connect county 2018- financial-6 · connect security solution sdn bhd ibex pictures entertainment...

(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

19571 Pauling, Foothill RanchCA 92610-2619 USATel: +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

(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

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L REPORT 2018

ANNUAL REPORT2018

Corporate Information Corporate Profile and Structure Chairman’s Statement Board of Directors’ Profile Senior Management’s (Corporate) Profile Statement on Management Discussion and AnalysisCorporate Governance Overview StatementSustainability Statement Audit Committee Report Statement on Risk Management and Internal ControlAdditional Compliance Information Statement on Directors’ Responsibility for Preparing the Financial StatementsDirectors’ Report Statement by Directors Statutory Declaration Independent Auditors’ Report to the Members Statements of Profit or Loss Statements of Comprehensive Income Consolidated Statement of Financial Position Company Statement of Financial Position Consolidated Statement of Changes in Equity Company Statement of Changes in Equity Statement of Cash FlowsNotes to the Financial Statements Statistics of ShareholdingsStatistics of WarrantholdingsNotice of Annual General MeetingProxy Form Enclosed

23571417293946515859606565667172737475777981144148152

TA B L E O FC O N T E N T S

CONNECTCOUNTY HOLDINGS BERHAD ( Company No. 618933 - D )

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CORPORATEINFORMATION

BOARD OF DIRECTORS

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

ANG CHUANG JUAY | Executive Deputy Chairman

WONG POOI FATT | Executive Director (Appointed w.e.f. 8 March 2019)

LEE SU LIN | Executive Director (Appointed w.e.f. 8 March 2019)

LIM BEE SAN | Independent Non-Executive Director

THONG MEI MEI | Independent Non-Executive Director

NG KEOK CHAI | Independent Non-Executive Director (Appointed w.e.f. 29 March 2019)

TAN SRI DATO’ AHMAD FUZI BIN ABDUL RAZAK | Non-Independent Non-Executive Chairman (Resigned w.e.f. 8 March 2019)

CHANG CHOON MING | Non-Independent Non-Executive Director (Resigned w.e.f. 8 March 2019)

TAN SZE CHONG | Non-Independent Non-Executive Director (Appointed w.e.f. 1 November 2018 and resigned w.e.f. 8 March 2019)

MOK SHIAW HANG | Independent Non-Executive Director (Resigned w.e.f. 29 March 2019)

REMUNERATION COMMITTEE

Lim Bee San (Chairperson)

Major General Dato’ Mamat Ariffin Bin Abdullah (Appointed w.e.f. 29 March 2019)

Thong Mei Mei(Appointed w.e.f. 28 November 2018)

Ng Keok Chai(Appointed w.e.f. 29 March 2019)

Ang Chuang Juay(Resigned w.e.f. 28 November 2018)

RISK MANAGEMENT COMMITTEE

Ang Chuang Juay (Chairman)Thong Mei MeiLim Yew Chai

AUDITORS

Moore Stephens Associates PLTChartered AccountantsUnit 3.3A, 3rd Floor, Surian TowerNo. 1, Jalan PJU 7/3Mutiara Damansara47810 Petaling JayaSelangor Darul EhsanTel : +6 03 7728 1800Fax : +6 03 7728 9800

SHARE REGISTRAR

Securities Services (Holdings) Sdn. Bhd.Level 7, Menara MileniumJalan DamanlelaPusat Bandar DamansaraDamansara Heights50490 Kuala LumpurWilayah PersekutuanTel : +6 03 2084 9000Fax : +6 03 2094 9940 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, and listed on the ACE Market on 20 October 2005

COMPANY SECRETARY

Chua Siew Chuan(MAICSA 0777689)

Cheng Chia Ping(MAICSA 1032514)

AUDIT COMMITTEE

Thong Mei Mei (Chairperson)

Lim Bee San

Major General Dato’ Mamat Ariffin Bin Abdullah (Appointed w.e.f. 29 March 2019)


Mok Shiaw Hang (Resigned 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 San

Thong Mei Mei(Appointed w.e.f. 24 May 2018)


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

COMPANY NUMBER

618933-D

REGISTERED OFFICE

Level 7, Menara MileniumJalan DamanlelaPusat Bandar DamansaraDamansara Heights50490 Kuala LumpurWilayah Persekutuan

Tel : +6 03 2084 9000Fax : +6 03 2094 9940

BUSINESS OFFICE

Level 16, BO1-A, Menara 2No. 3, Jalan BangsarKL Eco City59200 Kuala Lumpur Wilayah Persekutuan

Tel : +6 03 2202 3399 Ext: 1613 Fax : +6 03 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 BANKERS

Malayan Banking Berhad

CORPORATE WEBSITE

http://www.connectcounty.com

A N N U A L R E P O R T 2 0 1 8

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CORPORATEPROFILE AND STRUCTURE

ConnectCounty Holdings Berhad (“CCHB” or “the Company”) is an investment holding company headquartered in Kuala Lumpur, Malaysia. The Company’s division operating in China, the United States of America (“USA”) and Singapore is 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 (Shenzhen) Co. Ltd. (“RCC”), Rapid Conn Inc. (“RCI”), Rapid Conn (S) Pte. Ltd. (“RCS”), Shenzhen Rapid Power Co. Ltd. (“RCP”) and Shenzhen Rapid Resin Co. Ltd. (“RCR”). RCP is an associate company of RCC whereas RCR is 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.

^ The Company had disposed 40% of total share capital of CSS. The transfer of shares was completed on 14 February 2018.

* 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 is enroute 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.

The Company in 2018 started cybersecurity business operational under CSS which is providing information technology security consultation, technical assistance on operating computers, training programs and related services.

The Company also incorporated a subsidiary, IBEX for a new 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”) presence in its core market, the Connected Homes and Offices industry. Despite continued market challenges, we are able to increase the market share in Automotive and White Goods industries.

FINANCIAL PERFORMANCE OVERVIEW

In FYE 2018, the Group recorded a revenue of RM99.6 million or 18.4% decrease as compared to RM122.2 million in the financial year ended 31 December 2017 (“FYE 2017”).

The drop was mainly in United States of America and Singapore segments by 27.9%. and 35.2% respectively, as a result of lower demand in Connected Homes and Offices industry particularly from the video market. We have certain supply of products which has reached the final phase of the projects. Also, during FYE 2018, the slow-down of orders from customers who took the apprehensive view amid global trade tension.

Other factors to the decline in revenue are the price competition in the market and the continuous pressure to lower our prices due to end user expectation. Also, the lower average foreign exchange rates used in 2018 from the sales denominated in United States Dollar (“USD”).

Consequently, the Group’s gross profit and gross profit margin dropped to RM12.2 million and 12.2% in FYE 2018, and the Group recorded a loss before tax (“LBT”) of approximately RM10.0 million in FYE 2018, as compared to FYE 2017 profit before tax of RM52,349/-.

Despite implementation of cost saving initiative, operating losses were also caused by other expenses such as impairment on trade and others receivables. The Group’s results were also affected by higher professional fees and one-off expenses such as write-off of equipment related to certain products which has reached the final phase of the projects, write-off certain assets which are damaged beyond repair and write-off assets related to the thermoplastic elastomers production which ceased operation due to loss of major customers and stringent environmental requirements imposed. Total one-off other expenses were amounted to approximately RM5.1 million.

OPERATIONS OVERVIEW

For the year under review, the Group managed to increase its market penetration in Automotive and White Goods industries despite decrease in market share in its core market, i.e. Connected Homes and Offices.

Expansion into cable extrusion operations being the backward integration strategy 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.

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

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 2018 (“FYE 2018”).


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CORPORATE DEVELOPMENT

Diversification plan is our essential long-term strategy to achieve consistent returns over time and reduce overall risk to the Company.

One of the potential diversification’s initiative is venturing into cybersecurity related business. The Company has explored the opportunity in collaboration with experienced partners to this area.

The Board is of the view that the prospect for the business is positive as we see an increase in global incidents of cyber threats and crime; impact from new security legislation and mandates; and increase in outsourcing services in the industry. Despite small-scale activities in 2018, we look forward to future growth in these business opportunities.

On 22 March 2019, we have incorporated a new company namely IBEX Pictures Entertainment Sdn. Bhd. to be ready for a new business venture.

The Company implemented restructuring of operation in Shenzhen Rapid Power Co. Ltd. (“RCP”) and Shenzhen Rapid Resin Co. Ltd. (“RCR”). The details and rationale are as follows:-

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 has ceased to be indirect subsidiary of the Company and in turn, became an associate company during the year.

The Company ceased its thermoplastic elastomers production operated under RCR. The decision was made due to the loss of major customer amid changing in business environment in China and stringent environmental requirements imposed. RCR was in operations until November 2018. The decision to cease RCR’s operation will help to reduce losses to the Company.

APPRECIATION

On behalf of the Board of Directors, I wish to extend my sincere thanks 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 send my sincere appreciation and gratitude to my fellow Directors (past and present), the Management and staff for their dedication and commitment.

Major General Dato’ Mamat Ariffin Abdullah (R)Independent Non-Executive Chairman5 April 2019

CHAIRMAN’S STATEMENT (cont’d)

A N N U A L R E P O R T 2 0 1 8

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BOARD OF DIRECTORS’ PROFILE

MAJOR GENERAL DATO’MAMAT ARIFFIN BIN ABDULLAH (R)Independent Non-Executive Chairman

Malaysian, Male, aged 69

Date of Appointment as Director

Length of Service since the Date of Appointment (as at 29 March 2019)

Board Committee(s) Served on

Academic/ Professional Qualification(s) and Certification(s)

Present Directorship(s) in Other Public Listed and Non-Listed Public Companies

Family Relationship with any Director and/or Major Shareholder of the Company

20 March 2019

Less than 1 month

• 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)

• Masters of Sciences in Training and Human Resources from Leicester University, United Kingdom

• Diploma in Strategic Studies from Armed Forces Defence College, Kuala Lumpur

• Management Development Programme from Wolfson College, University of Cambridge

Nil

No family relationship with any Director and/or major shareholder of 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.

Time Committed:

Major General Dato’ Mamat was appointed on 20 March 2019 and therefore, he attended none of the Board of Directors’ Meetings of the Company held in the financial year ended 31 December 2018.


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BOARD OF DIRECTORS’ PROFILE (cont’d)

ANG CHUANG JUAYExecutive Deputy ChairmanSingaporean, Male, aged 61







18 August 2003

15 years 7 months

Chairman of the Risk Management Committee

Bachelor Degree in Engineering from the National University of Singapore

Nil



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 was 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 five (5) out of six (6) Board of Directors’ Meetings of the Company held in the financial year ended 31 December 2018.

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WONG POOI FATTExecutive Director








8 March 2019

Less than 1 month

Nil

Bachelor of Arts specialising in design, graphic design and multimedia from LimKokWing University, Malaysia

Nil

Mr. Wong is the spouse of Ms. Lee Su Lin, who is an Executive Director of the Company. Mr. Wong is also the major shareholder of the Company


Mr. Wong started his career as a music producer in 2001. Four years later, he established Nexus Creative (Mal) Sdn. Bhd. (“Nexus Creative”), a multimedia agency. It was in Nexus Creative that Mr. Wong was able to freely experiment with bold ideas and exercised his skills in visual and aural design. His creations eventually earned him several international design awards.

As his core background is in music and sound, over the past decade, he has written and scored music for movies, released two music albums and produced music for Discovery, Crime Investigation Channel, ASTRO, Tourism Malaysia and many more.

He continued to amass a set of skills from photography, video editing, sound design, art direction and in 2010, he ventured into film making. He debuted as a feature director in 2016 for THE SPIRAL and subsequently in 2018, it was selected in competition at International Horror and Sci-Fi Film Festival 2019.

He joined ACE Pictures Entertainment Sdn. Bhd. (“ACE Pictures”) in 2017. Primarily as film financiers, he analyses, selects and then recommends screenplays pitched to him. Working closely with producers and filmmakers, he and his team take proactive roles in shaping each project into perfection.

Now, he and his colleagues spearheaded an initiative to nurture emerging, diverse filmmakers both locally and internationally, to produce world class content alongside with their United States of America counterparts, putting ACE Pictures into the world map as a recognisable, global brand.

Alongside his career, he has also been actively volunteering his time and knowledge to nurture the younger talents through guest lecturing and workshops and as a teaching partner at various institutions.

Time Committed:

Mr. Wong was appointed on 8 March 2019 and therefore, he attended none of the Board of Directors’ Meetings of the Company held in the financial year ended 31 December 2018.


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LEE SU LINExecutive Director

Malaysian, Female, aged 40







8 March 2019

Less than 1 month

Nil

Bachelor of Commerce from Deakin University of Australia

Nil

Ms. Lee is the spouse of Mr. Wong Pooi Fatt, who is an Executive Director of the Company. Ms. Lee is also the major shareholder of the Company


Ms. Lee first started her career at TNS (a global market research agency), managing local and regional projects, both in qualitative and quantitative. She has her skills honed in developing screeners, questionnaires and discussion guides, moderating focus group discussions, in-depth interviews and home visits, conducting analysis and writing reports and eventually promoted as Qualitative Senior Manager at Insight Asia and later, Qualitative Associate Director at Millward Brown (a multinational market research firm) in year 2014.

As an Associate Director, she was responsible in planning, guiding and executing qualitative research studies, pitching for new businesses, writing proposals, supervising the work and mentoring qualitative junior researchers, co-ordinating international research studies and providing support to the company’s affiliates on regional projects, servicing both local and international clients.

Moving on, she then joined Nexus Creative (Mal) Sdn. Bhd. as a Director and she was actively involved in market analysis, business planning, business development, project planning and management, providing inputs on concept development and occasionally, she played the role as production manager.

In 2017, she was approached by ACE Pictures Entertainment Sdn. Bhd. to conduct a research study on international landscape in film industry. She and her colleagues had travelled to few film festivals around the world and made the first trip to United States of America to further explore the opportunity in Hollywood. Eventually, she and her team set foot in Hollywood and she has helped to set up ACE Pictures Entertainment LLC in California and is overseeing the day to day operations and company’s expansion as well as developing business plans and overseeing the company’s expansion.

Time Committed:

Ms. Lee was appointed on 8 March 2019 and therefore, she attended none of the Board of Directors’ Meetings of the Company held in the financial year ended 31 December 2018.


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LIM BEE SANIndependent Non-Executive Director








19 July 2016

2 year 8 months

• Chairperson of the Remuneration Committee• Member of the Audit Committee• Member of the Nomination Committee

• BA (Hons) Law, Accounting & Finance from Oxford Brookes University, United Kingdom

• Barrister-at-Law from Middle Temple, London

Nil



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 six (6) Board of Directors’ Meetings of the Company held in the financial year ended 31 December 2018.



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THONG MEI MEIIndependent Non-Executive Director








27 November 2017

1 year 4 months

• Chairperson of the Audit Committee

• Member of the Nomination Committee (Appointed w.e.f. 24 May 2018)

• Member of the Remuneration Committee (Appointed w.e.f. 28 November 2018)

• Member of the Risk Management Committee

• Diploma in Commerce (Management Accounting), Tunku Abdul 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

Nil



Ms. Thong is a Chartered Accountant with ACMA. She has 26 years’ experience in financial management reporting and general accounting, including 11 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 26 years of experiences, she had supervised up to a team of 26 across different markets in the cluster environment.

Time Committed:

Ms. Thong attended all the six (6) Board of Directors’ Meeting of the Company held in the financial year ended 31 December 2018.


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NG KEOK CHAIIndependent Non-Executive Director








29 March 2019

Less than 1 month

• Member of the Audit Committee (Appointed w.e.f. 29 March 2019)

• Member of the Nomination Committee (Appointed w.e.f. 29 March 2019)

• Member of the Remuneration Committee (Appointed w.e.f. 29 March 2019)

• Bachelor of Laws (Hons.) from University of Wolverhampton, London

• Certificate in Legal Practice from Legal Profession Qualifying Board

Nil



Tuan Ng started his early career as a Police Inspector with the Royal Malaysia Police in 1982. He was then posted to serve in Sarawak until the rank of Assistant Superintendent of Police for 20 years. During his tenure in Sarawak, his exposure included the Criminal Investigation Department (“CID”), General Duty and Police Field Force.

In 2003, Tuan Ng was transferred to Selangor Police Contingent Headquarters. In 2005, he was promoted to Deputy Superintendent of Police and served in the Commercial CID, Selangor Police Contingent Headquarters. He left this posting as Superintendent of Police.

After that, Tuan Ng was posted to the Johor Police Contingent Headquarters as Deputy Head of Commercial Crimes Investigation Department in 2014. Then in the same year, he was posted to the Commercial CID, Royal Malaysia Police Bukit Aman as Assistant Director in the Forensic Accounting Investigation Division.

The last held position of Tuan Ng was Principal Assistant Director in Forensic Accounting Investigation Division, Commercial CID, Royal Malaysia Police, Bukit Aman.

Throughout his 36 years service in Royal Malaysia Police, he was very much involved in police investigations due to his legal background. He specialises in criminal investigation across various fields which include commercial crime, general crime and forensic accounting with ample management and special operations experience.

Time Committed:

Tuan Ng was appointed on 29 March 2019 and therefore, he attended none of the Board of Directors’ Meetings of the Company held in the financial year ended 31 December 2018.


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 2018.


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SENIOR MANAGEMENT’S (CORPORATE) PROFILE

ANG CHUANG JUAYExecutive Deputy Chairman

The Senior Management team is headed by the Mr. Ang who is also the de facto Chief Executive Officer of the Group.He is temporary leading the operation of Rapid Conn (Shenzhen) Co. Ltd (“RCC”) while pending the position of General Manager of RCC to be taken up.

WONG POOI FATTExecutive Director

Mr. Wong is overseeing the business development of IBEX Pictures Entertainment Sdn. Bhd. (“IBEX”) of which he is a Director. Mr. Wong is the spouse of Ms. Lee Su Lin, who is an Executive Director of the Company.

LEE SU LINExecutive Director

Ms. Lee is overseeing the business development of IBEX of which she is a Director. Ms. Lee is the spouse of Mr. Wong Pooi Fatt, who is an Executive Director of the Company.

BALAJI RAGHUNATHANVice President, Group Engineeringand Research & DevelopmentVice President of Operations, Rapid Conn Inc.Indian National, United States of America (“USA”) Permanent Resident, Male, aged 43

Date of Employment: 28 June 2004

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.

Directorship held: Rapid Conn Inc. (“RCI”), USA

Qualification(s)/Certification(s):1. Bachelor in Mechanical Engineering, Vellore Institute of Technology, India2. Masters in Industrial Engineering, State University, USA

A N N U A L R E P O R T 2 0 1 8

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SENIOR MANAGEMENT’S (CORPORATE) PROFILE (cont’d)

CORINA YONGVice President, Group Business DevelopmentGeneral Manager, Rapid Conn (S) Pte. Ltd.Singaporean, Female, aged 56

Date of Employment: 13 June 2011

Working Experience:

Ms. Corina Yong specialises in building and leading integrated sales and marketing, business development and operational management in the Information Technology, Telecommunications and Financial Services industries. She is also a certified Professional Trainer from the Workforce Development Authority of Singapore.

Ms. Corina had a dynamic sales career in the multi-billion life insurance industry with American International Assurance Ltd. for eight (8) years prior to undertaking a position as publisher of a leading automobile magazine, AutoNews. Her career in multinational companies (“MNC”) saw her holding positions as Consultant for Cisco Systems, Head of the Asia Pacific Marcoms team in Lenovo, Director of Business Development in Sigma Delphi and regional marketing and channel marketing roles in Agilent and Racal Data Group.

Prior to joining RCS, Ms. Corina was a Training Consultant to various multinational corporations. In her regional roles with these companies, Ms. Corina travelled extensively to USA and Asia Pacific countries. Her keen perception of the country markets enabled her to develop creative branding strategies successfully. Her in-depth understanding of the markets is demonstrated in her ingenuity to enhance company’s branding, and to continuously develop and drive successful sales and marketing strategies in these countries.

Directorship held: Rapid Conn (S) Pte. Ltd. (“RCS”)

Qualification(s)/Certification(s):1. Post Graduate in Strategic Marketing, Chartered Institute of Marketing, United Kingdom2. Certified Professional Trainer, Workforce Development Agency, Singapore


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LIM YEW CHAIGroup AccountantMalaysian, Male, aged 48

Date of Employment: 3 July 2017

Working Experience :

Mr. Lim has over twenty-three (23) 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 and treasury management.

He started his career with an audit firm in Kuala Lumpur, and subsequently worked for various local commercial enterprises and overseas-based MNC 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 members of the senior management team 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.

SENIOR MANAGEMENT’S (CORPORATE) PROFILE (cont’d)

Directorship held: None

Qualification(s)/Certification(s) :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 Lumpur3. Member of the Malaysian Institute of Accountants (MIA) 4. Associate member of CIMA, UK

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17

STATEMENT ON MANAGEMENT DISCUSSION AND ANALYSIS

FINANCIAL PERFORMANCE REVIEW

The Group’s revenue and gross profit for the financial year ended 31 December 2018 (“FYE 2018”) had decreased as compared to financial year ended 31 December 2017 (“FYE 2017”). The revenue was recorded at RM99.6 million, a 18.4% decrease as compared to RM122.2 million in FYE 2017. Whereas the gross profit declined to RM12.2 million from RM18.4 million in FYE 2017.

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

Weighted Average Gross Gross (Forex ProfitFYE Malaysia China Singapore USA Revenue Profit Rate) Margin RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM:USD1 %

2018 200 44,786 17,353 37,302 99,641 12,179 4.04 : 1 12.222017 - 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 21,107 31,456 64,877 15,771 3.90 : 1 24.312014 744 9,380 12,162 30,324 52,610 11,827 3.27 : 1 22.48

Revenue

The decrease in revenue at Group level can be seen mainly from United States of America (“USA”) and Singapore segment. Rapid Conn Inc. (“RCI”) in USA, recorded a 27.9% decrease over the preceding year, while Rapid Conn (S) Pte. Ltd. (“RCS”) in Singapore, recorded a 35.2% decrease.

