Supercomnet Technologies BHD. ( H)

Transcription

1 Supercomnet Technologies BHD. ( H) Annual Report 2016

2 CONTENTS Notice of Annual General Meeting Corporate Information Corporate Structure Profile of Directors Profile of Key Senior Management Management Discussion & Analysis Statement on Corporate Governance Statement on Risk Management and Internal Control Audit Committee Report Additional Compliance Information Statement of Directors Responsibilities FINANCIAL STATEMENTS Directors Report Independent Auditors Report Statements of Profit or Loss and Other Comprehensive Income Statements of Financial Position Statements of Changes in Equity Statements of Cash Flows Notes to the Financial Statements Statement by Directors Declaration by the Director Primarily Responsible for the Financial Management of the Company Enclosed Group Properties Analysis of Shareholdings Proxy Form

3 NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN that the Twenty-Seventh Annual General Meeting of the Company will be held at Ifrah Hall, Cinta Sayang Resort, Persiaran Cinta Sayang, Sungai Petani, Kedah on Friday, May 26, 2017 at 9.30 a.m. for the following purposes:- A G E N D A 1. To receive the Audited Financial Statements for the financial year ended December 31, 2016 together with the reports of the Directors and Auditors thereon. 2. To approve the payment of Directors Fee of up to RM269,280/- for the period from January 1, 2017 until the next Annual General Meeting of the Company. 3. To approve the Directors benefits (excluding Directors Fee) payable of up to RM29,700/- for the period from January 1, 2017 until the next Annual General Meeting of the Company. (Please refer to Note A) (Resolution 1) (Resolution 2) 4. To re-elect the following Directors who are retiring pursuant to Article 99(1) of the Articles of Association of the Company, and who, being eligible offered themselves for re-election:- a) Mr. Ng Ngoon Weng (Resolution 3) b) Mdm. Wu, Huei-Chung (Resolution 4) 5. To re-appoint Deloitte PLT as Auditors of the Company for the ensuing year and to authorise the Directors to fix their remuneration. (Resolution 5) 6. AS SPECIAL BUSINESS To consider and, if thought fit, to pass the following Resolutions:- Ordinary Resolutions (a) Re-appointment of Directors That the following Directors be re-appointed to continue in office as Directors of the Company:- i) Mr. Wu, Chung-Jung ii) Mr. Shiue, Jong-Zone (b) Authority to Issue Shares That pursuant to Companies Act 2016 and approvals from the Bursa Malaysia Securities Berhad ( Bursa Securities ) and other relevant governmental/regulatory authorities where such authority shall be necessary, the Board of Directors be authorised to issue and allot shares in the Company from time to time until the conclusion of the next Annual General Meeting and upon such terms and conditions and for such purposes as the Board of Directors may, in its absolute discretion, deem fit provided that the aggregate number of shares to be issued shall not exceed ten per centum (10%) of the total number of issued shares (excluding treasury shares) of the Company for the time being, and that the Board of Directors be empowered to obtain the approval for the listing of and quotation for the additional shares so issued on the Bursa Securities. (Resolution 6) (Resolution 7) (Resolution 8) 7. To transact any other business of which due notice shall have been given in accordance with the Companies Act By Order of the Board HOW WEE LING (MAICSA ) OOI EAN HOON (MAICSA ) Secretaries Penang Date : April 28, ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

4 NOTICE OF ANNUAL GENERAL MEETING (CONT'D) Notes: A. This Agenda item is meant for discussion only as the provision of Section 340(1)(a) of the Companies Act 2016 and the Company s Articles of Association do not require a formal approval of the shareholders and hence, is not put forward for voting. B. For the purpose of determining a member who shall be entitled to attend and vote at this Twenty-Seventh Annual General Meeting, the Company shall be requesting the Record of Depositors as at May 9, Only a depositor whose name appears on the Record of Depositors as at May 9, 2017 shall be entitled to attend, speak and vote at the said meeting or appoint proxy(ies) to attend, speak and vote on his/her behalf. 1. A member (Except Exempt Authorised Nominee) shall be entitled to appoint up to two (2) proxies to attend and vote at the same meeting. Where a member appoints two (2) or more proxies, the appointment shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy. 2. 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. 3. The instrument appointing a proxy shall be in writing under the hand of the appointor or his attorney duly authorised in writing or, if the appointor is a corporation, either under its common seal or under the hand of an officer or attorney duly authorised. 4. The instrument appointing a proxy must be deposited at the Registered Office of the Company at 57-G Persiaran Bayan Indah, Bayan Bay, Sungai Nibong, Penang not less than twenty-four(24) hours before the time set for holding of the Meeting i.e. Thursday, May 25, 2017 at 9.30 a.m. or at any adjournment thereof. Explanatory Note On Special Business: 1. Re-appointment of Directors At the Twenty-Sixth Annual General Meeting of the Company held on May 27, 2016, both Mr. Wu, Chung-Jung and Mr. Shiue, Jong-Zone who are over seventy years of age were re-appointed pursuant to Section 129(6) of the Companies Act, 1965* to hold office until the conclusion of the Twenty-Seventh Annual General Meeting of the Company. The proposed Resolution No. 6 & 7 (Item 6(a)), if passed, will enable the above Directors to continue in office and they shall subject to retirement by rotation in accordance with the Company s Articles of Association. The Nominating Committee has assessed the above Directors and recommended for their re-appointment which has been duly endorsed by the Board of Directors of the Company. * Companies Act, 1965 was repealed on January 31, 2017 following the coming into operation the Companies Act Pursuant to the Companies Act 2016, there is no maximum age limit for directors. 2. Authority to issue Shares The proposed Resolution No. 8 (Item 6(b)), if passed, will grant a renewed general mandate (Mandate 2017) and empower the Directors of the Company to issue and allot shares up to an amount not exceeding in total ten per centum (10%) of the issued share capital of the Company from time to time and for such purposes as the Directors consider would be in the interest of the Company. In order to avoid any delay and costs involved in convening a general meeting, it is thus appropriate to seek shareholders approval. This authority will, unless revoked or varied by the Company in general meeting, expire at the next Annual General Meeting of the Company. The Mandate 2017 will provide flexibility to the Company for allotment of shares for any possible fund raising activities, including but not limited for further placing of shares, for the purpose of funding future investment(s), acquisition(s) and/or working capital. As at the date of this Notice, the Company did not issue any shares pursuant to the mandate granted to the Directors at the Twenty-Sixth Annual General Meeting. The Company did not issue any share pursuant to the mandate granted because there was no investment, acquisition or working capital that required fund raising activity. 03

