), OHSAS18001:1999 Occupational Health and Safety Assessment Series and local rules and regulations.

Establishment of Environmental Management System

In compliance with ISO 14001:2015, the Company establishes, implements and maintains an environmental management system to assure the conformity with its stated environmental policy. It enables us to develop and implement a policy and objectives in considering respective legal requirements and other requirements to which we subscribe, and information about significant environmental aspects.

We continuously review the controls and standard operating procedures with regards to its business operations and manufacturing activities with a view to managing, attaining and improving the Group’s environmental sustainability objectives.

To create an ever-increasing awareness of this initiative within the Group and stakeholders, training programs have been organised for the employees, and we also ensure adherence to our policy on environmental, health and safety guidelines and practices. Our policy can be found on Rapid Conn Group’s official website: http://www.rapidconn.org.

SOCIAL

Workplace

The Group continues to invest in its employees amid constantly evolving information, technology and latest regulatory requirements.

1. Training and Development

Training programmes, both internal and external, are organised to deliver an all-round training experience to our employees to upgrade their skill sets, job knowledge and competency level in promoting personal development and achieving higher level of in productivity.

For the FYE 2019, at least 40 training sessions had been organised covering environment, health and safety, quality, productivity, administration, human resource, personal development, internal control and financial reporting.

2. Workplace Diversity

The Group embraces diversity at the workplace and is committed to provide a fair and equal opportunity for its employees. We do not allow room for any form of discrimination practice against people of different gender, age, ethnicity, nationality or marital status.



40

SOCIAL (Cont’d)

Workplace (Cont’d)

2. Workplace Diversity (Cont’d)

By employing a diverse workforce, the Group is able to have a better understanding of current dynamic market demographics. It also enables the Group to tap into a pool of people from diverse background who can provide unique market insights or generate creative solutions, thereby increasing the Group’s competitiveness in globalised and challenging economy.

Please note that all members of the Board are also included as part of the Group’s workplace diversity in terms of gender, age and ethnicity.

a. Gender diversity

As at 31 December 2019, the Group recorded a male to female ratio of 53:47 (2018: 62:38) within its workforce, and we believe that having gender diversity will create more conducive and productive workplace.

b. Age diversity

As at 31 December 2019, 43% of our employees belong to the age group of between 30 and 39 representing the largest age group. The next largest age group is those aged between 20 and 29 being 21%, followed by those aged between 40 and 49 years being 19%. The Group has a very strict employment policy against the hiring of minors or underage workers and in this respect, it is consistent with the related labour laws of the country in which it operates.

The Group’s age demographics broadly reflected those overseas where the younger age employees form the majority of the workforce.

c. Ethnicity diversity

As most of the staff come from oversea subsidiaries located in United States of America (“USA”), Singapore and China, the demographics of the ethnicity of the Group’s employees are broadly reflected accordingly. From this perspective, any non-citizens of Malaysia, regardless of race, are considered as “other” in the below ethnicity distribution pie chart.

As at 31 December 2019, employment of non-Malaysian citizens ethnicity constituted the largest workforce of the Group at 95%.


53%47%

Workforce in terms of Gender

Male

Female

2%

21%

43%

18%

11%5%

Workforce in terms of Age

< 20 years

20-29 years

30-39 years

40-49 years

50-59 years

60 years andabove

0.8% 5%

95%

Workforce in terms of Ethnicity

Malay

Chinese

Indian

Other

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SOCIAL (Cont’d)


3. Healthy and Safe Working Environment

The Group continuously strive to provide a healthier and safer working environment for our employees. For safer working environment, regular workplace inspection is one of the main duties of the Management to ensure work places are uncluttered, neat, tidy and safe. Fire and safety drills, as well as risk awareness campaigns and training are held regularly to ensure that employees are well prepared in the event of an emergency.

To promote a healthier working environment, the Group encourages its employees to take part in sports and other health-related activities.

4. Employees’ Well Being

As a caring and law-abiding employer, the Group has ensured that all the benefits-in-kind and/or perks as required by the local legislation (where the individual subsidiary operates) are accorded and complied with.

The Group creates a conducive working environment for the employees by providing benefits such as:-

a. Hostel accommodation – provided to out-of-town employees. The hostel is situated adjacent to the manufacturing plant;

b. Food subsidy allowance – free and discounted meals based on length of services;

c. Staff welfare store – a purpose-built subsidised convenience store within the compound of RCC for the benefit of the employees who stayed in the hostel accommodation;

d. Financial assistance – provided by the welfare committee to relief and support workers facing difficulties;

e. Annual dinner - as an appreciation towards staff for their hard work and dedication throughout the year; and

f. Annual events – team building and outdoor activities for staff and its family members. We believe that it will create more effective, friendly and confident team spirit among the staff who will not only produce better results in work environment but also lead to greater self-satisfaction and motivation. The family members are also invited together and they enjoyed their great moment in the activities.



42


SOCIAL (Cont’d)


4. Employees’ Well Being (Cont’d)

Community

The Group recognises that the community plays an essential role in driving the success of its business. In view thereof, the Group has made its contribution back to society. For the FYE 2019, the following community activities were carried out by the Group:-

1. Community Welfare and Development

We sponsored winter coats and free meal to social workers who involved in environmental development and improvement. It was an opportunity for us to give well deserved thanks and recognise the impact of their tireless effort and work have in the society.

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SOCIAL (Cont’d)

Community (Cont’d)

1. Community Welfare and Development

Our staff, joint with communities and individuals to give their time and dedication to make the city a cleaner and nicer place to live.

2. Study grant

The Company provided study grant to deserving high school students for their family financial ease.

3. Sponsorship towards Lions Clubs International

The Company contributed sponsorship funds to the Malaysia District of Lions Clubs International, a global leader in community and humanitarian service, in helping the volunteers to serve communities, meet humanitarian needs, encourage peace and promote international understanding.

CONCLUSION

Notwithstanding the initiative disclosed in this section, the Group also considers other areas of risks and opportunities of the sustainability in respect of economic, environmental and social matters. Additional efforts and resources will be invested to manage and improve these matters where applicable. The Group is committed to understanding and implementing sustainable practices and to exploring the benefits to the business whilst attempting to achieve the right balance between the needs of the wider community, the requirements of shareholders and stakeholders, and economic success.


44

The Board of Directors (“the Board”) presents the Audit Committee Report to provide insights on the discharge of the Audit Committee’s functions during the financial year ended 31 December 2019 (“FYE 2019”), in compliance with Rule 15.15(1) of the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad (“ACE LR”) and the Malaysian Code on Corporate Governance (“MCCG”).

COMPOSITION

As at 29 May 2020, being the latest practicable date (“LPD”) for this Audit Committee Report, the Audit Committee comprises three (3) members, all of whom are Independent Non-Executive Directors. All of the members of the Audit Committee satisfied the test of independence under the ACE LR and also met the requirements of the MCCG.

Furthermore, in adopting the Step-Up Practice 8.4 of the MCCG, the Audit Committee comprises solely Independent Directors.

The composition of the Audit Committee is as follows:

Name Designation Directorate

Thong Mei Mei Chairperson Independent Non-Executive DirectorLim Bee San Member Independent Non-Executive DirectorMajor General Dato’ Mamat Ariffin bin Abdullah(Appointed w.e.f. 29 March 2019)

Member Independent Non-Executive Chairman


Member Independent Non-Executive Director

Mok Shiaw Hang(Resigned w.e.f. 29 March 2019)

Member Independent Non-Executive Director

The Chairperson of the Audit Committee, Ms. Thong Mei Mei is an Independent Non-Executive Director. In this respect, the Company complies with Rule 15.10 of the ACE LR. Furthermore, in compliance with Practice 8.1 of the MCCG, the Chairperson of the Audit Committee is not the Chairman of the Board.

In addition, Ms. Thong Mei Mei is member of the Malaysian Institute of Accountants (MIA) and associate member of Chartered Institute of the Management Accountants (CIMA), United Kingdom. In this respect, the Company complies with Rule 15.09(1)(c) of the ACE LR.

Assessment on the Term of Office and Performance of the Audit Committee

The Nomination Committee had in February 2020, reviewed the term of office and performance of the Audit Committee, as well as whether its members had carried out their duties in accordance with the Terms of Reference (“TOR”) of Audit Committee for the FYE 2019.

Upon review, the Nomination Committee was satisfied with the overall performance of the Audit Committee and its individual members for FYE 2019. The Nomination Committee had reported its satisfaction to the Board of Directors for notation.

Formal assessment on the External Auditors (“EA”)

The Audit Committee has its procedures to assess the suitability, objectivity and independence of the external auditors on annual basis, prior to making their recommendation to the Board whether to seek shareholders’ approval at the forthcoming Annual General Meeting (“AGM”) for the re-appointment of external auditors for the ensuing year.

Upon completion of its assessment for FYE 2019, the Audit Committee was satisfied with Messrs. Moore Stephens Associates PLT’s technical competency i.e. effectiveness, suitability and independence during the financial year under review and recommended to the Board the re-appointment of Messrs. Moore Stephens Associates PLT as the external auditors of the Company for the financial year ending 31 December 2020 (“FYE 2020”). The Board had in turn, recommended the same for shareholders’ approval at the forthcoming AGM of the Company.

AUDIT COMMITTEE REPORT

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MEETINGS AND ATTENDANCES

The Audit Committee held a total of five (5) meetings during the FYE 2019 and the details of attendance of the members during the financial year were as below:-

Members

Total no. of meetings attended

Total no. of meetings

held during tenure of

office %Thong Mei Mei 4 5 80.00Lim Bee San 5 5 100.00Major General Dato’ Mamat Ariffin bin Abdullah(Appointed w.e.f. 29 March 2019)

4 4 100.00


1 1 100.00

Mok Shiaw Hang(Resigned w.e.f. 29.03.2019)

1 1 100.00

The lead audit partner of the external auditors responsible for the Company and its subsidiaries ("Group") had attended three (3) Audit Committee Meetings held during FYE 2019.

The external auditors are encouraged to raise with the Audit Committee any matters they considered important to bring to the Audit Committee’s attention. For FYE 2019, two (2) private sessions were held between the Audit Committee and the external auditors without the presence of the Executive Board members and management personnel.

The Audit Committee Chairperson sought information on the communication flow between the external auditors and the Management which is necessary to allow unrestricted access to information for the external auditors to effectively perform their duties.

Notices of the Audit Committee Meeting were sent to the Audit Committee members at least seven (7) days in advance. Robust discussions between the Audit Committee and Management were held and the Audit Committee has consistently applied a critical and probing view on the Company’s financial reporting process, transactions and other financial information.

All deliberations during the Audit Committee Meetings were duly minuted. Minutes of the Audit Committee Meetings were tabled for confirmation at every succeeding Audit Committee Meeting. The Audit Committee Chairperson presented the Audit Committee’s recommendations together with the respective rationale to the Board for approval of the annual audited financial statements and the unaudited quarterly financial results. As and when necessary, the Audit Committee Chairperson would convey to the Board, matters of significant concern raised by the internal or external auditors.

TOR

The TOR of the Audit Committee was last reviewed in March 2018, which is in line with the ACE LR and MCCG.

A copy of the latest TOR of the Audit Committee is available for viewing under “Corporate Governance” section of the Company’s website at www.connectcounty.com.

AUDIT COMMITTEE REPORT(cont’d)


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SUMMARY OF WORKS

In respect of the FYE 2019, the summary of works undertaken by the Audit Committee was as follows:-

1. Overview of Financial Performance and Reporting

• Reviewed the unaudited quarterly financial results for the quarters ended 31 December 2018, 31 March 2019, 30 June 2019 and 30 September 2019 and recommended the same for the Board’s approval.

• Reviewed the annual budget of the Group for FYE 2020 and deliberated on the assumptions made in preparing the annual budget, and recommended the same to the Board for approval and adoption.

• Reviewed the financial performance and financial highlights of the Group on quarterly basis.

• Reviewed the identified significant matters pursuant to Rule 15.12(1)(g)(ii) of the ACE LR.

• Reviewed the draft audited financial statements for the financial year ended 31 December 2018 (“FYE 2018”) and recommended the same for the Board’s approval.

2. Oversight of External Auditors

• Received the Audit Progress Memorandum prepared by the external auditors for the FYE 2018, covering areas of concern and areas for improvement and status of the audit field works.

• Discussed with the external auditors, the applicability and the impact of the new accounting standards and new financial reporting regime issued by the Malaysian Accounting Standards Board and reviewed the Audit Planning Memorandum for the FYE 2019 prepared by the external auditors, entailing mainly the audit approach and timeline and areas of audit emphasis of the Group.

• Met twice with the external auditors without the presence of the Executive Director and management personnel.

• Reviewed the effectiveness, suitability and independence of the external auditors in respect of FYE 2019 vide a formalised “Assessment on External Auditors” and upon reviewed and being satisfied with the results of the said assessment, the same had been recommended to the Board for consideration and thereafter recommendation of the same to the shareholders for approval at the Seventeenth AGM of the Company.

• Reviewed the statutory audit fees for FYE 2019 and recommended to the Board’s approval.

3. Oversight of Internal Audit Function

• Recommended to the Board for a change of Internal Auditors for FYE 2019, from Morison AAC Corporate Solutions Sdn. Bhd. to Enrichvision Resources Advisory Sdn. Bhd.

• Reviewed the Internal Audit Plan for the Group for the FYE 2019 and approved for adoption of the same by the Group throughout FYE 2019.

• Reviewed the Internal Audit Report for the FYE 2019 and assessed the internal auditors’ findings and the Management’s responses and made the necessary recommendations to the Board for approval.

• Reviewed the progress updates on the follow-up review of the previous Internal Audit Reports.

• Evaluated the performance of the outsourced Internal Auditors and reviewed the adequacy of the scope, competency and resources of internal audit function for the FYE 2019, as well as the weaknesses in the Group’s internal control system were appropriately addressed.


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SUMMARY OF WORKS (Cont’d)

4. Oversight of Internal Control Matters

• Reviewed and confirmed the minutes of the Audit Committee Meetings.

• Reviewed the disclosures in Audit Committee Report and Statement on Risk Management and Internal Control to be included in the Annual Report 2018.

• Recommended to the Board, the adoption of Whistleblowing Policy and Policies and Procedures to Access the Suitability, Objectivity and Independence of the External Auditors.

5. Review of Related Party Transactions

• Reviewed the related party transactions and conflict of interest situation that arise within the Group on quarterly basis, including any transaction, procedure or course of conduct that raises questions on Management integrity.

The Board is satisfied that the Audit Committee has carried out their responsibilities and duties in accordance with the Audit Committee’s TOR.

INTERNAL AUDIT FUNCTION

(1) Appointment

The internal audit services of the Group for FYE 2019 were outsourced to Enrichvision Resources Advisory Sdn. Bhd. (“Enrichvision”).

The purpose of the internal audit is to provide the Board, through the Audit Committee, reasonable assurance of the effectiveness of the system of internal control in the Group.

The internal audit function of the Group is independent and performs audit assignments with impartiality, proficiency and due professional care.

The profile of Enrichvision is set out as follows:-

Principal Engagement Lead : Mr. Clement Cheong, CA(M), CPA, MBA Director, Corporate Governance & Risk Management

Qualifications : ■ Member of the Malaysian Institute of Accountants ■ Member of the Malaysian Institute of Certified Public Accountants ■ Master of Business Administration, University of Bath ■ Charter Member, Certified Risk Professional

Experiences : Mr. Clement Cheong has over fifteen (15) years of professional experience in providing internal audit, risk management advisory as well as financial management advisory services.

He began his accountancy training with one of the Big Four accounting practice and then moved on to the banking and finance sector. He had held various key positions in the banking industry, serving as the Chief Internal Auditor of three major public listed financial institutions. He had also served as the Chief Financial Officer of a major public listed banking group. He was also involved in the setting up of the Integrated Risk Management division and had overseen Remedial Management for a major bank.

Number of resources : The engagement team consisted of five (5) personnel, including the principal engagement lead, while the fieldwork for the audited areas were conducted by three (3) personnel.



48

INTERNAL AUDIT FUNCTION (Cont'd)

(1) Appointment (Cont'd)

For FYE 2019, the engagement team personnel have affirmed to the Audit Committee that in relation to the Company/Group, they were free from any relationships or conflicts of interest, which could impair their objectivity and independency.

(2) Summary of Works of the Internal Audit Function for FYE 2019

During the FYE 2019, the summary of works undertaken by the internal auditors comprised the following:-

• Reviewed compliance with policies, procedures and standards, relevant external rules and regulations;

• Assessed the adequacy and effectiveness of the Group’s system of internal control and recommended appropriate actions to be taken where necessary;

• The internal audits performed met the objective of highlighting to the Audit Committee the audit findings which required follow-up actions by the Management, any outstanding audit issues which required corrective actions to be taken to ensure an adequate and effective internal control system within the Group, as well as any weaknesses in the Group’s internal control system;

• Ensured that those weaknesses were appropriately addressed and that recommendations from the internal audit reports and corrective actions on reported weaknesses were taken appropriately within the required timeframe by the Management; and

• Presentation of audit findings and corrective actions to be taken by Management in the quarterly Audit Committee Meetings.

For the FYE 2019, the following areas of the Group had been audited by Enrichvision in accordance with the risk-based audit plan adopted:-

Name of Audited Subsidiary Audit Area/ Function Tabling of Internal Audit Report

RapidConn (S) Pte. Ltd. • Procurement Management• Payment and Accounts Payable• Sales and Revenue Management• Account Receivable Management

November 2019

(3) Total costs incurred for FYE 2019

The total cost incurred for the outsourced internal audit function of the Group for the FYE 2019 is amounted to RM7,850/- (2018: RM41,450/-).

This Audit Committee Report is made in accordance with a resolution passed by the Directors on 29 May 2020.


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The Board of Directors (“the Board”) is pleased to present the Statement on Risk Management and Internal Control (“SORMIC”), which is made pursuant to Paragraph 15.26(b) of the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad (“ACE LR”) and in accordance with Part II of Principle B, Intended Outcome 9.0, Practices 9.1 and 9.2 and Guidance 9.1 and 9.2 relating to risk management and internal controls framework provided in the Malaysian Code on Corporate Governance (“MCCG”) as well as the Statement on Risk Management and Internal Control: Guidelines for Directors of Listed Issuers.

THE BOARD’S ROLE AND RESPONSIBILITY

The Board assumes its role and the importance of good corporate governance policies and practices and is therefore, committed to maintaining a sound, effective and robust enterprise risk management (“ERM”) framework and internal control system.

The Board acknowledges that the ERM framework and the system of internal controls can only provide reasonable, but not absolute, assurance against any material misstatement, fraud or loss as they are designated to manage rather than eliminate the risk of failure to achieve the Group’s business objectives, and to safeguard shareholders’ investments and the Company and its subsidiaries’ (“the Group”) assets.

The Board has overall responsibility for the Group’s ERM framework and internal control system rather than directly involves in managing risks. The Board assumes an oversight role and establish an on-going process for reviewing the adequacy and integrity of risk management and internal controls are as follows:-

1. Identifying material risks, implementing appropriate and relevant control measures to evaluate and manage these risks, and reviewing the adequacy, relevance and integrity of both the ERM framework and internal control system;

2. Ensuring policies and procedures involve risk management that are consistent with the Company’s strategic and business objectives;

3. Following up on the Management’s implementation of risk management, and be assured that they function as intended; and

4. Taking steps to foster risk awareness and encourage an organisational culture of risk adjusting awareness.

For the financial year ended 31 December 2019 (“FYE 2019”), assurance are obtained from the Executive Deputy Chairman (i.e. the de facto Group’s Chief Executive Officer), who is primarily responsible for the Group’s operations and the Group Accountant, being the officer, primarily responsible for the management of the financial affairs of the Company, that throughout FYE 2019, the Group’s risk management and internal control systems are operating effectively. The assurance given by the Executive Deputy Chairman and Group Accountant is supported by risk assessments carried out by the senior management team.

STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL


50

THE CONTROL STRUCTURE

The overall control environment is established and the monitoring mechanisms are developed and implemented involving the Board, its Risk Management Committee (“RMC”) and the senior management team who implement and maintain the risk management and control system.

As at 31 March 2020, being the latest practicable date for the SORMIC, the composition of the RMC is as follows:-

Name Designation Directorate/DesignationMr. Ang Chuang Juay Chairman Executive Deputy ChairmanMs. Thong Mei Mei Member Independent Non-Executive DirectorMr. Lim Yew Chai Member Group Accountant

Although the Board liaises directly with the external auditors and the internal auditors, it may, when the situation calls for it, relies on external consultants or professionals to obtain further assurance.

RISK MANAGEMENT

The risk management approach adopted by the Group is objective driven and uses the basic “cause, risk and effect” principle to describe risk (i.e. risk profiling).

Purpose and Application

Risk assessment is intended to furnish the Management with information regarding events that could impact the achievement of objectives. It is best coordinated and integrated into existing management and operational processes that should be carried out using a top-down approach that is complemented by a bottom-up appraisal methodology.

The ERM framework considers all inherent and residual risks, including how risks interrelate, and develops a portfolio view of risks from both subsidiary and entity level perspectives.

The purpose of risk management is to identify potential problems before they occur so that risk-handling activities may be planned and invoked as needed across the life of the product or project to mitigate adverse impacts on achieving objectives.

Risk management is a continuous, forward-looking process which is an important part of business and technical management processes. It addresses issues that could endanger achievement of critical objectives. A continuous risk management approach is applied to effectively anticipate and mitigate the risks that have critical impact on the business.

STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL(cont’d)

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The Risk Management Process

THE COMPANY'S STRATEGIC OBJECTIVES

Risk Analysis Risk Identification Risk Description Risk Estimation

Risk Evaluation

RISK REPORTING Threats and Opportunities

DECISION

RISK TREATMENT

RESIDUAL RISK REPORTING

MONITORING

RISK ASSESSMENT

FORMAL AUDIT M

odifi

catio

n

The above is a diagrammatical representation of the risk management process which was developed by the major risk management organisations in the United Kingdom – The Institute of Risk Management (IRM), The Association of Insurance and Risk Managers (AIRMIK), and The National Forum for Risk Management in the Public Sector (ALARM).

The ERM framework adopted by the Company is based on the risk management framework developed by the above internationally-recognised professional bodies in risk management field.

The steps within the process are incorporated in the Company’s risk register and references are made in the subsidiaries’ standard operating procedures (SOP).

As the Company’s risk management framework is objective driven, this approach will certainly protect, while at the same time add value to the Group and its stakeholders by:-

1. Providing a framework for the Group that enables future activity to take place in a consistent and controlled manner;2. Improving decision making, planning and prioritisation by comprehensive and structured understanding of business

activity, volatility and project opportunity/ threat;3. Contributing to more efficient use/allocation of capital and resources within the Group;4. Reducing volatility in the non-essential areas of the business;5. Protecting and enhancing assets and company image;6. Developing and supporting people and the Group’s knowledge base; and7. Optimising operational efficiency.



52

Risk Register

The Group’s risk register is a master document and plays an essential role to the successful management of risk. Each subsidiary within the Group manages its own risks and therefore, maintains separate and distinct risk register. The risk register forms the platform for documenting risks (source, nature and profile) and identifies the principal risk owners and risk managers (i.e. on a departmental/divisional basis) within each subsidiary, including actions to be taken to manage each risk. It tracks and addresses issues as they arise. It also records potential risks and provide guidelines on how these risks are to be avoided/mitigated and managed if they should occur.

Risk Management Activities during the Year under Review

During the year under review, the RMC continued to:-

1. Review all risk events and factors, whether inherent or otherwise, that are both internal and external to the Group, while continuing to monitor the Group’s business environment to ensure that the risk register continues to be relevant and up to-date; and

2. Re-evaluate current risks and determine if there were any additional risks to consider in light of changing events and to ensure that the current risk management strategies are adequate and relevant, and to make the appropriate amendments where necessary:-

a. The very nature of the Group’s business and its global positioning in terms of location, business operations and trading activities, has invariably caused the Group to be exposed to external risk factors that can be relatively difficult to predict, mitigate and/or manage. The most notable factors are foreign exchange, commodity prices and local laws/regulations (e.g. labour laws, customs, monetary policy, etc.) that may change over time – all of which will have an impact on the Groups’ business operations, which will ultimately affect the Group’s strategic objectives; and

b. Management continued to eliminate the impact of non-trade foreign exchange by reducing long standing intercompany debts. Management is currently reviewing the foreign exchange impact on intercompany trading activities to ascertain the appropriate risk management approach.

The RMC has ascertained that there were no major changes in the Group’s overall risks profile as compared to the financial year ended 31 December 2018. The key risk areas identified in FYE 2019 are as follows:-

1. Political risk;2. Marketing risk;3. Debtor/creditor management risk;4. Competition risk;5. Cash management risk; and6. Stock obsolescence risk.

Periodic Review and Disclosure

For the FYE 2019, the RMC met twice on 28 August 2019 and 26 November 2019. The current findings and updates for the year under review were presented to the Board by the RMC during the Board meeting.

Management still maintain the ERM framework and the risk register as there are no significant changes in the risk exposure pertaining to the Group’s current operations and business environment.

On-going Assessment by the Board

The RMC reports to the Board periodically on key developments of the Group’s business strategies, risks, opportunities and rewards that may have impacted or likely to impact the Group and its achievement of its strategic objectives.


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KEY FEATURES OF INTERNAL CONTROL SYSTEM

Internal Control

As per the Committee of Sponsoring Organisations of the Treadway Commission (COSO)’s definition:

“Internal control is a process, effected by an entity’s Board of Directors, Management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives relating to operations, reporting and compliance.”

The key elements of the Group’s internal control processes are summarised as follows:-

1. The Board, Audit Committee and RMC meet on a periodic basis to review and discuss strategic, operational, risk and control issues;

2. Documented operating procedures are in place and are reviewed regularly to meet the operational and statutory reporting requirements;

3. Financial reports are provided to the Board for review and deliberation and approval;

4. Annual budget is tabled to the Board for approval. Subsequently, periodic monitoring is carried out to measure the actual performance against budget to identify variances and to plan necessary remedial action;

5. The Company’s quality management systems as disclosed in SORMIC, are audited by external parties periodically to ensure compliance with the terms and conditions of the certification;

6. Related party transactions are monitored by the Audit Committee and the Board on a periodic basis; and

7. Whistleblowing policy provides an avenue for employees and stakeholders to raise matters of serious concerns which could have an impact on the Group. Under the policy, a whistle blower is assured of confidentiality of matter reported and protection against retaliation.