The lower contribution was partly driven by lower video demand in the market which is indicated from our industry breakdown table showing the reduction in Connected Homes & Offices industry. Moreover, there was certain supply of products which reached the final phase of the projects in 2018. Also, during the year, customers took the apprehensive view amid global trade tension resulted in lower orders received.

Other factors to the decline are, for example, keen competition in the interconnect market from diversified manufactures and highly specialised manufactures, and the lower average foreign exchange rates for the sales denominated in United States dollar (“USD”).

Group Revenue RM’000

140,000

120,000

100,000

80,000

60,000

40,000

20,000

-2014 2015 2016 2017 2018

52,61064,877

81,711

122,163

99,641


18

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 increased its market share in Automotive and White Goods sector despite continued market challenges.

Gross Profit and Gross Profit Margin

The Group’s gross profit and gross profit margin recorded a decrease to RM12.2 million and 12.22% respectively in FYE 2018.

The decrease in gross profit was mainly attributable to the lower revenue in FYE 2018. Both gross profit and gross profit margin were affected by relatively lower product margin primary because of general reduction in selling price and competitive pricing despite efforts implemented on cost reduction programs.

Among other factors such as the lower average foreign exchange rates e.g. USD, negative impact of changes in foreign currency in inventory and increase in factory overheads (i.e. factory rental and minimum labour wages).

STATEMENT ON MANAGEMENT DISCUSSION AND ANALYSIS (cont’d)

2014 2015 2016 2017 2018

Gross Profit (RM’000) & GP Margin (%)

20,000

18,000

16,000

14,000

12,000

10,000

8,000

6,000

4,000

2,000

-

30.0%

25.0%

20.0%

15.0%

10.0%

5.0%

0%

11,827

15,77116,923

18,415

12,179

22.5 24.3

20.7

15.1

12.2

Group Gross Profit Gross Profit Margin

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FINANCIAL PERFORMANCE REVIEW (Cont’d)

Loss Before Tax

The Group recorded a loss before tax (“LBT”) of approximately RM10.0 million in FYE 2018, compared to FYE 2017 profit before tax of RM52,349/-.

The losses were not only affected by the reduction in revenue and gross margin but also affected by other operating expenses for example, Impairment on trade receivables based on expected credit loss and realised and unrealised loss on foreign exchange. Despite implementation of further cost saving, the lower results were also caused by professional fees and one-off expenses such as:

1. Write-off of equipment related to certain products which reached the final phase of the projects;

2. Write-off certain assets which were damaged beyond repair;

3. Write-off assets related to the thermoplastic elastomers production which ceased operation due to loss of major customers and stringent environmental requirements imposed; and

4. Impairment on others receivables.

Total professional fees and one-off other expenses were amounted to approximately RM5.1 million.

Financial Position and Liquidity

The Group’s total assets and total liabilities as at the end of FYE 2018 decreased to RM48.5 million and RM17.8 million respectively. The major movements highlighted are as follows:

1. Drop in trade and others receivables and inventories generated additional cash from operation. It was then funded to reduce trade payables and others payables.

2. The total borrowings of the Group increased in FYE 2018 mainly due to the finance lease for motor vehicle.

3. After changes in working capital, the Group recorded a negative cash generated from operations mainly attributable to losses incurred for the year and reduction in payables.

4. Total assets and total liabilities reduced in 2018 as a result of Shenzhen Rapid Power Co. Ltd. (RCP) being recognised as an associate company. Those like items of assets and liabilities of RCP were not combined accordingly.

5. Other factors resulted in reduction of assets are aforementioned impairment on trade and others receivables and write-off of assets.

6. Proceeds were raised from allotment and issuance of shares capital by conversion of irredeemable convertible preference shares (“ICPS”) and exercise of Warrants.


20


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-one (21) 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.

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 currently focuse on certain strategic initiatives which translate into the Group’s unique selling points (“USPs”), which in turn give us a distinct competitive edge over our competitors in this highly dynamic and competitive market.

Restructuring of operations

The Company wholly-owned subsidiary, Rapid Conn (Shenzhen) Co. Ltd. (“RCC”) had disposed of 31% of the equity interests in RCP in 2018 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 Company ceased thermoplastic elastomers production operated under Shenzhen Rapid Resin Co. Ltd. (“RCR”) due to the loss of major customer amid changing in business environment in China and stringent environmental requirements imposed. RCR was operational until November 2018. The decision made is expected to improve the results of the Company.

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.

One of the potential diversification’s initiative is venturing into cybersecurity related business. The Company explored the opportunity in collaboration with experienced partners. We began the business with a small-scale activity in 2018 under Connect Security Solution Sdn. Bhd. (“CSS”).

We are also planning 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. On 22 March 2019, we have incorporated IBEX Pictures Entertainment Sdn. Bhd. (“IBEX”) for the intended purpose.

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21


COPPEREXTRUSION

PLASTIC RESINAND PLASTIC

COMPOUNDING

CABLE EXTRUSION

CONNECTORPRODUCTION

CABLE ASSEMBLY

FINAL TESTING

BUSINESS FOCUS AND STRATEGIC ACTION PLANS

Vertically Integrated Solutions Provider

Our Rapid Conn Group (“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. The cable extrusion business also expands the scope of our current business.

The diagram below illustrates the entire process that would be undertaken by a fully integrated cable house. With the incorporation of RCP, the Group is able to cover the two final stages in the process.

• Shenzhen Rapid Power Co. Ltd. (“RCP”)

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, USB3.1, and cables used in medical and automotive applications.


22


Vertically Integrated Services

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

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 team, 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.

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23


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.

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 14001:20043. Automotive Industrial Quality Management System - IATF 16949:20164. Product Quality Control - IPC/WHMA-A6205. Electronic Industry Citizenship Coalition - EICC Code of Conduct6. Hazardous Substance Control:-

a. EU RoHS 2.0 - Restriction of Hazardous Substancesb. China RoHs - Restriction of Hazardous Substancesc. REACH - Registration, Evaluation, Authorisation and Restriction of Chemicalsd. 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.


24


MARKET PENETRATION AND DEVELOPMENT

The Industry Landscape – 2018

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 88.6% revenue in 2018 compared to 96.2% in 2017.

In 2018, we increased the penetration into more 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 create growth in Automotive markets and it saw an increase to 7% in 2018 from 2% in 2017. Also, the growth in White Goods markets saw an increase to 10.6% in 2018 compared to 5.8% in 2017.

RAPID CONN INDUSTRY BREAKDOWN FOR FYE 2014-2018

2018 2017 2016 2015 2014Industries % % % % %

Connected Homes & Offices 72.4% 84.0% 75.0% 71.0% 71.0%Smart Connected Devices 5.6% 6.4% 6.9% 9.0% 15.0%White Goods 10.6% 5.8% 9.7% 8.0% 7.0%Automotive 7.0% 2.0% 3.5% 2.0% 1.0%Medical 1.2% 0.5% 0.7% 1.0% 1.0%Interactive Kiosks & Security 0.5% 0.5% 2.8% 2.0% 2.0%Others 2.7% 0.8% 1.4% 7.0% 3.0%

100% 100% 100% 100% 100%

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.

RAPID CONN GROUPBY INDUSTRIES(2018)

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25


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.

Unique Selling Points (USPs)

1. Vertically Integrated Services (“VIS”)

The VIS model 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 past 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.

4. Warehousing Solutions

RCI, the Group’s subsidiary in USA is occupying around 25,000 square feet (2,322.6 square metres) in office cum warehousing space and providing a team of experience logistic personnel for prompt and uninterrupted product delivery. In addition, we have a warehouse 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.

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

a. Connected Homes & Officesb. Smart Connected Devicesc. White Goodsd. Automotive


26

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.

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 our major customers over the last 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 2018 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.


A N N U A L R E P O R T 2 0 1 8

27

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; and c. 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.



28

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 forex 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 of 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.

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.


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29

CORPORATE GOVERNANCE OVERVIEWSTATEMENT

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 2018 (“FYE 2018”) and up to the latest practicable date of 29 March 2019 (“LPD”).

This Statement also serves as a compliance 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 2018 (“CG Report 2018”) 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 within clearly 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.


30

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, Dato’ Mamat 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 are members of the 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 advice 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 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 2018, 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 consists of four (4) Independent Non-Executive Directors and three (3) Executive Directors as indicated in the table below. Hence, the Board complies with Practice 4.1 of the MCCG which stated that at least half of the Board comprises Independent Directors.

Name Designation

Major General Dato’ Mamat Ariffin Bin Abdullah Independent Non-Executive ChairmanAng Chuang Juay Executive Deputy ChairmanWong Pooi Fatt Executive DirectorLee Su Lin Executive DirectorLim Bee San Independent Non-Executive DirectorThong Mei Mei Independent Non-Executive DirectorNg Keok Chai Independent Non-Executive Director

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

The Board consists of three (3) female Directors out of seven (7) Directors, namely Ms. Lim Bee San, Ms. Thong Mei Mei and Ms. Lee Su Lin, representing 43% of female representatives on Board, which has achieved 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 attended /held during Designation/ the financial year Members Directorate under review %

Major General Dato’ Mamat Chairman Ariffin Bin Abdullah (Independent Non-(Appointed w.e.f. 29 March 2019) Executive Chairman) Not applicable Not applicable

Mok Shiaw Hang Chairman(Resigned w.e.f. 29 March 2019) (Independent Non- Executive Director) 3/3 100.0

Lim Bee San Member (Independent Non- Executive Director) 3/3 100.0


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4.6 Nomination Committee (Cont’d) No. of meeting attended /held during Designation/ the financial year Members Directorate under review %

Thong Mei Mei Member(Appointed w.e.f. 24 May 2018) (Independent Non- Executive Director) 1/1 100.0

Ng Keok Chai Member(Appointed w.e.f. 29 March 2019) (Independent Non- Executive Director) Not applicable Not applicable

The NC has undertaken the following activities during the financial year under review:-

(i) Confirmed minutes of the preceding meetings.(ii) Examined size of the Board and the composition of Board Committees.(iii) Reviewed the required mix of skills, experience, gender diversity and other qualities of the Board.(iv) Reviewed the term office and performance of the Audit Committee and each of its members in respect of

financial year ended 31 December 2017 (“FYE 2017”) and FYE 2018.(v) Conducted evaluation on the effectiveness of the Board, as a whole, and the Committees of the Board in

respect of FYE 2017 and FYE 2018.(vi) Conducted evaluation on the contribution and performance of each individual Director in respect of FYE

2017 and FYE 2018.(vii) Assessed the independence of the Independent Non-Executive Directors.(viii) Reviewed and recommended to the Board, the re-election of the Directors who will be retiring at the Fifteenth

Annual General Meeting of the Company.(ix) Deliberated the appointments of new Directors based on the established criteria.

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 enlarged ConnectCounty Holdings Berhad 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 2018.



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4.6 Nomination Committee (Cont’d)

2019 Training Needs

Upon review of the training needs of the Directors for the financial year ending 31 December 2019 (“FYE 2019”) 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 2019, whereby it should be related to the industry-specific knowledge, corporate governance, sustainability or ACE LR.

5.0 Overall Board Effectiveness

5.1 Annual Assessments

During the FYE 2018, the NC had conducted the following annual assessments in respect of FYE 2017 and FYE 2018 and reported the same to the Board for notation:-

No. Subject Matters Evaluation Mechanism

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

(iii) Contribution and performance of each Conducted by way of self and peer assessment and 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.

This policy will be reviewed biennially by the Remuneration Committee or as and when it is required to ensure the information remains current and updated.


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Part 3 - Remuneration (Cont’d)

6.0 Level and Composition of Remuneration of Directors and Senior Management (Cont’d)

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.

During the FYE 2018, 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 2018 and

FYE 2019.(c) Reviewed and recommended the Directors’ fees for the FYE 2017 and FYE 2018.(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.

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

7.0 Remuneration of Directors and Senior Management

7.1 Directors’ Remuneration

The remuneration for Directors on named basis for the FYE 2018 were disclosed in the CG Report 2018, which can be downloaded from the Company’s corporate website at www.connectcounty.com.

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 had been disclosed under Practice 7.1 of the CG Report.

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 band of RM50,000/- were disclosed in the Pratice 7.2 of CG Report 2018, 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.



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Part 1 - Audit Committee (Cont’d) 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 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, auditing, taxation, finance, legal, sales and marketing, information technology and investment.

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

The Board has adopted a Group 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

Ang Chuang Juay Chairman (Executive Deputy Chairman)

Thong Mei Mei Member (Independent Non-Executive Director)

Lim Yew Chai Member (Group Accountant)


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Part 2 - Risk Management and Internal Control Framework (Cont’d) 9.0 Effective Risk Management and Internal Control Framework (Cont’d)

The Group has appointed an outsourced internal audit service provider, Morison AAC Corporate Solutions Sdn. Bhd. (“Morison”) to carry out the internal audit function.

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 two (2) cycles for FYE 2018 by Morison following the risk-based approaches. The reports of the internal audit were tabled for the Audit Committee’s review and deliberations, and the audit findings will then be 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 Morison. 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 2018, Morison 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.

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”.



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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 Annual General Meeting is issued at least 28 days prior to the meeting.

All the members of the Board and Chairmen of the Board Committees will be present at the Annual General Meeting to address the shareholders’ enquiry and concerns.

KEY FOCUS AREAS AND FUTURE PRIORITIES

Looking ahead to FYE 2019, 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, it complies substantially with the practices of the MCCG during the FYE 2018.

This Statement and the CG Report 2018 are made in accordance with the resolution passed by the Board on 5 April 2019.


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SUSTAINABILITY STATEMENT

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 Appendix 9C and Guidance Note 11 of the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad, which requires the Group to prepare its Sustainability Statement in our Annual Report for the financial year ended 31 December 2018 (“FYE 2018”).

Our Sustainability Statement is prepared based on Bursa Malaysia’s 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:-

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, financial statements, dividend policy, risk management, significant acquisitions and disposals, investments in significant joint ventures, significant property transactions, significant capital expenditure, dividends 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, Connected Homes and Offices sector was supported with the increase in market share throughout strong growth 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.


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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. In 2018, we started a cybersecurity business through engaging with experienced partners. It is a new business under the diversification initiative, 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 it has a moral and social responsibility in reducing the carbon footprint, contributing towards a greener environment. Thus, we are committed to identify, manage and minimise the environmental impact of its business operations and manufacturing activities.

Lesser Material Consumption, Wastage 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 Company has also 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 utilisation of labour resources.

The Group’s efforts to conserve the environment also see it following an ongoing practice 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 the Electronic Industry Citizenship Coalition Code of Conduct which is an industry best practices to ensure the Company operates responsibly within the sphere of ESG. It is a voluntary best practice for electronics industry supply chain that consistently operates with social, environmental and economic responsibility.

The Group also complies with 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 adopts REACH, 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.

In addition, we practise JIG, the Joint Industry Guide-Material Composition Declaration for Electronic Products, with the 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.

SUSTAINABILITY STATEMENT (cont’d)

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ENVIRONMENT (Cont’d)

Establishment of Environmental Management System

In compliance with ISO 14001:2004, 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 which consider 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 2018, a total of 38 training sessions had been organised covering environment, health and safety, quality, productivity, administration, human resource, personal development and risk management.

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.

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 2018, the Group recorded a male to female ratio of 62:38 (2017: 59:41) within its workforce, and we believe that having gender diversity will create more conducive and productive workplace.


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SOCIAL (Cont’d)

Workplace (Cont’d)

2. Workplace Diversity (Cont’d)

b. Age diversity

As at 31 December 2018, 34% 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 25%, followed by those aged between 40 and 49 years being 22%. 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 2018, employment of non-Malaysian citizens ethnicity constituted the largest workforce of the Group at 96%.


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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.


Cycling

Mini marathon

Hiking

International marathon


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SOCIAL (Cont’d)


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 events – team building was organised for staff. We believe that it will help to create more effective, friendly and confident teams 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 in the fun activities and they enjoyed their wonderful time.


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SOCIAL (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 2018, the following community activities were carried out by the Group:-

1. Community Welfare and Development

Shenzhen is a major city in Guangdong Provinces attracting huge population of rural-to-urban migrants. During annual travel rush around the Spring Festival, our Company together with other volunteers offered helps in traffic control at the busy bus station, coordinated the safety of the passengers and distributed refreshments.

Songgang Street public welfare activities

2. Donation to the Malaysian Association Help for The Poor Terminally Ill

The Company contributed funds to the Malaysian Association Help for The Poor Terminally Ill (“PPPM”). One of the key areas of PPPM is supplying poor patients with the basic medical needs and equipment vital for post hospital care and to ensure a decent quality of life for poor patients.

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. Moving forward, 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.



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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 2018 (“FYE 2018”), 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 March 2019, being the latest practicable date (“LPD”) for this Audit Committee Report, the Audit Committee comprises four (4) 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 current composition of the Audit Committee is as follows:

Name Designation Directorate

Thong Mei Mei Chairperson Independent Non-Executive Director

Major General Dato’ Mamat Ariffin Bin Abdullah(Appointed w.e.f. 29 March 2019) Member Independent Non-Executive Chairman

Lim Bee San Member Independent Non-Executive Director

Ng Keok Chai(Appointed w.e.f. 29 March 2019) Member Independent Non-Executive Director

Mok Shiaw Hang(Resigned w.e.f. 29 March 2019) Member Independent Non-Executive Director

The Chairman 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 a member of the Malaysian Institute of Accountants (“MIA”) and associate member of Chartered Institute of the Management Accountants (“ACMA”), 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 November 2018, reviewed the term of office and performance of the Audit Committee as well as whether its members have carried out their duties in accordance with the Terms of Reference (“TOR”) of Audit Committee for the FYE 2018.

Upon review, the Nomination Committee was satisfied with the overall performance of the Audit Committee and its individual members for FYE 2018. 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 2018, 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 external auditors for the financial year ending 31 December 2019 (“FYE 2019”). The Board has 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 2018 and the details of attendance of the members during the financial year were as below:-

Total no. Total no of meetings.Members of meetings attended held during tenure of office % Thong Mei Mei 5 5 100.00 Lim Bee San 5 5 100.00 Mok Shiaw Hang(Resigned w.e.f. 29.03.2019) 5 5 100.00

The lead audit partners of the external auditors responsible for the Group had attended three (3) Audit Committee Meetings held during FYE 2018.

The external auditors were encouraged to raise with the Audit Committee any matters they considered important to bring to the Audit Committee’s attention. For FYE 2018, 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 was 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 are 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

During the FYE 2018, the summary of works undertaken by the Audit Committee were as follows:-

1. Overview of Financial Performance and Reporting

a. Reviewed the unaudited quarterly financial results for the quarters ended 31 December 2017, 31 March 2018, 30 June 2018 and 30 September 2018 and recommended the same for the Board’s approval;

b. Reviewed the annual budget of the Group for FYE 2019 and deliberated on the assumptions made in preparing the annual budget, and recommended the same to the Board for approval and adoption;

c. Reviewed the financial performance and financial highlights of the Company and its subsidiaries (“the Group”) on quarterly basis;

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

e. Reviewed the draft audited financial statements for the financial year ended 31 December 2017 (“FYE 2017”) and recommended the same for the Board’s approval.

2. Oversight of External Auditors

a. Received the Audit Progress Memorandum prepared by the external auditors for the FYE 2017, covering areas of concern and areas for improvement and status of the audit field works;

b. 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 2018 prepared by the external auditors, entailing mainly the audit approach and timeline and areas of audit emphasis of the Group;

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

d. Reviewed the effectiveness, suitability and independence of the external auditors in respect of FYE 2017 and FYE 2018 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 Fifteenth AGM and Sixteenth AGM of the Company respectively; and

e. Reviewed the statutory audit fees for FYE 2017 and FYE 2018 and recommended to the Board’s approval.

3. Oversight of Internal Audit Function

a. Reviewed the Internal Audit Plan for the Group for the financial year ending 31 December 2019 (“FYE 2019”) and approved for adoption of the same by the Group throughout FYE 2019;

b. Reviewed the Internal Audit Reports for the FYE 2018 and assessed the internal auditors’ findings and the Management’s responses and made the necessary recommendations to the Board for approval;

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

d. Evaluated the performance of the outsourced internal auditors for the FYE 2017 and assessed the adequacy and effectiveness of the internal control system within the Group, as well as the weaknesses in the Group’s internal control system were appropriately addressed; and

e. 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 2018.

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SUMMARY OF WORKS (Cont’d)

4. Oversight of Internal Control Matters

a. Reviewed and confirmed the minutes of the Audit Committee Meetings; and

b. Reviewed the disclosures in Audit Committee Report and Statement on Risk Management and Internal Control to be included in the Annual Report 2017.

5. Review of Related Party Transactions

a. 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 Group has appointed an outsourced internal audit service provider, Morison AAC Corporate Solutions Sdn. Bhd. (“Morison”) to carry out the internal audit function.

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

The profile of Morison is set out as follows:-


Principal Engagement Lead

Qualifications

Experiences

Number of resources

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

• 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

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.

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.

For FYE 2018, the Morison 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.

:

:

:

:


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INTERNAL AUDIT FUNCTION (Cont’d)

2. Summary of Works of the Internal Audit Function for FYE 2018

During the FYE 2018, the summary of works undertaken by the internal auditors comprised the following:-

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

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

c. 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;

d. 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

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

For the FYE 2018, the following areas of the Group have been successfully audited by Morison in accordance with the risk-based audit plan adopted:-

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

Rapid Conn (Shenzhen) Co. Ltd. • Financial Management

Rapid Conn Power Co. Ltd. • Operations Management • Inventory Management May 2018

Rapid Conn Resin Co. Ltd. • Operations Management • Inventory Management

Rapid Conn Inc. • Policies and Procedures • Financial Management • Revenue and Accounts Receivables November 2018 • Inventory Management • Human Resources Management

3. Total costs incurred for FYE 2018

The total cost incurred for the outsourced internal audit function of the Group for the FYE 2018 is amounted to RM41,450 (2017: RM25,300/-).

This Audit Committee Report is made in accordance with a resolution passed by the Directors at the Board of Directors’ Meeting held on 5 April 2019.


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STATEMENT ONRISK MANAGEMENT AND INTERNAL CONTROL

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 (“ACE LR”) of Bursa Malaysia Securities Berhad (“Bursa Securities”) 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 issued on 26 April 2017 (“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 Group’s 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 2018 (“FYE 2018”), assurance 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, are obtained that throughout the year that the Group’s risk management and internal control systems are operating effectively. This assurance has obtained via formal and informal inquiries, discussions and meetings.


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

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 Management who implement and maintain the risk management and control system.

As at 29 March 2019, being the latest practicable date for the SORMIC, the composition of the RMC is as follows:-

Name Designation Directorate

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 Management consists of Executive Deputy Chairman and the Senior Management team.

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.

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The Risk Management Process

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 (“RR”) and references are made in the subsidiaries’ Standard Operating Procedures (“SOP”).



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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 an organisation 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 organisation;

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 organisation’s knowledge base; and

7. optimising operational efficiency.

RR

The Group’s RR 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 RR. The RR 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 RR 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 (i.e. copper) 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 inter-company debts. Management is currently reviewing the foreign exchange impact on intercompany trading activities to ascertain the appropriate risk management approach.

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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 2017. Therefore, the key risk areas identified in FYE 2018 remain unchanged, and are tabulated below:-


Key Areas of Risk Assessment

1 Strategic

2 Operational

3 Compliance

4 Internal Audit

5 Financial Statement

6 Fraud

7 Market

8 Credit

9 Customer

10 Supply Chain

11 Product

12 Project Management

13 Foreign Exchange

Risk Description

This relates to the Group’s mission and strategic objectives.

This relates to the Group’s risk of loss (i.e. financial performance) as a result of shortcomings or failings from within the Group (i.e. systems, processes, people), or from external events.

This relates to the Group’s compliance obligations vis-a-vis government regulations, policies and procedures, business ethics, etc.

This relates to risks associated with the value drivers of the Group that impact shareholder’s value as it affects strategic, financial, operational, and compliance objectives.

This relates to risks associated with the likelihood of material misstatements of the Group’s financial statements through input from various departments within the Group.

This relates to potential occurrence of fraud or misrepresentations that may compromise the Group’s ethics and compliance standards, business practice requirements, financial reporting integrity, and other objectives.

This relates to risks associated with movements in the market that could affect the Group’s performance or risk exposure (typically foreign exchange, interest rates and commodity prices).

This relates to risks associated with the likelihood that the borrower or counterparty (contracts) may default on their financial obligations.

This relates to the risk profile of the customer (i.e. creditworthiness) or counterparty (i.e. intent), that could affect the Group’s credibility, reputation and financial standing.

This relates to the risks associated with the functions of purchasing, planning, logistics and warehousing. The failure to effectively manage supply chain risks may result in economic and financial losses, reductions in product quality, delivery delays and loss of reputation.

This relates to risks associated with an organisation’s product, from design and development through manufacturing, distribution, use, and disposal. Failure to manage the risks will have far-reaching effects, as they not only negatively impact cost and revenue, but also the Group’s reputation and product credibility.

This relates to risks associated with the implementation and delivery of a project, taking into account the risks affecting the key parameters of project management, i.e. time, cost and quality.

This relates to risks associated with foreign currency transactions due to exchange differences between international and domestic foreign exchange rates - this will have an impact on trade (i.e. revenues) and trade payables (collection).


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Periodic Review and Disclosure

For the FYE 2018, the RMC meeting was held on 24 May 2018. 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 RR 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 shall report 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.

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.


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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. Risk Management Committee.

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.

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 2018, internal audits were carried out in accordance with the risk based internal audit plan approved by the Audit Committee. The business processes reviewed were sales and revenue account receivable management, operations management and follow-up on financial management, procurement and account payables management.

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.

This statement is made in accordance with a resolution of the Board of Directors dated 5 April 2019.



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ADDITIONAL COMPLIANCE INFORMATION

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. Recurrent Related Party Transactions of a Revenue or Trading Nature

During the financial year under review, the Company and its subsidiaries (“the Group”) have not entered into any recurrent related party transactions of a revenue or trading nature.

2. Audit and Non-Audit Services

For the financial year ended 31 December 2018, Messrs. Moore Stephens Associates PLT, the external auditors has 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 renderedStatutory audit in respect of the financial year ended 31 December 2018 30,000 208,018Non-audit services renderedReview of the Statement on Risk Management and Internal Control for Annual Report 2018 8,600 8,600

Total 38,600 216,618

3. 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.

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STATEMENT ON DIRECTORS’ RESPONSIBILITY FOR PREPARING THE FINANCIAL STATEMENTSIn 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 on Directors’ Responsibility for preparing the financial statements is made in accordance with a resolution passed by the Directors at the Board of Directors’ Meeting held on 5 April 2019.


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DIRECTORS’ REPORT

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

PRINCIPAL ACTIVITIES

The Company is an investment holding company. The principal activities of the subsidiaries and associate are disclosed in Note 13 and 15 to the financial statements.

There have been no significant changes in the nature of these principal activities during the financial year other than as disclosed in Note 36 to the financial statements.

RESULTS

Group Company RM RM Loss for the year, net of tax 10,202,953 7,545,844 Attributable to: Owners of the Company 9,461,394 7,545,844Non-controlling interests 741,559 -

10,202,953 7,545,844

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.

ISSUANCE OF SHARES OR DEBENTURES During the financial year, the Company increased its issued share capital from RM32,234,443 to RM32,930,493 by way of the issuance of:

(i) 6,705,500 new ordinary shares of RM0.10 each pursuant to conversion of 6,705,500 ICPS on the basis of 1 ICPS for 1 ordinary share with cash consideration of RM0.075 each;

(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.

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OPTIONS

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

DETACHABLE WARRANTS

Warrants 2011/2021 (“Warrants-A”)

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

During the financial year, total of 130,000 warrants were exercised which resulted in 130,000 ordinary shares being allotted, issued and listed. As at 31 December 2018, the total numbers of warrants that remained unexercised were 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 ICPS on 17 May 2016.

During the financial year, total of 125,000 warrants were exercised which resulted in 125,000 ordinary shares being allotted, issued and listed. As at 31 December 2018, the total numbers of warrants that remained unexercised were 29,062,988.

Details of the warrants are set out in Note 22 and Note 24 to the financial statements.

DIRECTORS

The names of the Directors of the Company in office since the beginning of the current 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 March 2019)Lee Su Lin (Appointed on 8 March 2019)Ng Keok Chai (Appointed on 29 March 2019)Tan Sze Chong (Appointed on 1 November 2018 and resigned on 8 March 2019)Wong Pooi Fatt (Appointed on 8 March 2019)Chang Choon Ming (Resigned on 8 March 2019)Mok Shiaw Hang (Resigned on 29 March 2019)Tan Sri Dato’ Ahmad Fuzi Bin Abdul Razak (Resigned on 8 March 2019)

DIRECTORS’ REPORT(cont’d)


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DIRECTORS (CONT’D)

The names of the Directors of the Company’s subsidiaries in office since the beginning of the current financial year to the date of this report are:

Ang Chuang Juay Balaji Raghunathan Corina Yong Fung Shoo Luo FangMing Mei Molitor Mok Shiaw Hang Chu Kim Fong (Appointed on 20 March 2018)Tan HuaRong Lim Wee Kong Chang Choon Ming Lim Say Chuan (Resigned on 30 June 2018)Liu ZhengHua (Resigned on 23 November 2018)

DIRECTORS’ INTERESTS

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

Number of Ordinary Shares Amount Bought/Direct interest 1.1.2018 Converted Sold 31.12.2018 1.1.2018 31.12.2018

Tan Sri Dato’ Ahmad Fuzi 36,352,500 - - 36,352,500 3,635,250 3,635,250 Bin Abdul Razak Ang Chuang Juay 19,114,124 2,000,000 (2,451,900) 18,662,224 1,911,412 1,866,222Chang Choon Ming 27,555,000 - - 27,555,000 2,755,500 2,755,500

Number of Irredeemable Convertible Preference Shares AmountDirect interest 1.1.2018 Acquired Converted 31.12.2018 1.1.2018 31.12.2018 Tan Sri Dato’ Ahmad Fuzi 300,000 - - 300,000 7,500 7,500 Bin Abdul Razak Ang Chuang Juay 52,897,256 - (5,500,000) 47,397,256 1,322,431 1,184,931Chang Choon Ming 7,990,000 - - 7,990,000 199,750 199,750

Other than as disclosed above, the other Directors do not have any interest in the shares or options over shares of the Company or of its related companies during and at the end of the financial year.


A N N U A L R E P O R T 2 0 1 8

63


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 - 1,007,621Fees 148,000 48,421Benefits-in-kind - 4,125 148,000 1,060,167

Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement to which the Company was a party, whereby the Directors might acquire benefits by means of acquisition of shares in or debentures of the Company or any other body corporate.

Since the end of the previous financial year, no Director has received or become entitled to receive a benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by the Directors as shown as above and in Note 9 and Note 31 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 he is a member, or with a company in which he has a substantial financial interest.

OTHER STATUTORY INFORMATION

(a) Before the financial statements of the Group and 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 there were no known bad debts and that adequate provision had been made for doubtful debts; and

(ii) to ensure that any current assets which were unlikely to realised in the ordinary course of business including their values as shown in the accounting records of the Group and 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 necessitate the writing off of 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.


64


OTHER STATUTORY INFORMATION (CONT’D)

(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 8 to the financial statements.

(f) There was no amount paid to or receivable by any third party in respect of the services provided to the Company or any of its subsidiary by any Director or past Director of the Company.

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

SIGNIFICANT EVENTS

Details of significant events are disclosed in Note 36 to the financial statements.

SUBSEQUENT EVENT

Details of subsequent event are disclosed in Note 37 to the financial statements.

AUDITORS

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

Signed on behalf of the Board in accordance with a resolution of the Directors dated 5 April 2019.

ANG CHUANG JUAY THONG MEI MEI

A N N U A L R E P O R T 2 0 1 8

65

We, Ang Chuang Juay and Thong Mei Mei, being two of the Directors of ConnectCounty Holdings Berhad, do hereby state that, in the opinion of the Directors, the accompanying financial statements set out on pages 71 to 143 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 2018 and of their financial performance and the cash flows for the year then ended.

Signed on behalf of the Board in accordance with a resolution of the Directors dated 5 April 2019.

ANG CHUANG JUAY THONG MEI MEI

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

I, Lim Yew Chai, MIA Membership Number: 17364, being the officer primarily responsible for the financial management of ConnectCounty Holdings Berhad, do solemnly and sincerely declare that the financial statements as set out on pages 71 to 143 are in my opinion, correct and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by the ) abovenamed Lim Yew Chai at ) Kuala Lumpur in the Federal Territory on )5 April 2019 ) LIM YEW CHAI

Before me:

S. ARULSAMYCommissioner for Oaths

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


66

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF CONNECTCOUNTY HOLDINGS BERHAD

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 2018 of the Group and of the Company, and the statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out on pages 71 to 143.

In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Group and of the Company as at 31 December 2018, and of their financial performance and their cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 2016 in Malaysia.

Basis 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. We have fulfilled the responsibilities described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis of our audit opinion on the accompanying financial statements.

A N N U A L R E P O R T 2 0 1 8

67

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

Key audit matters (cont’d)

Key Audit Matter How our audit addressed the key audit matter

Impairment loss on trade receivables

Refer to Note 33(d)(ii) to the financial statements. The Group has a material amount of trade receivables amounted to RM12,223,077, representing 26% of total assets of the Group and allowance for impairment of trade receivables was RM544,048 as at 31 December 2018.

We determined this to be a key audit matter because it requires management to exercise significant judgements in determining the probability of default by trade receivables and expected loss rate.

Our audit procedures included, among others:

• We obtained understanding of the Group’s credit control process;

• We obtained an understanding and assessed the Group’s assumptions in estimating the impairment losses;

• We checked accuracy of the expected credit losses calculation;

• We assessed the aging of the trade receivables, past payment and credit history of the customers; and

• We assessed actual loss events subsequent to the end of reporting period.

Going Concern

The Group’s revenue has decreased by 18% to RM99,641,262 and incurred net loss of RM10,202,953 for the financial year ended 31 December 2018. The continue losses by the Group has indicated a condition that may cast significant doubt on the Group’s ability to continues as a going concern.

The Directors have continued to adopt the going concern basis in preparing the financial statements. This is after having considered the discounted cash flow (“DCF”) projections supporting the assertion that the Group will have sufficient resources to continue for a period of at least 12 months from the end of the financial year.

We consider this to be an area of focus for our audit as judgement and assumption are involved in the Directors’ assessment on the Group’s ability to continue as a going concern.


• We reviewed the Directors’ assessment in relation to going concern;

• We reviewed DCF projections for the Group presented by the Directors; and

• We reviewed the appropriateness of the assumptions applied on the above.

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


68


Key audit matters (cont’d)

Key Audit Matter How our audit addressed the key audit matter

Impairment assessment of investment in subsidiaries

Refer to Note 13 to the financial statements.The investment in subsidiaries amounting to RM22,871,849, representing 75% of the Company’s total assets as at the reporting date. During the financial year, the Company has recognised an additional impairment loss of RM6,299,409 for its investment in subsidiaries.

The Company estimated the recoverable amount of its investment in these subsidiaries based on value in use basis (“VIU”). Estimating the VIU involves estimating the future cash flows that will be derived from the subsidiaries, including key assumption such as revenue growth rate and operating cost, and discounting them at an appropriate rate.

Due to the subjective estimates involved in the impairment assessment, we identified this as an area of audit focus


• We reviewed DCF projections for ithe Group presented by the Directors; and

• We reviewed the appropriateness of the assumptions applied on the above.

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 annual report, but does not include the financial statements of the Group and of the Company and our auditors’ report thereon, which is expected to be made available to us after the date of this auditors’ report.

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

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

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

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

A N N U A L R E P O R T 2 0 1 8

69


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:

• 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.

• 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.

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

• Conclude on the appropriateness of the Director’s 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 and 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.

• 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.

• 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.



70


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 subsidiaries of which we have not acted as auditors, are disclosed in Note 13 to the financial statements.

OTHER MATTERS

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 Fong Chee MengLLP0000963 – LCA & AF002096 2707/09/2020 JChartered Accountants Chartered Accountant

Petaling Jaya, Selangor5 April 2019


A N N U A L R E P O R T 2 0 1 8

71

Group Company NOTE 2018 2017 2018 2017 RM RM RM RM Revenue 3 99,641,262 122,163,131 - - Cost of sales 4 (87,462,203) (103,748,031) - - Gross profit 12,179,059 18,415,100 - - Other items of income 5 2,142,063 1,407,983 1,631,613 556,937 Other items of expenses Administration expenses (13,362,821) (13,662,047) (1,283,520) (1,092,976) Distribution and selling expenses (3,748,460) (5,324,180) - - Other expenses 6 (6,276,936) (675,207) (7,880,231) (1,535,417) Finance cost 7 (473,815) (109,300) (13,706) (1,337) Share of loss of equity accounted associate, net of tax 15 (350,717) - - - (Loss)/Profit before tax 8 (9,891,627) 52,349 (7,545,844) (2,072,793) Income tax expense 10 (311,326) (786,385) - - Loss net of tax (10,202,953) (734,036) (7,545,844) (2,072,793) Loss attributable to: Owners of the Company (9,461,394) (230,515) (7,545,844) (2,072,793)Non-controlling interest (741,559) (503,521) - -

(10,202,953) (734,036) (7,545,844) (2,072,793) Loss per share attributable to owners of the Company (sen) Basic 11(a) (2.879) (0.229) Diluted 11(b) N/A N/A

STATEMENTS OF PROFIT OR LOSSFOR THE YEAR ENDED 31 DECEMBER 2018

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


72

Group Company 2018 2017 2018 2017 RM RM RM RM Loss net of tax (10,202,953) (734,036) (7,545,844) (2,072,793) Other comprehensive income/(expense) Foreign currency translation 228,101 (1,457,318) - - Total comprehensive expense for the year (9,974,852) (2,191,354) (7,545,844) (2,072,793) Total comprehensive expense attributable to: Owners of the Company (9,237,997) (1,678,459) (7,545,844) (2,072,793)Non-controlling interest (736,855) (512,895) - -

(9,974,852) (2,191,354) (7,545,844) (2,072,793)

STATEMENTS OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2018


A N N U A L R E P O R T 2 0 1 8

73

NOTE 2018 2017 RM RM ASSETS Non-current assets Plant and equipment 12 3,314,748 10,875,914Intangible asset 14 - 741,217Investment in associate 15 1,701,296 -Other investment 16 1,079,900 1,079,900Deferred tax assets 17 374,075 382,997

6,470,019 13,080,028

Current assets Inventories 18 8,095,103 19,438,401Trade receivables 19 12,223,077 33,284,437Other receivables 20 9,738,715 7,494,921Cash and bank balances 21 11,956,151 13,788,892

42,013,046 74,006,651 TOTAL ASSETS 48,483,065 87,086,679 EQUITY AND LIABILITIES Equity Share capital 22 32,930,493 32,234,443Equity component of irredeemable convertible preference share 23 10,725,353 10,863,918Reserves 24 2,797,939 2,578,588Accumulated losses (13,382,389) (5,555,235)

Equity attributable to owners of the Company 33,071,396 40,121,714Non-controlling interest (2,377,789) 632,242

TOTAL EQUITY 30,693,607 40,753,956 Non-current liabilities Borrowings 25 689,936 76,823Liability component of irredeemable convertible preference share 23 1,352,818 1,391,071

2,042,754 1,467,894

Current liabilities Borrowings 25 135,938 76,467Trade payables 27 9,553,557 37,780,172Other payables 28 5,983,851 6,510,784Tax payable 73,358 497,406

15,746,704 44,864,829 TOTAL LIABILITIES 17,789,458 46,332,723 TOTAL EQUITY AND LIABILITIES 48,483,065 87,086,679

CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAS AT 31 DECEMBER 2018



74

COMPANY STATEMENT OF FINANCIAL POSITIONAS AT 31 DECEMBER 2018


NOTE 2018 2017 RM RM ASSETS Non-current assets Plant and equipment 12 395,443 83,939Investments in subsidiaries 13 22,871,849 29,171,258Other investment 16 1,079,900 1,079,900Deferred tax assets 17 324,676 333,857

24,671,868 30,668,954 Current assets Other receivables 20 2,531,324 353,305Cash and bank balances 21 3,209,552 6,022,814

5,740,876 6,376,119

TOTAL ASSETS 30,412,744 37,045,073 EQUITY AND LIABILITIES Share capital 22 32,930,493 32,234,443Equity component of irredeemable convertible preference shares 23 10,725,353 10,863,918Reserves 24 2,034,409 2,043,159Accumulated losses (17,154,682) (9,617,697)

TOTAL EQUITY 28,535,573 35,523,823 Non-current liabilities Borrowings 25 278,845 -Liability component of irredeemable convertible preference shares 23 1,352,818 1,391,071 1,631,663 1,391,071 Current liabilities Borrowings 25 67,461 -Other payables 28 178,047 130,179 245,508 130,179 TOTAL LIABILITIES 1,877,171 1,521,250

TOTAL EQUITY AND LIABILITIES 30,412,744 37,045,073

A N N U A L R E P O R T 2 0 1 8

75

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2018 (cont’d)

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A N N U A L R E P O R T 2 0 1 8

77

COMPANY STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2018

Non-distributable Share ICPS – 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 Total comprehensive expense for the year - - - (7,545,844) (7,545,844)

32,234,443 10,863,918 2,043,159 (17,163,541) 27,977,979 Issuance of ordinary shares pursuant to: -conversion of ICPS 22&23 670,550 (167,637) - - 502,913-exercise of Warrant-A 22 13,000 - - - 13,000-exercise of Warrant-B 22&24 12,500 - (8,750) 8,750 12,500Effects on deferred tax asset on conversion of ICPS 23 - (9,181) - - (9,181)Reclassification from equity component to liability component 23 - 38,253 - - 38,253Dividend refunded - - - 109 109

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



78

Non-distributable Share ICPS – equity Warrants Accumulated Note Capital component Reserve Losses Total RM RM RM RM RM At 1 January 2017 28,683,023 11,102,336 3,032,497 (8,055,654) 34,762,202 Total comprehensive expense for the year - - - (2,072,793) (2,072,793)

28,683,023 11,102,336 3,032,497 (10,128,447) 32,689,409 Issuance of ordinary shares pursuant to: -conversion of ICPS 22&23 1,046,480 (261,620) - - 784,860-exercise of Warrant-A 22 1,091,600 - - - 1,091,600-exercise of Warrant-B 22&24 1,413,340 - (989,338) 989,338 1,413,340Effects on deferred tax asset on conversion of ICPS 23 - (7,328) - - (7,328)Reclassification from equity component to liability component 23 - 30,530 - - 30,530Dividend 29 - - - (478,588) (478,588)

At 31 December 2017 32,234,443 10,863,918 2,043,159 (9,617,697) 35,523,823

COMPANY STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2018 (cont’d)


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Group Company 2018 2017 2018 2017 RM RM RM RM

CASH FLOWS FROM OPERATING ACTIVITIES (Loss)/Profit before tax (9,891,627) 52,349 (7,545,844) (2,072,793)Adjustments for: Allowance for impairment loss on – investment in subsidiaries - - 6,299,409 1,126,552– trade receivables 402,356 - - -– other receivables 1,838,987 - 209,488 8,030Amortisation of intangible asset 72,740 68,932 - -Depreciation of plant and equipment 2,634,572 2,800,080 29,650 12,799Gain on de-recognition of subsidiary (1,001,800) - - -Loss/(Gain) on disposal of plant and equipment 98,126 (48,916) 26,697 -Loss on disposal of subsidiary - - 1,352,139 -Loss/(Gain) on foreign exchange – unrealised 426,761 568,120 (62,313) 192,469Intangible asset written off 654,654 - - -Interest expenses 316,534 8,566 13,005 -Interest income (109,388) (204,819) (102,157) (195,647)Investment in subsidiary written off - - - 190,000Plant and equipment written off 2,457,140 994 50,668 741Reversal of impairment loss on – investments in subsidiaries - - (1,352,140) (99,999)– trade receivables - (477,126) - -– other receivables - - - (61,715)Share of loss of associate 350,717 - - -Waiver of amount due to former subsidiary - - - (15,641)