Authority and Responsibility

Certain responsibilities are delegated to the following Board Committees through clearly defined Terms of Reference (“TOR”) which are reviewed periodically and/or when the need arises:-

1. Audit Committee;2. Nomination Committee;3. Remuneration Committee; and4. RMC.

The TOR of the abovementioned Board Committees is an important feature of the Company’s Board Charter.

A full copy of the Board Charter is available for viewing on the Company’s corporate website at www.connectcounty.com.



54

The Internal Audit

The purpose of an Internal Audit function is to provide the Board, through the Audit Committee, on the assurance of the adequacy, efficiency and effectiveness of the internal control system in the Group. The Company has an internal audit function that is independent of Management, which reports directly to the Audit Committee.

The Board has outsourced the Group’s entire internal audit function to an independent, qualified professional consulting firm to provide the necessary support to the Audit Committee’s oversight role over the Group’s internal control function.

During the FYE 2019, internal audits were carried out in accordance with the risk based internal audit plan approved by the Audit Committee. The business processes that had been reviewed were procurement management, payment and account payables, sales and revenue management, account receivable management, and follow-up on previous internal audit report on sales and accounts receivable.

The internal audit reviews findings and associated recommendations for improvement were discussed with senior management team and subsequently, presented to the Audit Committee during its scheduled meetings. In addition, results of follow-up reviews conducted to ensure that corrective actions have been implemented in a timely manner, were also reported to the Audit Committee during the meetings.

REVIEW OF THE STATEMENT BY EXTERNAL AUDITORS

As required by Rule 15.23 of the ACE LR, the external auditors have reviewed the SORMIC. Their limited assurance review was performed in accordance with Audit and Assurance Practice Guide (“AAPG”) 3 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 the SORMIC is inconsistent with their understanding of the process the Board has adopted in the review of the adequacy and integrity of internal control and risk management of the Group. AAPG 3 does not require the external auditors to form an opinion on the adequacy and effectiveness of the risk management and internal control systems of the Group.

CONCLUSION

The Board has reviewed the risk management and internal control systems and is of the opinion that the systems in place during the financial year under review are adequate and effective to safeguard the shareholders’ as well as other key stakeholders’ interests and the Group’s assets.

The Board is also of the opinion that as the development of a sound risk management and internal control systems is a continuous process and must continuously evolve to support the Group’s business operations and strategic objectives, the Board together with Management are committed to ensure that the Group’s risk management and internal control systems will continue to remain robust, relevant and up to-date.

The SORMIC is made in accordance with a resolution of the Board passed on 29 May 2020.


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The following information is provided in accordance with Rule 9.25 of the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad as set out in Appendix 9C thereto.

1. Utilisation of Proceeds

The Company had on 28 May 2020 announced a private placement of 33,000,000 new ordinary shares (“Placement Shares”) (“Private Placement”) for a total cash consideration of RM2,821,500/-.

As of 29 May 2020, the status of utilisation of proceeds is as follows:-

Status of Proposed Amount Amount utilisation utilised utilised unutilised RM’000 RM’000 RM’000

Regional expansion Unutilised 1,000.0 - 1,000.0 Product development Unutilised 1,000.0 - 1,000.0 Working capital Unutilised 726.6 - 726.6 Estimated expenses Fully Utilised 94.9 94.9 -

Total 2,821.5 94.9 2,726.6

2. Recurrent Related Party Transactions of a Revenue or Trading Nature

During the financial year ended 31 December 2019, the Company and its subsidiaries (“the Group”) have not entered into any recurrent related party transaction of a revenue or trading nature.

3. Audit and Non-Audit Services

For the financial year ended 31 December 2019, Messrs. Moore Stephens Associates PLT, the external auditors had rendered certain audit and non-audit services to the Company and the Group, a breakdown of which is listed as below for information:-

Company Group (RM) (RM)

Audit services rendered Statutory audit in respect of the financial year ended 31 December 2019 110,400 220,033

Non-audit services rendered Review of the Statement on Risk Management and Internal Control for Annual Report 2019 8,600 8,600

Total 119,000 228,633

4. Material Contracts Involving the Interests of the Directors, Chief Executive who is not a Director or Major Shareholder

There was no material contract entered into by the Group involving the interests of the Directors, Chief Executive who is not a Director or Major Shareholder, either still subsisting at the end of the financial year or entered into since the end of the previous financial year.

ADDITIONAL COMPLIANCEINFORMATION


56

STATEMENT OF DIRECTORS’ RESPONSIBILITY FOR PREPARING THE FINANCIAL STATEMENTS

In accordance with the Companies Act 2016 and the applicable approved accounting standards, the Directors are required to prepare annual financial statements that give a true and fair view of the financial position and the results and cash flows of the Group and of the Company for that financial year then ended.

The Directors have reviewed the accounting policies to ensure that they are consistently applied throughout the financial year and are of the view that relevant approved accounting standards have been followed in the preparation of these financial statements. In cases where judgements and estimations were made, they were based on reasonableness and prudence.

The Directors have relied on the system of internal controls to ensure that the information generated for the preparation of the financial statements from the underlying accounting records are accurate and reliable.

The Directors are responsible for ensuring that the Company maintains accounting records which disclose with reasonable accuracy of the financial position of the Group and the Company, and which enable them to ensure that the financial statements comply with the provisions of the Companies Act 2016.

The Directors have general responsibilities for taking such steps that are reasonably available to them to safeguard the assets of the Group and the Company, and to prevent and detect frauds and other irregularities.

This statement of Directors’ responsibility for preparing the financial statements is made in accordance with a resolution passed by the Directors on 29 May 2020.

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The Directors hereby submit their report and the audited financial statements of the Group and of the Company for the financial year ended 31 December 2019.

PRINCIPAL ACTIVITIES

The principal activity of the Company is an investment holding company. The principal activities of its subsidiaries are set out in Note 13 to the financial statements.

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

RESULTS

Group Company RM RM

Loss for the financial year, net of tax (6,347,191) (10,366,322)

Attributable to: Owners of the Company (6,693,115) (10,366,322)Non-controlling interests 345,924 -

(6,347,191) (10,366,322)

RESERVES AND PROVISIONS

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

DIVIDENDS

No dividend has been paid or declared by the Company since the end of the previous financial year. The Directors do not recommend payment of any dividend for the current financial year.

ISSUANCE OF SHARES AND DEBENTURES The Company has not issued any shares or debentures during the financial year.

OPTIONS GRANTED OVER UNISSUED SHARES

No options were granted to any person to take up unissued shares of the Company during the financial year.

DIRECTORS’ REPORT

58


DETACHABLE WARRANTS

Warrants 2011/2021 (“Warrants-A”)

The Warrants-A represent detachable warrants which are constituted under Deed Poll dated 24 June 2011.

As at 31 December 2019, the total number of Warrants-A that remain unexercised amounted to 48,567,944.

Warrants 2016/2021 (“Warrants-B”)

The Warrants-B were issued by the Company pursuant to the Rights Issue with Warrant Exercise on the basis of one warrant for every 15 Irredeemable Cumulative Preference Shares (“ICPS”) on 17 May 2016.

As at 31 December 2019, the total number of Warrants-B that remain unexercised amounted to 29,062,988.

Further information is disclosed in Notes 23 and 25 to the financial statements.

DIRECTORS OF THE COMPANY

The Directors in office since the beginning of the financial year to the date of this report are:

Ang Chuang Juay Lim Bee San Thong Mei Mei Major General Dato’ Mamat Ariffin Bin Abdullah (Appointed on 20.03.2019)Vivek A/L Sasheendran (Appointed on 01.04.2020)Lee Su Lin (Appointed on 08.03.2019 and resigned on 30.06.2019)Ng Keok Chai (Appointed on 20.03.2019 and retired on 29.05.2019)Wong Pooi Fatt (Appointed on 08.03.2019 and resigned on 30.06.2019)Mok Shiaw Hang (Resigned on 29.03.2019)Chang Choon Ming (Resigned on 08.03.2019)Tan Sze Chong (Resigned on 08.03.2019)

DIRECTORS OF THE SUBSIDIARIES

The following is a list of Directors of the subsidiaries (excluding Directors who are also Directors of the Company) in office since the beginning of the financial year to the date of this report:

Balaji Raghunathan Luo FangMing Mei Molitor Mok Shiaw Hang Chu Kim Fong Tan HuaRong Lim Wee Kong Chang Choon Ming Goh Mee Chin (Appointed on 30.05.2019)Lim Yew Chai (Appointed on 30.06.2019)Corina Yong Fung Shoo (Resigned on 30.05.2019)

DIRECTORS’ REPORT (cont’d)

A N N U A L R E P O R T 2 0 1 9

59

DIRECTORS’ INTERESTS

According to the Register of Directors’ Shareholdings kept by the Company under Section 59 of the Companies Act 2016 (“Act”), the interest of Directors in office at the end of financial year in shares or debentures of the Company and its related corporations during the financial year were as follows:

Number of Ordinary Shares Direct interest 1.1.2019 Bought Sold 31.12.2019 Ang Chuang Juay 18,662,224 - - 18,662,224 Number of Irredeemable Convertible Preference SharesDirect interest 1.1.2019 Bought Sold 31.12.2019 Ang Chuang Juay 47,397,256 - (8,500,000) 38,897,256

The other Directors in office at the end of the financial year had no interest in the shares or warrants of the Company or of its related corporations during the financial year.

DIRECTORS’ REMUNERATION AND BENEFITS

The amounts of fees and other benefits paid to or receivable by the Directors or past Directors of the Company and the estimated money value of any other benefits received or receivable by them otherwise than in cash from the Company and its subsidiaries for their services to the Company and its subsidiaries were as follows:

Company Subsidiaries RM RM

Salaries and other emoluments 126,056 1,133,160 Fees 121,921 49,703 Benefits-in-kind - 9,787

247,977 1,192,650

Since the end of the previous financial year, no Director has received nor become entitled to receive any benefit (other than Directors’ emoluments received or due and receivable as disclosed in Note 8 to the financial statements) by reason of a contract made by the Company or a related corporation with any Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest other than as disclosed in Note 31 to the financial statements.

There were no arrangements during or at the end of the financial year which had the object 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.


60


OTHER STATUTORY INFORMATION

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

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

(ii) to ensure that any current assets which were unlikely to 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.

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

(i) which would render the amount written off for bad debts or the amount of the provision for doubtful debts inadequate to any substantial extent;

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

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

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

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

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

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

(d) In the opinion of the Directors:

(i) no contingent or other liability has become enforceable, or 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;

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

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

(e) The total amount paid to or receivable by the auditors as remuneration for their services as auditors for the financial

year from the Company and its subsidiaries is disclosed in Note 7 to the financial statements.

(f) The total amount paid to or receivables by Past Directors of the Company in respect of the services provided to the Company is RM157,215.

(g) There was no indemnity given to or insurance effected for any Director, officer or auditor of the Company and its subsidiaries.


A N N U A L R E P O R T 2 0 1 9

61

SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR

The details of significant events during the financial year are disclosed in Note 37 to the financial statements.

SUBSEQUENT EVENTS AFTER THE FINANCIAL YEAR

The details of significant events after the financial year are disclosed in Note 38 to the financial statements.

AUDITORS

The auditors, Moore Stephens Associates PLT, have expressed their willingness to continue in office.

Approved and signed on behalf of the Board in accordance with a resolution of the Directors dated 19 May 2020.

ANG CHUANG JUAY THONG MEI MEI


62


We, the undersigned, being two of the Directors of the Company, do hereby state that, in the opinion of the Directors, the accompanying financial statements set out on pages 67 to 154 are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the Companies Act 2016 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2019 and of their financial performance and the cash flows for the year then ended.

Approved and signed on behalf of the Board in accordance with a resolution of the Directors dated 19 May 2020.

ANG CHUANG JUAY THONG MEI MEI

STATUTORY DECLARATIONPURSUANT TO SECTION 251(1) OF THE COMPANIES ACT 2016

I, Lim Yew Chai, (MIA No.: 17364), being the officer primarily responsible for the financial management of the Company, do solemnly and sincerely declare that the financial statements as set out on pages 67 to 154 are to the best of my knowledge and belief, correct and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by the abovenamed at Kuala Lumpur in the Federal Territory on 19 May 2020 LIM YEW CHAI

Before me,

TAN KIM CHOOICommissioner for Oaths

STATEMENT BY DIRECTORSPURSUANT TO SECTION 251(2) OF THE COMPANIES ACT 2016

A N N U A L R E P O R T 2 0 1 9

63

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS

Opinion

We have audited the financial statements of ConnectCounty Holdings Berhad, which comprise the statements of financial position as at 31 December 2019 of the Group and of the Company, and the statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out on pages 67 to 154.

In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Group and of the Company as at 31 December 2019, and of their financial performance and their cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia.

Basis for Opinion

We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence and Other Ethical Responsibilities

We are independent of the Group and of the Company in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants (“By-Laws”) and the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code.

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the Group and of the Company for the current year. These matters were addressed in the context of our audit of the financial statements of the Group and of the Company as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Impairment review of plant and equipment

As at 31 December 2019, as shown in Note 11 to the financial statements, the total carrying amount of the Group’s plant and equipment amounted to RM2,749,380. The Group’s plant and equipment mainly comprise of plant and machinery, renovation and motor vehicles.

The financial results of the Group’s manufacturing division were not favourable, giving rise to indications of impairment of carrying amount on the plant and machinery and renovation of the manufacturing division.

Accordingly, the Group estimated the recoverable amounts of the plant and machinery and renovation based on value-in-use (“VIU”) calculation using cash flows projections derived from the most recent financial forecast approved by the Directors covering a five-year period.

We have identified the impairment review of plant and machinery and renovation as a key audit matter as impairment test involves significant management judgement in estimating the underlying assumptions to be applied in the discounted cash flows projections of the VIU calculation. The recoverable amounts of the plant and machinery and renovation are highly sensitive to key assumptions applied in respect of revenue growth rate, gross margin, production cost, expenses and pre-tax discount rate used in the cash flows projections. A small change in the assumptions can have a significant impact on the estimation of recoverable amount.

INDEPENDENT AUDITORS’ REPORTTO THE MEMBERS OF CONNECTCOUNTY HOLDINGS BERHAD

64


REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONT’D)

Key audit matters (cont’d)

Our audit procedures performed and responses thereon

We have performed the following audit procedures to evaluate management’s methodology and assumptions used in the VIU:-

• Evaluating the basis of preparing the cash flows forecasts by taking into consideration the assessment of management’s historical budgeting accuracy;

• Evaluating whether key assumptions which comprise the revenue growth rate, gross margin, production cost, expenses, pre-tax discount rate are reasonable by making comparisons to historical trends, taking into consideration the current and future market or economic conditions;

• Performed sensitivity analysis around the key inputs that are expected to be most sensitive to the recoverable amount; and

• We have considered the adequacy of disclosures on the impairment assessments.

Impairment Review of the Company’s Investment in Subsidiaries

As at 31 December 2019, as shown in Note 13 to the financial statements, the carrying amount of the Company’s investment in subsidiaries amounted to RM13,711,850 and the Company’s impairment loss on investments in subsidiaries recognised during the year was RM9,160,000.

A history of recent losses and significant accumulated losses recorded by certain subsidiaries have resulted in multiple indications that the carrying amount of investment in subsidiaries may be impaired. Accordingly, the Company estimated the recoverable amount of the investment in subsidiaries based on value-in-use (“VIU”) through calculation using cash flows projections derived from the most recent financial forecast approved by the Directors covering a five-year period.

We have performed the following audit procedures to evaluate management’s methodology and assumptions used in the VIU:-

• Evaluating the basis of preparing the cash flows forecasts by taking into consideration the assessment of management’s historical budgeting accuracy;

• Evaluating whether key assumptions which comprise the revenue growth rate, gross margin, production cost, expenses, pre-tax discount rate are reasonable by making comparisons to historical trends, taking into consideration the current and future market or economic conditions;

• Performed sensitivity analysis around the key inputs that are expected to be most sensitive to the future recoverable amount; and

• We have considered the adequacy of disclosures on the impairment assessments.

Information Other Than the Financial Statements and Auditors’ Report Thereon

The Directors of the Company are responsible for the other information. The other information comprises the information included in the Annual report, but does not include the financial statements of the Group and of the Company and our auditors’ report thereon.

Our opinion on the financial statements of the Group and of the Company does not cover the Annual Report and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements of the Group and of the Company, our responsibility is to read the Annual Report and, in doing so, consider whether the Annual Report is materially inconsistent with the financial statements of the Group and of the Company or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this Annual Report, we are required to report that fact. We have nothing to report in this regard.

INDEPENDENT AUDITORS’ REPORTTO THE MEMBERS OF CONNECTCOUNTY HOLDINGS BERHAD (cont’d)

A N N U A L R E P O R T 2 0 1 9

65


Responsibilities of the Directors for the Financial Statements

The Directors of the Company are responsible for the preparation of financial statements of the Group and of the Company that give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards, and the requirements of the Companies Act 2016 in Malaysia. The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of financial statements of the Group and of the Company that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements of the Group and of the Company, the Directors are responsible for assessing the Group’s and the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements of the Group and of the Company as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with approved standards of auditing in Malaysia and International Standards on Auditing, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

(a) Identify and assess the risks of material misstatement of the financial statements of the Group and of the Company, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

(b) Obtain an understanding of internal control relevant to the audit 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 Group’s and the Company’s internal control.

(c) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors.

(d) Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s or the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements of the Group and of the Company or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group or the Company to cease to continue as going concerns.

(e) Evaluate the overall presentation, structure and content of the financial statements of the Group and of the Company, including the disclosures, and whether the financial statements of the Group and of the Company represent the underlying transactions and events in a manner that achieves fair presentation.

(f) Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial statements of the Group. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.


66



Auditors’ Responsibilities for the Audit of the Financial Statements (cont’d)

We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the Directors, we determine those matters that were of most significance in the audit of the financial statements of the Group and of the Company for the current year and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

In accordance with the requirements of the Companies Act 2016 in Malaysia, we report that the subsidiary of which we have not acted as auditors, is disclosed in Note 13 to the financial statements.

Other Matter

This report is made solely to the members of the Company, as a body, in accordance with Section 266 of the Companies Act 2016 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

MOORE STEPHENS ASSOCIATES PLT LO KUAN CHE201304000972 (LLP0000963-LCA) 03016/11/2020 JChartered Accountants (AF002096) Chartered Accountant

Petaling Jaya, SelangorDate: 19 May 2020


A N N U A L R E P O R T 2 0 1 9

67

Group Company NOTE 2019 2018 2019 2018 RM RM RM RM Restated

Revenue 4 52,615,550 99,641,262 - - Cost of sales 5 (44,502,441) (88,174,408) - -

Gross profit 8,113,109 11,466,854 - - Other income 2,480,909 2,854,268 323,563 1,631,613 Administration expenses (9,763,954) (13,362,821) (1,556,900) (1,283,520)Selling and distribution expenses (3,366,238) (3,748,460) - - Other operating expenses (3,182,837) (6,276,936) (9,168,791) (7,880,231)Finance costs 6 (523,054) (473,815) (27,945) (13,706)Share of loss of equity accounted associate, net of tax (303,646) (350,717) - -

Loss before tax 7 (6,545,711) (9,891,627) (10,430,073) (7,545,844)Tax credit/(expense) 9 198,520 (311,326) 63,751 -

Loss for the financial year (6,347,191) (10,202,953) (10,366,322) (7,545,844)

Other comprehensive income Item that are or may be reclassified subsequently to profit or loss Foreign currency translation differences for foreign operation (14,455) 232,805 - - Item that will not be reclassified subsequently to profit or lossNet change in fair value of equity investment designated at fair value through other comprehensive income (“FVOCI”) (1,079,900) - (1,079,900) -

Total comprehensive income for the year (7,441,546) (9,970,148) (11,446,222) (7,545,844)

STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2019

The annexed notes form an integral part of, and should be read in conjunction with, these financial statements.

68


Group Company NOTE 2019 2018 2019 2018 RM RM RM RM Restated

Loss attributable to: Owners of the Company (6,693,115) (9,461,394) (10,366,322) (7,545,844)Non-controlling interests 345,924 (741,559) - -

(6,347,191) (10,202,953) (10,366,322) (7,545,844)

Total comprehensive income attributable to: Owners of the Company (7,788,090) (9,233,293) (11,446,222) (7,545,844)Non-controlling interests 346,544 (736,855) - - (7,441,546) (9,970,148) (11,446,222) (7,545,844)

Loss per ordinary share attributable to Owners of the Company (sen) Basic 10 (2.03) (2.88)

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2019 (cont’d)


A N N U A L R E P O R T 2 0 1 9

69

Group Company NOTE 2019 2018 2019 2018 RM RM RM RM Restated Restated

ASSETS Non-current assets Plant and equipment 11 2,749,380 3,314,748 1,925 395,443 Right-of-use assets 12 7,588,313 - 394,761 - Investments in subsidiaries 13 - - 13,711,850 22,871,849 Intangible asset 14 - - - - Investment in associate 15 - 304,203 - - Other investment 16 - 1,079,900 - 1,079,900 Deferred tax assets 17 445,697 374,075 388,427 324,676 Other receivables 18 3,399,881 - - -

14,183,271 5,072,926 14,496,963 24,671,868

Current assets Inventories 19 8,012,446 8,095,103 - - Trade receivables 20 8,428,763 12,223,077 - - Other receivables 18 2,863,761 9,964,053 2,616,641 2,531,324 Short term investment 21 574,545 1,525,463 574,545 1,525,463 Tax recoverable 178,412 - - - Deposits, cash and bank balances 22 9,528,605 10,430,688 1,178,166 1,684,089

29,586,532 42,238,384 4,369,352 5,740,876 TOTAL ASSETS 43,769,803 47,311,310 18,866,315 30,412,744 EQUITY AND LIABILITIES Equity Share capital 23 32,930,493 32,930,493 32,930,493 32,930,493 Irredeemable convertible preference shares (“ICPS”) 24 10,387,065 10,725,353 10,387,065 10,725,353 Reserves 25 1,702,964 2,797,939 954,509 2,034,409 Accumulated losses (20,072,994) (13,382,389) (27,521,004) (17,154,682)

Equity attributable to owners of the Company 24,947,528 33,071,396 16,751,063 28,535,573 Non-controlling interests (2,033,755) (2,377,789) - -

TOTAL EQUITY 22,913,773 30,693,607 16,751,063 28,535,573

Non-current liabilities Obligations under finance lease 26 - 689,936 - 278,845 Lease liabilities 27 4,255,221 - 205,956 - Irredeemable convertible preference shares (“ICPS”) 24 1,618,443 1,352,818 1,618,443 1,352,818

5,873,664 2,042,754 1,824,399 1,631,663

STATEMENTS OF FINANCIAL POSITION

AS AT 31 DECEMBER 2019


70


Group Company NOTE 2019 2018 2019 2018 RM RM RM RM Restated Restated

Current liabilities Obligations under finance lease 26 - 135,938 - 67,461 Lease liabilities 27 3,539,960 - 119,167 - Trade payables 28 7,030,662 9,553,557 - - Other payables 29 4,411,744 4,812,096 171,686 178,047 Tax payable - 73,358 - -

14,982,366 14,574,949 290,853 245,508

TOTAL LIABILITIES 20,856,030 16,617,703 2,115,252 1,877,171

TOTAL EQUITY AND LIABILITIES 43,769,803 47,311,310 18,866,315 30,412,744

STATEMENTS OF FINANCIAL POSITIONAS AT 31 DECEMBER 2019 (cont’d)


A N N U A L R E P O R T 2 0 1 9

71

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY


A

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72


CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2019 (cont’d)

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A N N U A L R E P O R T 2 0 1 9

73

Non-distributable ICPS – Share equity Warrants Fair value Accumulated Note Capital Component Reserve Reserve Losses Total RM RM RM RM RM RM

At 1 January 2019 32,930,493 10,725,353 2,034,409 - (17,154,682) 28,535,573 Loss for the financial year - - - - (10,366,322) (10,366,322) Other comprehensive income: Net change in fair value of equity investment designated at FVOCI, representing total other comprehensive income - - - (1,079,900) - (1,079,900)Total comprehensive income - - - (1,079,900) (10,366,322) (11,446,222)

Transaction with Owner of the Company: Reclassification from ICPS liability component 24 - (338,288) - - - (338,288)Total transaction with Owner of the Company - (338,288) - - - (338,288)

At 31 December 2019 32,930,493 10,387,065 2,034,409 (1,079,900) (27,521,004) 16,751,063

COMPANY STATEMENT OF CHANGES IN EQUITY



74


Non-distributable ICPS – Share equity Warrants Accumulated Note Capital Component Reserve Losses Total RM RM RM RM RM

At 1 January 2018 32,234,443 10,863,918 2,043,159 (9,617,697) 35,523,823 Loss for the financial year, representing total comprehensive expense the financial year - - - (7,545,844) (7,545,844)

Transactions with Owner of the Company: Issuance of ordinary shares pursuant to: -conversion of ICPS 23,24 670,550 (167,637) - - 502,913 -exercise of Warrant-A 23 13,000 - - - 13,000 -exercise of Warrant-B 23 12,500 - (8,750) 8,750 12,500 Effects on deferred tax asset on conversion of ICPS 24 - (9,181) - - (9,181)Reclassification from equity component to liability component 24 - 38,253 - - 38,253 Dividend refunded - - - 109 109 Total transactions with Owner of the Company 696,050 (138,565) (8,750) 8,859 557,594

At 31 December 2018 32,930,493 10,725,353 2,034,409 (17,154,682) 28,535,573

COMPANY STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2019 (cont’d)