Operating (loss)/profit before working capital changes (1,750,228) 2,768,180 (1,081,398) (915,204)Inventories 6,297,232 (7,479,872) - -Receivables (198,788) (10,952,617) (2,325,240) 1,209,830Payables (7,818,313) 17,364,434 47,868 (137,030)

Cash (used in)/generated from operations (3,470,097) 1,700,125 (3,358,770) 157,596Interest paid (316,534) (8,566) (13,005) -Tax paid (735,245) (354,148) - -

Net cash (used in)/generated from operating activities (4,521,876) 1,337,411 (3,371,775) 157,596

CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of interest in subsidiaries - - - (5,390,000)Acquisition of other investment - (1,079,900) - (1,079,900)Interest received 109,388 204,819 102,157 195,647Net cash flows on de-recognition of subsidiary (Note 13(e)) 2,465,235 - - -Proceeds from disposal of plant and equipment 453,798 65,035 1,481 -Proceeds from disposal of subsidiary - - 1 -Purchase of intangible asset - (808,600) - -Purchase of plant and equipment (785,694) (3,935,444) (42,000) (4,650)

Net cash generated from/(used in) investing activities 2,242,727 (5,554,090) 61,639 (6,278,903)

STATEMENTS OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2018



80


CASH FLOWS FROM FINANCING ACTIVITIES Dividends refunded/(paid) 109 (478,588) 109 (478,588)Non-controlling interest arising from investment in subsidiaries - 642,125 - -Proceeds from issuance of ordinary shares pursuant to conversion of ICPS 670,550 1,046,480 670,550 1,046,480Proceeds from issue of shares upon exercise of warrants 25,500 2,504,940 25,500 2,504,940Conversion of ICPS expenses (167,637) (261,620) (167,637) (261,620)Repayment of hire purchase (266,541) (87,833) (31,694) -

Net cash generated from financing activities 261,981 3,365,504 496,828 2,811,212 NET DECREASE IN CASH AND CASH EQUIVALENTS (2,017,168) (851,175) (2,813,308) (3,310,095)EFFECTS OF EXCHANGE RATE CHANGES 184,427 32,858 46 (6,750)CASH AND CASH EQUIVALENTS AT BEGINNING OF THE FINANCIAL YEAR 13,788,892 14,607,209 6,022,814 9,339,659

CASH AND CASH EQUIVALENTS AT END OF THE FINANCIAL YEAR (NOTE 21) 11,956,151 13,788,892 3,209,552 6,022,814

STATEMENTS OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2018 (cont’d)


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1. CORPORATE INFORMATION

The Company is a public limited liability company, incorporated and domiciled in Malaysia, and 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 the subsidiaries and associate are disclosed in Note 13 and Note 15. There have been no significant changes in the nature of these principal activities during the financial year other than as disclosed in Note 36.

2. SIGNIFICANT ACCOUNTING POLICIES

2.1 Basis of Preparation

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

The financial statements of the Group and of the Company have been prepared under the historical cost convention unless otherwise stated below.

The financial statements are presented in Ringgit Malaysia (“RM”).

2.2 New and amended Standards and Interpretations

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

Arising from the adoption of MFRS 15, Revenue from Contracts with Customers and MFRS 9, Financial Instruments, there are changes to the accounting policies of:

(i) Financial instruments;(ii) Revenue; and(iii) Impairment.

as compared to those adopted in previous financial statements. The impacts arising from the changes are disclosed in Note 34.

2.3 Standards and Interpretations Issued but Not Yet Effective

The Group and the Company have not adopted the following accounting standards, amendments and interpretations of the MFRS framework that have been issued by the Malaysian Accounting Standards Board (“MASB”) but not yet effective:

Effective for annual period beginning on or after 1 January 2019MFRS 16 LeasesIC Interpretation 23 Uncertainty over Income Tax Treatments

Effective for annual period beginning on or after 1 January 2020Amendments to MFRS 3, MFRS 101 and MFRS 108: Definition of Material

Effective for annual period beginning on or after 1 January 2021MFRS 17 Insurance Contracts*

NOTES TO THE FINANCIAL STATEMENTS 31 December 2018

NOTES TO THE FINANCIAL STATEMENTS 31 December 2018 (cont’d)


82

2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

2.3 Standards and Interpretations Issued but Not Yet Effective (Cont’d)

DeferredAmendments to MFRS 10 and MFRS 128: Sale or Contribution of Assets between an Investor and its Associates or Joint Ventures

* Not applicable to the Group and the Company

The Group and the Company are expected to apply the abovementioned new or amended standards beginning from the respective date the new or amended standards become effective.

The Directors expect that the adoption of the above standards and IC interpretations will have no material effect on the financial statements in the period of initial application except as those described below:

(i) MFRS 16: Leases

MFRS 16 will replace MFRS 117 Leases, IC Interpretation 4 Determining whether an Arrangement contains a Lease, IC Interpretation 115 Operating Lease-Incentives and IC Interpretation 127 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. MFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under MFRS 117.

At the commencement date of a lease, a lessee will recognise a liability to make lease payments and an asset representing the right to use the underlying asset during the lease term. Lessees will be required to recognise interest expense on the lease liability and the depreciation expense on the right-of-use asset.

Lessor accounting under MFRS 16 is substantially the same as the accounting under MFRS 117. Lessors will continue to classify all leases using the same classification principle as in MFRS 117 and distinguish between two types of leases: operating and finance leases.

MFRS 16 is effective for annual periods beginning on or after 1 January 2019. Early application is permitted but not before an entity applies MFRS 15. A lessee can choose to apply the standard using either a full retrospective or a modified retrospective approach. The Group is currently assessing the impact of MFRS 16 and plans to adopt the new standard on the required effective date.

2.4 Subsidiaries and Basis of Consolidation

(i) Subsidiaries

Subsidiaries are all entities over which the group has control. The group control an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

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


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83


2.4 Subsidiaries and Basis of Consolidation (Cont’d)

(ii) Basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the financial year end. The financial statements of the subsidiaries used in the preparation of the consolidated financial statements are prepared for the same financial year end as the Company. Consistent accounting policies are applied to like transactions and events in similar circumstances.

Subsidiaries are consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

All intra-group balances, income and expenses and unrealised gains and losses resulting from the intra-group transactions are eliminated in full.

Acquisitions of subsidiaries are accounted for using the purchase method. Under the purchase method of accounting, identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the date of acquisition. Adjustment to those fair values relating to previously held interests are treated as a revaluation and recognised in other comprehensive income. The cost of a business combination is measured as the aggregate of the fair values, at the date of exchange, of the assets given, liabilities incurred or assumed, and equity instruments issued, plus any costs directly attributable to the business combination.

Any excess of the cost of business combination over the Group’s share in the net fair value of the acquired subsidiary’s identifiable assets, liabilities and contingent liabilities is recorded as goodwill on the statement of financial position. Any excess of the Group’s share in the net fair value of the acquired subsidiary’s identifiable assets, liabilities and contingent liabilities over the cost of business combination is recognised as income in profit or loss on the date of acquisition. When the Group acquires a business, embedded derivatives are separated from the host contract that significantly modifies the cash flows that would otherwise be required under the contract.

(iii) Transactions with non-controlling interest

Non-controlling interests represent the equity in subsidiaries not attributable, direct or indirectly, to the owners of the Company, and is presented separately in consolidated statements of comprehensive income and within equity in the consolidated statement of financial position, separately from equity attributable to owners of the Company.

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

Total comprehensive income within a subsidiary is attributable to the non-controlling interest even if it results in a deficit balance.



84


2.4 Subsidiaries and Basis of Consolidation (Cont’d)

(iv) Loss of control

Upon the loss of control of a subsidiary, the Group derecognises the assets and liabilities of the former subsidiary, any non-controlling interests and the other components of equity related to the former subsidiary from its consolidated statement of financial position. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for an equity-accounted investee or as a fair value through other comprehensive income financial asset depending on the level of influence retained.

(v) 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.

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 the 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 remeasured. 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 if that gain or loss would be required to be reclassified to profit or loss on the disposal of the related assets or liabilities.

Investments in associates are measured in the Company’s statement of financial position at cost less any impairment losses, unless the investment is classified as held for sale or distribution. The cost of the investment includes transaction costs.

2.5 Foreign Currencies

(i) Functional and presentation currency

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


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85


2.5 Foreign Currencies (Cont’d)

(ii) Foreign currency transactions

Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiaries 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 profit or loss except for exchange differences arising on monetary items that form part of the Group’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 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 profit or loss for the period except for the differences arising on the translation of non-monetary items in respect of which gains and losses are recognised directly in equity. Exchange differences arising from such non-monetary items are also recognised directly in equity.

(iii) Foreign operations

The assets and liabilities of foreign operations are translated into RM at the rate of exchange ruling at the reporting date and income and expenses are translated at exchange rates at the dates of the transactions. The exchange differences arising on the translation are taken directly to other comprehensive income.

On disposal of a foreign operation, the convertible amount recognised in other comprehensive income and accumulated in equity under foreign currency translation reserve relating to that particular foreign operation is recognised in the profit or loss.

Fair value adjustments arising on the acquisition of foreign operations are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated at the closing rate at the reporting date.

2.6 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 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 parts as individual assets with specific useful lives and depreciation, respectively. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the 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.



86


2.6 Plant and Equipment (Cont’d)

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 10Motor vehicles 5 to 10Mouldings 5 Renovation 3 to 10

The carrying values of plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.

The residual values, useful life and depreciation method are reviewed at each financial year-end, and adjusted prospectively, if appropriate.

An item of plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on derecognition of the asset is included in the profit or loss in the year the asset is derecognised.

2.7 Intangible Asset

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 financial year end. 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.

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”).

2.8 Impairment of Non-Financial Assets

The Group and the Company assess at each reporting date whether there is an indication that an asset (other than inventories and deferred tax assets) may be impaired. If any such indications exist, or when an annual impairment assessment for an asset is required, the Group and the Company make an estimate of the asset’s recoverable amount.

An asset’s recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units (“CGU”)).


A N N U A L R E P O R T 2 0 1 8

87


2.8 Impairment of Non-Financial Assets (Cont’d)

In assessing value in use, the estimated future cash flows expected to be generated by the asset are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is written down to its recoverable amount. Impairment losses recognised in respect of a CGU or groups of CGUs are allocated to reduce the carrying amount of assets in the unit or groups of units on a pro-rata basis.

Impairment losses are recognised in profit or loss.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increase shall not exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised previously. Such reversal is recognised in profit or loss.

2.9 Financial instruments

Unless specifically disclosed below, the Group and the Company generally applied the following accounting policies retrospectively. Nevertheless, as permitted by MFRS 9, Financial Instruments, the Group and the Company have elected not to restate the comparatives.

A financial instrument 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 receivable without a significant financing component) and a financial liability is measured at fair value plus or minus, in the case of a financial instrument not at fair value through profit or loss, any directly attributable transaction cost incurred at the acquisition or issuance of the financial instrument.

2.10 Financial Assets

The Group and the Company applied the classification and measurement requirements for financial assets under MFRS 9 Financial Instruments effective from 1 January 2018. The 2017 financial year comparative was not restated, and the classification and measurement requirements under the previous MFRS 139 Financial Instruments: Recognition and Measurement was still applied. The changes in the classification and measurement requirements and its impact are disclosed in Note 34.

The Group and the Company determine the classification of financial assets upon initial recognition. The measurement for each classification of financial assets are as below:

Category in the financial year ended 31 December 2018

• Financial assets measured at amortised cost

Financial assets that are debt instruments are measured at amortised cost if they are held within a business model whose objective is to collect contractual cash flows and have contractual terms which give rise on specific dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Subsequent to initial recognition, financial assets are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss through the amortisation process and when the financial assets are impaired or derecognised.



88


2.10 Financial Assets (Cont’d)

Category in the financial year ended 31 December 2018 (Cont’d)

• Financial assets measured subsequently at fair value

Financial assets that are debt instruments are measured at fair value through other comprehensive income (“FVTOCI”) if they are held within a business model whose objectives are to collect contractual cash flows and selling the financial assets, and have contractual terms which give rise on specific dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Subsequent to initial recognition, financial assets that are debt instruments are measured at fair value. Any gains or losses arising from the changes in fair value are recognised in other comprehensive income, except for impairment losses, exchange differences and interest income which are recognised in profit or loss. The cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment when the financial asset is derecognised.

Financial assets that are debt instruments which do not satisfy the requirements to be measured at amortised cost or FVTOCI are measured at fair value through profit or loss (“FVTPL”). The Group and Company do not have any financial assets measured at FVTPL as at the financial year end.

A financial asset is derecognised when the contractual right to receive cash flows from the asset has expired. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace concerned. All regular way purchases and sales of financial assets are recognised or derecognised on the settlement date, i.e. the date that the asset is delivered to or by the Group and the Company.

Category in the financial year ended 31 December 2017

• Loans and receivables

Financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables.

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

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

• Available for sale (“AFS”) financial assets

AFS financial assets are financial assets that are designated as available for sale or are not classified in any other categories of financial assets. The Group’s and the Company’s available for sale financial assets comprise other investment.

After initial recognition, AFS financial assets are measured at fair value. Any gains or losses from changes in fair value of the financial assets are recognised in other comprehensive income, except that impairment losses, foreign exchange gains and losses on monetary instruments and interest calculated using the effective interest method are recognised in profit or loss.


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2.10 Financial Assets (Cont’d)

Category in the financial year ended 31 December 2017 (cont’d)

• Available for sale (“AFS”) financial assets (cont’d)

The cumulative gain or loss previously recognised in other comprehensive income is recognised in profit or loss when the financial asset is derecognised. Interest income calculated using the effective interest method is recognised in profit or loss. Dividends on available for sale equity instruments are recognised in profit or loss when the Group’s and the Company’s right to receive payment is established.

Investment in equity instruments whose fair value cannot be reliably measured are measured at cost less impairment loss.

AFS financial assets are classified as non-current assets unless they are expected to be realised within 12 months after the reporting date.

A financial asset is derecognised when the contractual right to receive cash flows from the asset has expired. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss.

Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace concerned. All regular way purchases and sales of financial assets are recognised or derecognised on the settlement date, i.e. the date that the asset is delivered to or by the Group and the Company.

2.11 Financial Liabilities

The Group and the Company determine the classification of financial liabilities upon initial recognition. The measurement for each classification of financial liabilities are as below:

Categories in the financial year ended 31 December 2018

• Financial liabilities at fair value through profit or loss (“FVTPL”)

Financial liabilities at FVTPL include financial liabilities held for trading and financial liabilities designated upon initial recognition as at FVTPL.

Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term. This includes derivatives entered into by the Group and the Company that do not meet the hedge accounting criteria. Derivative liabilities are initially measured at fair value and subsequently stated at fair value, with any resultant gains or losses recognised in profit or loss. Net gains or losses on derivatives include exchange differences

The Group and the Company do not have any financial liabilities at FVTPL as at the financial year end.

• Amortised cost

Other financial liabilities are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method.

For other financial liabilities, gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process.

A financial liability is derecognised when the obligation under the liability is extinguished.

When an existing financial liability is replaced by another instrument from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amount is recognised in profit or loss.



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2.11 Financial Liabilities (Cont’d)

Categories in the financial year ended 31 December 2017

• Other financial liabilities

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

Trade and other payables are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method.

Borrowings are recognised initially at fair value, net of transaction costs incurred, and subsequently measured at amortised cost using the effective interest method. Borrowing is classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

For other financial liabilities, gains and losses are recognised in profit or loss when the liabilities are derecognised and through the amortisation process.

A financial liability is derecognised when the obligation under the liability is extinguished.

When an existing financial liability is replaced by another instrument from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amount is recognised in profit or loss.

2.12 Impairment of Financial Assets

The Group and the Company applied the impairment requirements for financial assets under MFRS 9 Financial Instruments for the financial year ended 31 December 2018. The 2017 financial year comparative was not restated, and the impairment requirements under the previous MFRS 139 Financial Instruments: Recognition and Measurement were still applied. The changes in the impairment requirements are explained in Note 34.

Impairment based on ECL model in the financial year ended 31 December 2018

The Group and the Company assess at each financial year end whether there has been a significant increase in credit risk for financial assets by comparing the risk of default occurring over the expected life with the risk of default since initial recognition.

In determining whether credit risk on a financial asset has increased significantly since initial recognition, the Group and the Company use external credit rating and other supportive information to assess deterioration in credit quality of a financial asset. The Group and the Company assess whether the credit risk on a financial asset has increased significantly on an individual or collective basis. For collective basis evaluation, financial assets are grouped on the basis of similar risk characteristics.

The Group and the Company consider past loss experience and observable data such as current changes and future forecasts in economic conditions to estimate the amount of expected impairment loss. The methodology and assumptions including any forecasts of future economic conditions are reviewed regularly. The amount of impairment loss is measured as the probability-weighted present value of all cash shortfalls over the expected life of the financial asset discounted at its original effective interest rate. The cash shortfall is the difference between all contractual cashflows that are due to the Group and the Company and all the cash flows that the Group and the Company expect to receive.

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


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2.12 Impairment of Financial Assets (Cont’d)

Impairment based on ECL model in the financial year ended 31 December 2018 (cont’d)

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

The carrying amount of the financial asset is reduced through the use of an allowance account and the impairment loss is recognised in profit or loss. When a financial asset becomes uncollectible, it is written off against the allowance account

Impairment based on incurred loss model in the financial year ended 31 December 2017

The Group and the Company assess at each reporting date whether there is any objective evidence that a financial asset is impaired.

• Trade and other receivables and other financial assets carried at amortised cost

To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Group and the Company consider factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments and delinquency in interest or principal payments and other financial reorganisation where observable data indicate that there is a measurable decrease in the estimated future cash flows.

For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis based on similar risk characteristics. Objective evidence of impairment for a portfolio of receivables could include the Group’s and the Company’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period and observable changes in national or local economic conditions that correlate with default on receivables.

If any such evidence exists, the amount of impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable becomes uncollectible, it is written off against the allowance account.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the assets does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in profit or loss.



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2.12 Impairment of Financial Assets (Cont’d)

Impairment based on incurred loss model in the financial year ended 31 December 2017 (Cont’d) • Available for sale (“AFS”) financial assets

In the case of other investment classified as available for sale, significant or prolonged decline in fair value below cost, is considered as an indicator that the assets are impaired.

If an available for sale financial asset is impaired, an amount comprising the difference between its acquisition cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in profit or loss, is transferred from equity to profit or loss.

Impairment losses on available for sale equity investments are not reversed in profit or loss in the subsequent periods. Increase in fair value, if any, subsequent to impairment loss is recognised in other comprehensive income.

2.13 Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand, balances and deposits with banks and highly liquid investments which have an insignificant risk of changes in value. For the purpose of statements of cash flows, cash and cash equivalents are presented net of pledged deposits.

2.14 Inventories

Inventories are stated at the lower of cost and net realisable value. Costs incurred in bringing the inventories to their present location and condition are accounted for as follows:

- Raw materials: purchase costs on the first-in first-out basis and the weighted average basis.

- Finished goods and work-in-progress: costs of direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity. These costs are assigned on the first-in first-out basis and the weighted average basis.

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.

2.15 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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2.16 Borrowing Cost

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.

2.17 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.

2.18 Employee Benefits

(i) Short term benefits

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

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2.18 Employee Benefits (Cont’d)

(ii) Defined contribution plans

As required by law, companies in Malaysia make contributions to the state pension scheme, the Employees Provident Fund (“EPF”). Some of the Group’s 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.

2.19 Leases

Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the 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 charged to profit or loss. Contingent rents, if any, are charged as expenses in the periods in which they are incurred.

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

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

2.20 Income Taxes

(i) Current tax

Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date.

Current taxes are recognised in profit or loss except to the extent that the tax relates to items recognised outside profit or loss (whether in other comprehensive income or directly in equity), in which case the current taxes is also recognised in other comprehensive income or directly in equity respectively.

(ii) Deferred tax

Deferred tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all temporary differences, except:

- where the deferred tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

- in respect of taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.


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2.20 Income Taxes (Cont’d)

(ii) Deferred tax (Cont’d)

Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised except:

- where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

- in respect of deductible temporary differences associated with investments in subsidiaries, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. 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 allow the deferred tax asset to be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date.

Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity and deferred tax arising from a business combination is adjusted against goodwill on acquisition.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

(iii) Goods and Services Tax (“GST”) or Value Added Tax (“VAT”)

Where the GST or 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 GST or VAT being the difference between output and input of GST or 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.



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2.21 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 38.

2.22 Share Capital and Share Issuance Expenses

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

Ordinary shares are recorded at the proceeds received, net of directly attributable incremental transaction costs. Ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the period in which they are declared.

2.23 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.

2.24 Warrant Reserve

Fair values from the issuance of warrants are credited to warrant reserve which is non-distributable. When the warrants are exercised or expired, the warrant reserve will be transferred to another reserve account within equity.

2.25 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 Group 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.


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2.26 Revenue

The Group recognises revenue from sales of cables, connectors and related products when or as it transfer control over a product to customer. Control of a product is transferred when it is delivered at an agreed delivery point, upon which revenue is recognised at a point in time.

The Group and the Company recognise revenue from contracts with customer based on the five-step model as set out in this Standard:

(i) Identify contract(s) with a customer. A contract is defined as an agreement between two or more parties that creates enforceable rights and obligations and sets out the criteria that must be met.

The Group and the Company recognise revenue from contracts with customer based on the five-step model as set out in this Standard (cont’d):

(ii) Identify performance obligations in the contract. A performance obligation is a promise in a contract with a customer to transfer a good or service to the customer.

(iii) Determine the transaction price. The transaction price is the amount of consideration to which the Group and the Company expect to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.

(iv) Allocate the transaction price to the performance obligations in the contract. For a contract that has more than one performance obligation, the Group and the Company allocate the transaction price to each performance obligation in an amount that depicts the amount of consideration to which the Group and the Company expect to be entitled in exchange for satisfying each performance obligation.

(v) Recognise revenue when (or as) the Group and the Company satisfy a performance obligation.

The Group recognises revenue from cyber security services over the contract period.

The Group and the Company satisfy a performance obligation and recognise revenue over time if the Group’s and the Company’s performance:

(i) Do not create an asset with an alternative use to the Group and the Company and have an enforceable right to payment for performance completed to-date; or

(ii) Create or enhance an asset that the customer controls as the asset is created or enhanced; or

(iii) Provide benefits that the customer simultaneously receives and consumes as the Group and the Company perform.

For performance obligations where any one of the above conditions is not met, revenue is recognised at the point in time at which the performance obligation is satisfied.

When the Group and the Company satisfy a performance obligation by delivering the promised goods or services, it creates a contract based asset on the amount of consideration earned by the performance. Where the amount of consideration received from a customer exceeds the amount of revenue recognised, this gives rise to a contract liability. Revenue is measured at a fair value of consideration received or receivable.

Other income

(i) Rental income is accounted for on a straight-line basis over the lease terms.

(ii) Interest income is recognised using the effective interest method.



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2.27 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.

2.28 Significant Accounting Judgements and Estimates

The preparation of the Group’s and the Company’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability in the future.

(i) Judgement Made in Applying Accounting Policies

There were no major judgements made by the management in the process of applying the Group’s and the Company’s accounting policies that have the most significant effect on the amounts recognised in the financial statements other than those disclosed in Note 32(b) fair value of financial instruments that uses significant unobservable input in determination of the fair value.

(ii) Key Sources of Estimation Uncertainty

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

• Useful lives of plant and equipment

The cost of plant and equipment is depreciated on a straight-line basis over the assets’ estimated economic useful lives. Management estimates the useful life of these plant and equipment to be within 3 to 10 years based on past experience with similar assets or/and common life expectancies of the industries.

Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised. The carrying amount of the Group’s and the Company’s plant and equipment at the reporting date are disclosed in Note 12.

• Deferred tax assets

Deferred tax assets are recognised for all unused tax losses and unabsorbed capital allowances to the extent that it is probable that taxable profit will be available against which the losses and capital allowances can be utilised. Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based on the likely timing and level of future taxable profits together with future tax planning strategies. The total carrying value of the deferred tax assets of the Group is as disclosed in Note 17.


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2.28 Significant Accounting Judgements and Estimates (Cont’d)

(ii) Key Sources of Estimation Uncertainty (Cont’d)

• Impairment of trade receivables

The Group uses simplified approach whereby allowance for impairment are measured at lifetime ECL.

The provision matrix is initially based on the Group’s historical observed default rates. The Group will calibrate the matrix to adjust the historical credit loss experience with forward-looking information. For instance, if forecast economic conditions (i.e., gross domestic product) are expected to deteriorate over the next year which can lead to an increased number of defaults in the manufacturing sector, the historical default rates are adjusted. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed.

The assessment of the correlation between historical observed default rates, forecast economic conditions and ECLs is a significant estimate. The amount of ECLs is sensitive to changes in circumstances and of forecast economic conditions. The Group’s historical credit loss experience and forecast of economic conditions may also not be representative of customer’s actual default in the future. The information about the ECLs on the Group’s trade receivables is disclosed in Note 33.

• Inventories obsolescence

Reviews are made periodically by the management on inventories for excess inventories, obsolescence and decline in the net realisable value below cost. These reviews require the use of judgements and estimates. Possible changes in these estimates could result in revisions to the valuation of inventories.

• Impairment of investment in subsidiaries

The Company carried out the impairment test based on the estimation of the value-in-use of the cash-generating units (“CGU”) to which the investments in subsidiaries belong to. Estimating the recoverable amount requires the Company to make an estimate of the expected future cash flows from the CGU and also to determine a suitable discount rate in order to calculate the present value of those cash flows. Further details of the impairment losses recognised are disclosed in Note 13.

• ICPS

The fair values of the equity and liability components of a compound financial instrument requires the determination of the most appropriate valuation model to use depending on the terms and conditions of the financial instrument, the discount rate, and making assumptions about the future cash flow streams.



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3. REVENUE

Group 2018 2017 RM RM Sales of cables, connectors and related products, net 99,441,262 122,163,131Cyber security services 200,000 -

99,641,262 122,163,131

Impact of adoption MFRS 15 is as disclosed in Note 34. Disaggregation of revenue by geographical location and by segment are as disclosed in Note 38.

4. COST OF SALES

Cost of sales represents cost of inventories sold and recognised as expense.

5. OTHER ITEMS OF INCOME


Bad debts recovered - 374,144 - -Compensation received 285,156 - - -Government incentive and rebates 5,883 53,080 - -Gain on disposal of plant and equipment - 48,916 - -Gain on de-recognition of subsidiary 1,001,800 - - -Interest income 109,388 204,819 102,157 195,647Profit guarantee from a shareholder of an associate company 259,420 - - -Reversal of impairment on - investments in subsidiaries - - 1,352,140 99,999- trade receivables - 477,126 - -- other receivables - - - 61,715Recovery of expenses from subsidiaries - - 177,316 183,905Sales of scrap 17,513 35,931 - -Sub-let rental income 426,236 213,932 - -Waiver of amount due to a former subsidiary - - - 15,641Sundry income 36,667 35 - 30

2,142,063 1,407,983 1,631,613 556,937


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6. OTHER EXPENSES


Allowance for impairment loss on - investment in subsidiary - - 6,299,409 1,126,552- trade receivables 402,356 - - -- other receivables 1,838,987 - 209,488 8,030Loss on disposal of plant and equipment 98,126 - 26,697 -Intangible asset written off 654,654 - - -Investment in subsidiary written off - - - 190,000Plant and equipment written off 2,457,140 994 50,668 741Loss on disposal of subsidiary - - 1,352,139 -(Gain)/Loss on foreign exchange- realised 398,912 106,093 4,143 17,625- unrealised 426,761 568,120 (62,313) 192,469

6,276,936 675,207 7,880,231 1,535,417

7. FINANCE COST


Finance and bank interest 316,534 8,566 13,005 -Bank charges 157,281 100,734 701 1,337

473,815 109,300 13,706 1,337

8. (LOSS)/PROFIT BEFORE TAX

(Loss)/Profit before tax is stated after charging/(crediting):


Auditors’ remuneration - Statutory audit 127,018 121,878 30,000 27,000- Other services 8,600 8,600 8,600 8,600Auditors’ remuneration for subsidiaries - current year 81,000 65,000 81,000 65,000- under provision in prior year - 2,000 - 2,000Allowance for impairment loss on - investments in subsidiary (Note 13) - - 6,299,409 1,126,552- trade receivables (Note 33(d)(ii)) 402,356 - - -- other receivables (Note 33(d)(iii)) 1,838,987 - 209,488 8,030Amortisation of intangible asset 72,740 68,932 - -



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8. (LOSS)/PROFIT BEFORE TAX (CONT’D)

(Loss)/Profit before tax is stated after charging/(crediting) (Cont’d):


Bad debt recovered - (374,144) - -Depreciation 2,634,572 2,800,080 29,650 12,799Employee benefits expense (Note 9) 15,366,376 18,481,882 541,246 565,308Gain on de-recognition of subsidiary (1,001,800) - - -Interest income (109,388) (204,819) (102,157) (195,647)Interest expenses 316,534 8,566 13,005 -Investment in subsidiary written off - - - 190,000Intangible asset written off 654,654 - - -Loss/(Gain) on foreign exchange - realised 398,913 106,093 4,143 17,625- unrealised 426,761 568,120 (62,313) 192,469Loss/(Gain) on disposal of plant and equipment 98,126 (48,916) 26,697 -Loss on disposal of subsidiary - - 1,352,139 -Plant and equipment written off 2,457,140 994 50,668 741Profit guarantee from a shareholder of an associate company (259,420) - - -Reversal of impairment loss on - investment in subsidiaries (Note 13) - - (1,352,140) (99,999)- trade receivables (Note 33(d)(ii)) - (477,126) - -- other receivables (Note 33(d)(iii)) - - - (61,715)Rental of equipment 47,558 70,147 - 4,579Rental of premises 3,885,114 4,566,576 48,000 36,000Sub-let rental income (426,236) (213,932) - -Waiver of amount due to a former subsidiary - - - (15,641)

9. EMPLOYEE BENEFITS EXPENSE


Staff cost Salaries, wages, bonus and allowances 11,481,871 14,201,960 347,765 381,989Social security contributions 223,030 297,499 3,421 3,223Defined contribution plans 201,452 184,310 41,460 44,723Other staff related expenses 199,562 182,893 600 6,529

12,105,915 14,866,662 393,246 436,464


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9. EMPLOYEE BENEFITS EXPENSE


Directors of the Company Executive: Salaries and other emoluments 1,007,621 986,904 - -Fees 60,421 123,882 12,000 12,000Benefits-in-kind 4,125 14,144 - -

1,072,167 1,124,930 12,000 12,000 Non-Executive:Fees 136,000 116,844 136,000 116,844

136,000 116,844 136,000 116,844 Total Directors’ remuneration of the Company 1,208,167 1,241,774 148,000 128,844 Other Directors of Group Executive: Salaries and other emoluments 1,927,343 2,180,027 - -Defined contribution plans 28,109 50,951 - -Fees 96,842 140,580 - -Benefits-in-kind - 1,888 - -

2,052,294 2,373,446 - - Total Directors’ remuneration (Note 31) 3,260,461 3,615,220 148,000 128,844 Total employee benefits expenses 15,366,376 18,481,882 541,246 565,308 Analysis excluding benefits-in-kind Total executive Directors’ remuneration 3,120,336 3,482,344 12,000 12,000Total non-executive Directors’ remuneration 136,000 116,844 136,000 116,844

Total Directors’ remuneration 3,256,336 3,599,188 148,000 128,844

10. INCOME TAX EXPENSE

The major components of income tax expense are:


Statements of profit or loss: Current income tax: (Over)/Underprovision in prior year (52,670) 29,368 - -Foreign tax 363,996 757,017 - -

311,326 786,385 - - Income tax recognised in profit or loss 311,326 786,385 - -



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10. INCOME TAX EXPENSE (CONT’D)

Reconciliation between tax expense and accounting (loss)/profit

A reconciliation between tax expense and the product of accounting (loss)/profit are multiplied by the applicable corporate tax rate are as follows:

2018 2017 RM RM

Group (Loss)/Profit before tax (9,891,627) 52,349 Taxation at Malaysian statutory tax rate of 24% (2017: 24%) (2,373,990) 12,564Adjustments: Different tax rates in other countries 156,955 72,245Franchise tax - 10,355Non-deductible expenses 1,743,808 694,717Deferred tax assets movement not recognised 198,357 382,859Income not subject to tax (276,735) (415,723)(Over)/Underprovision of income tax in prior year (52,670) 29,368Utilisation of tax losses previously not recognised as deferred tax 915,601 -

Income tax recognised in profit or loss 311,326 786,385 Company Loss before tax (7,545,844) (2,072,793) Taxation at Malaysian statutory tax rate of 24% (2017: 24%) (1,811,003) (497,470)Adjustments: Non-deductible expenses 2,202,590 631,135Income not subject to tax (391,587) (133,665)

Income tax recognised in profit or loss - -

Domestic income tax is calculated at the Malaysian statutory tax rate of 24% (2017: 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 above reconciliation is prepared by aggregating separate reconciliation for each national jurisdiction.


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11. 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 share data used in the computation of basic loss per share for the years ended 31 December:

2018 2017

Loss for the year net of tax, attributable to owners of the Company (RM) (9,461,394) (230,515)Less: Preference dividend on ICPS (RM) - (478,588)

(9,461,394) (709,103)

Weighted average number of ordinary shares in issue (units) 328,680,648 310,045,513

Basic loss per share (sen) (2.879) (0.229)

(b) Diluted loss per share

Diluted loss per share amounts are calculated by dividing loss for the year, net of tax, attributable to owners of the parent 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.

12. PLANT AND EQUIPMENT

Office Equipment, Plant and Furniture Motor Machinery and Fittings Vehicles Mouldings Renovation Total RM RM RM RM RM RM

Group At 31 December 2018 Cost At 1 January 2018 15,586,553 2,534,749 1,121,020 214,102 3,819,271 23,275,695Additions 222,535 101,278 1,315,081 - 82,645 1,721,539Disposals (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 (308,703) (57,704) (13,923) (6,434) (116,177) (502,941)

At 31 December 2018 6,112,465 2,135,698 1,649,412 154,454 3,092,472 13,144,501



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12. PLANT AND EQUIPMENT (CONT’D)


Accumulated Depreciation and Impairment Losses At 1 January 2018 Accumulated depreciation 7,819,588 1,936,852 442,298 214,101 1,923,536 12,336,375Accumulated impairment losses 63,406 - - - - 63,406

7,882,994 1,936,852 442,298 214,101 1,923,536 12,399,781Charge for the year 2,036,326 219,573 152,716 - 225,957 2,634,572Disposals (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 9,766,347Accumulated 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

Group At 31 December 2017 Cost At 1 January 2017 14,016,698 2,130,365 1,182,127 233,802 3,802,962 21,365,954Additions 3,079,386 587,631 104,139 - 164,288 3,935,444Disposals (94,593) - (70,665) - - (165,258)Written off (700,098) (81,455) - (11,266) - (792,819)Exchange differences (714,840) (101,792) (94,581) (8,434) (147,979) (1,067,626)

At 31 December 2017 15,586,553 2,534,749 1,121,020 214,102 3,819,271 23,275,695 Accumulated Depreciation and Impairment Losses At 1 January 2017 Accumulated depreciation 6,848,168 1,901,605 408,145 232,683 1,765,975 11,156,576Accumulated impairment losses 63,406 - - - - 63,406

6,911,574 1,901,605 408,145 232,683 1,765,975 11,219,982


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GroupAt 31 December 2017Accumulated Depreciation and Impairment Losses (Cont’d) Charge for the year 2,229,191 213,430 118,842 1,101 237,516 2,800,080Disposals (92,349) - (54,176) - - (146,525)Written off (699,862) (80,697) - (11,266) - (791,825)Exchange differences (465,560) (97,486) (30,513) (8,417) (79,955) (681,931)

971,420 35,247 34,153 (18,582) 157,561 1,179,799At 31 December 2017 Accumulated depreciation 7,819,588 1,936,852 442,298 214,101 1,923,536 12,336,375Accumulated impairment losses 63,406 - - - - 63,406

7,882,994 1,936,852 442,298 214,101 1,923,536 12,399,781

Net Carrying Amount At 31 December 2017 7,703,559 597,897 678,722 1 1,895,735 10,875,914

Office Equipment, Furniture Motor and Fittings Vehicle Renovation Total RM RM RM RM

Company At 31 December 2018 Cost At 1 January 2017 45,284 - 84,221 129,505Additions - 420,000 - 420,000Disposals (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 45,566Charge for the year 1,650 28,000 - 29,650Disposals (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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Office Equipment, Furniture Motor and Fittings Vehicle Renovation Total RM RM RM RM

At 31 December 2017 Cost At 1 January 2017 47,624 - 84,221 131,845Additions 4,650 - - 4,650Written off (6,990) - - (6,990)

At 31 December 2017 45,284 - 84,221 129,505 Accumulated Depreciation At 1 January 2017 22,243 - 16,773 39,016Charge for the year 4,377 - 8,422 12,799Written off (6,249) - - (6,249)

At 31 December 2017 20,371 - 25,195 45,566 Net Carrying Amount At 31 December 2017 24,913 - 59,026 83,939

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


Cash 785,694 3,935,444 42,000 4,650Obligation under finance lease 935,845 - 378,000 -

1,721,539 3,935,444 420,000 4,650

(b) The net carrying amount of motor vehicle of the Group held under finance lease and held in trust by a Director at the end of the financial year is RM820,491 (2017: RM536,007).

(c) Included in plant and equipment of the Group and of the Company are the cost of fully depreciated assets which are still in use as follow:


Plant and machinery 2,986,586 3,622,983 - -Office equipment, furniture and fittings 1,610,000 1,606,606 12,409 14,389Motor vehicle 142,293 147,290 - -Mouldings 154,454 195,095 - -Renovation 1,381,364 1,421,527 - -

6,274,697 6,993,501 12,409 14,389


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13. INVESTMENTS IN SUBSIDIARIES Company 2018 2017 RM RM

Unquoted shares, at cost 39,005,824 40,357,964Less: Accumulated impairment losses (16,133,975) (11,186,706)

22,871,849 29,171,258 Movement in accumulated impairment losses At 1 January 11,186,706 10,160,153Addition during the year (Note 8) 6,299,409 1,126,552Reversal during the year (Note 8) (1,352,140) (99,999)

At 31 December 16,133,975 11,186,706

(a) Details of the subsidiaries are as follows:

Name of SubsidiariesCountry of

IncorporationEffective Interest

Held (%) Principal Activities

2018 2017

Connect Security Solution Malaysia 60 100 Cyber security services. Sdn. Bhd.

Rapid Conn Inc. United States 100 100 Design, manufacture, sales of America marketing and services of (USA) cables, connectors and related products. Rapid Conn (S) Pte. Ltd.* Singapore 100 100 Trading and marketing of cables, connectors and related products. Rapid Conn (ShenZhen) People’s Republic 100 100 Manufacture and trading of Co., Ltd. of China cables, connectors and related products.

Held through Rapid Conn (ShenZhen) Co., Ltd. ShenZhen Rapid Power People’s Republic - 80 Manufacture and trading of Co., Ltd. of China cables and related products. ShenZhen Rapid Resin People’s Republic 80 80 Manufacture and trading of Co., Ltd. of China 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) Auditors’ Reports and subsidiaries

The auditors’ reports of Connect Security Solution Sdn. Bhd. and ShenZhen Rapid Resin Co., Ltd. auditors’ reports contain material uncertainty relating to the appropriateness of going concern basis of accounting and is dependent on the financial support from their holding company and their fellow subsidiaries.

(c) Acquisition of subsidiaries and subscription of shares

Previous financial year

(i) Rapid Conn (S) Pte. Ltd (“RCS”)

During the financial year, the Company subscribed for additional shares amounting to USD1,191,078 (equivalent to RM5,300,000), in RCS.

(ii) ShenZhen Rapid Power Co., Ltd. (“RCP”)

During the financial year, the Company’s subsidiary, Rapid Conn (ShenZhen) Co., Ltd. (“RCC”) subscribed for additional shares amounting to RMB2,500,000 (equivalent to RM1,609,200), in RCP.

As at 31 December 2017, RCC had paid up to RMB6,000,000 (equivalent to RM3,878,000) of RCP’s share capital.

(iii) ShenZhen Rapid Resin Co., Ltd. (“RCR”)

During the financial year, the Company’s subsidiary, RCC subscribed for additional shares amounting to RMB1,000,000 (equivalent to RM645,150), in RCR.

As at 31 December 2017, RCC had paid up to RMB2,000,000 (equivalent to RM1,293,000) of RCR’s share capital.

(d) Disposal of subscription of subsidiary

Connect Security Solution Sdn. Bhd. (“CSS”)

On 22 January 2018, the Company disposed its 1,364,000 ordinary shares, representing 40% of equity interest in its wholly-owned subsidiary, Connect Security Solution Sdn. Bhd. (“CSS”) to a third party for a cash consideration of RM1. Following the disposal, the Company’s shareholding in CSS is 2,046,000 ordinary shares, representing 60% of equity interest.

(e) De-recognition of subsidiary

ShenZhen Rapid Power Co., Ltd. (“RCP”)

On 28 November 2018, the Company’s subsidiary, Rapid Conn (ShenZhen) Co., Ltd. (“RCC”) had entered into a Share Sale Agreement to dispose 31% of equity interest, representing 2,325,000 registered capital of RMB1 each in its subsidiary, ShenZhen Rapid Power Co., Ltd. (“RCP”), to a third party for a total consideration of RMB2,325,000 (equivalent to RM1,396,628). The transfer of shares was approved by the relevant authority on 8 January 2019, and upon completion of the disposal, RCC’s equity interest in RCP decreased from 80% to 49%.

Although RCC owned 80% shareholding in RCP as at year end, the Directors had determined that RCC had lost control over RCP as RCC has ceased to govern the financial and operation Policies of RCP and has no power over investee. Consequently, the Group reclassified RCP as an associate company as disclosed in Note 15.


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(e) De-recognition of subsidiary (Cont’d)

Effect of de-recognition of RCP are as follows:

Group RM

Plant and equipment 3,392,378Inventories 4,843,562Trade and other receivables 15,272,789Cash and bank balances 42,310Borrowings (1,335,790)Trade and other payables (20,890,260)Non-controlling interest (249,296)Foreign exchange reserve (31,404)

Net assets disposed 1,044,289Gain on de-recognition (Note 5) 1,001,800Reclassification to associate at fair value (649,461)

Total consideration 1,396,628Less: consideration not received (224,873)

Consideration received (Note 28) 1,171,755Add: bank balances and borrowings 1,293,480

Cash flow on de-recognition (net cash de-recognised) 2,465,235

(f) Impairment tests for investments in subsidiaries

(i) Key assumption used in use (“VIU”) calculation of cash generating units (“CGU”)

The recoverable amount of a CGU is determined based on VIU calculations using cash flow projections based on financial budgets covering a five-year period.

The following describes each key assumption on which management based its cash flow projections for VIU of CGUs to undertake impairment test of investments in subsidiaries.