A N N U A L R E P O R T 2 0 1 9

75

Group Company 2019 2018 2019 2018 RM RM RM RM Restated

CASH FLOWS FROM OPERATING ACTIVITIESLoss before tax (6,545,711) (9,891,627) (10,430,073) (7,545,844)Adjustments for: Amortisation of intangible asset - 72,740 - - Bad debts written off on: - trade receivables 17,470 - - - - other receivables 168,774 - - - Depreciation of plant and equipment 784,636 2,634,572 1,518 29,650 Depreciation of right-of-use assets 3,300,321 - 86,761 - (Gain)/loss on disposal of: - plant and equipment (224) 98,126 - 26,697 - subsidiaries - (1,001,800) - 1,352,139 Impairment loss on: - investments in subsidiaries - - 9,160,000 6,299,409 Intangible asset written off - 654,654 - - Interest expenses - 316,534 - 13,005 Interest income (76,206) (109,388) (68,950) (102,157)Addition/(reversal) of loss allowance on: - amount due from associate 2,846,246 - - - - trade receivables 8,823 402,356 - - - other receivables (133,671) 1,838,987 - 209,488 Loss/(gain) on foreign exchange - unrealised 155,332 426,761 8,069 (62,313)Lease interest 470,391 - 26,696 - Plant and equipment written off 141 2,457,140 - 50,668 Reversal of impairment loss on investments in subsidiaries - - - (1,352,140)Share of loss of associate, net of tax 303,646 350,717 - - Remeasurement of imputed interest income (72,663) - (72,663) - Waiver of amount due to Director of a subsidiary (59,980) - - -

Operating profit/(loss) before working capital changes 1,167,325 (1,750,228) (1,288,642) (1,081,398)Inventories 86,504 6,300,456 - - Receivables 3,986,946 741,921 (93,382) (2,325,240)Payables (2,557,142) (8,686,805) (6,361) 47,868

Cash generated from/(used in) operations 2,683,633 (3,394,656) (1,388,385) (3,358,770)Interest paid (470,391) (316,534) (26,696) (13,005)Tax paid (127,797) (733,994) - -

Net cash generated from/(used in) operating activities 2,085,445 (4,445,184) (1,415,081) (3,371,775)


STATEMENTS OF CASH FLOWS


76



CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of interest in subsidiary - - (1) - Interest received 76,206 109,388 68,950 102,157 Proceeds from disposal of plant and equipment 2,071 453,798 - 1,481 Net cash inflow on disposal of subsidiaries - 2,465,235 - 1 Proceeds from disposal of subsidiary in prior year 225,338 - - - Purchase of plant and equipment (614,705) (784,012) - (42,000)

Net cash (used in)/generated from investing activities (311,090) 2,244,409 68,949 61,639

CASH FLOWS FROM FINANCING ACTIVITIES Dividends refunded - 109 - 109 Proceeds from issuance of ordinary shares pursuant to conversion of ICPS - 670,550 - 670,550 Proceeds from issue of shares upon exercise of warrants - 25,500 - 25,500 Conversion of ICPS- liability component - (38,253) - (38,253)Conversion of ICPS- equity component - (129,384) - (129,384)Repayment of lease liabilities (3,524,078) - (110,705) - Repayment of finance lease - (242,802) - (31,694)

Net cash (used in)/generated from financing activities (3,524,078) 285,720 (110,705) 496,828

Net decrease in cash and cash equivalents (1,749,723) (1,915,055) (1,456,837) (2,813,308)Effects of exchange rate changes (103,278) 82,314 (4) 46 Cash and cash equivalents at beginning of financial year 11,956,151 13,788,892 3,209,552 6,022,814

Cash and cash equivalents at end of financial year 10,103,150 11,956,151 1,752,711 3,209,552


STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2019 (cont’d)

A N N U A L R E P O R T 2 0 1 9

77

Notes

(a) Cash and cash equivalents comprise the followings:

Group Company 2019 2018 2019 2018 RM RM RM RM

Short term investments 574,545 1,525,463 574,545 1,525,463 Cash on hand and at banks 8,713,056 8,951,086 362,617 204,487 Deposits with licensed bank 815,549 1,479,602 815,549 1,479,602

10,103,150 11,956,151 1,752,711 3,209,552

(b) During the financial year, the Group and the Company acquired their plant and equipment by means of:


Cash 614,705 784,012 - 42,000 Obligations under finance lease - 922,617 - 378,000

614,705 1,706,629 - 420,000

(c) Cash outflows for leases as a lessee:

Group Company 2019 2019 RM RM

Included in net cash used in operating activities: Interest paid in relation to lease liabilities (470,391) (26,696)Short-term lease expense (91,072) - Included in net cash used in financing activity: Repayment of lease liabilities (3,524,078) (110,705)

Total cash outflows for leases (4,085,541) (137,401)



78


Notes

(d) Reconciliation of movement of liabilities to cash flows arising from financing activities: (cont’d)

Net cash changes Net cash from Drawdown At financing of finance Exchange At 1.1.2018 cash flows lease differences 31.12.2018 RM RM RM RM RM

Group ICPS-liablitiy component 1,391,071 (38,253) - - 1,352,818 Obligations under finance lease 153,290 (242,802) 922,617 (7,231) 825,874

Total liabilities from financing activities 1,544,361 (281,055) 922,617 (7,231) 2,178,692

Company ICPS-liablitiy component 1,391,071 (38,253) - - 1,352,818 Obligations under finance lease - (31,694) 378,000 - 346,306

Total liabilities from financing activities 1,391,071 (69,947) 378,000 - 1,699,124



A N N U A L R E P O R T 2 0 1 9

79


The

anne

xed

note

s fo

rm a

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in c

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h flo

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cont

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on

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-

1

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80


1. CORPORATE INFORMATION

The Company is a public limited liability company, incorporated and domiciled in Malaysia, and is listed on the ACE Market of Bursa Malaysia Securities Berhad.

The registered office of the Company is located at Level 7, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, 50490 Kuala Lumpur.

The principal place of business is located at Level 16, B01-A, Menara 2, No. 3, Jalan Bangsar, KL Eco City, 59200 Kuala Lumpur.

The principal activity of the Company is investment holding. The principal activities of its subsidiaries are disclosed in Note 13. There have been no significant changes in the nature of these principal activities of the Group and of the Company during the financial year.

2. BASIS OF PREPARATION (a) Statement of compliance

The financial statements of the Group and of the Company have been prepared in accordance with the Malaysian Financial Reporting Standards (“MFRSs”) issued by the Malaysian Accounting Standards Board (“MASB”), International Financial Reporting Standards and complied with the provisions of the Companies Act 2016 in Malaysia.

New and Revised MFRSs, Amendments/Improvements to MFRSs, New IC Interpretations (“IC Int”) and Amendments to IC Int

(i) Adoption of New MFRS and Amendments/Improvements to MFRSs and IC Int

The Group and the Company had adopted the following new MFRS, amendments/improvements to MFRSs and IC Int that are mandatory as follows:

MFRS 16 Leases Amendments to MFRS 9 Prepayment Features with Negative Compensation Amendments to MFRS 128 Long-term Interests in Associates and Joint Ventures Amendments to MFRS 119 Plan Amendment, Curtailment or Settlement IC Interpretation 23 Uncertainty over Income Tax Treatments Annual Improvements to MFRSs 2015-2017 Cycle

The adoption of the new MFRS, amendments/improvements to MFRSs and IC int did not have any significant effect on the financial statements of the Group and the Company, except for the adoption of MFRS 16 Leases as disclosed below.

MFRS 16 Leases

The Group and the Company had applied MFRS 16 Leases for the first time to the financial year beginning on 1 January 2019.

NOTES TO THE FINANCIAL STATEMENTS31 DECEMBER 2019

NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2019 (cont’d)

A N N U A L R E P O R T 2 0 1 9

81

2. BASIS OF PREPARATION (cont’d) (a) Statement of compliance (cont’d)

(i) Adoption of New MFRS and Amendments/Improvements to MFRSs and IC Int (cont’d)

MFRS 16 Leases (cont’d)

Definition of a lease

Previously, the Group and the Company determined at contract inception whether an arrangement was or contained a lease under IC Interpretation 4, Determining Whether an Arrangement contains a Lease. The Group and the Company now assess whether a contract is or contains a lease based on the new definition of a lease. Under MFRS 16, a contract is, or contains, a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.

As a lessee

At 1 January 2019, for leases that were classified as operating lease under MFRS 117, lease liabilities were measured at the present value of the remaining lease payments, discounted at the Group’s and the Company’s incremental borrowing rate as at 1 January 2019. Right-of-use assets are measured at an amount equal to the lease liabilities, adjusted by the amount of any prepaid or accrued lease payments.

The Group and the Company used the following practical expedient when applying MFRS 16 to leases previously classified as operating lease under MFRS 117: -

- applied a single discount rate to a portfolio of leases with similar characteristics;

- applied the exemption not to recognise right-of-use assets and liabilities for leases with less than 12 months of lease term and low-value assets as at 1 January 2019;

- excluded initial direct costs from measuring the right-of-use asset at the date of initial application; and

- used hindsight when determining the lease term if the contract contains options to extend or terminate the lease.

For leases that were classified as finance lease under MFRS 117, the carrying amounts of right-of-use asset and the lease liability at 1 January 2019 are determined to be the same as the carrying amount of the leased asset and lease liability under MFRS 117 immediately before that date.

As a lessor

The Group which is an intermediate lessor reassessed the classification of a sublease previously classified as an operating lease under MFRS 117 and concluded that the sublease is an operating lease under MFRS 16.


82





Impact to financial statements

Since the Group applied the requirements of MFRS 16 modified retrospective transition approach with the right-of-use assets equal to lease liabilities at date of initial application of January 2019, there are no adjustments made to prior period presented.

The impact on the Group’s and the Company’s statements of financial position as at 1 January 2019 is summarised below:

Previously reported Effect Restated under of adoption under MFRS 117 MFRS 16 MFRS 16 RM RM RM

Group At 1 January 2019 Assets Plant and equipment 3,314,748 (392,000) 2,922,748 Right-of-use assets - 9,146,018 9,146,018

Liabilities Obligations under finance lease 825,874 (825,874) - Lease liabilities - 9,579,892 9,579,892

Company At 1 January 2019 Assets Plant and equipment 395,443 (392,000) 3,443 Right-of-use assets - 481,522 481,522

Liabilities Obligations under finance lease 346,306 (346,306) - Lease liabilities - 435,828 435,828


A N N U A L R E P O R T 2 0 1 9

83




Impact to financial statements (cont’d)

The following table explains the differences between operating lease commitments disclosed applying MFRS 117 at 31 December 2018, and lease liabilities recognised at the date initial application of 1 January 2019

Group Company RM RM

Operating lease commitments as disclosed at 31 December 2018 9,351,240 48,000 Effects from discounting at the incremental borrowings rate between 5.0% to 6.8% (742,506) (6,478) Add: Lease liabilities additionally recognised based on the initial application of MFRS 16 181,916 48,000 Transfer from obligations under finance lease upon initial application of MFRS 16 825,874 346,306 Less: Short term leases recognised on straight-line basis as expenses (36,632) -

Lease liabilities recognised as at 1 January 2019 9,579,892 435,828

(ii) New MFRS and Amendments/Improvements to MFRSs and IC Int that are issued but not yet effective and have not been early adopted

The Group and the Company have not adopted the following new MFRSs and amendments/improvements to MFRSs and IC Int that have been issued as at the date of authorisation of these financial statements but are not yet effective for the Group and the Company:-

Effective for financial period beginning on or after 1 January 2020

Amendments to MFRS 3 Business Combinations – Definition of a Business Amendments to MFRS 7 Financial Instruments: Disclosures - Interest Rate Benchmark Reform Amendments to MFRS 9 Financial Instruments - Interest Rate Benchmark Reform Amendments to MFRS 101 Presentation of Financial Statements – Definition of Material Amendments to MFRS 108 Accounting Policies, Changes in Accounting Estimates and Errors –

Definition of Material Amendments to References to the Conceptual Framework in MFRS Standards


84



(ii) New MFRS and Amendments/Improvements to MFRSs and IC Int that are issued but not yet effective and have not been early adopted (cont’d)


MFRS 17 Insurance Contracts


Amendments to MFRS 101 Presentation of Financial Statements – Classification of Liabilities as Current or Non-current

Effective date to be announced

Amendments to MFRS 10 Sale or Contribution of Assets between an Investor and its Associate and MFRS 128 or Joint Venture

The Group and the Company will adopt the above pronouncements when they become effective in the respective financial periods. These pronouncements are not expected to have any effect to the financial statements of the Group and the Company upon their initial application.

The Group and the Company do not plan to apply MFRS17, “Insurance Contracts” that is effective for annual periods beginning on or after 1 January 2021 as it is not applicable to the Group and the Company.

(b) Functional and presentation currency

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

(c) Basis of measurement

The financial statements have been prepared on the historical cost basis except as disclosed in accounting policies.

(d) Significant accounting estimates and judgements

The summary of accounting policies as described in Note 3 are essential to understand the Group’s and the Company’s result of operations, financial position, cash flows and other disclosures. Certain of these accounting policies require critical accounting estimates that involve complex and subjective judgements and the use of assumptions, some of which may be for matters that are inherently uncertain and susceptible to change. The Directors exercise their judgement in the process of applying the Group’s and the Company’s accounting policies.

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 of the Company’s accounting policies and reported amounts of assets, liabilities, income and expenses, and disclosures made.


A N N U A L R E P O R T 2 0 1 9

85

2. BASIS OF PREPARATION (cont’d)

(d) Significant accounting estimates and judgements (cont’d)

Estimates and underlying assumptions are assessed on an on-going basis and are based on experience and relevant factors, including expectations of future events that are believed to be reasonable under the circumstances. The actual results may differ from the judgements, estimates and assumptions made by management, and will seldom equal the estimated results.

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

(i) Impairment of financial assets and receivables

The Group and the Company assess on a forward-looking basis the expected credit loss associated with its debt instruments carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk.

For receivables, the Group and the Company apply the simplified approach permitted by MFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables.

(ii) Impairment of Non-Financial Assets

When the recoverable amount of an asset is determined based on the estimate of the value in use of the cash generating unit to which the asset is allocated, the management is required to make an estimate of the expected future cash flows from the cash generating unit and also to apply a suitable discount rate in order to determine the present value of those cash flows.

(iii) Carrying value of investments in subsidiaries

Investment in a subsidiary is reviewed for impairment whenever indication of impairment arises in accordance with its accounting policy whenever events or changes in circumstances indicate that the carrying values may not be recoverable.

Significant judgement is required in the estimation of the present value of future cash flows generated by the subsidiary, which involves uncertainties and are significantly affected by assumptions and judgements made regarding estimates of future cash flows and pre-tax discount rates. Changes in assumptions could significantly affect the carrying value of investments in subsidiaries.

(iv) Leases The Group and the Company assess at lease commencement by applying significant judgement whether

it is reasonably certain to exercise the extension options. The Group and the Company considers all facts and circumstances including their past practise and any cost that will be incurred to change the asset.

The Group and the Company also applied judgement and assumptions in determining the incremental borrowing rate of the respective leases. The Group and the Company first determine the closest available borrowing rates before using significant judgement to determine the adjustments required to reflect the term, security, value or economic environment of the respective leases.


86


3. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to the periods presented in these financial statements and have been consistently by the Group and the Company, unless otherwise stated.

Arising from the adoption of MFRS 16, “Leases”, there are changes to the accounting policies applied to lease contracts entered by the Group and the Company as compared to those applied in previous financial statements. The impacts arising from the changes are disclosed in Note 2(a)(i).

(a) Basis of consolidation

Consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the reporting date. The financial statements of the subsidiaries used in the preparation of the consolidated financial statements are prepared for the same reporting date as the Company. Consistent accounting policies are applied for like transactions and events in similar circumstances. The Company controls an investee if and only if the Company has all the following:

(i) Power over the investee (i.e. existing rights that give it the current ability to direct the relevant power activities of the investee);

(ii) Exposure, or rights, to variable returns from its investment with the investee; and(iii) The ability to use its power over the investee to affect its returns.

When the Company has less than a majority of the voting rights of an investee, the Company considers the following in assessing whether or not the Company’s voting rights in an investee are sufficient to give it power over the investee:

(i) The size of the Company’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders;

(ii) Potential voting rights held by the Company, other vote holders or other parties;(iii) Rights arising from other contractual arrangements; and(iv) Any additional facts and circumstances that indicate that the Company has, or does not have, the current

ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings.

Subsidiaries are consolidated when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary.

Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s interest and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. The resulting difference is recognised directly in equity and attributed to owners of the Company.

When control ceases, the disposal proceeds and the fair value of any retained investment are compared to the Group’s share of the net assets disposed. The difference together with the carrying amount of allocated goodwill and the exchange reserve that relate to the subsidiary is recognised as gain or loss on disposal.

Business combination

Acquisitions of subsidiaries are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree.

The Group elects on a transaction-by-transaction basis whether to measure the non-controlling interests in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Transaction cost incurred are expensed and included in administrative expenses.


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3. SIGNIFICANT ACCOUNTING POLICIES (cont’d)

(a) Basis of consolidation (cont’d)

Business combination (cont’d)

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes in the fair value of the contingent consideration which is deemed to be an asset or liability, will be recognised in accordance with MFRS 9 either in profit or loss or a change to other comprehensive income. If the contingent consideration is classified as equity, it will not be remeasured. Subsequent settlement is accounted for within equity. In instances where the contingent consideration does not fall within the scope of MFRS 9, it is measured in accordance with the appropriate MFRS.

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 acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

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

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

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

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

Business combinations under common control are accounted using the predecessor method of merger accounting where the profit or loss and other comprehensive income include the results of each of the combining entities from the earliest date presented or from the date when these entities came under the control of the common controlling party (if later).

The assets and liabilities of the combining entities are accounted for based on the carrying amounts from the perspective of the common controlling party, or the combining entities if the common controlling party does not prepare consolidated financial statements.

The difference in cost of acquisition over the aggregate carrying value of the assets and liabilities of the combining entities as of the date of the combination is taken to equity. Transaction cost for the combination is recognised in the profit or loss.

Similar treatment applies in the Company’s separate financial statements when assets and liabilities representing the underlying businesses under common control are directly acquired by the Company. In accounting for business combinations in the Company’s separate financial statements, the excess of the cost of acquisition over the aggregate carrying amounts of assets and liabilities as of the date of the combination is taken to equity.


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Subsidiaries

A subsidiary is an entity over which the Group has all the following:

(i) Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);

(ii) Exposure, or rights, to variable returns from its investment with the investee; and(iii) The ability to use its power over the investee to affect its returns.

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

Non-controlling Interests

Non-controlling interests represents the equity in subsidiaries not attributable directly or indirectly, to owners of the Company, and is presented separately in the consolidated profit or loss and within equity in the consolidated financial position, separately from equity attributable to Owners of the Company.

Changes in the Company’s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. In such circumstances, the carrying amounts of the 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 interests is adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to Owners of the Company.

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

Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions between subsidiaries in the Group, are eliminated in preparing the consolidated financial statements.

Unrealised gains arising from transactions with equity-accounted associates and joint ventures are eliminated against the investment to the extent of the Group’s interest in the investees. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

Associates

Associates are entities, including unincorporated entities, in which the Group has significant influence, but not control, over the financial and operating policies.

Investments in associates are accounted for in the consolidated financial statements using the equity method less any impairment losses, unless it is classified as held for sale or distribution. The cost of the investment includes transaction costs. The consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income of the associates, after adjustments if any, to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases.

When the Group’s share of losses exceeds its interest in an associate, the carrying amount of that interest including any long-term investments 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.


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Associates (cont’d)

When the Group ceases to have significant influence over an associate, any retained interest in the former associate at the date when significant influence is lost is measured at fair value and this amount is regarded as the initial carrying amount of a financial asset. The difference between the fair value of any retained interest plus proceeds from the interest disposed of and the carrying amount of the investment at the date when equity method is discontinued is recognised in profit or loss.

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

Investments in associates are measured in the Company’s statement of financial position at cost less any impairment losses. The cost of investment includes transaction costs.

(b) Foreign currencies

(i) Foreign currency transactions and balances

Transactions in foreign currencies are measured in the respective functional currencies of the Group and of the Company are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates.

Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the reporting date. Non-monetary items denominated in foreign currencies that are measured at historical cost are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items denominated in foreign currencies measured at fair value are translated using the exchange rates at the date when the fair value was determined.

Exchange differences arising on the settlement of monetary items or on translating monetary items at the reporting date are recognised in the profit or loss except for exchange differences arising on monetary items that form part of the Group’s and of the Company’s net investment in foreign operations, which are recognised initially in other comprehensive income and accumulated under foreign currency translation reserve in equity. The foreign currency translation reserve is reclassified from equity to the profit or loss of the Group on disposal of the foreign operation.

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

(ii) Group entities

On consolidation, the assets and liabilities of foreign operations are translated into RM at the rate of exchange prevailing at the reporting date and their profit or loss are translated at exchange rates prevailing at the dates of the transactions. The exchange differences arising on translation for consolidation are recognised in other comprehensive income. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognised in profit or loss.


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(c) Revenue and other revenue recognition

Revenue is recognised when or as a performance obligation in the contract with customer is satisfied, i.e. when the “control” of the goods or services underlying the particular performance obligation is transferred to the customer.

A performance obligation is a promise to transfer a distinct goods or service (or a series of distinct goods or services that are substantially the same and that have the same pattern of transfer) to the customer that is explicitly stated in the contract and implied in the Group’s and the Company’s customary business practices.

Revenue is measured at the amount of consideration to which the Group and the Company expect to be entitled in exchange for transferring the promised goods or services to the customers, excluding amounts collected on behalf of third parties such as sales taxes or goods and services taxes. If the amount of consideration varies due to discounts, rebates, refunds, credits, incentives, penalties or other similar items, the Group and the Company estimate the amount of consideration to which it will be entitled based on the expected value or the most likely outcome. If the contract with customer contains more than one performance obligation, the amount of consideration is allocated to each performance obligation based on the relative stand-alone selling prices of the goods or services promised in the contract.

The revenue is recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

The control of the promised goods or services may be transferred over time or at a point in time. The control over the goods or services is transferred over time and revenue is recognised over time if:

- The customer simultaneously receives and consumes the benefits provided by the Group’s and the Company’s performances as the Group and the Company perform;

- The Group’s and the Company’s performances create or enhance assets that the customer controls as the assets are created or enhanced; or

- The Group’s and the Company’s performances do not create assets with alternative use and the Group and the Company have enforceable rights to payment for performance completed to date.

Revenue for performance obligation that is not satisfied overtime is recognised at the point in time at which the customer obtains control of the promised goods or services.

Sale of goods

Revenue from sale of goods is measured at the fair value of the consideration received or receivable, net of returns and provisions, trade discounts and volume rebates.

Revenue is recognised when or as a performance obligation in the contract with customer is satisfied, i.e. when the “control” of the goods or services underlying the particular performance obligation is transferred to the customer.

Revenue is not recognised to the extent where there are significant uncertainties regarding recovery of the

consideration due, associated costs or the possible return of goods.


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(c) Revenue and other revenue recognition (cont’d)

Revenue from service

Revenue from services provided is recognised net of discount, where applicable, as and when the services are performed. Revenue is recognised over time based on contract.

Other revenue earned by the Group and the Company are recognised on the following basis:

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

Interest income is recognised on an accrual basis using the effective interest method.

(d) Employee benefits

(i) Short term benefits

Wages, salaries, bonuses and social security contributions are recognised as an expense in the year in which the associated services are rendered by employees. Short-term accumulating compensated absences such as paid annual leave are recognised as a liability when they accrue to the employees. The estimated liability for paid annual leave is recognised for services rendered by employees up to the reporting date. Short-term non-accumulating compensated absences such as sick leave are recognised when the absences occur.

(ii) Defined contribution plans

The Company and its Malaysian incorporated subsidiaries make contributions to the state pension scheme, the Employees Provident Fund (“EPF”). The foreign subsidiaries make contributions to their respective countries statutory pension schemes. Such contributions are recognised as an expense in the period in which the related service is performed.

Pursuant to the relevant laws and regulations of People’s Republic of China (“PRC”), the PRC incorporated subsidiary participates in a basic pension insurance for its employees, arranged by the local Labour and Social Security Bureau, whereby contributions are made to the pension insurance at applicable rates based on the amounts stipulated by the bureau concerned. The contributions are recognised as a liability after deducting any contribution already paid and as an expense in the period in which the employees render their services. When employees retire, the said bureau shall be responsible for the payment of the basic pension benefits to the retired employees.

(e) Income taxes

(i) Current tax Tax expense represents the aggregate amount of current and deferred tax. Current tax is the expected

amount payable in respect of taxable income for the financial year, using tax rates enacted or substantively enacted by the reporting date, and any adjustments recognised for prior years’ tax. When an item is recognised outside profit or loss, the related tax effect is recognised either in other comprehensive income or directly in equity.


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(e) Income taxes (cont’d)

(ii) Deferred tax

Deferred tax is recognised using the liability method, on all temporary differences between the tax base of assets and liabilities and their carrying amounts in the financial statements. Deferred tax is not recognised if the temporary difference arises from the initial recognition of an asset or liability in a transaction, which is not a business combination and at the time of the transaction, affects neither accounting nor taxable profit or loss. Deferred tax is measured at the tax rates that are expected to apply in the period in which the assets are realised or the liabilities are settled, based on tax rates and tax laws that have been enacted or substantively enacted by the reporting date.

Deferred tax assets are recognised only to the extent that there are sufficient taxable temporary differences relating to the same taxable entity and the same taxation authority to offset or when it is probable that future taxable profits will be available against which the assets can be utilised.

Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefits will be realised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will be available for the assets to be utilised.

Deferred tax assets relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transactions either in other comprehensive income or directly in equity and deferred tax arising from business combination is adjusted against goodwill on acquisition or the amount of any excess of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over the acquisition cost.

(iii) Value Added Tax (“VAT”) Where the VAT incurred in a purchase of assets or services is not recoverable from the respective taxation

authorities, it is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable.

The net amount of VAT being the difference between output and input of VAT, payable to or receivable from the respective taxation authorities at the reporting date, is included in trade and other payables or trade and other receivables accordingly in the statements of financial position.

(f) Earnings per share

Basic earnings per share (“EPS”) is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year, adjusted for own shares held.

Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares.

(g) Impairment

(i) Financial assets

The Group and the Company recognise loss allowances for expected credit losses (“ECL”) on financial assets measured at amortised cost, contract assets and lease receivables. Expected credit losses are a probability-weighted estimate of credit losses.


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(g) Impairment (cont’d)

(i) Financial assets (cont’d)

Loss allowance of the Group and of the Company are measured on either of the following bases:

(i) 12-month ECL – represents the ECLs that result from default events that are possible within the 12 months after the reporting date (or for a shorter period if the expected life of the instrument is less than 12 months); or

(ii) Lifetime ECLs – represents the ECLs that will result from all possible default events over the expected life of a financial instrument or contract asset

The impairment methodology applied depends on whether there has been a significant increase in credit risk.