(1) Pre-tax cash flow projections based on the most recent financial budgets approved by the Directors covering a 5 years period.

(2) Annual growth rate of 3% to 5% (2017: 3% to 10%) which reflect management’s expectation based on past experience and future expectations of business performance.

(3) Pre-tax discount rates of 2% to 6% (2017: 2% to 6%) were applied in determining the recoverable amount.



112


(f) Impairment tests for investments in subsidiaries (Cont’d)

(ii) Recognition of impairment

The continue losses reported by the subsidiary companies which is considered as a triggering event for impairment review. The Company conducted a review of the recoverable amounts of its investments in subsidiary companies which its carrying amount of investments exceeded its share of net assets in the respective subsidiary companies at the reporting date.

The review gave rise to recognition of an impairment loss of investment in subsidiary companies of RM6,299,409.

(g) Non-controlling interest in subsidiaries

The Group regards the non-controlling interests of the following subsidiary companies material to the Group and is set out below. The equity interests held by non-controlling interests are as follows:

Equity interest held by non- controlling interests 2018 2017 % %

CSS 40 -RCP - 20RCR 20 20

Summarised financial information of subsidiary companies which have non-controlling interests that are material to the Group is set out below. The summarised financial information presented below is the amount before inter-company elimination.

CSS RCP RCR Total RM RM RM RM

As at 31 December 2018 Carrying amount of NCI (2,004,231) - (373,558) (2,377,789)Total comprehensive expenses allocated to NCI (19,648) (260,872) (456,335) (736,855)

The Group’s subsidiaries that have material non-controlling interests (“NCI”) are as follows:

CSS RCR Total RM RM RM

As at 31 December 2018 Current assets 202,000 261,747 463,747Current liabilities (5,212,575) (2,123,692) (7,336,267)

Net liabilities (5,010,575) (1,861,945) (6,872,520)


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(g) Non-controlling interest in subsidiaries (cont’d)

The Group’s subsidiaries that have material non-controlling interests (“NCI”) are as follows:

CSS RCR Total RM RM RM

Year ended 31 December 2018 Total comprehensive income/(expenses) for the year 43,762 (2,281,678) (2,237,916)

Cash flows generated from operating activities 2,000 114,553 116,553Cash flows used in investing activities - (189) (189)

Net increase in cash and cash equivalents 2,000 114,364 116,364

RCP RCR Total RM RM RM

As at 31 December 2017 Carrying amount of NCI 549,466 82,776 632,242 Total comprehensive expenses allocated to NCI (308,499) (204,396) (512,895)

Non-current assets 4,324,871 1,486,963 5,811,834 Current assets 20,497,942 546,192 21,044,134 Current liabilities (22,080,356) (1,613,422) (23,693,778)

Net assets 2,742,457 419,733 3,162,190

Year ended 31 December 2017 Total comprehensive expenses for the year (1,542,494) (1,021,977) (2,564,471)

Year ended 31 December 2017 Cash flows (used in)/generated from operating activities (865,991) 157,061 (708,930)Cash flows used in investing activities (1,337,019) (1,121,468) (2,458,487)Cash flows generated from financing activities 1,866,000 933,000 2,799,000

Net decreased in cash and cash equivalents (337,010) (31,407) (368,417)

14. INTANGIBLE ASSET

2018 2017 RM RM

Group At 31 December 2018 Cost At 1 January 808,600 -Additions - 808,600Written off (793,520) -Exchange differences (15,080) -

At 31 December - 808,600



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14. INTANGIBLE ASSET (CONT’D)

2018 2017 RM RM

Accumulated Amortisation At 1 January 67,383 -Charge for the year 72,740 68,932Written off (138,866) -Exchange differences (1,257) (1,549)

At 31 December - 67,383 Net carrying amount At 31 December - 741,217

Intangible asset represented technology transfer of technical expertise and associated expenses incurred in the development and production of thermoplastic elastomers (“TPE”) of a subsidiary and was written off during the year.

15. INVESTMENT IN ASSOCIATE

Group 2018 2017 RM RM Unquoted shares, at cost 2,119,541 - Share of post-acquisition reserves (418,245) -

1,701,296 -

Details of the associate company are as follows:

Name of CompanyCountry of

IncorporationEffective Interest

Held (%) Principal Activities

2018 2017

ShenZhen Rapid Power People’s Republic 80 - Manufacture and trading of Co., Ltd. (“RCP”) of China cables and related products.

Summarised financial information in respect of material associated company is set out below. The summarised financial information below represents the amounts in the financial statements of associated company and the Group’s share of those amounts.

RCP 2018 RM Non-current assets 3,307,970Current assets 19,739,227Non-current liabilities (172,743)Current liabilities (21,980,595)

Net assets 893,859


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15. INVESTMENT IN ASSOCIATE (CONT’D)

RCP 2018 RM Equity attributable to: Owners of the associated company 893,859

Total equity 893,859 Revenue 2,830,567Loss for the year (438,396)

Total comprehensive expenses (438,396) Loss for the year attributable to: Owners of the associated company (438,396) Total comprehensive expenses attributable to Owners of the associated company (438,396) The Group’s share of loss for the year (350,717)

The Group’s share of total comprehensive expenses for the year (350,717)

In previous financial year, the Company’s wholly-owned subsidiary, Rapid Conn (ShenZhen) Co., Ltd. had entered into a Profit Guarantee Agreement (“Profit Guarantee”) with a shareholder of its subsidiary company, RCP. The shareholder of RCP guaranteed to RCC that RCP shall achieve net profit position for the year ended 31 December 2017, taken into reasonable consideration of unforeseen market factors. As at 31 December 2017, RCP failed to achieve the profit under the Profit Guarantee, the shareholder of RCP had made payment to RCP of the shortfall of RMB425,000 (equivalent to RM259,420) during the financial year.

16. OTHER INVESTMENT

Group and Company 2018 2017 RM RM Fair value through other comprehensive income 1,079,900 - Available for sale - 1,079,900

At 1 January 2018, the Group and the Company designated the investment as financial asset as at fair value through other comprehensive income because the Group and the Company intend to hold for long-term strategic purposes. In previous financial year, this investment was classified as available for sale.



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16. OTHER INVESTMENT (CONT’D)

In previous financial year, the Company had subscribed 3,131,675 of Series A Voting Common Stock USD0.001 each at USD0.0798 per shares, 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 carrying amount of the other investment is reasonably approximate its fair value.

17. DEFERRED TAX ASSETS


At 1 January 382,997 391,643 333,857 341,185Recognised in equity (Note 23) (9,181) (7,328) (9,181) (7,328)Exchange differences 259 (1,318) - -

At 31 December 374,075 382,997 324,676 333,857

The components and movement of deferred tax assets during the financial year are as follow:

Unutilised business losses ICPS Others Total RM RM RM RM

Group At 1 January 2018 37,704 333,857 11,436 382,997Recognised in equity - (9,181) - (9,181)Exchange differences 259 - - 259

At 31 December 2018 37,963 324,676 11,436 374,075 At 1 January 2017 39,022 341,185 11,436 391,643Recognised in equity - (7,328) - (7,328)Exchange differences (1,318) - - (1,318)

At 31 December 2017 37,704 333,857 11,436 382,997

Company At 1 January 2018 - 333,857 - 333,857Recognised in equity - (9,181) - (9,181)

At 31 December 2018 - 324,676 - 324,676

At 1 January 2017 - 341,185 - 341,185Recognised in equity - (7,328) - (7,328)

At 31 December 2017 - 333,857 - 333,857


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17. DEFERRED TAX ASSETS (CONT’D)

The deferred tax assets are recognised for:

(i) issuance of ICPS of the Company where the deferred tax assets will be reversed on conversion of the ICPS; and

(ii) unutilised business losses of a subsidiary as the management considered it probable that the future taxable profits of the subsidiary based on the projected future profits will be available against which they can be utilised.

Deferred tax assets have not been recognised in respect of the following items:

Group 2018 2017 RM RM Unutilised business losses 9,201,000 6,048,000Unutilised capital allowances 3,723,000 4,512,000

Deferred tax assets have not been recognised in respect of the items above as it is not probable that future taxable profits of certain subsidiaries will be available against which the items above can be utilised.

The availability of unutilised tax losses for offsetting against future taxable profits of the subsidiary in Malaysia is subject to no substantial changes in the shareholding of the subsidiary under the Income Tax Act 1967 and guidelines issued by the tax authority. The foreign unutilised 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.

18. INVENTORIES

Group 2018 2017 RM RM At cost: Raw materials 1,045,339 2,312,997Finished goods 5,110,331 10,701,373Goods in transit 1,277,389 2,012,147Work in progress 662,044 4,411,884

8,095,103 19,438,401



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19. TRADE RECEIVABLES

Group 2018 2017 RM RM Third parties 12,567,125 33,284,437Due from shareholder company of a subsidiary 200,000 -

12,767,125 33,284,437Less: Allowance for impairment (Note 33(d)(ii)) (544,048) -

12,223,077 33,284,437

The Group’s normal trade credit terms are 30 days to 90 days (2017: 30 days to 90 days). Other credit terms are assessed and approved on a case-by-case basis.

The currency exposure profiles of trade receivables are as follows:

Group 2018 2017 RM RM

Hong Kong Dollars 764,462 503,079US Dollars 2,055,727 1,155,684

20. OTHER RECEIVABLES


Amount due from subsidiaries - - 8,752,959 6,368,115Amount due from associate 7,350,423 - - -Sales tax and purchase tax recoverable 2,575,663 6,043,637 - -Deposits 492,047 997,407 9,636 11,120Prepayments 265,389 101,786 6,861 2,714Sundry receivables 865,558 352,091 1,000 1,000

11,549,080 7,494,921 8,770,456 6,382,949Less: Allowance for impairment (Note 33(d)(iii) and (iv)) (1,810,365) - (6,239,132) (6,029,644)

9,738,715 7,494,921 2,531,324 353,305

The amounts due from related parties are unsecured, non-interest bearing and are repayable on demand.


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20. OTHER RECEIVABLES (CONT’D)

The currency exposure profiles of other receivables are as follows:


US Dollars - - 1,266,439 1,340,991Singapore Dollars 2,583,012 116,717 2,422,358 -

21. CASH AND BANK BALANCES


Cash on hand and at banks 10,476,549 8,022,034 1,729,950 255,956Deposits with licensed bank 1,479,602 5,766,858 1,479,602 5,766,858

Cash and cash equivalents 11,956,151 13,788,892 3,209,552 6,022,814

The currency exposure profiles of cash and bank balances are as follows:


Hong Kong Dollars 244,030 22,239 - -Renminbi 7,403 7,401 - -Singapore Dollars 87,895 240,148 - -US Dollars 80,461 2,752,425 3,024 124,438

The interest rate of the deposits with licensed bank is at rate of 2.87% (2017: 3.07%) per annum.

22. SHARE CAPITAL

Group and Company Number of Ordinary Shares Amount 2018 2017 2018 2017 RM RM

Issued and fully paid: At 1 January 322,344,425 286,830,225 32,234,443 28,683,023Conversion of ICPS 6,705,500 10,464,800 670,550 1,046,480Issuance of shares pursuant to exercise of warrants 255,000 25,049,400 25,500 2,504,940

At 31 December 329,304,925 322,344,425 32,930,493 32,234,443



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22. SHARE CAPITAL (CONT’D)

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.

WARRANTS 2011/2021 (“WARRANTS-A”)

In year 2011, the Company issued 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.

During the financial year, total of 130,000 (2017: 10,916,000) warrants were exercised by the warrants holders and 48,567,944 (2017: 48,697,944) warrants are still outstanding as at 31 December 2018.

The movement of the Company’s Warrants-A are as followed:

Number of Warrants-A Group and Company 2018 2017 Unit Unit At 1 January 48,697,944 59,613,944Exercised (130,000) (10,916,000)

At 31 December 48,567,944 48,697,944

WARRANTS 2016/2021 (“WARRANTS-B”)

In year 2016, 649,821,600 irredeemable convertible preference shares (“ICPS”) were issued pursuant to a renounceable rights issues on basis of 3 ICPS for every 1 existing ordinary share of RM0.10 each 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 is expired 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


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22. SHARE CAPITAL (CONT’D)

WARRANTS 2016/2021 (“WARRANTS-B”) (Cont’d)

(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.

During the financial year, total of 125,000 (2017: 14,133,400) warrants were exercised by the warrant holders and 29,062,988 (2017: 29,187,988) warrants are outstanding as at 31 December 2018.

The movement of the Company’s Warrants-B are as follows:

Number of Warrants-B Group and Company 2018 2017 Unit Unit At 1 January 29,187,988 43,321,388Exercised (125,000) (14,133,400)

At 31 December 29,062,988 29,187,988

23. IRREDEEMABLE CONVERTIBLE PREFERENCE SHARES

The value of ICPS has been split into the liabilities component and equity component. The ICPS are accounted for the statements of financial position as follows:

Group and Company Equity Liability component component Total RM RM RM At 1 January 2018 10,863,918 1,391,071 12,254,989Converted into ordinary shares during the year (129,384) (38,253) (167,637)Deferred tax effect on conversion (Note 17) (9,181) - (9,181)

At 31 December 2018 10,725,353 1,352,818 12,078,171

At 1 January 2017 11,102,336 1,421,601 12,523,937 Converted into ordinary shares during the year (231,090) (30,530) (261,620)Deferred tax effect on conversion (Note 17) (7,328) - (7,328)

At 31 December 2017 10,863,918 1,391,071 12,254,989

During the financial year, 6,705,500 ICPS were converted into ordinary shares on the basis of 1 ICPS for 1 existing ordinary share with cash consideration of RM0.075 each.

The outstanding ICPS as at 31 December 2018 was 470,139,800 (2017: 476,845,300) units at the Group and the Company levels.



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23. IRREDEEMABLE CONVERTIBLE PREFERENCE SHARES (CONT’D)

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.

24. RESERVES


Foreign exchange reserve 763,530 535,429 - -Warrants reserve 2,034,409 2,043,159 2,034,409 2,043,159

2,797,939 2,578,588 2,034,409 2,043,159

Foreign exchange reserve

Group 2018 2017 RM RM At 1 January 535,429 1,992,747Arising during the year 228,101 (1,457,318) At 31 December 763,530 535,429

The foreign 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.


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24. RESERVES (CONT’D)

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 premium account 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 2018 2017 RM RM Warrants-B 2,034,409 2,043,159

Warrants-B movement

Group and Company 2018 2017 RM RM At 1 January 2,043,159 3,032,497Exercise during the year (8,750) (989,338)

At 31 December 2,034,409 2,043,159

The fair value of the warrants-B is derived at using the Black-Scholes option pricing model with the assumptions as follow:

Exercise price RM0.10Tenure 5 yearsShare price of the Company as at latest practicable date 18 April 2016 RM0.1206Volatility rate 85.01%Risk free rate 3.516%

25. BORROWINGS


CurrentSecured: Obligations under finance lease (Note 26) 135,938 76,467 67,461 - Non-Current Secured: Obligations under finance lease (Note 26) 689,936 76,823 278,845 -

Total borrowings 825,874 153,290 346,306 - Total borrowings Obligations under finance lease (Note 26) 825,874 153,290 346,306 -



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26. OBLIGATIONS UNDER FINANCE LEASE


Future minimum finance lease payments: Not later than 1 year 180,812 84,281 89,400 -Later than 1 year and not later than 2 years 180,812 77,223 89,400 -Later than 2 years and not later than 5 years 596,701 - 223,486 -

958,325 161,504 402,286 -Less: Future finance charges (132,451) (8,214) (55,980) -

Present value of obligation under finance lease (Note 25) 825,874 153,290 346,306 -

Analysis of present value of finance lease liabilities: Not later than 1 year (Note 25) 135,938 76,467 67,461 -Later than 1 year and not later than 2 years 145,446 76,823 72,889 -Later than 2 years and not later than 5 years 544,490 - 205,956 -

825,874 153,290 346,306 -

Interest rates of obligations under finance lease at reporting date are at rate of 3.25% - 3.65% (2017: 3.25%) per annum.

The currency exposure profiles of obligations under finance lease are as follow:

2018 2017 RM RM Singapore Dollar 479,568 153,290

27. TRADE PAYABLES

Trade payables are non-interest bearing and the normal trade credit terms granted to the Group range from 30 to 120 days (2017: 30 to 120 days).

The currency exposure profiles of trade payables are as follows:

Group 2018 2017 RM RM Singapore Dollars 87 23,652US Dollars 1,837,378 778,161


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28. OTHER PAYABLES Group Company 2018 2017 2018 2017 RM RM RM RM

Accruals 2,367,856 2,221,325 143,418 118,995Amount due to shareholders of subsidiary company 60,090 - - -Amount due to shareholder company of subsidiary company 127,656 - - -Amount due to shareholder of associate company - 653,100 - -Amount received from shareholder of an associate company in relation to acquisition of shares (Note 13 (e)) 1,171,755 - - -Provision for unutilised leave 126,932 237,655 - -Sundry payables 2,129,562 3,398,704 34,629 11,184

5,983,851 6,510,784 178,047 130,179

Amounts due to related parties are unsecured, non-interest bearing and are repayable upon demand.

The currency exposure profiles of other payables are as follows:


Singapore Dollars 300,001 257,479 - -

29. DIVIDENDS

Group and Company 2017 2017 Dividend per shares Dividend Sen RM Recognised during the year Final dividend of RM0.001 per shares in respect of the financial year ended 31 December 2017 0.10 478,588

On 14 July 2017, the Company distributed a final share dividend of RM0.10 in respect of financial year ended 31 December 2017 for every 100 ICPS held.



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30. COMMITMENTS

(a) 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 3,282,344 5,274,479 48,000 48,000Payable more than one year but not more than five years 6,068,896 14,824,233 - 48,000

9,351,240 20,098,712 48,000 96,000

(b) Capital commitment

Capital expenditure contracted for at the reporting date but not recognised in the financial statements is as follow:


Authorised and contracted but not accounted for - Purchase of motor vehicle in a subsidiary - 807,936

31. SIGNIFICANT RELATED PARTY DISCLOSURES

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.


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31. SIGNIFICANT RELATED PARTY DISCLOSURES (CONT’D)

The Group and the Company have related party relationships with their related parties and key management personnel.

2018 2017 RM RM Group Related parties Purchase from associate company 139,180 -Profit guarantee received from a shareholder of an associate company (259,420) -Sales to a shareholder company of a subsidiary company (200,000) -Net advance to an associate company 570,855 -Net advance from a shareholder of an associate company 318,477 653,100Net advance from a shareholder of subsidiary company 60,090 - Company Related parties Recovery of expenses received from subsidiaries (177,316) (183,905)Recovery of expenses paid to a subsidiary 2,375,000 -

The key management personnel compensations are as follows:


Key management personnel Directors Salaries and other emoluments 3,195,987 3,507,727 148,000 128,844Defined contribution plan 60,349 91,461 - -Benefits-in-kind 4,125 16,032 - -

3,260,461 3,615,220 148,000 128,844 Other key management personnel Salaries and other emoluments 326,298 551,602 144,000 177,897Defined contribution plan 32,423 51,833 18,203 21,240 358,721 603,435 162,203 199,137 3,619,182 4,218,655 310,203 327,981

32. 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 2.10 and 2.11 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.



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32. FINANCIAL INSTRUMENTS (CONT’D)

(a) Classification of financial instruments

(i) Financial assets Note 2018 2017

Group RM RM

Financial assets at FVTOCI Other investment 16 1,079,900 -

Financial assets available-for-sale Other investment 16 - 1,079,900

Financial assets at amortised cost Trade receivables 19 12,223,077 33,284,437Other receivables 20 9,738,715 7,494,921Cash and bank balances 21 11,956,151 13,788,892

33,917,943 54,568,250

Total financial assets 34,997,843 55,648,150

Company

Financial assets at FVTOCI Other investment 16 1,079,900 -

Financial assets available-for-sale Other investment 16 - 1,079,900

Financial assets at amortised cost Other receivables 20 2,531,324 353,305Cash and bank balances 21 3,209,552 6,022,814

5,740,876 6,376,119

Total financial assets 6,820,776 7,456,019

(ii) Financial liabilities Note 2018 2017

Group RM RM

Financial liabilities measured at amortised cost Trade payables 27 9,553,557 37,780,172Other payables 28 5,983,851 6,510,784Borrowings 25 825,874 153,290

16,363,282 44,444,246

Company

Financial liabilities measured at amortised cost Borrowings 25 346,306 -Other payables 28 178,047 130,179

524,353 130,179


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32. FINANCIAL INSTRUMENTS (CONT’D)

(b) Fair value of the financial instruments

The table below analyses the financial instrument measured at fair value at the reporting date according to the level in the fair value hierarchy.

Group and Company Level 1 Level 2 Level 3 Total RM RM RM RM

2018 Financial asset Other investment - - 1,079,900 1,079,900

2017 Financial asset Other investment - - 1,079,900 1,079,900

(c) Financial instruments that are not carried at fair value

The carrying amount of the financial instruments carried at amortised cost are reasonable approximation of their fair value due to short-term nature:

Note

Trade receivables 19Other receivables 20Cash and bank balances 21Borrowings (current) 25Trade payables 27Other payables 28

(d) Fair values of financial instruments by classes that are not carried at fair value and whose carrying amounts are not reasonable approximation of fair value

Obligations under finance leases

The fair value is estimated by discounting expected future cash flows at market incremental lending rate for similar types of leasing arrangements at the reporting date.

2018 2017 Carrying Fair Carrying Fair amount value amount value RM RM RM RM

Group Financial liabilities Obligations under finance leases (non-current) 689,936 616,014 76,823 73,436

Company Financial liabilities Obligations under finance leases (non-current) 278,845 247,424 - -



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33. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group’s and the Company’s activities expose them to a variety of financial risk: liquidity risk, market risk (including interest rate risk, foreign currency risk) and credit 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 and the Company 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 or the Company will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial assets.

To manage liquidity risk, the Group and the Company maintain a level of cash equivalent and funding facilities deemed adequate by management to finance their operations. In assessing the adequacy of the facilities, management reviews its working capital requirements.

Analysis of financial instruments by remaining contractual maturities

The table below summarises the maturity profile of the Group’s and the Company’s financial liabilities at the reporting date based on contractual undiscounted repayment obligations.

On demand or within 1 year 1 to 5 years TotalGroup RM RM RM

31 December 2018 Trade payables 9,553,557 - 9,553,557Other payables 5,983,851 - 5,983,851Borrowings 135,938 689,936 825,874

15,673,346 689,936 16,363,282

31 December 2017 Trade payables 37,780,172 - 37,780,172Other payables 6,510,784 - 6,510,784Borrowings 76,467 76,823 153,290

44,367,423 76,823 44,444,246

Company

31 December 2018 Borrowings 67,461 278,845 346,306Other payables 178,047 - 178,047

245,508 278,845 524,353

31 December 2017 Other payables 130,179 - 130,179


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33. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D)

(b) Interest Rate Risk

Interest rate risk is the risk that the fair value of the future cash flows of the Group’s or the Company’s future instruments will fluctuate because of change in market interest rates.

The Group’s and the Company’s exposure to interest rate risk arises primarily from their borrowings. The Group and the Company have no substantial long term interest-bearing assets as at 31 December 2018. The other investment, short term receivables and payables are not significantly exposed to interest rate risk.

Borrowings issued at variable rates expose the Group and the Company to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group and the Company to fair value interest rate risk. The interest rate that the Group and the Company will be able to obtain on debt financing will depend on market conditions at that time, and may differ from the rates the Group has secured currently.

The interest rates and repayment terms of interest-bearing financial instruments are disclosed in the respective notes to the financial statements.

The Group and the Company are not exposed to any significant market risk for changes in interest rates. Hence, no sensitivity analysis is presented.

(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”), 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.

Sensitivity analysis for foreign currency risk

The following table demonstrates the sensitivity of the Group’s and the Company’s loss/(profit) before tax to change in the USD, SGD and HKD exchange rates against the respective functional currencies of the Group’s entities, with all other variables held constant.



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(c) Foreign Currency Risk (Cont’d)

Effect on (loss)/profit before tax: Group Company 2018 2017 2018 2017 RM RM RM RM

USD against RM (2017: 4% , 2017: 8%) - strengthened (13,188) 252,831 (56,030) 146,563 - weakened 13,188 (252,831) 56,030 (146,563) SGD against RM (2017: 1%, 2017: 2%) - strengthened 4,636 (2,108) (21,145) - - weakened (4,636) 2,108 21,145 -

HKD against RM (2017: 2%, 2017: 2% ) - strengthened (23,946) 9,782 - - - weakened 23,946 (9,782) - -

(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 and the Company are exposed to credit risk primarily from their trade receivables, other receivables which are financial assets, amount due from subsidiaries and related companies and cash and bank balances.

(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.

(ii) Trade receivables

Credit risk concentration profile

Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis.

The Group has no significant concentration of credit risks that may arise from exposures to a single debtor or to group of debtors.

Impairment on trade receivables

At each reporting date, the Group assesses whether any of the trade receivables are credit impaired.

The gross carrying amounts of credit impaired trade receivables and contract assets are written off (either partial or full) when there is no realistic prospect of recovery. This is generally the case when the Group determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. Nevertheless, trade receivables and contract assets that are written off could still be subject to enforcement activities.


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(d) Credit Risk (Cont’d)

(ii) Trade receivables (cont’d)

Impairment on trade receivables (cont’d)

In managing credit risk of trade receivables, the Group manages its debtors and takes appropriate actions (including but not limited to legal actions) to recover long overdue balances.

The Group applies the simplified approach whereby allowance for impairment are measured at lifetime ECL.

The following table provides information about the exposure to credit risk and ECL for trade receivables as at 31 December 2018.

2018 Gross carrying Loss Net amount allowances balance Group RM RM RM

Current 10,315,699 (26,114) 10,289,585 1 - 30 days past due 1,359,584 (33,273) 1,326,311 31 - 60 days past due 67,146 (2,746) 64,400 61 - 90 days past due 361,698 (18,917) 342,781 91 - 120 days past due - - -More than 120 days past due 662,998 (462,998) 200,000

12,767,125 (544,048) 12,223,077

The movement of the allowance for impairment loss on trade receivables is as follows:

Lifetime ECL Total allowance allowanceGroup RM RM

At 1 January 2018 - -Adjustments on initial recognition of MFRS 9 398,499 398,499

At 1 January 2018 398,499 398,499Charge for the year (Note 8) 402,356 402,356De-recognition of subsidiary (231,986) (231,986)Exchange difference (24,821) (24,821)

At 31 December 2018 544,048 544,048



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(ii) Trade receivables (cont’d)

Impairment on trade receivables (cont’d)

There was trade receivable where the Group has not recognised any loss allowances as the trade receivable is with a shareholder company of a subsidiary. The amount has been outstanding for less than a year.

Comparative information under MFRS139, Financial Instruments: Recognition and measurement

The ageing analysis of the Group’s trade receivables as at 31 December 2017 are as follows:

2017 Individual Gross impairment Net Group RM RM RM

Current 29,664,216 - 29,664,2161 - 30 days past due 2,309,432 - 2,309,43231 - 60 days past due 401,075 - 401,07561 - 90 days past due 228,264 - 228,26491 - 120 days past due 390,618 - 390,618More than 120 days past due 290,832 - 290,832

33,284,437 - 33,284,437

The movement of the allowance for impairment loss on trade receivables during the financial year were:

2017 RM

Group At 1 January 484,400Reversal (Note 8) (477,126)Exchange differences (7,274)At 31 December -

(iii) Other receivables

Other receivables are generally unsecured and non-interest bearing.

The movement of allowance for impairment (individually impaired) during the financial year are as follows:


At 1 January - -Additional (Note 8) 1,838,987 -Exchange difference (28,622) -

At 31 December 1,810,365 -


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(iv) Amount due from subsidiaries and related parties

The Group and the Company provide advances to subsidiaries and related parties. The Group and the Company monitor the ability of the subsidiaries to repay the advances on an individual basis

99% (2017: 99%) of the Company’s receivables are due from subsidiaries.

Impairment on amount due from subsidiaries and related parties

The Group and the Company assume that there is a significant increase in credit risk when a subsidiary’s financial position deteriorates significantly. As the Group and the Company are able to determine the timing of payments of the subsidiaries’ and the related parties’ advances when they are payable, the Group and the Company consider the advances to be in default when the subsidiaries and the related parties are not able to pay when demanded. The Group and the Company consider a subsidiary’s or a related party’s advance to be credit impaired when:

• The subsidiaries or the related parties are unlikely to repay their advances to the Group and the

Company in full; or• The subsidiaries’ or the related parties’ advances are overdue for more than 365 days; or• The subsidiaries or the related parties are continuously loss making and are having a deficit

shareholders’ fund.

The Group and the Company determine the probability of default for these advances individually using internal information available.

Movements in allowance for impairment (individually impaired) during the financial year are as follows:

Company 2018 2017 RM RM

At 1 January 6,029,644 6,083,329Additional (Note 8) 209,488 8,030Reversal (Note 8) - (61,715)

At 31 December 6,239,132 6,029,644

(v) Cash and bank balances

These banks and financial institutions have low credit risk. Consequently, the Group and the Company are of the view that the loss allowance is not material and hence, it is not provided for.



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34. SIGNIFICANT CHANGES IN ACCOUNTING POLICIES

The accounting policies adopted are consistent with those of the preceding year except as follows:

On 1 January 2018, the Group and the Company adopted the following new standards, IC Interpretation and amendments mandatory for annual financial periods beginning on or after 1 January 2018.

Effective for annual periods beginning on or after 1 January 2018MFRS 2 Classification and Measurement of Share-based Payment Transactions (Amendments to MFRS 2)*MFRS 9 Financial InstrumentsMFRS 15 Revenue from Contracts with CustomersMFRS 140 Transfers of Investment Property (Amendments to MFRS 140)*Annual Improvements to MFRS Standards 2014 – 2017 CycleIC Interpretation 22 Foreign Currency Transactions and Advance Consideration

* not applicable to the Group and the Company.

The adoption of the above new standards, IC Interpretation and amendments did not have any significant impact on the financial statements other than the below.

(a) MFRS 9 Financial Instruments

MFRS 9 Financial Instruments replaces MFRS 139 Financial Instruments: Recognition and Measurement for annual periods beginning on or after 1 January 2018, bringing together all three aspects of the accounting for financial instruments: classification and measurement; impairment; and hedge accounting.

The Group and the Company applied MFRS 9 prospectively, with an initial application date of 1 January 2018. The Group and the Company have not restated the comparative information, which continues to be reported under MFRS 139. Differences arising from the adoption of MFRS 9 have been recognised directly in accumulated losses and other components of equity.

The effect of adopting MFRS 9 as at 1 January 2018 is, as follows:

1 January Adjustments 2018Group RM

Assets Trade receivables (ii) (398,499)

Total adjustment to equity Accumulated losses (i), (ii) (398,499)

The nature of the adjustments are described below:

(i) Classification and measurement

Under MFRS 9, the Group’s and the Company’s debt financial instruments are measured at amortised cost. The classification is based on two criteria: the Group’s and the Company’s business model for managing the assets; and whether the instruments’ contractual cash flows represent “solely payments of principal and interest” on the principal amount outstanding (the “SPPI criterion”).

The assessment of the Group’s and the Company’s business model was made as of the date of initial application, 1 January 2018. The assessment of whether contractual cash flows on financial assets comprised solely of payments of principal and interest was made based on the facts and circumstances as at the initial recognition of the assets.


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34. SIGNIFICANT CHANGES IN ACCOUNTING POLICIES (CONT’D)

(a) MFRS 9 Financial Instruments (Cont’d)

(i) Classification and measurement (Cont’d)

Trade and other receivables previously classified as loans and receivables are held to collect contractual cash flows and give rise to cash flows representing solely payments of principal and interest. These are now classified and measured as debt instruments at amortised cost.

Other investment previously classified as available for sales are now classified and measured as FVTOCI.

There are no changes in classification and measurement for the Group’s financial liabilities.

In summary, upon the adoption of MFRS 9, the Group and the Company made the following reclassifications as at 1 January 2018.

MFRS 9 measurement category Fair value through other Amortised comprehensiveMFRS 139 cost incomemeasurement category RM RM

Group Loans and receivables Trade receivables* 33,284,437 32,885,938 -Other receivables 7,494,921 7,494,921 -Cash and bank balances 13,788,892 13,788,892 -

54,568,250 54,169,751 -

Available for sale Other investment 1,079,900 - 1,079,900

Company Loans and receivables Other receivables 353,305 353,305 -Cash and bank balances 6,022,814 6,022,814 -

6,376,119 6,376,119 -

Available for sale Other investment 1,079,900 - 1,079,900

* The change in carrying amount is a result of additional impairment allowance. Kindly refer to Note(ii) below.



138


(a) MFRS 9 Financial Instruments (Cont’d)

(ii) Impairment

The adoption of MFRS 9 has fundamentally changed the Group’s and the Company’s accounting for impairment losses for financial assets by replacing MFRS 139’s incurred loss approach with a forward-looking expected credit loss (“ECL”) approach. MFRS 9 requires the Group and the Company to recognise an allowance for ECLs for all debt instruments not held at fair value through profit or loss.

Upon adoption of MFRS 9, the Group recognised additional impairment of RM398,499 on the Group’s trade receivables, resulting in a increase in accumulated losses of RM398,499 (net of tax) as at 1 January 2018.

Set out below is the reconciliation of the ending impairment allowances in accordance with MFRS 139 to the opening loss allowances determined in accordance with MFRS 9:

Allowance for impairment ECL under under MFRS 139 MFRS 9 as at as at 31 Re- 1 January December 2017 measurement 2018 RM RM RM

Loans and receivables under MFRS 139/ financial assets at amortised cost under MFRS 9 - 398,499 398,499

(b) MFRS 15 Revenue from contract with customers

MFRS 15 supersedes MFRS 111 Construction Contracts, MFRS 118 Revenue and related Interpretations and it applies, with limited exceptions, to all revenue arising from contracts with customers. MFRS 15 establishes a five-step model to account for revenue arising from contracts with customers and requires that revenue be recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.

MFRS 15 requires entities to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying each step of the model to contracts with their customers. The standard also specifies the accounting for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract. In addition, the standard requires extensive disclosures.

The Group adopted MFRS 15 using the modified retrospective method of adoption with the date of initial application of 1 January 2018. Under this method, the standard can be applied either to all contracts at the date of initial application or only to contracts that are not completed at this date. The Group elected to apply the standard to all contracts as at 1 January 2018.

The cumulative effect of initially applying MFRS 15 is recognised at the date of initial application as an adjustment to the opening balance of accumulated losses. Therefore, the comparative information was not restated and continues to be reported under MFRS 118 and related Interpretations.

The effect of adopting MFRS 15 is, as follows:


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(b) MFRS 15 Revenue from contract with customers (cont’d)

(i) Sale of goods

The Group contracts with its customers for sales of cables, connectors and related products. The Group has concluded that revenue for sales cables, connectors and related products should be recognised at the point in time when the control of the asset is transferred to the customer, generally when risk and reward of the goods are transferred. Therefore, the adoption of MFRS 15 did not have any impact on the timing of revenue recognition for the sales of goods.

(ii) Cyber security services

The Group provides cyber security services to its customer. Upon the adoption of MFRS 15, cyber security services will be recognised over time and its stage of completion is measured using the actual time incurred to date compared to the estimated time needed to complete the cyber security services. The adoption of MFRS 15 did not have any impact on the timing of revenue recognition for the cyber security services.

35. CAPITAL MANAGEMENT

The primary objective of the Group’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 manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group 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 2018 and 31 December 2017.

The Group monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Group includes within net debt, trade and other payables and borrowings, less cash and bank balances. Capital includes equity attributable to the owners.

The Group’s strategy is to maintain the gearing ratio at a very low level.

36. SIGNIFICANT EVENTS

(a) On 22 January 2018, the Company disposed its 1,364,000 ordinary shares, representing 40% of equity interest in its wholly-owned subsidiary, Connect Security Solution Sdn. Bhd. (“CSS”) to a third party for a cash consideration of RM1. Following the disposal, the Company’s shareholding in CSS is 2,046,000 ordinary shares, representing 60% of equity interest.

On 3 May 2018, the Company announced to undertake a proposed diversification of the existing business in CSS to undertake the cyber security business which provides information technology security consultation and services, technical assistance on operating computers as well as the provision of information technology training programmes. The proposed diversification was duly passed by the shareholders of the Company in the Extraordinary General Meeting held on 27 June 2018.

(b) On 28 November 2018, Company’s subsidiary, Rapid Conn (ShenZhen) Co., Ltd. (“RCC”) had entered into a Share Sale Agreement to dispose 31% of equity interest, representing 2,325,000 registered capital of RMB1 each in its subsidiary, ShenZhen Rapid Power Co., Ltd. (“RCP”) to a third party for a total consideration of RMB2,325,000 (equivalent to RM1,396,628). The transfer of shares was approved by the relevant authority on 8 January 2019, and upon completion of the disposal, RCC’s equity interest in RCP decreased from 80% to 49%.

Although RCC owned 80% shareholding in RCP as at year end, the Directors had determined that RCC had lost control over RCP as RCC has ceased to govern the financial and operating policies of RCP and has no power over investee. Consequently, the Group reclassified RCP as an associate company.



140

37. SUBSEQUENT EVENT

On 22 March 2019, the Company incorporated a wholly-owned subsidiary, IBEX Entertainment Sdn. Bhd. (“IBEX”) with a total paid-up share capital of RM1 comprising of 1 ordinary share. The principal activities of IBEX are to develop, finance and produce screenplay, film, soundtrack and other media, talent management and business of merchandising in relation to film and music.

38. 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) 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 People’s Republic of China (“China”);

(iii) Rapid Conn (S) Pte. Ltd. (“RCS”) covering Singapore; and

(iv) Rapid Conn Inc. (“RCI”) covering United States of America (“USA”).

Except as indicated above, no operating segment has been aggregated to form the above reportable operating segments.

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.


A N N U A L R E P O R T 2 0 1 8

141

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142

38. 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 There are no other material non-cash expenses

C The following items are added to/(deducted from) segment (loss)/profit to arrive at “ (Loss)/ Profit before tax” presented in the consolidated statement of comprehensive income:

2018 2017 RM RM

(Loss)/Profit from inter-companies sales (356,806) 134,589Profit/(Loss) from inter-companies recovery charges 92 (19,276)Allowance for impairment loss on - investments in subsidiaries 6,299,409 1,126,552- other receivables 209,488 8,030Loss on disposal of subsidiary 1,352,139 -Investment in subsidiary written off - 190,000Reversal of impairment loss on - investments in subsidiaries (1,352,140) (99,999)- trade and other receivables - (61,715)Foreign currency difference 356,714 (115,315)

6,508,896 1,162,866

D The following items are deducted from segment assets to arrive at total assets reported in the consolidated statement of financial position: 2018 2017 RM RM

Investments in subsidiaries (22,871,849) (29,171,258)Plant and equipment (10,706) (10,706)Inter-companies assets (12,807,069) (9,647,002)Deferred tax 37,000 37,000

(35,652,624) (38,791,966)

E The following items are deducted from segment liabilities to arrive at total liabilities reported in the consolidated statement of financial position:

2018 2017 RM RM

Inter-companies liabilities (18,998,485) (15,676,525)


A N N U A L R E P O R T 2 0 1 8

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38. SEGMENT INFORMATION (CONT’D)

GEOGRAPHICAL INFORMATION

Revenue and non-current assets information based on the geographical location of customers and assets respectively are as follows:

Revenue Non-current assets 2018 2017 2018 2017 RM RM RM RM Malaysia 200,000 - 1,475,343 1,163,839People’s Republic of China 44,786,757 43,657,669 3,724,834 9,298,173Singapore 17,353,004 26,790,516 848,683 2,155,457USA 37,301,501 51,714,946 47,084 79,562

99,641,262 122,163,131 6,095,944 12,697,031

Non-current assets information presented above consist of the following items as presented in the consolidated statement of financial position.

2018 2017 RM RM Motor vehicles 1,311,957 678,722Mouldings 1 1Office equipment, furniture and fittings 231,610 597,897Plant and machinery 627,093 7,703,559Renovation 1,144,087 1,895,735Intangible asset - 741,217Investment in associate 1,701,296 -Other investment 1,079,900 1,079,900

6,095,944 12,697,031

39. AUTHORISATION OF FINANCIAL STATEMENTS FOR ISSUE

The financial statements for the year ended 31 December 2018 were authorised for issue in accordance with a resolution of the Directors on 5 April 2019.


144

Total Number of Issued Shares : RM32,930,492.50 comprising of 329,304,925 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 54 3.84 2,088 0.00100 - 1,000 255 18.11 120,243 0.041,001 - 10,000 434 30.82 2,300,100 0.7010,001 - 100,000 451 32.03 19,165,320 5.82100,001 – 16,465,245* 213 15.13 204,936,674 62.2316,465,246 and above ** 1 0.07 102,780,500 31.21 Total: 1,408 100.00 329,304,925 100.00

Notes:-* Less than 5% of issued holdings** 5% and above of issued holdings

SUBSTANTIAL SHAREHOLDERS BASED ON THE REGISTER OF SUBSTANTIAL SHAREHOLDERS AS AT 29 MARCH 2019 No. of Ordinary Shares Direct Indirect No. Name Interest % Interest %

1. Ang Chuang Juay 18,662,224 5.67 - -2. Nexus Creative (Mal) Sdn. Bhd. 102,780,500 31.21 - -3. Wong Pooi Fatt - - 102,780,500(1) 31.214. Lee Su Lin - - 102,780,500(1) 31.21

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 AS AT 29 MARCH 2019 No. of Ordinary Shares Direct Indirect Name of Directors Interest % Interest %

Major General Dato’ Mamat Ariffin Bin Abdullah - - - -Ang Chuang Juay 18,662,224 5.67 - -Wong Pooi Fatt - - 102,780,500(1) 31.21Lee Su Lin - - 102,780,500(1) 31.21Lim Bee San - - - -Thong Mei Mei - - - -Ng Keok Chai - - - -


Act 2016.