Simplified approach- trade receivables, lease receivables and contract assets

The Group and the Company apply the simplified approach to provide ECLs for all trade receivables, lease receivables and contract assets as permitted by MFRS 9. The simplified approach required expected lifetime losses to be recognised from initial recognition of the receivables. The expected credit losses on these financial assets are estimated using a provision matrix based on the Group’s and the Company’s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date, including time value of money where applicable. General approach- other financial instruments and financial guarantee contracts

The Group and the Company apply the general approach to provide for ECLs on all other financial instruments and financial guarantee contracts, which requires the loss allowance to be measured at an amount equal to 12-months ECLs at initial recognition.

At each reporting date, the Group and the Company assess whether the credit risk of a financial instrument has increased significantly since initial recognition. When credit risk has increased significantly since initial recognition, loss allowance is measured at an amount equal to lifetime ECLs. In assessing whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Group and the Company consider reasonable and supportable information that is relevant and available without undue cost or effort.

This includes both quantitative and qualitative information and analysis, based on the Group’s and the Company’s historical experience and informed credit assessment and including forward looking information, where available.

If credit risk has not increased significantly since initial recognition or if the credit quality of the financial instruments improves such that there is no longer a significant credit risk since initial recognition, loss allowance is measured at an amount equal to 12-months ECLs.

The Group and the Company consider an event of default for internal credit risk management purposes when the borrower is unlikely to pay its credit obligations to the Group and the Company in full, without recourse by the Group and the Company to actions such as realising security (if any is held).

Credit impaired financial assets

At each reporting date, the Group and the Company assess whether financial assets carried at amortised cost is credit impaired. A financial asset is credit impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.


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(g) Impairment (cont’d)

(i) Financial assets (cont’d)

Credit Impaired financial assets (cont’d)

Evidence that a financial asset is credit impaired includes the observable data about the following events:

- Significant financial difficulty of the borrower or issuer;- A breach of contract such as a default or significant past due event;- The lender of the borrower, for economic or contractual reasons relating to the borrower’s financial

difficulty, having granted to the borrower or a concession that the lender would not otherwise consider (e.g. the restructuring of a loan or advance by the Group and the Company on terms that the Group and the Company would not consider otherwise);

- It is becoming probable that the borrower will enter bankruptcy or other financial reorganisation; or - The disappearance of an active market for security because of financial difficulties. Write-off policy

The gross carrying amount of a financial asset is written off (either partially or full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Group and the Company determine that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group’s and the Company’s procedures for recovery amounts due. Any recoveries made are recognised in profit or loss.

(ii) Non-financial assets

The carrying amounts of non-financial assets (except for inventories and deferred tax assets) are reviewed at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised immediately in profit or loss, unless the asset is carried at a revalued amount, in which such impairment loss is recognised directly against any revaluation surplus for the asset to the extent that the impairment loss does not exceed the amount in the revaluation surplus for that same asset. A cash-generating unit is the smallest identifiable asset group that generates cash flows that largely are independent from other assets and groups.

The recoverable amount of an asset or cash-generating units is the greater of its value in use and its fair value less costs to sell. 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.

Except for goodwill, assets that were previously impaired are reviewed for possible reversal of the impairment at the end of each reporting period. Any subsequent increase in recoverable amount is recognised in the profit or loss unless it reverses an impairment loss on a revalued asset in which case it is taken to revaluation reserve. Reversal of impairment loss is restricted by the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years.

An impairment loss recognised for goodwill is not reversed.

An impairment loss is recognised for the amount by which the carrying amount of the subsidiary, joint venture or associate exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and present value of the estimated future cash flows expected to be derived from the investment including the proceeds from its disposal. Any subsequent increase in recoverable amount is recognised in profit or loss.


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(h) Plant and equipment

All items of plant and equipment are initially recorded at cost. The cost of an item of 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.

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

All plant and equipment are depreciated on the straight-line basis to write off the cost of the plant and equipment over their estimated useful lives.

Depreciation of plant and equipment is computed on a straight-line basis over the estimated useful lives of the assets as follows:

Useful life (years) Plant and machinery 3 to 10 Office equipment, furniture and fittings 3 to 10 Motor vehicles 5 to 10 Mouldings 5 Renovation 3 to 10

The residual values, useful lives and depreciation method are reviewed at each reporting date 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 plant and equipment.

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

Fully depreciated plant and equipment are retained in the financial statements until they are no longer in use and no further charge for depreciation is made in respect of these plant and equipment.

(i) Intangible assets

Intangible asset is initially measured at cost. Following initial recognition, intangible asset is measured at cost less accumulated amortisation and accumulated impairment losses.

Intangible asset with finite useful lives is amortised over its estimated useful life and assessed for impairment whenever there is an indication that it may be impaired. The amortisation period and method are reviewed at least at each reporting period. Changes in the expected useful lives or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible asset with finite lives is recognised in profit or loss.


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3. SIGNIFICANT ACCOUNTING POLICIES (cont’d) (i) Intangible assets (cont’d)

The intangible asset has useful life of 10 years.

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

Intangible asset represented technology transfer of technical expertise and associated expenses incurred in the development and production of thermoplastic elastomers (“TPE”).

(j) Inventories

Inventories, comprising raw materials and consumables, are stated at the lower of cost and net realisable value. Cost is determined on the first-in first-out and weighted average basis. Costs of raw materials and consumables comprise the cost of purchase plus the cost of bringing the inventories to their present location and condition.

In the case of work in progress and manufactured inventories, cost includes materials, direct labour and an appropriate share of production overheads based on normal operating capacity.

Net realisable value is the estimated selling price in the ordinary course of business less estimated costs of completion and the estimated costs necessary to make the sale. Where necessary, due allowance is made for all damaged, obsolete and slow moving items.

(k) Financial instruments

(i) Initial recognition and measurement

A financial asset or a financial liability is recognised in the statements of financial position when, and only when, the Group or the Company become a party to the contractual provisions of the instrument.

A financial asset (unless it is a trade receivable without significant financing component) or a financial liability is initially measured at fair value plus or minus, for an item not at fair value through profit or loss, transaction costs that are directly attributable to its acquisition or issuance. A trade receivable without a significant financing component is initially measured at the transaction price.

The Group and the Company categorise financial instruments as follows:

Financial assets

Categories of financial assets are determined on initial recognition and are not reclassified subsequent to their initial recognition unless the Group or the Company changes its business model for managing financial assets in which case all affected financial assets are reclassified on the first day of the first reporting period following the change of the business model.


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(k) Financial instruments (cont’d)

(ii) Financial instrument categorises and subsequent measurement

Financial assets (cont’d)

(a) Amortised cost

Amortised cost category comprises financial assets that are held within a business model whose objective is to hold assets to collect contractual cash flows and its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The financial assets are not designated as fair value through profit or loss. Subsequent to initial recognition, these financial assets are measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss. Any gain or loss on derecognition is recognised in profit or loss. Interest income is recognised by applying effective interest rate to the gross carrying amount except for credit impaired financial assets (Note 3(g)(i)) where the effective interest rate is applied to the amortised cost.

(b) Fair value through profit or loss

All financial assets not measured at amortised cost or fair value through other comprehensive income are measured at fair value through profit or loss. This includes derivative financial assets (except for a derivative that is a designated and effective hedging instrument). On initial recognition, the Group or the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at fair value through other comprehensive income as at fair value through profit or loss if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise. Financial assets categorised as fair value through profit or loss are subsequently measured at their fair value. Net gains or losses, including any interest or dividend income, are recognised in the profit or loss.

(c) Fair value through other comprehensive income

Equity investments

On initial recognition, the Group makes irrevocable election (on an instrument-by-instrument basis) to designate investments in equity instruments as at fair value through other comprehensive income (“FVTOCI”). Designation at FVTOCI is not permitted, if the equity investment is held for trading or if it is contingent consideration recognised by an acquirer in a business combination. Dividends are recognised as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of investment. Other net gains and losses are recognised in other comprehensive income. On derecognition, gains and losses accumulated in other comprehensive income are not reclassified to profit or loss.

All financial assets, except for those measured at fair value through profit or loss, are subject to impairment assessment (Note 3(g)(i)).


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(ii) Financial instrument categories and subsequent measurement (cont’d)

Financial liabilities

The categories of financial liabilities at initial recognition are as follows:

(a) Fair value through profit or loss

Fair value through profit or loss category comprises financial liabilities that are derivatives (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument), contingent consideration in a business combination and financial liabilities that are specifically designated into this category upon initial recognition.

On initial recognition, the Group or the Company may irrevocably designate a financial liability that otherwise meets the requirements to be measured at amortised cost as at fair value through profit or loss:

(a) if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise;

(b) a group of financial liabilities or assets and financial liabilities is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the Group’s key management personnel; or

(c) if a contract contains one or more embedded derivatives and the host is not a financial asset in the scope of MFRS 9, where the embedded derivative significantly modifies the cash flows and separation is not prohibited.

Financial liabilities categorised as fair value through profit or loss are subsequently measured at their fair value with gains or losses, including any interest expense are recognised in the profit or loss.

For financial liabilities where it is designated as fair value through profit or loss upon initial recognition, the Group and the Company recognise the amount of change in fair value of the financial liability that is attributable to change in credit risk in the other comprehensive income and remaining amount of the change in fair value in the profit or loss, unless the treatment of the effects of changes in the liability’s credit risk would create or enlarge an accounting mismatch.

(b) Amortised cost

Other financial liabilities not categorised as fair value through profit or loss are subsequently measured at amortised cost using the effective interest method.

Interest expense and foreign exchange gains and losses are recognised in the profit or loss. Any gains or losses on derecognition are also recognised in the profit or loss.


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(iii) Offsetting

Financial assets and financial liabilities are offset and the net amount presented in the statements of financial position when, and only when, the Group or the Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and liability simultaneously.

(iv) Regular way purchase or sale of financial assets

A regular way purchase or sale is a purchase or sale of a financial asset under a contract whose terms require delivery of the asset within the time frame established generally by regulation or convention in the marketplace concerned.

A regular way purchase or sale of financial assets is recognised and derecognised, as applicable, using trade date accounting. Trade date accounting refers to:

(a) the recognition of an asset to be received and the liability to pay for it on the trade date, and

(b) derecognition of an asset that is sold, recognition of any gain or loss on disposal and the recognition of a receivable from the buyer for payment on the trade date.

(v) Derecognition

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 control of the asset is not retained or substantially all of the risks and rewards of ownership of the financial asset are transferred to another party. 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 profit or loss.

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

(l) Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and at bank, deposits with licensed bank and short term investments that are readily convertible to known amount of cash and which are subject to an insignificant risk of changes in value. For the purpose of the statements of cash flows, cash and cash equivalents are presented net of pledged deposits, if any.

(m) Leases

The Group and the Company have applied MFRS 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognised as an adjustment to retained earnings as at 1 January 2019. Accordingly, the comparative information presented for 2018 has not been restated. i.e. it is presented, as previously reported under MFRS 117, Leases and related interpretations.


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(m) Leases (cont’d)

Current financial year

(i) Definition of lease

A contract is, or contain, a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control for the use of an identified asset, the Group and the Company assess whether:

• the contract involves the use of an identified asset - this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified;

• the Group and the Company have the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and

• the Group and the Company have the right to direct the use of the asset. The Group and the Company have the right when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. In rare cases, where the decision about how and what purpose the asset is used is predetermined, the Group and the Company have the right to direct use of the asset if either the customer has the right to operate the asset; or the Group and the Company designed the asset in a way that predetermines how and what purpose it will be used.

At inception or on assessment of a contract that contain a lease component, the Group and the Company allocate the consideration in the contract to each lease and non-lease component on the basis of their relative stand-alone prices. However, for leases of properties in which the Group and the Company are a lessee, they have elected not to separate non-lease components and will be instead account for the lease and non-lease components as a single lease component.

(ii) Recognition and initial measurement

The Group and the Company recognised a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less the lease incentives received.

The lease liability is initially measured at the present value of the lease payments that are not paid at the

commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the respective Group’s and the Company’s incremental borrowing rate. Generally, the Group and the Company use their incremental borrowing rate as the discount rate.

The Group and the Company have elected not to recognise right-to-use assets and liabilities for short term leases that have a lease terms of 12 months or less and leases of low-value assets. The Group and the Company recognise the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

(iii) Subsequent measurement

The right-to-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of plant and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any and adjusted for certain remeasurements of the lease liability.


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(m) Leases (cont’d)

(iii) Subsequent measurement (cont’d)

The principal useful life used for this purpose are: -

Factory buildings 28 to 51 months Office and hostel 24 to 28 months Office equipment 35 to 54 months Motor vehicles 120 months

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a revision of in-substance fixed lease payments, or if there is a change in the Group’s and the Company’s estimate of the amount expected to be payable under a residual value guarantee, or if the Group and the Company change their assessment of whether they will exercise a purchase, extension or termination option.

When the lease liability is remeasured, a corresponding adjustment is made to the carrying amount of the right-to-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

Previous financial year

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

(i) Finance lease

Leases in terms of which the Group and the Company assume substantially all the risks and rewards of ownership are classified as finance lease. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.

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

(ii) Operating lease

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

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


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(n) Equity instrument

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 their liabilities. Ordinary shares are equity instruments.

Ordinary shares are recorded at the proceeds received, net of directly attributable incremental transaction costs. Dividends on ordinary shares are recognised in equity in the period in which they are declared.

(o) Warrants

Warrants are classified as equity instrument and it is allocated its value based on the closing price of the first trading day, if the warrant is listed, or estimated using option pricing models, if the warrant is not listed.

The issuance of 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.

(p) Warrants reserve

Amount allocated in relation to the issuance of warrants are credited to a warrants reserve which is non-distributable. Warrants reserve is transferred to the share capital account upon the exercise of warrants and the warrants reserve in relation to the unexercised warrants at the expiry of the warrants period will be transferred to retained earnings.

(q) Compound financial instruments

A compound financial instruments is a non-derivatives financial instruments that contains both a liability and an equity component.

Compound financial instruments issued by the Company comprise irredeemable convertible preference shares (“ICPS”) that can be converted to share capital at the option of the holder, when the number of shares to be issued does not vary with changes in their fair value.

The proceeds are first allocated to the liability component, determined based on the fair value of a similar liability that does not have a conversion features or similar associated equity component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.

Subsequent to initial recognition the liability component of a compound financial instruments is measured at amortised cost using the effective interest method. The equity component of a compound financial instrument is not remeasured subsequent to initial recognition.

Interest and losses and gains relating to the financial liability are recognised in profit or loss. On conversion, the financial liability is reclassified to equity, no gain or loss is recognised on conversion.

(r) Provisions

Provisions are recognised when the Group and the Company have a legal or constructive present obligation as a result of a past event, and it is probable that an outflow of resources embodying economics benefits will be required to settle the obligation and the amount of the obligation can be estimated reliably.

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 provision is reversed. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risk specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.


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(s) Borrowing costs

Borrowing costs are capitalised as part of the cost of a qualifying asset if they are directly attributable to the acquisition, construction or production of that asset. Capitalisation of borrowing costs commences when the activities to prepare the asset for its intended use or sales are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are capitalised until the assets are substantially completed for their intended use or sale.

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

(t) Fair value measurement

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.

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.

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

Level 1: Quoted price (unadjusted) in active markets for identical assets or liabilities that the Group and the Company can access at the measurement date.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly or indirectly.

Level 3: Unobservable inputs for the asset or liability.

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

(u) Segment reporting For management purposes, the Group is organised into geographical operating segments which are independently

managed by the respective geographical segment managers responsible for the performance of the respective segments under their charge. The segment managers’ report directly to Executive Deputy Chairman, who regularly reviews the segment results in order to allocate resources to the segments and to assess the segments performance. Additional disclosures on each of these segments are shown in Note 32.

(v) 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.


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4. REVENUE

(a) Disaggregation of revenue by:

Group 2019 2018 RM RM

Major goods and services: Manufacturing and sales of goods 52,615,550 99,441,262 Consultancy services - 200,000

52,615,550 99,641,262

Timing of revenue: At a point in time 52,615,550 99,441,262 Over time - 200,000

52,615,550 99,641,262

This represents invoiced value of goods sold and service rendered less discounts, return and net of taxes. (b) Nature of goods and services

The following information reflects the typical transactions of the Group:

Revenue from manufacturing and sales of goodsNature of goods or services The Group manufactures and sells various of cable,

connectors and related products. Sales of goods are bundled with transportation services which are not considered as a separate performance obligation.

Timing of recognition or method used to recognise revenue

Revenue is recognised when the goods are delivered and accepted by the customers.

Significant payment terms Credit period of 30 to 120 days from invoice date.Obligation for returns or refunds The Group allows returns only on manufacturing/

goods sold defect for exchange with new goods (i.e. no cash refunds are offered).

Revenue from consultancy servicesNature of goods or services The Group provides consultancy services related to

Information Technology (“IT”) Security. Timing of recognition or method used to recognise revenue

Revenue is recognised over time as the services are performed.

Significant payment terms Based on agreed milestones, as certified by the respective customer on their services rendered.

Obligation for returns or refunds Not applicable.

(c) Significant judgements and assumptions arising from revenue recognition

No significant judgement was made in the adoption of MFRS 15 Revenue from Contracts with Customers and there was no impact on the revenue recognition method of the Group and of the Company.


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5. COST OF SALES

Cost of sales represents manufacture cost, cost of inventories sold and recognised as expense.

6. FINANCE COSTS


Bank charges 52,663 157,281 1,249 701 Interest expense - 316,534 - 13,005 Lease interest 470,391 - 26,696 -

523,054 473,815 27,945 13,706

7. LOSS BEFORE TAX Loss before tax is stated after charging/(crediting):

Group Company 2019 2018 2019 2018 Note RM RM RM RM Restated

Auditors’ remuneration - statutory audit 144,633 127,018 35,000 30,000 - other non-audit services 8,600 8,600 8,600 8,600 - special audit 75,400 81,000 75,400 81,000 Amortisation of intangible asset 14 - 72,740 - - Bad debts written off on: - trade receivables 17,470 - - - - other receivables 168,774 - - - Depreciation on: - plant and equipment 11 784,636 2,634,572 1,518 29,650 - right-of-use assets 12 3,300,321 - 86,761 - Impairment loss on: - investments in subsidiaries 13 - - 9,160,000 6,299,409 Intangible asset written off 14 - 654,654 - - Addition/(reversal) of loss allowance on: - amount due from associate 34 2,846,246 - - - - trade receivables 34 8,823 402,356 - - - other receivables 34 (133,671) 1,838,987 - 209,488 Loss/(gain) on foreign exchange: - realised 12,295 398,912 722 4,143 - unrealised 155,332 426,761 8,069 (62,313) (Gain)/loss on disposal of: - plant and equipment (224) 98,126 - 26,697 - subsidiaries 13 - (1,001,800) - 1,352,139 Plant and equipment written off 11 141 2,457,140 - 50,668 Share of loss in associate, net of tax 15 303,646 350,717 - -


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7. LOSS BEFORE TAX (cont’d) Loss before tax is stated after charging/(crediting) (Cont’d):

Group Company 2019 2018 2019 2018 Note RM RM RM RM Restated

Compensation received - (285,156) - - Interest income (76,206) (109,388) (68,950) (102,157) Profit guarantee from a shareholder of an associate* - (259,420) - - Recovery of expenses from subsidiaries - - (181,950) (177,316) Reversal of impairment loss on investments in subsidiaries 13 - - - (1,352,140) Sub-let rental income (1,750,183) (1,138,441) - - Remeasurement of imputed interest income 24 (72,663) - (72,663) - Waiver of amount due to a Director of subsidiary (59,980) - - -

* In the previous financial year, the Group received a profit guarantee from a shareholder of an associate of RMB425,000 (equivalent to RM259,420) in relation to the associate, namely ShenZhen Rapid Power Co., Ltd (“RCP”). The associate had failed to achieve the profit guarantee as stated in the Profit Guarantee Agreement entered by a wholly-owned subsidiary of the Company, Rapid Conn (ShenZhen) Co., Ltd (“RCC”) and the Group was compensated accordingly.


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8. EMPLOYEES BENEFITS EXPENSE


Staff costs Salaries, wages, bonus and allowances 7,347,215 11,481,871 364,010 347,765 Social security contributions 227,143 223,030 3,401 3,421 Defined contribution plans 91,385 201,452 43,472 41,460 Other staff related expenses 350,162 199,562 27,000 600

8,015,905 12,105,915 437,883 393,246

Directors of the Company Executive: Salaries and other emoluments 1,217,993 975,276 112,000 - Defined contribution plans 40,607 32,345 13,440 - Social security contributions 616 - 616 - Fees 69,227 60,421 19,524 12,000 Benefits-in-kind 9,787 4,125 - -

1,338,230 1,072,167 145,580 12,000

Non-executive: Fees 102,397 136,000 102,397 136,000

Total Directors’ remuneration of the Company 1,440,627 1,208,167 247,977 148,000

Other Directors of the subsidiaries Executive: Salaries and other emoluments 1,530,435 1,927,343 - - Defined contribution plans 6,362 28,109 - - Fees 153,705 96,842 - -

1,690,502 2,052,294 - -

Total Directors’ remuneration 3,131,129 3,260,461 247,977 148,000

Total employee benefits expense 11,147,034 15,366,376 685,860 541,246

Analysis excluding benefits-in-kind Total executive Directors’ remuneration 3,018,945 3,120,336 145,580 12,000 Total non-executive Directors’ remuneration 102,397 136,000 102,397 136,000

Total Directors’ remuneration 3,121,342 3,256,336 247,977 148,000


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9. TAX (CREDIT)/EXPENSE


Current income tax: Malaysian income tax: - overprovision in prior year - (52,670) - - Foreign tax: - current year’s provision - 363,996 - - - overprovision in prior year (126,208) - - - (126,208) 311,326 - -

Deferred tax (Note 17) - origination of temporary differences (121,738) - (63,751) - - overprovision in prior year 49,426 - - - (72,312) - (63,751) -

Tax (credit)/expense (198,520) 311,326 (63,751) -

Domestic income tax is calculated at the Malaysian statutory tax rate of 24% (2018: 24%) of the estimated assessable (loss)/profit for the year. Taxation for other jurisdiction is calculated at the rates prevailing in the respective jurisdictions.

The reconciliation between tax expense and the product of accounting results multiplied by the applicable corporate tax rate for the years ended 31 December 2019 and 2018 is as follows:


Loss before tax (6,545,711) (9,891,627) (10,430,073) (7,545,844)

Taxation at Malaysian statutory rate of 24% (2018: 24%) (1,570,971) (2,373,990) (2,503,218) (1,811,003) Different tax rates in other countries 642,832 156,955 - - Non-deductible expenses 955,292 1,743,808 2,517,122 2,202,590 Deferred tax assets not recognised during the year 6,289 1,113,958 - - Income not subject to tax (155,180) (276,735) (77,655) (391,587) Overprovision in prior year in respect of: - income tax (126,208) (52,670) - - - deferred tax 49,426 - - -

Tax (credit)/expense (198,520) 311,326 (63,751) -


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9. TAX EXPENSE (cont’d)

The Group has the following estimated unutilised tax losses and unabsorbed capital allowance available for set-off against future taxable profit as follows:


Unutilised tax losses 9,250,000 9,216,000 - - Unabsorbed capital allowance 4,688,000 4,663,000 - -

13,938,000 13,879,000 - -

For entities under Malaysian jurisdiction, any unutilised tax losses in a year of assessment can only be allowed to be

carried forward up to a maximum of seven (7) consecutive years of assessment effective from Year of Assessment 2019. The foreign unutilised tax losses and unabsorbed capital allowance applicable to foreign incorporated subsidiary companies are pre-determined by and subject to the tax legislation of the respective countries.

10. LOSS PER SHARE

(a) Basic loss per share

Basic loss per share amounts are calculated by dividing loss for the year net of tax, attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares in issue during the financial year.

The following reflect the loss and shares data used in the computation of basic loss per share for the years ended 31 December:


Loss for the year net of tax, attributable to Owners of the Company (RM) (6,693,115) (9,461,394)

Weighted average number of ordinary shares in issue (units): Number of ordinary shares at beginning of the year 329,304,925 322,344,425 Effect of new shares issued - 6,175,345

329,304,925 328,519,770

Basic loss per share (sen) 2.03 2.88


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10. LOSS PER SHARE (cont’d)

(b) Diluted loss per share

Diluted loss per share amounts are calculated by dividing loss for the year, net of tax, attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the financial year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

Fully diluted loss per share on the basis of the assumed conversion of warrants and ICPS have not been disclosed as the effect is anti-dilutive.

11. PLANT AND EQUIPMENT

Office Equipment, Plant and Furniture Motor Mouldings Renovation Total Machinery and Fittings Vehicles RM RM RM RM RM RM

Group 2019 Cost At 1 January 2019 (previously reported) 6,112,465 2,135,698 1,649,412 154,454 3,092,472 13,144,501 Effect of adoption of MFRS 16 (Note 2(a)(i)) - - (420,000) - - (420,000) At 1 January 2019 (restated) 6,112,465 2,135,698 1,229,412 154,454 3,092,472 12,724,501 Additions 380,904 55,279 33,823 - 144,699 614,705 Reversal (681,954) - - - - (681,954) Disposals - (3,094) - - - (3,094) Written off (152,990) (214,930) - - (149,113) (517,033) Exchange differences (100,011) (39,274) (17,056) (3,445) (67,215) (227,001)

At 31 December 2019 5,558,414 1,933,679 1,246,179 151,009 3,020,843 11,910,124


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11. PLANT AND EQUIPMENT (cont’d)


Group (cont’d) Accumulated depreciation and impairment losses At 1 January 2019 (previously reported) Accumulated depreciation 5,421,966 1,904,088 337,455 154,453 1,948,385 9,766,347 Accumulated impairment losses 63,406 - - - - 63,406 Effect of adoption of MFRS 16 (Note 2(a)(i)) - - (28,000) - - (28,000)

At 1 January 2019 (restated) Accumulated depreciation 5,421,966 1,904,088 309,455 154,453 1,948,385 9,738,347 Accumulated impairment losses 63,406 - - - - 63,406 Reversal (732,335) - - - - (732,335) Charge for the year 324,694 146,805 134,239 - 178,898 784,636 Disposals - (1,247) - - - (1,247) Written off (152,990) (214,810) - - (149,092) (516,892) Exchange differences (83,516) (36,808) (7,974) (3,445) (43,428) (175,171)

(644,147) (106,060) 126,265 (3,445) (13,622) (641,009)

At 31 December 2018 Accumulated depreciation 4,777,819 1,798,028 435,720 151,008 1,934,763 9,097,338 Accumulated impairment losses 63,406 - - - - 63,406

4,841,225 1,798,028 435,720 151,008 1,934,763 9,160,744

Net carrying amount At 31 December 2019 717,189 135,651 810,459 1 1,086,080 2,749,380


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Group 2018 Cost At 1 January 2018 15,586,553 2,534,749 1,121,020 214,102 3,819,271 23,275,695 Additions 226,053 102,768 1,293,857 - 83,951 1,706,629 Disposals (3,548) (25,932) (772,766) - (12,250) (814,496) De-recognition of subsidiary (4,515,017) (312,848) - - (441,114) (5,268,979) Written off (4,869,355) (103,845) - (53,214) (239,903) (5,266,317) Exchange differences (312,221) (59,194) 7,301 (6,434) (117,483) (488,031)

At 31 December 2018 6,112,465 2,135,698 1,649,412 154,454 3,092,472 13,144,501

Accumulated depreciation and impairment losses At 1 January 2018 Accumulated depreciation 7,819,588 1,936,852 442,298 214,101 1,923,536 12,336,375 Accumulated impairment losses 63,406 - - - - 63,406

7,882,994 1,936,852 442,298 214,101 1,923,536 12,399,781 Charge for the year 2,036,326 219,573 152,716 - 225,957 2,634,572 Disposals (1,419) (6,431) (251,149) - (3,573) (262,572) De-recognition of subsidiary (1,681,042) (113,296) - - (82,263) (1,876,601) Written off (2,613,918) (86,121) - (53,214) (55,924) (2,809,177) Exchange differences (137,569) (46,489) (6,410) (6,434) (59,348) (256,250)

(2,397,622) (32,764) (104,843) (59,648) 24,849 (2,570,028)

At 31 December 2018 Accumulated depreciation 5,421,966 1,904,088 337,455 154,453 1,948,385 9,766,347 Accumulated impairment losses 63,406 - - - - 63,406

5,485,372 1,904,088 337,455 154,453 1,948,385 9,829,753

Net carrying amount At 31 December 2018 627,093 231,610 1,311,957 1 1,144,087 3,314,748


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Office Equipment, Furniture Motor and Fittings Vehicle Renovation Total RM RM RM RM

Company 2019 Cost At 1 January 2019 (previously reported) 18,902 420,000 - 438,902 Effect of adoption of MFRS 16 (Note 2(a)(i)) - (420,000) - (420,000)

At 1 January 2019 (restated)/ 31 December 2019 18,902 - - 18,902

Accumulated depreciation At 1 January 2019 (previously reported) 15,459 28,000 - 43,459 Effect of adoption of MFRS 16 (Note 2(a)(i)) - (28,000) - (28,000)

At 1 January 2019 (restated) 15,459 - - 15,459 Charge for the year 1,518 - - 1,518

At 31 December 2019 16,977 - - 16,977

Net carrying amount At 31 December 2019 1,925 - - 1,925

2018 Cost At 1 January 2018 45,284 - 84,221 129,505 Additions - 420,000 - 420,000 Disposals (25,932) - (12,250) (38,182) Written off (450) - (71,971) (72,421)

At 31 December 2018 18,902 420,000 - 438,902

Accumulated depreciation At 1 January 2018 20,371 - 25,195 45,566 Charge for the year 1,650 28,000 - 29,650 Disposals (6,431) - (3,573) (10,004) Written off (131) - (21,622) (21,753)

At 31 December 2018 15,459 28,000 - 43,459

Net carrying amount At 31 December 2018 3,443 392,000 - 395,443


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(a) During the financial year, the Group and the Company acquired their plant and equipment by means of:


Cash 614,705 784,012 - 42,000 Hire purchase payables - 922,617 - 378,000

614,705 1,706,629 - 420,000

(b) The net carrying amount of motor vehicle of the Group held under finance lease as at 31 December 2018 was RM820,491.

(c) The net carrying amount of motor vehicles of the Group held in trust by a Director as at 31 December 2019 is RM750,766 (2018: RM820,491).

12. RIGHT-OF-USE ASSETS

Factory Office and Motor Office buildings hostel vehicle equipment Total RM RM RM RM RM

Group Cost At 1 January 2019 (previously reported) - - - - - Effect of adoption of MFRS 16 (Note 2(a)(i)) 7,558,913 1,041,205 420,000 153,900 9,174,018

At 1 January 2019 (restated) 7,558,913 1,041,205 420,000 153,900 9,174,018 Addition 1,811,916 42,794 - - 1,854,710 Exchange differences (144,434) (22,100) - (1,578) (168,112)

At 31 December 2019 9,226,395 1,061,899 420,000 152,322 10,860,616

Accumulated depreciation At 1 January 2019 (previously reported) - - - - - Effect of adoption of MFRS 16 (Note 2(a)(i)) - - 28,000 - 28,000

At 1 January 2019 (restated) - - 28,000 - 28,000 Charge during the year 2,755,396 464,360 42,000 38,565 3,300,321 Exchange differences (46,937) (8,605) - (476) (56,018)

At 31 December 2019 2,708,459 455,755 70,000 38,089 3,272,303

Net carrying amount At 31 December 2019 6,517,936 606,144 350,000 114,233 7,588,313


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12. RIGHT-OF-USE ASSETS (cont’d)

Office and Motor Hostel vehicle Total RM RM RM

Company Cost At 1 January 2019 (previously reported) - - - Effect of adoption of MFRS 16 (Note 2(a)(i)) 89,522 420,000 509,522

At 1 January 2019 (restated)/ At 31 December 2019 89,522 420,000 509,522

Accumulated depreciation At 1 January 2019 (previously reported) - - - Effect of adoption of MFRS 16 (Note 2(a)(i)) - 28,000 28,000

At 1 January 2019 (restated) - 28,000 28,000 Charge during the year 44,761 42,000 86,761

At 31 December 2019 44,761 70,000 114,761

Net carrying amount At 31 December 2019 44,761 350,000 394,761

(a) The Group and the Company lease various factory buildings, offices and hostel and office equipment with lease terms that run between 1 year and 6 years, with an option to review the leases after the expiry date.

(b) The expenses charged to profit or loss as follows:


Depreciation of right-of-use assets 3,300,321 86,761 Short-term lease expense 91,072 - Interest expense on lease liabilities 470,391 26,696


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13. INVESTMENTS IN SUBSIDIARIES

Company 2019 2018 RM RM

Unquoted shares, at cost At 1 January 39,005,824 40,357,964 Addition 1 - Disposal - (1,352,140) At 31 December 39,005,825 39,005,824

Less: Accumulated impairment loss At 1 January (16,133,975) (11,186,706) Addition (9,160,000) (6,299,409) Reversal - 1,352,140

At 31 December (25,293,975) (16,133,975)

Net carrying amount 13,711,850 22,871,849

(a) Details of the subsidiaries are as follows:

Name of Subsidiaries Country of Incorporation

Effective Interest Held (%) Principal Activities2019 2018

Connect Security Solution Sdn. Bhd. (“CSS”)

Malaysia 60 60 Cyber security services.

IBEX Pictures Entertainment Sdn. Bhd. (“IBEX”)

Malaysia 100 - Dormant.

Rapid Conn Inc. (“RCI”) United States of America(USA)

100 100 Design, manufacture, sales, marketing and services of cables, connectors and related products.

Rapid Conn (S) Pte. Ltd.* (“RCS”)

Singapore 100 100 Trading and marketing of cables, connectors and related products.

Rapid Conn (ShenZhen) Co., Ltd.(“RCC”)

People’s Republic of China

100 100 Manufacture and trading of cables, connectors and related products.

Held through RCCShenZhen Rapid Resin Co., Ltd. (“RCR”)


80 80 Manufacture and trading of thermoplastic and elastomers materials.Ceased operation during the year.

* Audited by Moore Stephens LLP, Singapore.


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13. INVESTMENTS IN SUBSIDIARIES (cont’d)

(b) Incorporation of a subsidiary

On 22 March 2019, the Company incorporated a wholly-owned subsidiary, namely IBEX and subscribed for the total paid-up share capital of RM1 comprising of 1 ordinary share, representing the entire share capital of IBEX.

(c) Disposal of shares/derecognition of subsidiaries

(i) CSS

On 22 January 2018, a wholly-owned subsidiary of the Company, namely CSS completed the disposal of 40% equity interest representing 1,364,000 ordinary shares in CSS to a third party for a cash consideration of RM1. Consequent thereupon, the equity interest of the Company decreased from 100% to 60%.

The Company recognised a loss of disposal RM1,352,139 in the statements of profit or loss for the financial year ended 31 December 2018.

The effect of changes in the equity interest in CSS that is attributable to owners of the Group:

RM

Proportion of net liabilities as at the date of disposal 2,023,880 Increase stake in non-controlling interests (2,023,880)

Impact to financial statements -

(ii) ShenZhen Rapid Power Co., Ltd. (“RCP”)

On 28 November 2018, a wholly-owned subsidiary of the Company, namely RCC, had entered into a Share Sale Agreement (“SSA”) to dispose 31% of equity interest, representing 2,325,000 registered capital of RMB1 each in its subsidiary, RCP to an existing shareholder of RCP for a total consideration of RMB2,325,000. The Directors determined all the conditions precedent as per stated in the SSA has been fulfilled on the same date of the SSA executed and in addition effectively from the execution of the SSA the subsidiary, RCC has also ceased to govern the financial and operating policies of RCP and has no power over the investee.

Consequently, the Group has reclassified RCP as an associate company as disclosed in Note 15 and the Group’s equity interest in RCP decreased from 80% to 49%. As part of the administrative process, the transfer of shares was completed and approved by the relevant authority on 8 January 2019.


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(c) Disposal of shares/derecognition of subsidiaries (cont’d)

(ii) ShenZhen Rapid Power Co., Ltd. (“RCP”) (cont’d)

The effect of disposal on the financial position of the Group is as follows:

Group 2018 RM

Plant and equipment (Note 11) 3,392,378 Inventories 4,843,562 Trade and other receivables 15,272,789 Cash and bank balances 42,310 Borrowings (1,335,790) Trade and other payables (20,890,260) Non-controlling interest (249,296) Foreign currency translation reserve (31,404)

Net assets disposed 1,044,289 Gain on disposal (Note 7) 1,001,800 Reclassification to associate at fair value (Note 15) (649,461)

Total consideration 1,396,628 Less: Consideration receivable (224,873)

Consideration received 1,171,755 Add: Bank balances and borrowings 1,293,480

Cash flow on disposal (net cash generated) 2,465,235

(d) Addition/(reversal) of impairment loss on investments in subsidiaries

RCC

The Group carried out a review of the recoverable amount of its investment in RCC due to its continuous loss-making and significant accumulated losses. An impairment loss amounting to RM660,000 (2018: RM6,299,409) was recognised and stated as “other operating expenses” for the financial year ended.

The recoverable amount was derived based on value-in-use using cash flow projections derived from the most recent financial forecast approved by the Directors covering a five-years period and the pre-tax discount rate used was 5.75% (2018: 4%) based on the weighted average cost of capital of the Company.

RCS

The Group carried out a review of the recoverable amount of its investment in RCS due to its continuous loss-making and significant accumulated losses. An impairment loss amounting to RM8,500,000 (2018: Nil) was recognised and stated as “other operating expenses” for the financial year ended.

The recoverable amounts was derived based on value-in-use using cash flow projections derived from the most recent financial forecast approved by the Directors covering a five-years period and the pre-tax discount rate used was 5.75% (2018: 2%) based on the weighted average cost of capital of the Company.


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(d) Addition/(reversal) of impairment loss on investments in subsidiaries (cont’d)

CSS

In the previous financial year, upon disposal of 40% equity interest in CSS as disclosed in Note 13(c)(i) the Company reversed impairment loss of RM1,352,140 to the statements of profit or loss.

(e) Non-controlling interests in subsidiaries

The subsidiaries of the Group that have non-controlling interests (“NCI”) are as follows:

Other CSS RCP RCR adjustments Total RM RM

2019 NCI percentage ownership interest and voting interest 40% - 20%Carrying amount of NCI (RM) (2,033,042) - 1,797 (2,510) (2,033,755)

(Loss)/profit for the financial year allocated to NCI (RM) (28,811) - 374,735 - 345,924 Other comprehensive income - - 620 - 620

Total comprehensive income attributable to NCI (28,811) - 375,355 - 346,544

2018 NCI percentage ownership interest and voting interest 40% 20% 20% Carrying amount of NCI (RM) (2,004,231) - (373,558) - (2,377,789)

Loss for the financial year allocated to NCI (RM) (19,648) (260,872) (461,039) - (741,559)Other comprehensive income - - 4,704 - 4,704

Total comprehensive income attributable to NCI (19,648) (260,872) (456,335) - (736,855)


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(e) Non-controlling interests in subsidiaries (cont’d)

The summarised financial information before intra-group elimination of the subsidiaries that have NCI as at the end of each reporting period are as follows:

CSS RCR Total RM RM RM

2019 Current assets 1,940 14,828 16,768 Current liabilities (5,084,542) - (5,084,542)

Net (liabilities)/assets (5,082,602) 14,828 (5,067,774)

Results Revenue (Loss)/profit for the financial year (72,027) 1,873,674 1,801,647 Other comprehensive income - 3,099 3,099 Total comprehensive income for the financial year (72,027) 1,876,773 1,804,746

Cash flows: Cash flows used in operating activities (60) (108,012) (108,072)

Net increase in cash and cash equivalents (60) (108,012) (108,072)

2018 Current assets 202,000 261,747 463,747 Current liabilities (5,212,575) (2,123,692) (7,336,267)

Net liabilities (5,010,575) (1,861,945) (6,872,520) Results Revenue Profit/(loss) for the financial year 43,762 (2,305,197) (2,261,435) Other comprehensive income - 23,519 23,519

Total comprehensive income for the financial year 43,762 (2,281,678) (2,237,916)

Cash flows: Cash flows from operating activities 2,000 114,553 116,553 Cash flows used in investing activities - (189) (189)

Net increase in cash and cash equivalents 2,000 114,364 116,364


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14. INTANGIBLE ASSET

2019 2018 RM RM

Group Cost At 1 January - 808,600 Written off - (793,520) Exchange differences - (15,080)

At 31 December - -

Accumulated amortisation At 1 January - 67,383 Charge for the year - 72,740 Written off - (138,866) Exchange differences - (1,257)

At 31 December - -

Net carrying amount At 31 December - -

Intangible asset represented technology transfer of technical expertise and associated expenses incurred in the development and production of thermoplastic elastomers (“TPE”).

In the previous financial year, the relevant subsidiary had ceased operations and the assets no longer had any potential to generate economic benefits to the Group. The Group has written off the carrying amount of RM654,654 to profit or loss.

15. INVESTMENT IN ASSOCIATE

Group 2019 2018 RM RM Restated

Unquoted shares, at cost 649,461 649,461 Share of post-acquisition reserves (654,363) (350,717) Exchange differences 4,902 5,459

- 304,203


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15. INVESTMENT IN ASSOCIATE (cont’d)

(a) Details of the associate are as follows:

Name of Company Country of Incorporation

Effective Interest Held (%) Principal Activities2019 2018

ShenZhen Rapid Power Co., Ltd. (“RCP”)


49 49 Manufacture and trading of cables and related products.

(b) The summarised financial information below represents the amounts in the financial statements of associate and the Group’s share of those amount.


Non-current assets 6,438,911 3,307,970 Current assets 18,195,229 19,739,227 Non-current liabilities (9,375,398) (172,743)Current liabilities (16,289,015) (21,980,595)Shareholder contribution reserve* (1,421,750) -

Net (liabilities)/assets (2,452,023) 893,859

Results Revenue 30,121,204 30,098,519 Loss for the financial year (3,518,375) (1,783,322)Other comprehensive income 172,493 (150,250)

Total comprehensive income (3,345,882) (1,933,572)

Cash flows: Cash flows from operating activities 776,069 (1,006,820)Cash flows used in investing acitivities (81,329) (142,902)Cash flows used in financing acitivities (672,094) 1,224,340

22,646 74,618

* This represent capital contribution by a shareholder of the associate by way of capitalised the amount owing to a Director amounted to RM1,421,750 (equivalents to RMB 2,450,000).


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15. INVESTMENT IN ASSOCIATE (cont’d)

(c) The reconciliation of net assets of the associate to the carrying amount of the investment in an associate is as follows:

Group 2019 2018 RM RM Restated Group’s share of net assets - 304,203

Group’s share of results, net of tax (303,646) (350,717)

The Group’s share of loss in associate is restricted to the Group’s cost of investment in associate. Accordingly, the Group has excluded its current year’s share of loss of associate amounting to RM1,335,836 (2018: Nil) from its financial statements.

As at 31 December 2019, the unrecognised share of loss of the associate is RM1,201,491 (2018: Nil).

16. OTHER INVESTMENT

Group and Company 2019 2018 RM RM

Unquoted investments outside Malaysia FVOCI At beginning of year 1,079,900 1,079,900 Changes in fair value (1,079,900) -

At end of year - 1,079,900

In year 2017, the Company had subscribed 3,131,675 of Series A Voting Common Stock USD0.001 each at USD0.0798 per share, representing 5% interest held in NetObjex Inc. (“NOI”), a private limited company domiciled in United States of America, for a total consideration of USD250,000 (equivalent to RM1,079,900).

The Group designated the above unquoted shares investment at FVOCI as the Group intends to hold for long term strategic purpose. Fair value of unquoted shares of the Group is determined based on adjusted net asset method and is categorised as Level 3 in the fair value hierarchy.


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17. DEFERRED TAX ASSETS


At 1 January 374,075 382,997 324,676 333,857 Recognised in profit or loss (Note 9) 72,312 - 63,751 - Recognised in equity (Note 24) - (9,181) - (9,181) Exchange differences (690) 259 - -

At 31 December 445,697 374,075 388,427 324,676

This is in respect of estimated deferred tax assets arising from temporary differences as follows:


Deferred tax assets Unutilised tax losses 57,270 49,399 - - ICPS liability 388,427 324,676 388,427 324,676

445,697 374,075 388,427 324,676

The estimated temporary differences for which no deferred tax assets have been recognised in the financial statements are as follows:-


Unutilised tax losses 9,011,375 9,010,171 - - Unabsorbed capital allowances 4,688,000 4,663,000 - -

13,699,375 13,673,171 - -

Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profits will be available against which the subsidiaries can utilise the benefits therefrom. The comparative figures have been restated to reflect the revised tax losses and capital allowances available to subsidiaries.


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18. OTHER RECEIVABLES


Non-current Amount due from associate 6,187,759 - - - Less: Loss allowance (2,787,878) - - -

3,399,881 - - -

Current Amounts due from subsidiaries - - 8,830,610 8,752,959 Amount due from associate 705,000 7,350,423 - - Amount receivable from a shareholder of associate in relation to acquisition of shares - 225,338 - - Deposits 600,203 492,047 9,318 9,636 Prepayments 100,037 265,389 14,843 6,861 Sales tax and purchase tax recoverable 2,063,177 2,575,663 - - Sundry receivables 1,034,409 865,558 1,002 1,000

4,502,826 11,774,418 8,855,773 8,770,456 Less: Loss allowance Amounts due from subsidiaries - - (6,239,132) (6,239,132) Other receivables (1,639,065) (1,810,365) - - (1,639,065) (1,810,365) (6,239,132) (6,239,132)

2,863,761 9,964,053 2,616,641 2,531,324

Total other receivables 6,263,642 9,964,053 2,616,641 2,531,324

The amounts due from subsidiaries are unsecured, non-interest bearing and are repayable on demand. The amount due from associate is unsecured, interest bearing at a rate of 4.75% (2018: Nil) per annum and is repayable over 5 years.

19. INVENTORIES


At cost: Raw materials 997,551 1,045,339 Finished goods 3,112,481 5,110,331 Goods in transit 3,212,051 1,277,389 Work in progress 690,363 662,044

8,012,446 8,095,103

Recognised in profit or loss: Inventories recognised as cost of sales 32,055,704 74,177,918


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20. TRADE RECEIVABLES


Third parties 8,969,320 12,567,125 Due from shareholder company of a subsidiary - 200,000

8,969,320 12,767,125 Less: Loss allowance (540,557) (544,048)

8,428,763 12,223,077

The Group’s normal trade credit terms are 30 days to 120 days (2018: 30 days to 90 days). Other credit terms are assessed and approved on a case-by-case basis.

21. SHORT TERM INVESTMENTS


Fair value through profit or loss Investment in Malaysia: - Islamic cash fund - 1,525,463 - Money market fund 574,545 -

574,545 1,525,463

The above investment funds represent investments in highly liquid money market instrument. The Group and the Company classified these short-term funds as cash and cash equivalents, as the amounts deposited can be withdrawn at the discretion of the Group and of the Company by giving a one (1) day notice period and are subject to an insignificant risk of changes in value. The distribution income from these funds is tax exempted.

22. DEPOSITS, CASH AND BANK BALANCES

Group Company 2019 2018 2019 2018 RM RM RM RM Restated Restated

Cash on hand and at banks 8,713,056 8,951,086 362,617 204,487 Deposits with licensed bank 815,549 1,479,602 815,549 1,479,602

9,528,605 10,430,688 1,178,166 1,684,089

The deposits with licensed bank bore effective interest rate at 2.32% (2018: 2.87%) per annum with maturity period of 30 days (2018: 30 days).


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23. SHARE CAPITAL

Group and Company Number of Ordinary Shares Amount 2019 2018 2019 2018 Units Units RM RM

Issued and fully paid: At beginning of year 329,304,925 322,344,425 32,930,493 32,234,443 Conversion of ICPS - 6,705,500 - 670,550 Issuance of shares pursuant to exercise of warrants - 255,000 - 25,500

At end of year 329,304,925 329,304,925 32,930,493 32,930,493

(a) Ordinary Shares

In previous financial year, the Company increased its issued and paid-up share capital from RM32,234,443 to RM32,930,493 by way of issuance of the following:

(i) 6,705,500 new ordinary shares pursuant to conversion of 6,705,500 ICPS on the basis of 1 ICPS for 1 ordinary share;

(ii) 130,000 new ordinary shares at the issue price of RM0.10 pursuant to exercise of 130,000 warrants 2011/2021 (Warrant-A); and

(iii) 125,000 new ordinary shares at the issue price of RM0.10 pursuant to exercise of 125,000 warrants 2016/2021 (Warrant-B).

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

The holders of 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.

(b) Detachable Warrants

(i) Warrant A 2011/2021 (“Warrant-A”)

In year 2011, the Company issued a renounceable rights issue of 60,847,500 new ordinary shares together with 60,847,500 free detachable warrants on the basis of 3 rights shares together with 3 detachable warrants for every 4 ordinary shares of the Company. This exercise price is subject to adjustment in accordance with the basis set out in the deed poll.

The warrants may be exercised at any time commencing on the date of issue of warrants on 19 September 2011 but not later than 18 September 2021. Any warrants which have not been exercised at date of maturity will lapse and cease to be valid for any purpose.

The new ordinary shares allotted and issued upon exercise of the warrants shall be fully paid and rank pari passu with the then existing ordinary shares of the Company. The warrant holders will not have any voting rights in any general meeting of the Company unless the warrants are exercised into new ordinary shares and registered prior to the date of the general meeting of the Company.


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23. SHARE CAPITAL (cont’d)

(b) Detachable Warrants (cont’d)

(i) Warrant A 2011/2021 (“Warrant-A”) (cont’d)

As disclosed in Note 23(a)(ii), total of 130,000 warrants were exercised in the financial year ended 31 December 2018 by the Warrants holders. As at 31 December 2019, total of 48,567,944 (2018: 48,567,944) warrants remain unexercised.

The movement of the Company’s Warrants-A is as follow:

Group and Company 2019 2018 Unit Unit

At 1 January 48,567,944 48,697,944 Exercised - (130,000)

At 31 December 48,567,944 48,567,944

(ii) Warrant B 2016/2021 (“Warrant-B”)

In year 2016, 649,821,600 irredeemable convertible preference shares (“ICPS”) were issued pursuant to a renounceable rights issue on basis of 3 ICPS for every 1 existing ordinary share held in the Company, at an issue price of RM0.025 per ICPS payable in full upon acceptance together with 43,321,388 free detachable warrants (“Warrants-B”) on the basis of 1 free warrants-B for every 15 ICPS.

Warrants-B 2016/2021 is constituted by a Deed Poll dated 25 April 2016.

The salient features of the Warrants-B 2016/2021 are as follow:

(a) The issue date of Warrants-B is pursuant to the Rights Issue of ICPS and will expire on the date preceding the 5th anniversary of the Issue Date. Any Warrants-B not exercised at expiry date will lapse and cease to be valid for any purpose;

(b) The exercise price and the number of outstanding Warrants-B are subject to the adjustments in accordance with the term and provisions of the Deed Poll;

(c) The rights of Warrants-B holder to subscribe the Company’s ordinary shares under a Warrant-B at exercise price and is subjected to the provision of the Deed Poll; and

(d) Upon exercise of the Warrants-B into new ordinary shares, such shares shall rank pari passu in all respect with the ordinary shares of the Company in issue at the time of exercise except that they shall not be entitled to any dividend or other distributions declared in respect of a financial period prior to the financial period.


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23. SHARE CAPITAL (cont’d)

(b) Detachable Warrants (cont’d)

(ii) Warrant B 2016/2021 (“Warrant-B”) (cont’d)

As disclosed in Note 23(a)(iii), total of 125,000 warrants were exercised in the financial year ended 31 December 2018 by the Warrants holders. As at 31 December 2019, total of 29,062,988 (2018: 29,062,988) warrants remain unexercised.