STATISTICS OF SHAREHOLDINGS AS AT 29 MARCH 2019

A N N U A L R E P O R T 2 0 1 8

145

TOP 30 SECURITIES ACCOUNT HOLDERS (ORDINARY SHARES) AS PER RECORD OF DEPOSITORS AS AT 29 MARCH 2019 No. ofNo. Name Issued Shares %

1. Ace Credit (M) Sdn. Bhd.

- Pledged Securities Account for Nexus Creative (Mal) Sdn. Bhd. 102,780,500 31.21

2. Teow Chee Poh 15,780,000 4.79

3. Chan Swee Ying 14,778,800 4.49

4. AmSec Nominees (Asing) Sdn. Bhd.

- Pledged Securities Account for Ang Chuang Juay 13,313,852 4.04

5. JF Apex Nominees (Tempatan) Sdn. Bhd.

- Pledged Securities Account for Strongleap Sdn. Bhd. 13,295,000 4.04


- Pledged Securities Account for Wong Sau Bing 8,284,000 2.52

7. Kenanga Nominees (Tempatan) Sdn. Bhd.

- Pledged Securities Account for Cheok Kuang Yi 7,720,900 2.34

8. Teoh Hwa Peng 7,491,000 2.27


- Pledged Securities Account for Cheah Hock Choon 7,093,100 2.15


- Pledged Securities Account for Lee Chong Peng 6,891,800 2.09

11. Ang Chuang Juay 5,348,372 1.62


- Pledged Securities Account for Chin Sin Hong 4,859,400 1.48

13. RHB Nominees (Tempatan) Sdn. Bhd.

- Cheong Wong Sang 4,210,000 1.28

14. M & A Nominee (Tempatan) Sdn. Bhd.

- Pledged Securities Account for Chang Choon Ming 4,205,000 1.28

15. Teow Chee Hwa 2,436,700 0.74

16. Chua Ah Choo 2,000,000 0.61

17. TA Nominees (Tempatan) Sdn. Bhd.

- Pledged Securities Account for Kong Foong Kiew @ Kong Oil Lin 1,885,000 0.57

18. Lim Bee Kheng 1,875,000 0.57

19. Heng Ling Jy 1,700,000 0.52


- Pledged Securities Account for Tan Poo Yot 1,700,000 0.52

21. Chan Pek Chen 1,643,000 0.50

22. AllianceGroup Nominees (Tempatan) Sdn. Bhd.

- Pledged Securities Account for Chai Wee Kiong 1,618,400 0.49

23. Ng Poh Seng 1,500,000 0.46

24. Teo Ha Fang 1,500,000 0.46

25. Ng Chie Huing 1,460,000 0.44


- Pledged Securities Account for Ng Meow Giak 1,410,000 0.43

27. Tan Ying Jun 1,390,000 0.42

28. Saw Bee Ann 1,350,000 0.41

29. Lui Yuen Qiu 1,300,000 0.39

30. Seaw Keng Seng 1,250,000 0.38

Total: 242,069,824 73.51

STATISTICS OF SHAREHOLDINGS AS AT 29 MARCH 2019 (cont’d)


146

Description : Irredeemable Convertible Preference Shares (“ICPS”) Total Number of ICPS Issued : 470,139,800 Conversion Period : 5 years Maturity Date : 7 June 2021

ANALYSIS BY SIZE OF SHAREHOLDINGS

Size of Holdings No. of Holders % No. of Shares % 1 - 99 1 0.39 72 0.00100 - 1,000 11 4.28 2,846 0.001,001 - 10,000 28 10.89 169,100 0.0410,001 - 100,000 99 38.52 5,207,200 1.11100,001 – 23,506,989* 113 43.97 164,675,310 35.0323,506,990 and above ** 5 1.95 300,085,272 63.83 Total: 257 100.00 470,139,800 100.00


DIRECTORS’ INTEREST IN ICPS BASED ON THE REGISTER OF DIRECTORS’ SHAREHOLDINGS AS AT 29 MARCH 2019

No. of Irredeemable Convertible Preference Shares Direct Indirect No. Name Interest % Interest %

Major General Dato’ Mamat Ariffin Bin Abdullah - - - -Ang Chuang Juay 38,897,256 8.28 - -Wong Pooi Fatt - - 158,290,000(1) 33.67Lee Su Lin - - 158,290,000(1) 33.67Lim Bee San - - - -Thong Mei Mei - - - -Ng Keok Chai - -


Act 2016.


A N N U A L R E P O R T 2 0 1 8

147

TOP 30 SECURITIES ACCOUNT HOLDERS (ICPS) AS PER RECORD OF DEPOSITORS AS AT 29 MARCH 2019

No. ofNo. Name Issued Shares %


- Pledged Securities Account for Nexus Creative (Mal) Sdn. Bhd. 158,290,000 33.67


- Pledged Securities Account for Ace Corporation (M) Sdn. Bhd. 52,282,916 11.12


- Pledged Securities Account for Cheok Kuang Yi 33,534,800 7.13

4. AmSec Nominees (Asing) Sdn. Bhd.

- Pledged Securities Account for Ang Chuang Juay 28,897,256 6.15


- Pledged Securities Account for Chin Sin Hong 27,080,300 5.76

6. Yeo Chih Peng (Yang Zhipeng) 13,274,200 2.82


- Pledged Securities Account for Cheah Hock Choon 12,110,000 2.58


- Pledged Securities Account for Ace Credit (M) Sdn. Bhd. 11,561,100 2.46

9. Ang Chuang Juay 10,000,000 2.13


- Pledged Securities Account for Lee Chong Peng 9,956,800 2.12

11. Chan Swee Ying 9,224,400 1.96

12. Mercsec Nominees (Tempatan) Sdn. Bhd.

- Pledged Securities Account for Avenue Portal Sdn. Bhd. 7,905,000 1.68

13. Kenanga Nominees (Tempatan) Sdn. Bhd .

- Pledged Securities Account for Eng Mok Hock 6,015,000 1.28

14. Nicholas Cheong Wei Juan 5,894,800 1.25

15. Tang Seng Huat 4,374,000 0.93

16. Saw Bee Ann 4,000,000 0.85

17. Teo Ha Fang 3,829,500 0.81

18. Goh Mee Fong 3,205,510 0.68

19. HLIB Nominees (Tempatan) Sdn. Bhd.

- Pledged Securities Account for Chia Soo Yee 2,432,400 0.52

20. Ng Poh Seng 2,380,000 0.51

21. Teoh Hwa Peng 2,000,000 0.43

22. Carmen Wong Ming Ai 1,800,000 0.38

23. Teow Yueh Tern 1,800,000 0.38

24. Eow Wai Yen 1,500,000 0.32

25. New Wee Keng 1,480,000 0.31

26. Maybank Securities Nominees (Tempatan) Sdn Bhd.

- Pledged Securities Account for Oh Teik Chye 1,463,100 0.31

27. Teow Chee Hwa 1,391,300 0.30

28. Pamela Ong Mei Yu 1,355,000 0.29

29. Lee Phaik Kooi 1,350,000 0.29

30. Chia Jerng Shung 1,273,000 0.27

Total: 421,660,382 89.69



148

STATISTICS OF WARRANTHOLDINGS AS AT 29 MARCH 2019

Description : Warrants 2011/2021 (“Warrants A”)

Total Outstanding Warrants : 48,567,944

Maturity Date : 18 September 2021

Number of Warrantholders : 378

ANALYSIS BY SIZE OF WARRANTHOLDINGS FOR WARRANTS A AS PER THE RECORD OF DEPOSITORS

Size of Warrantholdings No. of Warrant Holders % No. of Warrant % 1 – 99 147 38.89 6,389 0.01100 – 1,000 28 7.41 11,469 0.021,001 - 10,000 46 12.17 220,335 0.4510,001 – 100,000 94 24.87 4,363,042 8.98100,001 – 2,428,396 * 60 15.87 21,620,509 44.522,428,397 and above ** 3 0.79 22,346,200 46.01 Total: 378 100.00 48,567,944 100.00


DIRECTORS’ INTEREST IN WARRANTS A BASED ON THE REGISTER OF DIRECTORS’ SHAREHOLDINGS AS AT 29 MARCH 2019

No. of Warrants A Direct Indirect No. Name Interest % Interest %

Major General Dato’ Mamat Ariffin Bin Abdullah - - - -Ang Chuang Juay - - - -Wong Pooi Fatt - - - -Lee Su Lin - - - -Lim Bee San - - - -Thong Mei Mei - - - -Ng Keok Chai - - - -

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STATISTICS OF WARRANTHOLDINGS AS AT 29 MARCH 2019 (cont’d)

TOP 30 SECURITIES ACCOUNT HOLDERS (WARRANTS A) AS PER THE RECORD OF DEPOSITORS

No. Name of Warrantholders No. of Warrants %

1. Chan Swee Ying 12,062,600 24.84



3. Pamela Ong Mei Yu 3,024,400 6.23

4. Chen Tong Yee 1,290,400 2.66

5. Lim Lay Peng 1,209,873 2.49

6. Tay Seng Chew 1,035,000 2.13

7. Goh Mee Fong 1,000,035 2.06

8. Ng Poh Seng 1,000,000 2.06

9. Tew Ah Keng 918,200 1.89

10. Low Kean Teik 800,000 1.65

11. Chang Kok Yaw 723,500 1.49

12. Chua Lee Guan 600,000 1.24

13. Lok Wei Seong 569,900 1.17

14. Lee Eng Min 518,200 1.07

15. Low Pak Seng 487,636 1.00

16. Khong Heng Jian 480,000 0.99

17. Lim Song War 473,214 0.97

18. Yeo Chih Peng (Yang Zhipeng) 445,321 0.92

19. CimSec Nominees (Tempatan) Sdn. Bhd.

- CIMB Bank for Pang Hoi Kee 410,000 0.84

20. Koh Whee Ling 409,850 0.84

21. Lurtutas a/l Permallo 400,000 0.82

22. Lud Lee Hock Seng 390,200 0.80

23. Evelyn Eu Im Lin 385,000 0.79

24. Public Nominees (Tempatan) Sdn. Bhd.

- Pledged Securities Account for Ho Chi Lin 363,209 0.75

25. Lee Mee Yoke 362,300 0.75

26. Kwong Yok Chin 350,000 0.72


- Pledged Securities Account for Beh Kam Quee 331,250 0.68


- Pledged Securities Account for Cheok Kuang Yi 319,500 0.66

29. Alliancegroup Nominees (Tempatan) Sdn. Bhd.

- Pledged Securities Account for Batu Bara Resources Corporation Sdn. Bhd. 300,000 0.62


- Pledged Securities Account for Andrew a/l Lurtutas 300,000 0.62

Total: 38,218,788 78.69


150


Description : Warrants 2016/2021 (“Warrants B”)

Total Outstanding Warrants : 29,062,988

Maturity Date : 7 June 2021

Number of Warrantholders : 328

ANALYSIS BY SIZE OF WARRANTHOLDINGS FOR WARRANTS B AS PER THE RECORD OF DEPOSITORS

Size of Warrantholdings No. of Warrant Holders % No. of Warrant % 1 – 99 59 17.99 2,870 0.01100 – 1,000 32 9.76 14,597 0.051,001 - 10,000 79 24.09 388,109 1.3410,001 – 100,000 102 31.10 4,945,252 17.02100,001 – 1,453,148 * 53 16.16 17,007,960 58.521,453,149 and above ** 3 0.91 6,704,200 23.07 Total: 328 100.00 29,062,988 100.00


DIRECTORS’ INTEREST IN WARRANTS B BASED ON THE REGISTER OF DIRECTORS’ SHAREHOLDINGS AS AT 29 MARCH 2019 No. of Warrants B Direct Indirect No. Name Interest % Interest %

Major General Dato’ Mamat Ariffin Bin Abdullah - - - -Ang Chuang Juay - - - -Wong Pooi Fatt - - - -Lee Su Lin - - - -Lim Bee San - - - -Thong Mei Mei - - - -Ng Keok Chai - - - -

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TOP 30 SECURITIES ACCOUNT HOLDERS (WARRANTS A) AS PER THE RECORD OF DEPOSITORS

No. Name of Warrantholders No. of Warrants %



2. Chan Swee Ying 2,078,100 7.15

3. Lee Mee Kuen 1,700,000 5.85

4. Tay Seng Chew 1,200,000 4.13

5. Pamela Ong Mei Yu 958,400 3.30

6. Khong Heng Jian 900,000 3.10

7. TA Nominees (Tempatan) Sdn. Bhd.

- Pledged Securities Account for Chia Mee Thih 850,000 2.92

8. Khoo Tee Keah 600,000 2.06

9. Goh Mee Fong 561,554 1.93

10. Oh Teik Chye 547,800 1.88

11. Albert Lim Wei Peng 500,000 1.72

12. Chin Siew Yin @ Chan Siew Yee @ J Baptist 500,000 1.72

13. Kwong Yok Chin 463,200 1.59

14. Chua Lee Guan 448,100 1.54

15. Chen Tong Yee 440,000 1.51

16. Gan Kah Seng 425,300 1.46

17. Yee Teck Choon 418,800 1.44

18. Ng Poh Seng 400,000 1.38


- Pledged Securities Account for Ho Chi Lin 389,700 1.34

20. Lud Lee Hock Seng 380,000 1.31

21. Lee Eng Min 347,900 1.20

22. Lee Siew Mei 320,000 1.10


- Pledged Securities Account for Andrew a/l Lurtutas 300,000 1.03

24. Ngu Meng Chung 300,000 1.03

25. Saw Bee Ann 300,000 1.03

26. HLB Nominees (Tempatan) Sdn. Bhd.

- Pledged Securities Account for Ser Kong Lam 296,513 1.02

27. Lim Lye Guan 275,000 0.95

28. Lee Chee Siong 251,200 0.86


- Pledged Securities Account for Yeap Sek Seong 230,000 0.79

30. Ng Sook Kin 229,200 0.79

Total: 19,536,867 67.22


152

NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN THAT the Sixteenth Annual General Meeting (“AGM”) of the Company will be held at Function Room 1, Level 2, Hotel Sri Petaling, 30, Jalan Radin Anum, Bandar Baru Sri Petaling, 57000 Kuala Lumpur, Wilayah Persekutuan on Wednesday, 29 May 2019 at 10:00 a.m. for the following purposes:-

A G E N D A

Ordinary Business

1. To receive the Audited Financial Statements of the Company for the financial year ended 31 December 2018 together with the Reports of the Directors and Auditors thereon.

2. To approve the payment of Directors’ fees amounting to RM148,000/- for the financial year

ended 31 December 2018. 3. To approve an amount of up to RM90,000/- as benefits payable to the Non-Executive

Directors from 30 May 2019, being the date after the Sixteenth AGM to the Seventeenth AGM of the Company pursuant to Section 230(1)(b) of the Companies Act 2016.

4. To recommend the re-election of Mr. Ang Chuang Juay, the Director who is retiring

pursuant to Article 83 of the Company’s Articles of Association and being eligible, has offered himself for re-election.

5. To recommend the re-election of the following Directors who are retiring pursuant to Article 90 of the Company’s Articles of Association and being eligible, have each offered themselves for re-election:-

(a) Mr. Wong Pooi Fatt;(b) Ms. Lee Su Lin; (c) Major General Dato’ Mamat Ariffin Bin Abdullah; and(d) Mr. Ng Keok Chai.

6. To re-appoint Messrs. Moore Stephens Associates PLT as Auditors of the Company until the conclusion of the next Annual General Meeting 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 and Special Resolution:-

7. Ordinary Resolution - Authority to Issue Shares pursuant to the Companies Act 2016

“THAT subject to the Companies Act 2016, the Articles of Association/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 empowered, pursuant to the Companies Act 2016, to issue and allot shares in the Company at any time 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 ten per centum (10%) of the total number of issued shares of the Company 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 Note 8)

Ordinary Resolution 1



Ordinary Resolution 4Ordinary Resolution 5Ordinary Resolution 6Ordinary Resolution 7



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8. Special Resolution - Proposed Adoption of a New Constitution of the Company

“THAT approval be and is hereby given to revoke the existing Memorandum and Articles of Association of the Company with immediate effect and in place thereof, the proposed new Constitution of the Company, as set out in Appendix I despatched together with the Company’s Annual Report 2018, be and is hereby adopted as the Constitution of the Company (“Proposed Adoption of New Constitution”);

AND THAT the Directors of the Company be and are hereby authorised to assent to any modification, variation and/or amendment as may be required by the relevant authorities (if any) and to do all acts and things and take all such steps as may be considered necessary to give full effect to the Proposed Adoption of New Constitution.”

9. To transact any other business of which due notice shall have been given in accordance with the Companies Act 2016.

BY ORDER OF THE BOARD

CHUA SIEW CHUAN (MAICSA 0777689)CHENG CHIA PING (MAICSA 1032514)Company Secretaries

Kuala Lumpur30 April 2019

Notes:

Information for Shareholders/ Proxies

1. In respect of deposited securities, only members whose names appear in the Record of Depositors on 21 May 2019 (General Meeting Record of Depositors) shall be eligible to attend the Meeting.

2. A member entitled to attend and vote at the Meeting is entitled to appoint more than one (1) proxy to attend and vote in his stead (subject always to a maximum of two (2) proxies at each meeting). Where a member appoints more than one (1) proxy, the appointments shall be invalid unless he specifies the proportions of his shareholdings to be represented by each proxy.

3. A proxy may but does not need to be a member of the Company. Notwithstanding this, a member entitled to attend and vote at the Meeting is entitled to appoint any person as his proxy to attend and vote instead of the member at the Meeting. There shall be no restriction as to the qualification of the proxy. A proxy appointed to attend and vote at the 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 appointor or of his attorney duly authorised in writing or, if the appointor is a corporation, either under its seal or under the hand of an officer or attorney duly authorised.

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 in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.

6. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one securities account (“omnibus account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds.

NOTICE OF ANNUAL GENERAL MEETING(Cont’d)

SpecialResolution


154

NOTICE OF ANNUAL GENERAL MEETING(Cont’d)

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 located at Level 7, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, Damansara Heights, 50490 Kuala Lumpur, Wilayah Persekutuan, not less than 48 hours before the time for holding the Meeting or at any adjournment thereof.

Audited Financial Statements for the financial year ended 31 December 2018

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.

Benefits payable to the Non-Executive Directors

9. The proposed benefits payable to the Non-Executive Directors 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 is in the best interest of the Company for the applicable period between 30 May 2019, being the date after the Sixteenth AGM to Seventeenth AGM of the Company. The proposed benefits comprised travelling expenses and Directors’ Liability Insurance up to RM90,000/-. The travelling expenses will only be accorded based on actual attendance of meetings by the Non-Executive Directors.

Explanatory Note to Special Businesses

10. Ordinary Resolution 9 – Authority to Issue Shares pursuant to the Companies Act 2016

The proposed adoption of the Ordinary Resolution is for the purpose of granting a renewed general mandate (“General Mandate”) and empowering the Directors of the Company, pursuant to the Companies Act 2016, to issue and allot new shares in the Company from time to time provided that the aggregate number of shares issued pursuant to the General Mandate does not exceed 10% of the total number of issued shares of the Company for the time being. The General Mandate, unless revoked or varied by the Company in general meeting, will expire at the conclusion of the next AGM of the Company.

The 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).

As at the date of this Notice, no new shares in the Company have been issued pursuant to the mandate granted to the Directors at the Fifteenth AGM held on 27 June 2018 and it will lapse at the conclusion of the forthcoming Sixteenth AGM.

11. Special Resolution – Proposed Adoption of a New Constitution of the Company

The proposed Special Resolution is undertaken primarily to streamline the existing Memorandum and Articles of Association (“M&A”) of the Company with the Companies Act 2016, which was effective from 31 January 2017. The Proposed Adoption of New Constitution is also to align the existing M&A with the recent amendments made to the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad, and to provide clarity to certain provision thereof and to render consistency throughout in order to facilitate and further enhance administrative efficiency.

Please refer to the Appendix I for further information.

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(Incorporated in Malaysia)(Company No. 618933-D)

FORM OF PROXY

*I/We, ...................................................................................................... Company No./NRIC No ./Passport No..............................(full name as per NRIC/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 in capital letters)and/ or failing him/ her, ................................................................................................................ NRIC No ./Passport No......................................................

(full name as per NRIC in capital letters)

Ordinary Business For AgainstOrdinary Resolution 1



Ordinary Resolution 3Ordinary Resolution 4




Ordinary Resolution 9 Authority to issue shares pursuant to the Companies Act 2016 Proposed Adoption of a New Constitution of the Company

(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 _________________, 2019

__________________________________________Signature(s)/Common Seal of Member(s)

Notes:

* Delete if not applicable

Number of shares heldCDS account no.

For appointment of two proxies, percentage of shareholdings to be represented by the proxies

No. of shares PercentageProxy 1Proxy 2Total 100%

or failing *him/her, the Chairman of the Meeting as *my/our proxy, to vote for *me/us on *my/our behalf at the Sixteenth Annual General Meeting of the Company to be held at Function Room 1, Level 2, Hotel Sri Petaling, 30, Jalan Radin Anum, Bandar Baru Sri Petaling, 57000 Kuala Lumpur, Wilayah Persekutuan on Wednesday, 29 May 2019 at 10:00 a.m. and at any adjournment thereof, on the following resolutions referred to in the Notice of Sixteenth Annual General Meeting.*My/Our proxy(ies) *is/are to vote as indicated below:-

1. In respect of deposited securities, only members whose names appear in the Record of Depositors on 21 May 2019 (General Meeting Record of Depositors) shall be eligible to attend the Meeting.

2. A member entitled to attend and vote at the Meeting is entitled to appoint more than one (1) proxy to attend and vote in his stead (subject always to a maximum of two (2) proxies at each meeting). Where a member appoints more than one (1) proxy, the appointments shall be invalid unless he specifies the proportions of his shareholdings to be represented by each proxy.

3. A proxy may but does not need to be a member of the Company. Notwithstanding this, a member entitled to attend and vote at the Meeting is entitled to appoint any person as his proxy to attend and vote instead of the member at the Meeting. There shall be no restriction as to the qualification of the proxy. A proxy appointed to attend and vote at the 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 appointor or of his attorney duly authorised in writing or, if the appointor is a corporation, either under its seal or under the hand of an officer or attorney duly authorised.

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 in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.

6. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one securities account (“omnibus account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds.

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 located at Level 7, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, Damansara Heights, 50490 Kuala Lumpur, Wilayah Persekutuan, not less than 48 hours before the time for holding the Meeting or at any adjournment thereof.

To approve payment of Directors’ fees for the financial year ended 31 December 2018To approve the benefits payable to the Non-Executive Directors from 30 May 2019 to the Seventeenth Annual General Meeting of the CompanyTo re-elect Mr. Ang Chuang Juay as Director (Article 83)To re-elect Mr. Wong Pooi Fatt as Director (Article 90)To re-elect Ms. Lee Su Lin as Director (Article 90)To re-elect Major General Dato’ Mamat Ariffin Bin Abdullah as Director (Article 90) To re-elect Mr. Ng Keok Chai as Director (Article 90)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 Resolution

Special Business

Please fold here

Please fold here

The Share Registrar of

CONNECTCOUNTY HOLDINGS BERHAD (618933-D)

Level 7, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, Damansara Heights,50490 Kuala Lumpur, Wilayah Persekutuan

Attention : Mr. Wong Piang Yoong

AFFIXSTAMP

(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

19571 Pauling, Foothill RanchCA 92610-2619 USATel: +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

(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

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L REPORT 2018

ANNUAL REPORT2018

connect county 2018- financial-6 · connect security solution sdn bhd ibex pictures entertainment...

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