The movement of the Company’s Warrants-B is as follows:

Group and Company 2019 2018 Unit Unit

At 1 January 29,062,988 29,187,988 Exercised - (125,000)

At 31 December 29,062,988 29,062,988

24. IRREDEEMABLE CONVERTIBLE PREFERENCE SHARES (“ICPS”)

Group and Company Number of Amount shares ICPS-Equity ICPS-Liability ICPS component component Total ICPS Units RM RM RM

At 1 January 2019 470,139,800 10,725,353 1,352,818 12,078,171 Reclassification - (338,288) 338,288 - Charged to profit or loss - - (72,663) (72,663)

At 31 December 2019 470,139,800 10,387,065 1,618,443 12,005,508

At 1 January 2018 476,845,300 10,863,918 1,391,071 12,254,989 Conversion to ordinary shares (6,705,500) (129,384) (38,253) (167,637) Deferred tax effect on conversion (Note 17) - (9,181) - (9,181)

At 31 December 2018 470,139,800 10,725,353 1,352,818 12,078,171


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24. IRREDEEMABLE CONVERTIBLE PREFERENCE SHARES (“ICPS”) (cont’d)

The income charged to profit or loss is as follow:

Group and Company 2019 2018 RM RM

Remeasurement of imputed interest income (72,663) -

As disclosed in Note 23(a)(i), in the previous financial year, 6,705,500 ICPS were converted into ordinary shares on the basis of 1 ICPS for 1 existing ordinary share.

The outstanding ICPS as at 31 December 2019 was 470,139,800 (2018: 470,139,800) units.

The salient terms of the ICPS were as follows:

(i) ICPS shall be convertible into ordinary shares of the Company during the period from the date of Rights Issue to the maturity date on 5 years from issue date. The remaining ICPS that are not converted on the maturity date shall be automatically converted into ordinary shares.

(ii) Upon conversion of the ICPS into new ordinary shares, such shares shall rank pari passu in all respects with the ordinary shares of the Company except that such new ordinary shares shall not entitle its holders to any dividends, rights, allotments and/or other distributions on or prior to the relevant date of allotment of new ordinary shares arising from the conversion of the ICPS.

(iii) ICPS may be converted into new ordinary shares in the following manners:

(a) by surrendering for cancellation the ICPS with an aggregate par value equivalent to the conversion price; or

(b) by surrendering for cancellation such number of ICPS with an aggregate par value below the conversion price, subject to a minimum of 1 ICPS, and paying the difference between the par value of ICPS surrendered and the conversion price in cash, for every 1 new ordinary share.

(iv) A cumulative preference dividend rate per annum of 10 sen per 100 ICPS shall be payable out of post taxation profits. Dividends of ICPS holders of less than 100 ICPS shall be pro-rated based on such number of the ICPS held by the ICPS holder. No dividends shall be paid on the ordinary shares of the Company unless the dividends on the ICPS have first been paid.

25. RESERVES

Group Company 2019 2018 2019 2018 Note RM RM RM RM

Non-distributable Fair value reserve (a) (1,079,900) - (1,079,900) - Foreign currency translation reserve (b) 748,455 763,530 - - Warrants reserve (c) 2,034,409 2,034,409 2,034,409 2,034,409

1,702,964 2,797,939 954,509 2,034,409


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25. RESERVES (cont’d)

(a) Fair value reserve

The fair value reserve comprises the cumulative net change in the fair value of equity instrument designated at fair value through other comprehensive income until the assets are derecognised or impaired.

(b) Foreign currency translation reserve

The foreign currency exchange reserve comprises all foreign exchange differences arising from the translation of the financial statements of subsidiaries whose functional currencies are different from that of the Company’s functional currency as well as foreign currency differences arising from the translation of monetary items that are considered to form part of a net investment in a foreign operation.

The movement of foreign currency translation reserve were as follow:

Group 2019 2018 RM RM At 1 January 763,530 535,429 Arising during the year (15,075) 228,101

At 31 December 748,455 763,530

(c) Warrants reserve

Warrants reserve arose from the rights issues together with free detachable warrants which is measured at fair value on the date of issuance. Warrants reserve is transferred to the share capital upon the exercise of warrants and the warrants reserve in relation to unexercised warrants at the expiry of the warrant periods will be transferred to retained earnings.

The warrants reserve comprised the following:

Group and Company 2019 2018 RM RM Warrants-B 2,034,409 2,034,409

The fair value of the warrants-B is derived at using the Black-Scholes option pricing model with the assumptions as follow:

Exercise price RM0.10 Tenure 5 years Share price of the Company as at latest practicable date 18 April 2016 RM0.1206 Volatility rate 85.01% Risk free rate 3.516%


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26. OBLIGATIONS UNDER FINANCE LEASE


Future minimum finance lease payments: Not later than 1 year 180,812 89,400 Later than 1 year and not later than 2 years 180,812 89,400 Later than 2 years and not later than 5 years 596,701 223,486

958,325 402,286 Less: Future finance charges (132,451) (55,980)

Present value of obligation under finance lease 825,874 346,306

Analysis of present value of finance lease liabilities: Not later than 1 year 135,938 67,461 Later than 1 year and not later than 2 years 145,446 72,889 Later than 2 years and not later than 5 years 544,490 205,956

825,874 346,306

Representing: Non-current 689,936 278,845 Current 135,938 67,461

825,874 346,306

In the previous financial year, the effective interest rates of obligations under finance lease of the Group and of the Company ranged from 3.25% - 3.65% per annum and 3.65% per annum respectively.

27. LEASE LIABILITIES


Future minimum lease payments 8,364,087 360,885 Less: Future finance charges (568,906) (35,762)

Total present value of minimum lease payments 7,795,181 325,123

Payable within one year Future minimum lease payments 3,870,272 137,400 Less: Future finance charges (330,312) (18,233)

Present value of minimum lease payments 3,539,960 119,167 Payable more than one year but not more than five years Future minimum lease payments 4,493,815 223,485 Less: Future finance charges (238,594) (17,529)

Present value of minimum lease payments 4,255,221 205,956

7,795,181 325,123


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27. LEASE LIABILITIES (cont’d)


Analysis of present value of lease liabilities: Not later than 1 year 3,539,960 119,167 Later than 1 year and not later than 2 years 2,305,085 78,317 Later than 2 years and not later than 5 years 1,950,136 127,639

7,795,181 325,123

Representing: Current 3,539,960 119,167 Non-current 4,255,221 205,956

7,795,181 325,123

The lease liabilities of the Group and the Company bear interest at rate of 3.65% to 6.80% per annum.

Included in lease liabilities of the Group and of the Company are finance lease liabilities granted by financial institutions amounting to RM278,845.

28. TRADE PAYABLES

Trade payables are non-interest bearing and the normal trade credit terms granted to the Group range from 30 to 120 days (2018: 30 to 120 days).

29. OTHER PAYABLES


Accruals 2,133,640 2,367,856 150,202 143,418 Amount due to shareholders of subsidiary - 60,090 - - Amount due to shareholder company of subsidiary - 127,656 - - Provision for unutilised leave 137,218 126,932 - - Sundry payables 2,140,886 2,129,562 21,484 34,629

4,411,744 4,812,096 171,686 178,047

These amounts due to related parties are unsecured, non-interest bearing and are repayable upon demand.


134


30. COMMITMENTS

Rental commitments

The Group and the Company have entered into non-cancellable operating lease agreements for use of factory, office and equipment. These leases have an average life of between 1 and 5 years with renewal option included in the contracts. There are no restrictions placed upon the Group and the Company by entering into the leases.

The future aggregate minimum lease payments under the non-cancellable operating lease contracted as at reporting date but not recognised as liabilities are as follow:


Payable within one year 39,303 3,282,344 - 48,000 Payable more than one year but not more than five years - 6,068,896 - -

39,303 9,351,240 - 48,000

Upon adoption of MFRS 16 Leases, the Group and the Company have accounted these lease commitments at the

beginning of financial year, 1 January 2019 as Lease liabilities as disclosed in Note 2(a)(i) except for short lease less than 12 months amounted to RM39,303 as at the reporting date.

31. RELATED PARTY DISCLOSURES

(a) Identity of related parties

For the purpose of these financial statements, parties are considered to be related to the Group and the Company if the Group and the Company have the ability to directly control the party or exercise significant influence over the party in making financial and operating decision, or vice versa, or where the Group and the Company and the party are subject to common control or common significant influence. Related parties may be individuals or other entities.

The Group and the Company have related party relationships with their related parties and key management personnel. The related party balances are disclosed in Notes 18, 20, and 29.

(b) Related party transactions

2019 2018 Group RM RM

Related parties Purchase of raw material from an associate 1,163,789 139,180 Profit guarantee received from a shareholder of an associate - (259,420) Sales to a shareholder company of a subsidiary - (200,000) Waiver of amount due to a Director of subsidiary (59,980) - Net advance (to)/from an associate (71,364) 570,855 Net advance from a shareholder of an associate - 318,477 Net advance from a shareholder of subsidiary - 60,090

Company Subsidiaries Recovery of expenses received from subsidiaries (181,950) (177,316) Recovery of expenses paid to a subsidiary - 2,375,000


A N N U A L R E P O R T 2 0 1 9

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31. RELATED PARTY DISCLOSURES (cont’d)

(c) Compensation of key management personnel

Key management personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group and of the Company either directly or indirectly, including any Directors of the Company and its subsidiaries.

The key management personnel compensations are as follows:


Key management personnel Directors Salaries and other emoluments 2,748,428 2,902,619 112,000 - Fee 325,329 293,263 121,921 148,000 Defined contribution plan 46,969 60,454 13,440 - Social security contribution 616 - 616 - Benefits-in-kind 9,787 4,125 - -

3,131,129 3,260,461 247,977 148,000

Other key management personnel Salaries and other emoluments 171,000 326,298 171,000 144,000 Defined contribution plan 21,443 32,423 21,443 18,203

192,443 358,721 192,443 162,203

3,323,572 3,619,182 440,420 310,203

32. SEGMENT INFORMATION

For management purposes, the Group is organised into business units based on their geographical location, and has four reportable segments as follows:

(i) IBEX Pictures Entertainment Sdn. Bhd. (“IBEX”), Connect Security Solution Sdn. Bhd (“CSS”) and ConnectCounty Holdings Berhad (“CCHB”) covering Malaysia;

(ii) Rapid Conn (ShenZhen) Co., Ltd. (“RCC”), ShenZhen Rapid Power Co., Ltd. (“RCP”) and ShenZhen Rapid Resin Co., Ltd. (“RCR”) covering the People’s Republic of China (“China”);

(iii) Rapid Conn (S) Pte. Ltd. (“RCS”) covering Singapore; and

(iv) Rapid Conn Inc. (“RCI”) covering the United States of America (“USA”).

Except as indicated above, no operating segment has been aggregated to form the above reportable operating segments.

The business segment for cyber security services is not of a sufficient size to be reported separately; as such, information by business segment on the Group’s operation is not presented.

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss which, in certain respect as explained in the table below, is measured differently from operating profit or loss in the consolidated financial statements.


136


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A N N U A L R E P O R T 2 0 1 9

137

32. SEGMENT INFORMATION (cont’d)

Note: Nature of adjustments and eliminations to arrive at amounts reported in the consolidated financial statements

A Inter-companies revenues are eliminated on consolidation

B Other material non-cash expenses/(income) consist of the following items as presented in the respective notes to the financial statements:

2019 2018 RM RM

Bad debt written off on: - trade receivables 17,470 - - other receivables 168,774 - Intangible asset written off - 654,654 Addition/(reversal) of loss allowance on: - amount due from associate 2,846,246 - - trade receivables 8,823 402,356 - other receivables (133,671) 1,838,987 Loss/(gain) on foreign exchange - unrealised 155,332 426,761 Plant and equipment written off 141 2,457,140 Share of loss in associate, net of tax 303,646 350,717 Remeasurement of imputed interest income (72,663) - Waiver of amount due to a Director of subsidiary (59,980) -

3,234,118 6,130,615

C The following items are added to/(deducted from) segment (loss)/profit to arrive at “loss before tax” presented in the consolidated statement of profit or loss and other comprehensive income:

2019 2018 RM RM

Gain on disposal of subsidiary - (1) Impairment on amounts due from subsidiaries - 209,488 Impairment on amounts due from fellow subsidiary 9,779,042 - Impairment on investments in subsidiaries 9,160,000 6,299,409

18,939,042 6,508,896

D Additions to non-current assets consists of:

2019 2018 RM RM

Plant and equipment 614,705 1,706,629 Right-of-use assets: - Adoption of MFRS 16 Leases 9,146,018 - - Addition during the year 1,854,710 -

11,000,728 -

11,615,433 1,706,629


138


32. SEGMENT INFORMATION (cont’d) E Reconciliation of assets:

2019 2018 RM RM

Segments assets 43,145,694 46,937,235 Deferred tax assets 445,697 374,075 Tax recoverable 178,412 -

Total assets 43,769,803 47,311,310

The following items are deducted from segment assets to arrive at total assets reported in the consolidated

statement of financial position: 2019 2018 RM RM

Investments in subsidiaries (13,711,850) (22,871,849) Plant and equipment (10,706) (10,706) Inter-companies assets (3,423,099) (12,807,069) Deferred tax assets - 37,000

(17,145,655) (35,652,624)

F Reconciliation of liabilities:

2019 2018 RM RM

Segments liabilities 20,856,030 16,544,345 Tax payable - 73,358

Total liabilities 20,856,030 16,617,703

The following items are deducted from segment liabilities to arrive at total liabilities reported in the consolidated statement of financial position:

2019 2018 RM RM

Inter-companies liabilities (19,317,688) (18,998,485)


A N N U A L R E P O R T 2 0 1 9

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32. SEGMENT INFORMATION (cont’d)

GEOGRAPHICAL INFORMATION

Non-current assets information based on the geographical location of customers and assets respectively are as follows:

Non-current assets 2019 2018 RM RM

Malaysia 396,686 1,475,343 People’s Republic of China 7,843,802 2,327,741 Singapore 760,428 848,683 USA 4,736,658 47,084

13,737,574 4,698,851

The Group has two customers which contributes approximately RM26,596,203 or 51% (2018: four customers, RM45,897,507 or 46%) of the Group’s revenue during the financial year.

Non-current assets information presented above consist of the following items as presented in the consolidated statement of financial position.

2019 2018 RM RM

Motor vehicles 810,459 1,311,957 Mouldings 1 1 Office equipment, furniture and fittings 135,651 231,610 Plant and machinery 717,189 627,093 Renovation 1,086,080 1,144,087 Right-of-use assets 7,588,313 - Investment in associate - 304,203 Other investment - 1,079,900 Other receivable 3,399,881 -

13,737,574 4,698,851

33. FINANCIAL INSTRUMENTS

The Group’s and the Company’s financial assets and financial liabilities are measured on an ongoing basis at either fair value or at amortised cost based on their respective classification. The significant accounting policies in Note 3(k) describe how the classes of financial instruments are measured, and how income and expenses, including fair value gains and losses, are recognised.

The following table analyses the financial assets and financial liabilities of the Group and the Company in the statements of financial position by the classes and categories of financial instruments to which they are assigned, and therefore by the measurement basis.


140


33. FINANCIAL INSTRUMENTS (cont’d)

(a) Classification of financial instruments

Group Company 2019 2018 2019 2018 Note RM RM RM RM Restated Restated

Financial assets at: FVOCI Other investment 16 - 1,079,900 - 1,079,900

FVTPL Short term investments 21 574,545 1,525,463 574,545 1,525,463

Amortised cost Trade receivables 20 8,428,763 12,223,077 - - Other receivables, net of prepayments 18 6,163,605 9,698,664 2,601,798 2,524,463 Cash and bank balances 22 9,528,605 10,430,688 1,178,166 1,684,089

24,120,973 32,352,429 3,779,964 4,208,552

Total financial assets 24,695,518 34,957,792 4,354,509 6,813,915

Financial liabilities at: Amortised cost Trade payables 28 7,030,662 9,553,557 - - Other payables 29 4,411,744 4,812,096 171,686 178,047 ICPS- liability component 24 1,618,443 1,352,818 1,618,443 1,352,818 Lease liabilities 27 7,795,181 - 325,123 - Obligations under finance lease 26 - 825,874 - 346,306

Total financial liabilities 20,856,030 16,544,345 2,115,252 1,877,171

34. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group’s and the Company’s activities expose them to a variety of financial risk, liquidity risk, credit risk and foreign currency risk. The Group’s and the Company’s overall risk management strategy seeks to minimise adverse effects from the unpredictability of financial markets on the Group’s and the Company’s financial performance. The Group may use relevant financial instruments to manage certain risks. Such financial instruments are not held for trade or speculative purposes.

(a) Liquidity Risk

Liquidity risk is the risk that the Group and the Company will encounter difficulty in meeting financial obligations associated with financial liabilities. The Group’s and the Company’s exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. The Group objective is to maintain a balance between continuity of funding and flexibility through use of stand-by credit facilities.

The Group’s liquidity risk management policy is to manage its debt maturity profile, operating cash flows and the availability of funding so as to ensure that refinancing, repayment and funding needs are met. In addition, the Group and the Company maintain sufficient levels of cash and available banking facilities at a reasonable level to its overall debt position to meet their working capital requirements.


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34. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont’d)

(a) Liquidity Risk (cont’d)

Analysis of financial instruments by remaining contractual maturities

The following table sets out the maturity profile of the financial liabilities as at the end of the reporting period based on contractual undiscounted cash flows (including interest payments computed using contractual rates or, if floating, based on the rates at the end of the reporting period):

On demand Carrying Contractual or within amount cash flows 1 year 1 to 5 years RM RM RM RM

Group 2019 Lease liabilities 7,795,181 8,364,087 3,870,272 4,493,815 Trade payables 7,030,662 7,030,662 7,030,662 - Other payables 4,411,744 4,411,744 4,411,744 - ICPS- liability component 1,618,443 1,880,559 470,140 1,410,419

20,856,030 21,687,052 15,782,818 5,904,234

2018 Obligations under finance lease 825,874 958,325 180,812 777,513 Trade payables 9,553,557 9,553,557 9,553,557 - Other payables 4,812,096 4,812,096 4,812,096 - ICPS- liability component 1,352,818 1,880,559 470,140 1,410,419

16,544,345 17,204,537 15,016,605 2,187,932

Company 2019 Lease liabilities 325,123 360,885 137,400 223,485 Other payables 171,686 171,686 171,686 - ICPS- liability component 1,618,443 1,880,559 470,140 1,410,419

2,115,252 2,413,130 779,226 1,633,904

2018 Obligations under finance lease 346,306 402,286 89,400 312,886 Other payables 178,047 178,047 178,047 - ICPS- liability component 1,352,818 1,880,559 470,140 1,410,419

1,877,171 2,460,892 737,587 1,723,305


142



(b) Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

The Group’s exposure to interest rate risk arises mainly from interest-bearing financial assets and liabilities. The Group’s policies are to obtain the most favourable interest rates available. Any surplus funds of the Group and of the Company will be placed with licensed financial institutions to generate interest income.

In respect of interest-earning financial assets and interest-bearing financial liabilities, the following table indicates its effective interest rates at the reporting date and the periods in which they reprice or mature, whichever is earlier:

Exposure in interest rate risk

The interest rate profile of the Group’s and the Company’s significant interest-bearing financial instruments, based on carrying amounts as at the end of the reporting period was:

Group/Company 2019 2018 RM RM

Floating rate instruments Financial assets Deposits with licensed bank 815,549 1,479,602 Short-term investments 574,545 1,525,463

1,390,094 3,005,065

Interest rate risk sensitivity analysis

Fair value sensitivity analysis for fixed rate instruments

The Group and the Company do not account for any fixed rate financial assets and liabilities at fair value through profit or loss, and the Group does not designate derivatives as hedging instruments under a fair value hedge accounting model. Therefore, a change in interest rates as the reporting period would not affect profit or loss.

Cash flow analysis for variable rate instruments

A change of 25 basis points in interest rates at the end of the reporting period would have increased/(decreased) equity and results after tax by amount shown below.

The following table details the sensitivity analysis to a reasonably possible change in the interest rates as at the end of the reporting period, with all other variables held constant:

Group/Company 2019 2018 Increase/ Increase/ (Decrease) (Decrease) RM RM

Effect on profit after tax Increase of 25 basis points 2,641 5,710 Decrease of 25 basis points (2,641) (5,710)

Effect on equity Increase of 25 basis points 2,641 5,710 Decrease of 25 basis points (2,641) (5,710)


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(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 has transactional currency exposures that are denominated in a currency other than respective functional currencies of Group entities, primarily Ringgit Malaysia (“RM”), Renminbi (“RMB”) and US Dollars (“USD”). The foreign currencies in which these transactions are denominated are mainly US Dollars (“USD”), Renminbi (“RMB”), Singapore Dollars (“SGD”) and Hong Kong Dollars (“HKD”).

The Group does not have any formal hedging policy for its foreign exchange exposure and did not actively engage in activities to hedge its foreign currency exposures during the financial year. The Group seeks to manage the foreign currency risk by constructing natural hedges where it matches revenue and expenses in any single currency.

The Group is also exposed to currency translation risk arising from its net investments in foreign operations. The Group’s net investment in Singapore, People’s Republic of China and United States of America are not hedged as currency position in RMB and USD are considered to be long-term in nature.

The Group’s and the Company’s exposure to foreign currency are as follows:

USD HKD SGD RMB Total RM RM RM RM RM

Group 2019 Financial assets Trade receivables 644,653 1,475,042 - - 2,119,695 Other receivables - - 25,759 - 25,759 Deposits, cash and bank balances 4,007 5,332 49,849 6,496 65,684

648,660 1,480,374 75,608 6,496 2,211,138

Financial liability Other payables - - (167,408) - (167,408)

648,660 1,480,374 (91,800) 6,496 2,043,730

2018 (restated) Financial assets Trade receivables 2,055,727 764,462 - - 2,820,189 Other receivables - - 2,583,012 - 2,583,012 Deposits, cash and bank balances 80,461 244,030 87,895 7,403 419,789

2,136,188 1,008,492 2,670,907 7,403 5,822,990


144



(c) Foreign Currency Risk

The Group’s and the Company’s exposure to foreign currency are as follows: (cont’d)

USD HKD SGD RMB Total RM RM RM RM RM

Group Financial liabilities Trade payables (371,060) - - (87) (371,147) Other payables (1,466,432) - (300,001) - (1,766,433) Obligations under finance lease - - (479,568) - (479,568)

(1,837,492) - (779,569) (87) (2,617,148)

298,697 1,008,492 1,891,338 7,316 3,205,843

Company 2019 Financial assets Other receivables 164,692 - 2,415,586 - 2,580,278 Deposits, cash and bank balances 2,961 - - - 2,961

167,653 - 2,415,586 - 2,583,239

2018 (restated) Financial assets Other receivables 91,471 - 2,422,358 - 2,513,829 Deposits, cash and bank balances 3,024 - - - 3,024

94,495 - 2,422,358 - 2,516,853

Foreign currency risk sensitivity analysis

The following table details the sensitivity analysis to a reasonably possible change in the foreign currencies as at the end of the reporting period to the increase/(decrease) of loss for the year, with all other variables held constant:


USD against RM (2019: 5% , 2018: 4%) - strengthened (24,649) (9,080) (6,371) (2,873) - weakened 24,649 9,080 6,371 2,873

SGD against RM (2019: 5%, 2018: 1%) - strengthened (3,488) 14,374 (91,792) (18,410) - weakened 3,488 (14,374) 91,792 18,410


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(c) Foreign Currency Risk (cont’d)

Foreign currency risk sensitivity analysis (cont’d)


HKD against RM (2019: 1%, 2018: 2% ) - strengthened (11,251) (15,329) - - - weakened 11,251 15,329 - -

RMB against RM (2019: 3%, 2018: 3% ) - strengthened (148) (59,059) - - - weakened 148 59,059 - -

(d) Credit Risk

Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on its obligations. The Group’s exposure to credit risk arises principally from the loan and advances to an associate and individual characteristic of each customers. The Company’s exposure to credit risk arises principally from loans and advances to subsidiaries. For other financial assets (including cash and bank balances, deposits placed with licensed banks and short-term fund), the Group and the Company minimise credit risk by dealing exclusively with high credit rating counterparties.

There are no significant changes as compared to prior periods.

(i) Maximum Risk Exposure

As at the current and previous financial year end, the Group’s and the Company’s maximum exposure to credit risk is represented by the carrying amount of each class of financial asset recognised in the statements of financial position.

Risk management objectives, policies and processes for managing the risk

Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit risk is minimised and monitored via strictly limiting the Group’s associations to business partners with good credit rating. Credit evaluations are performed on all customers requiring credit over a certain amount.

At each reporting date, the Group assesses whether any of the trade receivables and contract assets are credit impaired.

The gross carrying amounts of credit impaired receivables and contract assets are written off (either partially or full) when there is no realistic prospect of recovery. This is generally the case when the Group determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to write-off. Nevertheless, receivables and contract assets that are written off could still be subject to enforcement activities. There are no significant changes as compared to previous year.


146



(d) Credit Risk (cont’d)

(ii) Trade receivables

Risk management objectives, policies and processes for managing the risk (cont’d)

Credit risk concentration profile

The Group has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis.

As at 31 December 2019, the Group has significant concentration of credit risks arising from the amount owing from four customers (2018: four customers) constituting 46% (2018: 49%) of net trade receivables of the Group.

Exposure to credit risk, credit quality and collateral

As the Group and the Company do not hold any collateral, the maximum exposure to credit risk is represented by the carrying amount of the financial assets as at the end of the reporting period.

Recognition and measurement of impairment loss

The Group and the Company have applied the simplified approach in MFRS 9 to measure the loss allowance at lifetime expected loss allowance for trade receivables.

The Group and the Company assess impairment of trade receivables on collective basis. In previous financial year, the Group and the Company assessed impairment on individual and collective basis.

For collective assessment, the Group and the Company used an allowance matrix to measure ECL of collective assessed receivables as they are grouped based on shared credit risk characteristics, the days past due and similar types of contracts which have similar risk characteristics.

Loss rates under collective assessment are calculated using a ‘roll rate’ method based on the probability of a receivable progressing through successive stages of delinquency to 180 days past due. Loss rates are based on actual credit loss experienced over the past years. The Group and Company also consider differences between (a) economic conditions during the period over which the historic data has been collected, (b) current conditions and (c) the Group’s and Company’s view of economic conditions over the expected lives of the receivables.

Consistent with the debt recovery process, the Group and the Company have set an observation period of 180 days from the date of invoices, balances which are past due after the observation period will be considered as credit impaired.


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(ii) Trade receivables (cont’d)

Recognition and measurement of impairment loss (cont’d)

The movements in the allowance for loss allowance in respect of trade receivables are shown below.


At 1 January 544,048 398,499 Charge for the year 8,823 402,356 Disposal of subsidiary (Note 13) - (231,986) Exchange differences (12,314) (24,821)

At 31 December 540,557 544,048

The following table provides information about the exposure to credit risk and ECLs for trade receivables and contract assets as at 31 December 2019 and 2018 which are grouped together as they are expected to have similar risk nature.

Gross carrying Loss amount allowances Net balance Group RM RM RM

2019 Current 7,028,539 (10,279) 7,018,260 1 - 30 days 744,645 (6,713) 737,932 31 - 60 days 331,522 - 331,522 61 - 90 days 305,109 - 305,109 More than 120 days 230,946 (195,006) 35,940

8,640,761 (211,998) 8,428,763 Credit impaired More than 180 days 328,559 (328,559) -

8,969,320 (540,557) 8,428,763

2018 Current 10,315,699 (26,114) 10,289,585 1 - 30 days 1,359,584 (33,273) 1,326,311 31 - 60 days 67,146 (2,746) 64,400 61 - 90 days 361,698 (18,917) 342,781 More than 120 days 200,000 - 200,000

12,304,127 (81,050) 12,223,077 Credit impaired More than 180 days 462,998 (462,998) -

12,767,125 (544,048) 12,223,077


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(iii) Other receivables and deposits

Other receivables and deposits of the Group and of the Company are generally unsecured and non-interest bearing.

Expected credit loss of other receivable is determined individually after considering the financial strength of the other receivables. As at the end of the reporting period, the maximum exposure to credit risks is represented by their carrying amounts in the statements of financial position.

The Group and the Company have provided allowances for expected credit losses on these amounts (excluding amounts due to from associate and subsidiaries) as disclosed as follow:


At 1 January 1,810,365 - Charge for the year - 1,838,987 Revesal during the year (133,671) - Exchange differences (37,629) (28,622)

At 31 December 1,639,065 1,810,365

(iv) Deposits, cash and bank balances

The deposits, cash and cash equivalents are held with banks and financial institutions. As at the reporting period, the maximum exposure to credit risk is represented by their carrying amounts in the statements of financial position. These banks and financial institutions have low credit risks. Hence, a loss allowance is not necessary.

(v) Amount due from associate

The Group provides unsecured loans and advances to associate. The Group monitors the ability of the associate to repay the loans and advances on an individual basis.


As at the end of the reporting period, the maximum exposure to credit risk is represented by their carrying amounts in the statements of financial position. Loans and advances provided are not secured by any collateral or supported by any other credit enhancements.


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(v) Amount due from associate (cont’d)


The Group assumes that there is a significant increase in credit risk when an associate’s financial position deteriorates significantly.

At the reporting date the Group assumes that there is a significant increase in credit risk given the associate’s financial position has deteriorated significantly which may lead to high probability of default for the advances to the associate.

The Group has provided allowances for expected credit losses on these amounts as disclosed as follow:


At 1 January - - Charge for the year 2,846,246 - Exchange differences (58,368) -

At 31 December 2,787,878 -

(vi) Amounts due from subsidiaries

The Company provides unsecured loans and advances to subsidiaries. The Company monitors the ability of the subsidiaries to repay the loans and advances on an individual basis.


As at the end of the reporting period, the maximum exposure to credit risk is represented by their carrying amounts in the statements of financial position. Loans and advances provided are not secured by any collateral or supported by any other credit enhancements.


Generally, the Company considers loans and advances to subsidiaries have low credit risk. The Company assumes that there is a significant increase in credit risk when a subsidiary’s financial position deteriorates significantly.

At the reporting date the Company assumes that there is a significant increase in credit risk given the subsidiaries’ financial position has deteriorated significantly which may lead to high probability of default for the advances to the subsidiaries. The Company determines the probability of default for these loans and advances individually using internal information available.

The Company has provided allowances for expected credit losses on these amounts as disclosed as follow:

2019 2018 RM RM

At 1 January 6,239,132 6,029,644 Charge for the year - 209,488

At 31 December 6,239,132 6,239,132


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35. FAIR VALUE

The aggregate fair values and the carrying amounts of other financial assets and liabilities carried on the statements of financial position as at 31 December are as below:

Financial instrument other than those carried at fair value

Financial instruments that are not carried at fair value and whose carrying amounts are reasonable approximation of fair value

The carrying amounts of short term receivables and payable, cash and cash equivalents and short term borrowings approximate their fair value due to the relatively short term nature of these financial instruments and insignificant impact of discounting.

Table below analyses assets and liabilities carried at fair value and those not carried at fair value for which fair value is disclosed together with the carrying amounts shown in the statements of financial position.

Financial assets and liabilities carried at fair value 2019 2018 Carrying Fair value Carrying Fair value amount Level 1 Level 3 amount Level 1 Level 3 RM RM RM RM RM RM

Financial assets Group and Company Short term investments 574,545 574,545 - 1,525,463 1,525,463 - Other investment - - - 1,079,900 - 1,079,900

Financial assets and liabilities not carried at fair value 2019 2018 Carrying Fair value Carrying Fair value amount Level 1 Level 3 amount Level 1 Level 3 RM RM RM RM RM RM

Financial liabilities Group Obligations under finance lease (non-current) - - - 689,936 - 616,014 ICPS liabilities component 1,618,443 - 1,618,443 1,352,818 - 1,352,818

Company Obligations under finance lease (non-current) - - - 278,845 - 247,424 ICPS liabilities component 1,618,443 - 1,618,443 1,352,818 - 1,352,818

Level 1:

The fair values of short term investments are valued using the net asset value of the investment funds.


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35. FAIR VALUE (cont’d)

Level 3:

The fair value of obligations under finance lease is determined by discounting the relevant cash flows using interest rates for similar instruments at the end of the reporting period. As permitted by MFRS 7, the fair value for lease liabilities is not disclosed. In the previous financial year, the interest rates used to discount the estimated cash flows for obligation under finance lease was ranged from 2.68% to 3.65%.

The fair value of liability component of ICPS is estimated by discounting cash flows at the adjusted market cost of debts of the Group and of the Company.

The fair value of other investment (unquoted shares) is based on adjusted net asset method.

There was no material transfer between Level 1, Level 2 and Level 3 during the financial year.

36. CAPITAL MANAGEMENT

The primary objective of the Group’s and the Company’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value.

The Group and the Company manage their capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group and the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the years ended 31 December 2019 and 31 December 2018.

The Group and Company monitor capital using a gearing ratio, which is net debts comprise of obligation under finance lease less deposits, cash and bank balances and short term investments divided by total capital plus net debts divided by total equity attributable to the Owners.

The Group’s and the Company’s strategy is to maintain the gearing ratio at a very low level.

The gearing ratio is as follows:

Group Company 2019 2018 2019 2018 RM RM RM RM Restated Restated

Obligations under finance lease - 825,874 - 346,306 Less: Deposits, cash and bank balances (9,528,605) (10,430,688) (1,178,166) (1,684,089) Short term investments (574,545) (1,525,463) (574,545) (1,525,463) Net debts/(net cash) (10,103,150) (11,130,277) (1,752,711) (2,863,246) Total equity attributable to the owners of the Company 24,947,528 33,071,396 16,751,063 28,535,573

Gearing ratio (times) * * * *

* Not meaningful


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37. SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR

On 8 November 2019, on behalf of the Board of Directors of the Company, Mercury Securities Sdn Bhd (“Mercury Securities”) announced that the Company proposes to undertake the Proposed Placement of up to 10% of the total number of issued shares of the Company.

The Proposed Placement will be undertaken pursuant to the shareholders’ mandate for issuance of new ordinary shares of the Company under Sections 75 and 76 of the Companies Act 2016 (“Act”) obtained at the Company’s 16th annual general meeting (“AGM”) held on 29 May 2019 (“General Mandate”).

Subsequently on 5 December 2019, the Company announced that the Company had obtained approved by Bursa Securities Malaysia Berhad to issuance up to 87,707,500 new Shares of the Company subject to the following conditions:

(i) The Company and Mercury Securities must fully comply with the relevant provisions under the Listing Requirements pertaining to the implementation of the Proposed Placement;

(ii) The Company and Mercury Securities to inform Bursa Securities upon the completion of the Proposed Placement; and

(iii) The Company to furnish Bursa Securities with a written confirmation of its compliance with the terms and conditions of Bursa Securities’ approval once the Proposed Placement is completed.

38. SUBSEQUENT EVENTS AFTER THE FINANCIAL YEAR

(i) On 21 January 2020, the Company announced the increase of its issued and paid-up share capital from RM32,930,493 to RM33,000,493 by way of issuance of 700,000 new ordinary shares pursuant to conversion of ICPS at RM0.10 per ICPS share.

(ii) On 15 May 2020, on behalf of the Board of Directors of the Company, Mercury Securities announced that the Board of the Directors of the Company had fixed the issue price at RM0.0855 per Placement Share (“Issue Price”) relating to Proposed Placement of up to 10% of the total number of issued shares of the Company announced by the Company on 5 December 2019.

(iii) The Group’s performance for the first quarter of 2020 was impacted due to the Group’s China operation were locked down due to outbreak since end of January 2020. The factories at China were unable to resume production and subsequently resumed operation in the middle of February 2020.

The Group considers the Covid-19 outbreak to be a non-adjusting event subsequent to the reporting date and does not result in any adjustments to the financial statements for the year ended 31 December 2019. As at the date of approval of the financial statements for issuance, due to various uncertainties of, including but not limited to, demand and consumption of the Group’s products and the availability of raw material supplies and logistics, a reasonable estimate of the financial impact for the financial year ending 31 December 2020, certain parts of which could be possibly expected to be material, is unable to be reliably determined.


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39. COMPARATIVE FIGURES

As previously reported Reclassification As restated Note RM RM RM

Statements of financial position Group Non-current assets Investment in associate (i) 1,701,296 (1,397,093) 304,203 Current assets Other receivables (i) 9,738,715 225,338 9,964,053 Short term investment (ii) - 1,525,463 1,525,463 Cash and bank balances (ii) 11,956,151 (1,525,463) 10,430,688 Current liabilities Other payables (i) 5,983,851 (1,171,755) 4,812,096

Company Current assets Short term investment (ii) - 1,525,463 1,525,463 Cash and bank balances (ii) 3,209,552 (1,525,463) 1,684,089 Statements of profit or loss and other comprehensive income Group Cost of sales (ii) (87,462,203) (712,205) (88,174,408) Other income (ii) 2,142,063 712,205 2,854,268

Statements of cash flows Group Cash flows from operating activities Operating loss before working capital changes (1,750,228) - (1,750,228) Inventories 6,297,232 3,224 6,300,456 Receivables (198,788) 940,709 741,921 Payables (7,818,313) (868,492) (8,686,805) Cash (used in)/generated from operations (3,470,097) 75,441 (3,394,656) Interest paid (316,534) - (316,534) Tax paid (735,245) 1,251 (733,994)

Net (cash used in)/generated from operating activities (4,521,876) 76,692 (4,445,184)

Cash flows from investing activities Interest received 109,388 - 109,388 Proceeds from disposal of plant and equipment 453,798 - 453,798 Proceeds from disposal of subsidiary 2,465,235 - 2,465,235 Purchase of plant and equipment (785,694) 1,682 (784,012)

Net cash generated from investing activities 2,242,727 1,682 2,244,409


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39. COMPARATIVE FIGURES (cont’d)

As previously reported Reclassification As restated Note RM RM RM

Cash flows from financing activities Dividends refunded 109 - 109 Proceeds from issuance of ordinary shares pursuant to conversion of ICPS 670,550 - 670,550 Proceeds from issue of shares upon exercise of warrants 25,500 - 25,500 Conversion of ICPS expenses (167,637) 167,637 - Conversion of ICPS equity component - (129,384) (129,384) Conversion of ICPS liability component - (38,253) (38,253) Repayment of hire purchase (266,541) 23,739 (242,802)

Net cash generated from financing activities 261,981 23,739 285,720

Net decrease in cash and cash equivalents (2,017,168) 102,113 (1,915,055) Effects of exchange rate changes 184,427 (102,113) 82,314 Cash and cash equivalents at the beginning of year 13,788,892 - 13,788,892

Cash and cash equivalents at the end of year 11,956,151 - 11,956,151

(i) These reclassifications are relating to partial proceeds received from the disposal of a subsidiary previously classified as other payables and subsequently reclassified to set-off the cost of investment in associate in accordance to MFRS 128 Investments in Associates and Joint Ventures to remeasure the cost of investment in associate under equity accounting. The remaining balance of the proceeds to the received was accounted as other receivables.

(ii) Certain comparative figures of the Group and of the Company for the financial year ended 31 December 2018 have been reclassified to conform with the current year presentation.

40. AUTHORISATION OF FINANCIAL STATEMENTS FOR ISSUE

The financial statements for the year ended 31 December 2019 were authorised for issue in accordance with a resolution of the Directors on 19 May 2020.

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Total Number of Issued Ordinary Shares : 363,704,925 ordinary shares Class of Shares : Ordinary shares Voting Rights : One vote per ordinary share

ANALYSIS BY SIZE OF SHAREHOLDINGS

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

1 - 99 56 3.39 2,158 0.00100 - 1,000 259 15.70 121,843 0.031,001 - 10,000 521 31.58 2,972,200 0.8210,001 - 100,000 615 37.27 24,943,370 6.86100,001 – 18,185,245* 198 12.00 232,884,854 64.0318,185,246 and above ** 1 0.06 102,780,500 28.26

Total: 1,650 100.00 363,704,925 100.00

Notes:-* Less than 5% of issued holdings** 5% and above of issued holdings

SUBSTANTIAL SHAREHOLDERS BASED ON THE REGISTER OF SUBSTANTIAL SHAREHOLDERS

No. of Ordinary SharesNo. Name Direct Interest % Indirect Interest %

1. Ang Chuang Juay 18,662,224 5.13 - -2. Nexus Creative (Mal) Sdn. Bhd. 102,780,500 28.26 - -3. Wong Pooi Fatt - - 102,780,500(1) 28.264. Lee Su Lin - - 102,780,500(1) 28.26

Remark:(1) Deemed interested by virtue of their interest in Nexus Creative (Mal) Sdn. Bhd. pursuant to Section 8 of the Companies Act 2016.

DIRECTORS’ SHAREHOLDINGS BASED ON THE REGISTER OF DIRECTORS’ SHAREHOLDINGS

No. of Ordinary Shares Name of Directors Direct Interest % Indirect Interest %

Ang Chuang Juay 18,662,224 5.13 - -Major General Dato’ Mamat Ariffin bin Abdullah - - - -Lim Bee San - - - -Thong Mei Mei - - - -Vivek a/l Sasheendran - - - -

STATISTICS OFSHAREHOLDINGS

AS AT 29 MAY 2020

156


TOP 30 SECURITIES ACCOUNT HOLDERS (ORDINARY SHARES) AS PER RECORD OF DEPOSITORS

No. Name No. of Issued Shares %

1. JF Apex Nominees (Tempatan) Sdn. Bhd. 102,780,500 28.26 - Pledged Securities Account for Nexus Creative (Mal) Sdn. Bhd.2. M & A Nominee (Tempatan) Sdn. Bhd. 16,000,000 4.40 - Pledged Securities Account Majestic Salute Sdn. Bhd. for Chan Yok Peng3. Teow Chee Poh 15,780,000 4.344. Leong Kim Fong 14,778,800 4.065. AmSec Nominees (Asing) Sdn. Bhd. 13,313,852 3.66 - Pledged Securities Account for Ang Chuang Juay 6. JF Apex Nominees (Tempatan) Sdn. Bhd. 9,810,000 2.70 - Pledged Securities Account for Strongleap Sdn. Bhd.7. Tajul Arifin Bin Mohd Tahir 9,090,900 2.508. ACE Private Equity Sdn. Bhd. 8,331,900 2.299. ACE Credit (M) Sdn. Bhd. 7,093,100 1.95 - Pledged Securities Account for Cheah Hock Choon10. JF Apex Nominees (Tempatan) Sdn. Bhd. 6,891,800 1.89 - Pledged Securities Account for Lee Chong Peng11. Affin Hwang Nominees (Tempatan) Sdn. Bhd. 6,700,000 1.84 - Pledged Securities Account for Yong Siew Yee12. Chin Sin Hong 5,812,400 1.6013. Ang Chuang Juay 5,348,372 1.4714. Chow Dai Ying 5,000,000 1.3715. ACE Credit (M) Sdn. Bhd. 4,859,400 1.34 - Pledged Securities Account for Chin Sin Hong16. Quek Pei Wen 4,660,000 1.2817. Tan Choon Cheng 4,607,400 1.2718. ACE Credit (M) Sdn. Bhd. 4,205,000 1.16 - Pledged Securities Account for Chang Choon Ming19. Norzaity Binti Othman 3,500,000 0.9620. Lai Mooi Peng 3,000,000 0.8221. Wong Koo Choy 2,972,000 0.8222. Lee Choon Kwong 2,590,400 0.7123. Citigroup Nominees (Tempatan) Sdn. Bhd. 2,300,000 0.63 - Pledged Securities Account for Yong Koon Seng24. Chua Ah Choo 2,000,000 0.5525. Saw Bee Ann 1,950,300 0.5426. Heng Ling Jy 1,700,000 0.4727. Chong Loong Men 1,669,500 0.4628. CGS-CIMB Nominees (Tempatan) Sdn. Bhd. 1,500,000 0.41 - Pledged Securities Account for Kong Min Ho29. Chaw Wai Kheng 1,500,000 0.4130. Gui Soon Yi 1,500,000 0.41

Total: 271,245,624 74.57

STATISTICS OF SHAREHOLDINGSAS AT 29 MAY 2020 (cont’d)

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STATISTICS OF IRREDEEMABLE CONVERTIBLE PREFERENCE SHARES (“ICPS”)

AS AT 29 MAY 2020

Total Number of ICPS Issued : 468,739,800Conversion Period : 5 yearsMaturity Date : 7 June 2021

ANALYSIS BY SIZE OF ICPS HOLDINGS

Size of Holdings No. of Holders % No. of ICPS %

1 - 99 1 0.41 72 0.00100 - 1,000 12 4.98 3,846 0.001,001 - 10,000 25 10.37 140,900 0.0310,001 - 100,000 107 44.40 5,797,000 1.24100,001 – 23,436,989* 91 37.76 162,712,710 34.7123,436,990 and above ** 5 2.07 300,085,272 64.02

Total: 241 100.00 468,739,800 100.00


DIRECTORS’ INTEREST IN ICPS BASED ON THE REGISTER OF DIRECTORS’ ICPS HOLDINGS

No. of ICPSName of Directors Direct Interest % Indirect Interest %

Ang Chuang Juay 38,897,256 8.30 - -Major General Dato’ Mamat Ariffin bin Abdullah Lim Bee San - - - -Thong Mei Mei - - - -Vivek a/l Sasheendran - - - -

158


TOP 30 SECURITIES ACCOUNT HOLDERS (ICPS) AS PER RECORD OF DEPOSITORS

No. Name No. of Issued ICPS %

1. Nexus Creative (Mal) Sdn. Bhd. 158,290,000 33.772. ACE Corporation (M) Sdn. Bhd. 52,282,916 11.153. Ong Hay Thong 33,534,800 7.154. AmSec Nominees (Asing) Sdn. Bhd. 28,897,256 6.16 - Pledged Securities Account for Ang Chuang Juay 5. ACE Credit (M) Sdn. Bhd. 27,080,300 5.78 - Pledged Securities Account for Chin Sin Hong6. Leong Kim Fong 15,239,400 3.257. Yeo Chih Peng (Yang Zhipeng) 13,024,200 2.788. ACE Credit (M) Sdn. Bhd. 12,110,000 2.58 - Pledged Securities Account for Cheah Hock Choon 9. JF Apex Nominees (Tempatan) Sdn. Bhd. 11,561,100 2.47 - Pledged Securities Account for ACE Credit (M) Sdn. Bhd.10. Ang Chuang Juay 10,000,000 2.1311. JF Apex Nominees (Tempatan) Sdn. Bhd. 9,956,800 2.12 - Pledged Securities Account for Lee Chong Peng12. Mercsec Nominees (Tempatan) Sdn. Bhd. 7,905,000 1.69 - Pledged Securities Account for Avenue Portal Sdn. Bhd.13. Lee Mee Kuen 7,902,400 1.6914. Tan Choon Cheng 5,800,000 1.2415. Quek Pei Wen 5,560,800 1.1916. Khong Heng Jian 4,830,300 1.0317. Saw Bee Ann 4,262,000 0.9118. Low Lay Ping 3,949,900 0.8419. Goh Mee Fong 3,205,510 0.6820. Khong Heng Shaun 2,812,000 0.6021. Pang Swee Sing 2,639,000 0.5622. HLIB Nominees (Tempatan) Sdn. Bhd. 2,432,400 0.52 - Pledged Securities Account for Chia Soo Yee23. Pamela Ong Mei Yu 1,918,300 0.4124. Lee Phaik Kooi 1,604,600 0.3425. Lee Phaik Kooi 1,550,000 0.3326. Yong Siew Ngee 1,300,000 0.2827. Chia Jerng Shung 1,273,000 0.2728. CGS-CIMB Nominees (Tempatan) Sdn. Bhd. 1,200,000 0.26 - Pledged Securities Account for Teh Swee Heng29. Tay Seng Chew 1,200,000 0.2630. Lee Kok Hoong 1,164,800 0.25

Total: 434,486,782 92.69

STATISTICS OF IRREDEEMABLE CONVERTIBLE PREFERENCE SHARES (“ICPS”) AS AT 29 MAY 2020 (cont’d)

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Description : Warrants 2011/2021 (“Warrants A”)Total Outstanding Warrants : 48,567,944Maturity Date : 18 September 2021Number of Warrant Holders : 413

ANALYSIS BY SIZE OF WARRANT HOLDINGS FOR WARRANTS A AS PER THE RECORD OF DEPOSITORS

Size ofWarrant Holdings No. of Warrant Holders % No. of Warrants %

1 – 99 150 36.32 6,615 0.01100 – 1,000 29 7.02 11,605 0.021,001 - 10,000 54 13.08 272,852 0.5610,001 – 100,000 121 29.30 5,606,213 11.54100,001 – 2,428,396 * 56 13.56 20,324,459 41.852,428,397 and above ** 3 0.73 22,346,200 46.01

Total: 413 100.00 48,567,944 100.00


DIRECTORS’ INTEREST IN WARRANTS A BASED ON THE REGISTER OF DIRECTORS’ WARRANT HOLDINGS

No. of Warrants A Name of Directors Direct Interest % Indirect Interest %

Ang Chuang Juay - - - -Major General Dato’ Mamat Ariffin bin Abdullah - - - -Lim Bee San - - - -Thong Mei Mei - - - -Vivek a/l Sasheendran - - - -

STATISTICS OF WARRANTHOLDINGS FOR WARRANTS A

AS AT 29 MAY 2020

160


TOP 30 SECURITIES ACCOUNT HOLDERS (WARRANTS A) AS PER THE RECORD OF DEPOSITORS

No. Name of Warrantholders No. of Warrants %

1. Leong Kim Fong 12,062,600 24.842. ACE Corporation (M) Sdn. Bhd. 7,259,200 14.953. Pamela Ong Mei Yu 3,024,400 6.234. Ng Poh Seng 1,700,000 3.505. Lok Wei Seong 1,391,000 2.866. Lim Lay Peng 1,209,873 2.497. Goh Mee Fong 1,000,035 2.068. Tay Seng Chew 1,000,000 2.069. Chen Tong Yee 950,000 1.9610. Low Kean Teik 800,000 1.6511. Ng Sook Kin 619,700 1.2812. Chua Lee Guan 600,000 1.2413. CGS-CIMB Nominees (Tempatan) Sdn. Bhd. 500,000 1.03 - Pledged Securities Account for Lim Boon Sing14. Low Pak Seng 487,636 1.0015. Lim Song War 473,214 0.9716. Maybank Nominees (Tempatan) Sdn. Bhd. 450,400 0.93 - Liew Shak Kiun17. Yeo Chih Peng (Yang Zhipeng) 445,321 0.9218. CGS-CIMB Nominees (Tempatan) Sdn. Bhd. 410,000 0.84 - Pledged Securities Account for Pang Hoi Kee 19. Lurtutas a/l Permallo 400,000 0.8220. Public Nominees (Tempatan) Sdn. Bhd. 363,209 0.75 - Pledged Securities Account for Ho Chi Lin 21. Lee Mee Yoke 362,300 0.7522. Public Nominees (Tempatan) Sdn. Bhd. 331,250 0.68 - Pledged Securities Account for Beh Kam Quee23. Ong Hay Thong 319,500 0.6624. AllianceGroup Nominees (Tempatan) Sdn. Bhd. 300,000 0.62 - Pledged Securities Account for Batu Bara Resources Corporation Sdn. Bhd.25. AllianceGroup Nominees (Tempatan) Sdn. Bhd. 300,000 0.62 - Pledged Securities Account for Andrew a/l Lurtutas26. JF Apex Nominees (Tempatan) Sdn. Bhd. 300,000 0.62 - Pledged Securities Account for Chin Chee Yong27. Ng See Kuang 283,600 0.5828. Phoo Keng Hui 279,858 0.5829. Chuah Yong Tian 269,300 0.5530. Kenanga Nominees (Tempatan) Sdn. Bhd. 250,000 0.51 - Rakuten Trade Sdn. Bhd. for Shazni bin Abdullah Zubir

Total: 38,142,396 78.55

STATISTICS OF WARRANTHOLDINGS FOR WARRANTS AAS AT 29 MAY 2020 (cont’d)

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Description : Warrants 2016/2021 (“Warrants B”)Total Outstanding Warrants : 29,062,988Maturity Date : 7 June 2021Number of Warrant Holders : 324

ANALYSIS BY SIZE OF WARRANT HOLDINGS FOR WARRANTS B AS PER THE RECORD OF DEPOSITORS

Size ofWarrant Holdings No. of Warrant Holders % No. of Warrants %

1 – 99 61 18.83 2,904 0.01100 – 1,000 32 9.88 14,723 0.051,001 - 10,000 83 25.62 406,910 1.4010,001 – 100,000 95 29.32 4,492,525 15.46100,001 – 1,453,148 * 50 15.43 17,141,726 58.981,453,149 and above ** 3 0.93 7,004,200 24.10

Total: 324 100.00 29,062,988 100.00


DIRECTORS’ INTEREST IN WARRANTS B BASED ON THE REGISTER OF DIRECTORS’ WARRANT HOLDINGS

No. of Warrants BName of Directors Direct Interest % Indirect Interest %

Ang Chuang Juay - - - -Major General Dato’ Mamat Ariffin bin Abdullah - - - -Lim Bee San - - - -Thong Mei Mei - - - -Vivek a/l Sasheendran - - - -

STATISTICS OF WARRANTHOLDINGS FOR WARRANTS B

AS AT 29 MAY 2020

162


TOP 30 SECURITIES ACCOUNT HOLDERS (WARRANTS B) AS PER THE RECORD OF DEPOSITORS

No. Name of Warrant Holders No. of Warrants %

1. ACE Corporation (M) Sdn. Bhd. 2,926,100 10.072. Leong Kim Fong 2,078,100 7.153. HSBC Nominees (Asing) Sdn. Bhd. 2,000,000 6.88 - Exempt AN for Credit Suisse 4. Ng Poh Seng 1,300,000 4.475. Tay Seng Chew 1,150,000 3.966. Pamela Ong Mei Yu 958,400 3.307. TA Nominees (Tempatan) Sdn. Bhd. 850,000 2.92 - Pledged Securities Account for Chia Mee Thih 8. Khoo Tee Keah 600,000 2.069. Public Nominees (Tempatan) Sdn. Bhd. 584,700 2.01 - Pledged Securities Account for Ho Chi Lin 10. Goh Mee Fong 561,554 1.9311. Ngu Meng Chung 541,000 1.8612. Mohd Radzi bin Hanafi 511,100 1.7613. Albert Lim Wei Peng 500,000 1.7214. Lee Ah Mooi @ Lee Wan Eng 500,000 1.7215. Ng Sook Kin 490,700 1.6916. Lee Eng Min 490,000 1.6917. Chua Lee Guan 448,100 1.5418. Chen Tong Yee 440,000 1.5119. Yee Teck Choon 418,800 1.4420. Lee Mee Kuen 400,000 1.3821. Wong Ding Nen 400,000 1.3822. Kenanga Nominees (Tempatan) Sdn. Bhd. 350,000 1.20 - Rakuten Trade Sdn. Bhd. for Phang Wai Yeah23. Lee Siew Mei 320,000 1.1024. AllianceGroup Nominees (Tempatan) Sdn. Bhd. 300,000 1.03 - Pledged Securities Account for Andrew a/l Lurtutas 25. Chuah Yong Tian 300,000 1.0326. Saw Bee Ann 300,000 1.0327. HLB Nominees (Tempatan) Sdn. Bhd. 296,513 1.02 - Pledged Securities Account for Ser Kong Lam 28. Maybank Nominees (Tempatan) Sdn. Bhd. 250,000 0.86 - Muhammad Taufiq bin Abdul Latif 29. Teh Heng Gnoi @ Teh Heng Gnai 213,333 0.7330. Yong Chun Meng 211,900 0.73

Total: 20,690,300 71.17

STATISTICS OF WARRANTHOLDINGS FOR WARRANTS BAS AT 29 MAY 2020 (cont’d)

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NOTICE IS HEREBY GIVEN THAT the Seventeenth Annual General Meeting (“AGM”) of the Company will be held at Skyview 7, Level 29, The Gardens Hotel & Residences, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur, Wilayah Persekutuan on Tuesday, 28 July 2020 at 10:00 a.m. for the following purposes:-

A G E N D A

Ordinary Business

NOTICE OF SEVENTEENTH ANNUAL GENERAL MEETING

1. To receive the Audited Financial Statements of the Company for the financial year ended 31 December 2019 together with the Reports of the Directors and Auditors thereon.

2. To approve the payment of Directors’ fees amounting to RM121,921.32 for the financial year

ended 31 December 2019. 3. To approve an amount of up to RM60,000/- as benefits payable to the Non-Executive Directors

of the Company from 29 July 2020, being the date after the Seventeenth AGM to the Eighteenth AGM of the Company in year 2021 pursuant to Section 230(1)(b) of the Companies Act 2016.

4. To recommend the re-election of Ms. Lim Bee San, the Director who is retiring pursuant to

Clause 124 of the Company’s Constitution and being eligible, has offered herself for re-election.

5. To recommend the re-election of Mr. Vivek a/l Sasheendran, the Director who is retiring pursuant to Clause 107 of the Company’s Constitution and being eligible, has offered himself for re-election.

6. To re-appoint Messrs. Moore Stephens Associates PLT as the Auditors of the Company until the conclusion of the next AGM and to authorise the Board of Directors of the Company to determine their remuneration.

Special Business

To consider and, if thought fit, with or without any modification, to pass the following as Ordinary Resolution:-

7. Ordinary Resolution - Authority to Issue Shares Pursuant to the Companies Act 2016

“THAT subject always to the Companies Act 2016, the Constitution of the Company and the approvals of Bursa Malaysia Securities Berhad and any other governmental/ regulatory authorities, the Directors of the Company be and are hereby authorised and empowered pursuant to the Companies Act 2016, to issue and allot shares in the Company, at any time, at such price, to such persons and upon such terms and conditions and for such purposes as the Directors of the Company may, in their absolute discretion, deem fit, provided that the aggregate number of shares to be issued pursuant to this resolution does not exceed twenty per centum (20%) of the total number of issued shares of the Company (excluding Treasury Shares) for the time being; AND THAT such authority shall commence immediately upon the passing of this resolution and continue to be in force until the conclusion of the next Annual General Meeting of the Company.

AND THAT the Directors of the Company, whether solely or jointly, be and are hereby empowered to obtain the approval for the listing of and quotation for the additional shares so issued on the ACE Market of Bursa Malaysia Securities Berhad AND be hereby authorised to do all such acts and things including executing all relevant documents as he/they may consider expedient or necessary to complete and give full effect to the abovesaid mandate.”

(Refer to Explanatory

Note 8)Ordinary

Resolution 1

OrdinaryResolution 2





164


8. To transact any other business of which due notice shall have been given in accordance with the Companies Act 2016 and the Constitution of the Company.

BY ORDER OF THE BOARD

CHUA SIEW CHUAN (SSM PC NO.: 201908002648)(MAICSA 0777689)CHENG CHIA PING (SSM PC NO.: 202008000730)(MAICSA 1032514)Company Secretaries

Kuala Lumpur26 June 2020

Notes:

Information for Shareholders/ Proxies

1. In respect of deposited securities, only members whose names appear in the Record of Depositors on 21 July 2020 (General Meeting Record of Depositors) shall be eligible to attend the Meeting.

2. A member shall not be entitled to appoint more than two (2) proxies to attend and vote at the same general meeting. Where a member appoints two (2) proxies, the appointments shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy.

3. A proxy may but need not be a member of the Company and a member may appoint any person to be his proxy. There shall be no restriction as to the qualification of the proxy and a proxy appointed to attend and vote at a general meeting shall have the same rights as the member to speak at the meeting.

4. The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorised in writing or, if such appointer is a corporation, under its common seal or under the hand of an officer or attorney duly authorised. The Directors may, but shall not be bound to require evidence of the authority of any such attorney or officer.

5. Where a member is an authorised nominee as defined under the Securities Industry (Central Depository) Act, 1991, it may appoint at least one (1) proxy but not more than two (2) proxies in respect of each securities account it holds to which shares in the Company standing to the credit of the said account.

6. Where a member is an exempt authorised nominee which holds deposited securities in the Company for multiple beneficial owners in one (1) securities account (“omnibus account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds.

7. The instrument appointing a proxy and the power of attorney or other authority, if any, under which it is signed or a

notarially certified copy of that power or authority shall be deposited at the office of the Company’s Share Registrar at Level 7, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, Damansara Heights, 50490 Kuala Lumpur, Wilayah Persekutuan, not less than forty-eight (48) hours before the time for holding the meeting or adjourned meeting at which the person named in the instrument proposes to vote, and in default the instrument of proxy shall not be treated as valid.

Audited Financial Statements for the financial year ended 31 December 2019

8. This agenda item is meant for discussion only, as the provision of Section 340(1)(a) of the Companies Act 2016 does not require a formal approval for the Audited Financial Statements from the shareholders. Therefore, this agenda item is not put forward for voting.

NOTICE OF SEVENTEENTH ANNUAL GENERAL MEETING(cont’d)

A N N U A L R E P O R T 2 0 1 9

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Ordinary Resolution 1 - Payment of Directors’ Fees

9. The proposed Directors’ fees payable to the Directors of the Company for the financial year ended 31 December 2019 shall be up to RM121,921.32 only, which comprise the following:-

Directors’ Fees Financial Year Ended31 December 2019

Non-Executive Directors RM2,000 per person per monthAudit Committee Chairperson Additional RM1,000 per month

Executive Director RM1,000 per month

Ordinary Resolution 2 - Benefits payable to the Non-Executive Directors

10. The proposed benefits payable to the Non-Executive Directors of the Company pursuant to Section 230 (1)(b) of the Companies Act 2016 has earlier been reviewed by the Remuneration Committee and the Board of Directors of the Company, which recognise that the benefits payable are in the best interest of the Company for the applicable period between 29 July 2020, being the date after the Seventeenth AGM to Eighteenth AGM of the Company. The proposed benefits of up to RM60,000/- comprised travelling expenses, training and seminar and Directors’ and Officers’ Liability Insurance. The travelling expenses will only be accorded based on actual claims for attendance of meetings by the Non-Executive Directors.

Explanatory Note to Special Businesses

11. Ordinary Resolution 6 – Authority to Issue Shares pursuant to the Companies Act 2016

The proposed adoption of the Ordinary Resolution is to renew the mandate granted to the Directors of the Company at the Sixteenth AGM held on 29 May 2019 (“Previous Mandate”), to issue and allot shares at any time to such persons in the Directors’ absolute discretion without convening a general meeting provided that the aggregate number of the shares issued does not exceed 20% of the total number of issued shares of the Company for the time being (hereinafter referred to as the “20% General Mandate”).

As part of the initiative from Bursa Malaysia Securities Berhad (“Bursa Malaysia Securities”) to aid and facilitate listed issuers in sustaining their business or easing their compliance with Bursa Malaysia Securities’ rules, amid the unprecedented uncertainty surrounding the recovery of the COVID-19 outbreak and Movement Control Order imposed by the Malaysian Government, Bursa Malaysia Securities had vide their letter dated 16 April 2020 allow a listed issuer to seek a higher general mandate under Rule 6.04 of the ACE Market Listing Requirements of Bursa Malaysia Securities of not more than 20% of the total number of issued shares (excluding treasury shares) for the general issue of new securities.

The 20% General Mandate will provide flexibility to the Company for allotment of shares for any possible fund-raising activities for the purpose of funding future investment project(s), working capital and/or acquisition(s).

The Board of Directors, having considered the current and prospective financial position, needs and capacity of the Company and its subsidiaries, is of the opinion that the 20% General Mandate is in the best interests of the Company and its shareholders.

Pursuant to the Previous Mandate, the Company had undertaken a private placement of 33,000,000 new ordinary shares which were issued at the issue price of RM0.0855 each and was listed on 28 May 2020. The proceeds raised from the said private placement exercise was RM2,821,500/-.

The details of utilisation of the proceeds from the abovementioned corporate exercise were as follows:-

Description Status of utilisation

Amount utilisedRM’000

Amount unutilisedRM’000

Regional expansion Unutilised - 1,000.0Product development Unutilised - 1,000.0Working capital Unutilised - 726.6Estimated expenses Fully Utilised 94.9 -

Total 94.9 2,726.6

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Important Notes:

The members are required to refer to the Administrative Guide for Shareholders/Proxies Attending the Seventeenth AGM, despatched together with the Notice of AGM which outlines the guidance for attendance at the AGM.

The said Administrative Guide has taken into account the latest measures to-date to deal with the COVID-19 situation announced and/or implemented in Malaysia which affect the holding or conduct of general meetings. The Company will closely monitor the situation and reserves the right to take further measures or short-notice arrangements as and when appropriate in order to minimise any risk to the AGM. Any material developments will be announced on the Bursa Malaysia Securities Berhad and members are advised to check the Company’s announcement(s) made via Bursa Malaysia Securities Berhad regularly for updates on the AGM and/or material developments.


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CONNECTCOUNTY HOLDINGS BERHAD[Registration No. 200301016513 (618933-D)]

(Incorporated in Malaysia)

ADMINISTRATIVE GUIDE FOR SHAREHOLDERS/PROXIES ATTENDING THE SEVENTEENTH ANNUAL GENERAL MEETING (“AGM”)

INFORMATION ON AGM

1. Date, Time and Venue of AGM Date : Tuesday, 28 July 2020 Time : 10:00 a.m. Venue : Skyview 7, Level 29, The Gardens Hotel & Residences, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur, Wilayah Persekutuan

2. Entitlement to Attend In respect of deposited securities, only members whose names appear in the Record of Depositors on 21 July 2020

(General Meeting Record of Depositors) shall be eligible to attend the Meeting.

3. Lodgement of Proxy Form of AGM If you are unable to attend the AGM and wish to appoint a proxy to vote on your behalf, you may deposit your

Proxy Form at the Share Registrar’s office of the Company, Securities Services (Holdings) Sdn. Bhd. at Level 7, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, Damansara Heights, 50490 Kuala Lumpur, Malaysia in accordance with the notes and instructions printed therein, not later than 48 hours before the AGM i.e. latest by Sunday, 26 July 2020 at 10:00 a.m.

4. No Door Gift / Refreshment No door gift or refreshment will be provided.

GUIDANCE FOR ATTENDANCE OF AGM

In compliance with the Guidance and Frequently Asked Questions on the Conduct of General Meetings for Listed Issuers (“Guidance Note”) issued by Securities Commission of Malaysia (SC) on 18 April 2020 and subsequently revised on 11 June 2020 and 18 June 2020, and the Standard Operating Procedures (“SOP”) issued by Majlis Keselamatan Negara Malaysia (MKN) on 16 June 2020, the Company would be implementing the following in holding its AGM:-

1. Prior Registration of Attendance

Shareholders who wish to attend the AGM in person are requested to PRE-REGISTER and provide the following details by email to [email protected], before the AGM:-

a) Full nameb) Identity card no./Passport no.c) CDS account numberd) Mobile phone number

After verification of your registration against the Record of Depositors as at 21 July 2020, the Company’s Share Registrar will send you an e-mail on or after 26 July 2020 to approve or reject your registration to attend physically at the Meeting Venue.

This is to allow the Company to make the necessary arrangement at the AGM day including in relation to the logistics.

168


2. SOP and Precautionary Measures at the AGM

The Company will implement the following precautionary measures to minimise possible COVID-19 transmission at the AGM. Shareholders, proxies and other attendees attending the AGM are expected to comply with all the SOP and precautionary measures. Anyone who declines to adhere to any of the measures or cooperate with the Company’s staff will be denied entry to the AGM venue: -

a. Attendees must follow instructions of the coordinator at the health screening counter at the entrance to conduct body temperature check and fill a Health Declaration Form.

b. Attendees with body temperature of over 37.5 Celsius or show symptoms of respiratory illness such as coughing and sneezing will be declined from entering into the meeting venue.

c. Patient under Investigation (PUI) and Person under Surveillance (PUS) are PROHIBITED from attending the AGM.

d. Attendees must maintain good self-hygiene and sanitise their hands at the entrance.e. Attendees must observe social distancing of at least 1 meter at any queue according to the marked spot.f. Attendees MUST wear a face mask at all times at the AGM.g. In addition to the attendance registration for the Company’s records, the attendees must also register with

MySejahtera (QR code scanning), or manual registration for those who does not own a smartphone, to facilitate contact tracing, if required.

h. Attendees must take seat following the marked spot of 1 meter apart.i. Attendees must always practise social distancing in the lift and washroom.j. Attendees are PROHIBITED to gather outside of the meeting venue BEFORE or AFTER the AGM.

Personal attendance is NOT RECOMMENDED and shareholders are encouraged to appoint the Chairman as their proxy to cast their votes.

Important Notes

This Administrative Guide has taken into account the latest measures to-date to deal with the COVID-19 situation announced and/or implemented in Malaysia which affect the holding or conduct of general meetings. The Company will closely monitor the situation and reserves the right to take further measures or short-notice arrangements as and when appropriate in order to minimise any risk to the AGM. Any material developments will be announced on the Bursa Malaysia Securities Berhad and members are advised to check the Company’s announcement(s) made via Bursa Malaysia Securities Berhad regularly for updates on the AGM and/or material developments.

3. Submission of Questions prior to AGM

The shareholders are encouraged to submit questions ahead of the AGM and email your questions to Mr. Lim Yew Chai ([email protected]), latest by Sunday, 26 July 2020 at 10:00 a.m.

The Company will endeavour to answer to your questions at the AGM if time permitted or by email after the AGM. A written record of the questions and answers would be published in the key summary matters of the AGM (to be uploaded by the Company in its corporate website in due course).

The AGM proceedings will focus on the proposed resolutions with a view to minimising crowd gathering time in an enclosed environment.

A N N U A L R E P O R T 2 0 1 9

169

4. Registration

a. Please read the signage to ascertain the registration counter to register yourself for the AGM and join the queue accordingly.

b. Please produce your original identity card (“IC”) / passport to the Share Registrar for verification. Please make sure you collect your IC / passport thereafter.

c. After the verification, you are required to write your name and mobile contact no. and sign on the attendance list placed at the registration counter.

d. NO person will be allowed to register on behalf of another person even with the original IC / passport of that other person.

ENQUIRY

If you have any enquiries prior to the AGM, please contact the following persons during office hours:-

Share Registrar Securities Services (Holdings) Sdn. Bhd. Mr. Wong Piang Yoong / Mr. Jerry Tan Hor Seng / Ms. Yuli ChewSenior Manager / Manager / ExecutiveTel no.: +603-2084 9168 / 2084 9165 / 2084 9008Fax no.: +603-2094 9940 / 2095 0292 Email: [email protected] / [email protected] / [email protected]

ConnectCounty Holdings BerhadMr. Lim Yew Chai / Ms. Synn ChongTel no.: +603-2202 3399Fax no.: +603-2202 2244Email: [email protected] / [email protected]

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(Incorporated in Malaysia)

Dear Shareholders,

We thank you for your continuing support to CONNECTCOUNTY HOLDINGS BERHAD (“Company”) and we are pleased to invite you to our Seventeenth Annual General Meeting (“17th AGM”), which will be held as follows:-

Date : Tuesday, 28 July 2020Time : 10:00 a.m.Venue : Skyview 7, Level 29, The Gardens Hotel & Residences, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur, Wilayah Persekutuan

Please be informed that the Annual Report 2019 is available in printed copy. Should you require a printed copy, kindly submit your request by completing the Requisition Form with information below. Thereafter, please send it by post or email to our Share Registrar, Securities Services (Holdings) Sdn. Bhd. at [email protected] or log on to the website of our Share Registrar as follows:-

Step 1 - Please visit http://www.sshsb.com.my/new/requestarep.aspx.Step 2 - Please type our Company’s name and complete the on-line request form.Step 3 - Please click “Send” button to submit your request.

The requested documents will be forwarded to you by ordinary post within four (4) market days from the date of receipt of your request.

Should you require further assistance, kindly contact our Share Registrar, Mr. Wong Piang Yoong / Mr. Jerry Tan (Tel: +603-2084 9000 or Email: [email protected] / [email protected]).

REQUISITION FORM

The Share RegistrarSecurities Services (Holdings) Sdn. Bhd.Level 7, Menara Milenium,Pusat Bandar Damansara, Damansara Heights,50490 Kuala Lumpur, Wilayah PersekutuanTelephone No. : (+603) 2084 9008 / 2084 9165Facsimile No. : (+603) 2094 9940 / 2095 0292

I / We wish to request a printed copy of the Annual Report 2019, inclusive of Notice of the 17th AGM and Form of Proxy of ConnectCounty Holdings Berhad to be forwarded to me / us at the address stated below:-

Name (as per NRIC/Passport) :

CDS Account No. :

NRIC No. / Passport No. :

Address :

Telephone No. :

Date: Signature of Shareholder

The Company Secretary

CONNECTCOUNTY HOLDINGS BERHAD[Registration No. 200301016513 (618933-D)]Level 7, Menara Milenium,Jalan Damanlela, Pusat Bandar Damansara,Damansara Heights,50490 Kuala Lumpur,Wilayah Persekutuan

AFFIXSTAMP

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(Incorporated in Malaysia)FORM OF PROXY

*I/We, *Company No./NRIC No./Passport No. (full name as per NRIC/Passport/ Certificate of Incorporation in capital letters)

of (full address)

being a member of CONNECTCOUNTY HOLDINGS BERHAD hereby appoint

*NRIC No./Passport No. (full name as per NRIC/Passport in capital letters)

*and/ or failing *him/ her, *NRIC No./Passport No.

(full name as per NRIC/Passport in capital letters)

or failing *him/her, the Chairman of the Meeting as *my/our proxy, to vote for *me/us on *my/our behalf at the Seventeenth Annual General Meeting of the Company to be held at Skyview 7, Level 29, The Gardens Hotel & Residences, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur, Wilayah Persekutuan on Tuesday, 28 July 2020 at 10:00 a.m. and at any adjournment thereof, on the following resolutions referred to in the Notice of Seventeenth Annual General Meeting.*My/Our proxy(ies) *is/are to vote as indicated below:-

Ordinary Business For AgainstOrdinary Resolution 1 To approve payment of Directors’ fees for the financial year ended 31

December 2019.Ordinary Resolution 2 To approve the benefits payable to the Non-Executive Directors from 29 July

2020 to the Eighteenth Annual General Meeting of the Company in year 2021.Ordinary Resolution 3 To re-elect Ms. Lim Bee San as Director (Clause 124).Ordinary Resolution 4 To re-elect Mr. Vivek a/l Sasheendran as Director (Clause 107).Ordinary Resolution 5 To re-appoint Messrs. Moore Stephens Associates PLT as Auditors of

the Company and to authorise the Board of Directors to determine their remuneration

Special BusinessOrdinary Resolution 6 Authority to issue shares pursuant to the Companies Act 2016

(Please indicate with an “X” in the appropriate box against each Resolution how you wish your vote to be cast. If no specific direction as to how the proxy shall vote, the proxy shall vote as he/she thinks fit or, at his/her discretion, abstain from voting.)

Signed this_______ day of _____________, 2020

*Signature(s)/Common Seal of Member(s)

Notes:Information for Shareholders/ Proxies1. In respect of deposited securities, only members whose names appear in the Record of Depositors on 21 July 2020 (General Meeting Record

of Depositors) shall be eligible to attend the Meeting.2. A member shall not be entitled to appoint more than two (2) proxies to attend and vote at the same general meeting. Where a member

appoints two (2) proxies, the appointments shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy.3. A proxy may but need not be a member of the Company and a member may appoint any person to be his proxy. There shall be no restriction

as to the qualification of the proxy and a proxy appointed to attend and vote at a general meeting shall have the same rights as the member to speak at the meeting.

4. The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorised in writing or, if such appointer is a corporation, under its common seal or under the hand of an officer or attorney duly authorised. The Directors may, but shall not be bound to require evidence of the authority of any such attorney or officer.

5. Where a member is an authorised nominee as defined under the Securities Industry (Central Depository) Act, 1991, it may appoint at least one (1) proxy but not more than two (2) proxies in respect of each securities account it holds to which shares in the Company standing to the credit of the said account.

6. Where a member is an exempt authorised nominee which holds deposited securities in the Company for multiple beneficial owners in one (1) securities account (“omnibus account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds.

7. The instrument appointing a proxy and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power or authority shall be deposited at the office of the Company’s Share Registrar at Level 7, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, Damansara Heights, 50490 Kuala Lumpur, Wilayah Persekutuan, not less than forty-eight (48) hours before the time for holding the meeting or adjourned meeting at which the person named in the instrument proposes to vote, and in default the instrument of proxy shall not be treated as valid.

* Delete if not applicable

Number of shares held

CDS account no.

For appointment of two (2) proxies, percentage of shareholdings to be represented by the proxies

No. of shares Percentage

Proxy 1Proxy 2Total 100%

The Share Registrar of

CONNECTCOUNTY HOLDINGS BERHAD[Registration No. 200301016513 (618933-D)]Level 7, Menara Milenium,Jalan Damanlela, Pusat Bandar Damansara,Damansara Heights,50490 Kuala Lumpur,Wilayah Persekutuan

Attention : Mr. Wong Piang Yoong

AFFIXSTAMP

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[200301016513 (618933-D)]CONNECT SECURITY SOLUTION SDN BHDIBEX PICTURES ENTERTAINMENT SDN BHD

RAPID CONN (SHENZHEN) CO LTD

RAPID CONN INC

RAPID CONN (S) PTE LTD

Level 16, BO1-A, Menara 2,No. 3, Jalan Bangsar, KL Eco City,59200 Kuala Lumpur, Malaysia.Tel: +6 03 2202 3399 Ext: 1613Fax: +6 03 2202 2244

No. 12, Long Shan Road, 6th Lane, Luo Tian Social DistrictYan Luo Street, Bao An DistrictShenzhen City 518105, ChinaTel: +86 755 2972 6660Fax: +86 755 2972 6744

SHENZHEN RAPID POWER CO LTD2-4 Floor, B Building, Tongfuhanhaida Creative Zone10th, Jiangfu Road, XinZhuang Area, MaTian TownGuangMing district, Shenzhen City, ChinaTel: +86 755 3321 0968Fax: +86 755 3321 0969

Tel: +1 949 951 1020 Fax: +1 949 951 8265

4012 Ang Mo Kio Ave 10 #03-07Tech Place 1 Singapore 569628Tel: +65 6841 4517 Fax: +65 6841 4519

[200301016513 (618933-D)]

W W W. C O N N E C T C O U N T Y. C O M

Level 16, BO1-A, Menara 2,No. 3, Jalan Bangsar, KL Eco City,

59200 Kuala Lumpur, Malaysia.Tel: +6 03 2202 3399 Ext: 1613

Fax: +6 03 2202 2244

CO

NNECTC

OUNTY HO

LDINGS BERHAD

[200301016513 (618933-D)]

ANNUAL REPO

RT 2019

ANNUAL REPORT

2019

25172 Arctic Ocean Dr, Suite 106,Lake Forest, CA 92630, USA

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