5 CORPORATE INFORMATION BOARD OF DIRECTORS Ng Ngoon Weng Independent Non-Executive Chairman Shiue, Jong-Zone Managing Director Wu, Huei-Chung Executive Director Hsueh, Chih-Yu Executive Director Wu, Chung-Jung Non-Independent Non-Executive Director Goh Chooi Eam Independent Non-Executive Director COMPANY SECRETARIES How Wee Ling MAICSA Ooi Ean Hoon MAICSA AUDIT COMMITTEE Goh Chooi Eam - Chairman (Independent Non-Executive Director) Wu, Chung-Jung - Member (Non-Independent Non-Executive Director) Ng Ngoon Weng - Member (Independent Non-Executive Chairman) NOMINATING COMMITTEE Ng Ngoon Weng - Chairman (Independent Non-Executive Chairman) Wu, Chung-Jung - Member (Non-Independent Non-Executive Director) Goh Chooi Eam - Member (Independent Non-Executive Director) REMUNERATION COMMITTEE Shiue, Jong-Zone - Chairman (Managing Director) Ng Ngoon Weng - Member (Independent Non-Executive Chairman) Goh Chooi Eam - Member (Independent Non-Executive Director) AUDITORS Deloitte PLT Chartered Accountants Level 12A, Hunza Tower, 163E Jalan Kelawei, Penang Tel : Fax : REGISTERED OFFICE 57-G Persiaran Bayan Indah, Bayan Bay, Sungai Nibong, Penang Tel : Fax : SOLICITORS Syarikat Ng & Anuar No. 65-A, 2 nd Floor, Jalan Pengkalan, Taman Pekan Baru, Sungai Petani, Kedah Tel : Fax : PRINCIPAL BANKER Malayan Banking Berhad REGISTRAR Securities Services (Holdings) Sdn. Bhd. Level 7, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara Damansara Heights, Kuala Lumpur Tel : Fax : STOCK EXCHANGE LISTING ACE Market of Bursa Malaysia Securities Berhad Stock Name : SCOMNET Stock Code : ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

6 CORPORATE STRUCTURE AS AT DECEMBER 31, 2016 INFORMATION OF SUBSIDIARY COMPANY NAME SHAREHOLDING DATE OF INCORPORATION PRINCIPAL ACTIVITIES SUPERCOMAL ADVANCED CABLES SDN. BHD. 100% The company is principally involved in the manufacture of wires and cables INFORMATION OF ASSOCIATED COMPANY COMPANY NAME SHAREHOLDING DATE OF INCORPORATION PRINCIPAL ACTIVITIES SUPERCOMAL MEDICAL PRODUCTS SDN. BHD. 20% The company is principally involved in the manufacture of cables for medical devices 05

7 PROFILE OF DIRECTORS NG NGOON WENG Malaysian, Male, aged 59, Independent Non-Executive Chairman Mr. Ng Ngoon Weng was appointed to the Board on August 27, 2012 and later as Chairman of the Company on April 23, He holds a Degree in Social Science (Management Studies) from Universiti Sains Malaysia and a Diploma in Selling Financial Services from International Management Centre, London. He held managerial positions in various financial institutions in Malaysia for the past 20 years, from He possesses vast board experience having sat on board on other listed companies both as Executive Director and also Independent Director in the past. He is also the Chairman of Nominating Committee as well as member of the Audit Committee and Remuneration Committee of the Company. SHIUE, JONG-ZONE Taiwanese, Male, aged 71 Managing Director Mr. Shiue, Jong-Zone was appointed to the Board on September 25, He holds a Certificate in Industrial Engineering from Taipei Institute of Industry, which he received in He started his career as Marketing Planner at Matsushita Co. Ltd from 1969 to He then joined Sanyo Electrical Co. Ltd. from 1970 to 1983, his last post there being the Manufacturing Technical Chief. In 1983, he started his own company, King Royal Electric Inc., a company involved in the wire harnessing, cable moulding assembly, manufacturing of SCSI control modules, and other electrical/electronic products. He joined Supercomal Wire & Cable Sdn. Bhd. as the General Manager from 1993 to 1995 and presently is the Managing Director of the Company. He is the Chairman of the Risk Management Committee and Remuneration Committee. Mr. Shiue is the husband of Wu, Huei-Chung who is an Executive Director of the Company and father of Hsueh, Chih-Yu, an Executive Director of the Company. He is also the brother-inlaw of Wu, Chung-Jung who is a Non-Independent Non-Executive Director of the Company. WU, HUEI-CHUNG Taiwanese, Female, aged 69 Executive Director Mdm Wu, Huei-Chung was appointed to the Board on August 10, She holds a Certificate in Chemistry from Cheah Yi District Vocational School, Taiwan. She worked in various factories in Taiwan as Chemist, Production Supervisor and Technician after she graduated. She joined King Royal Electric Inc. (KREI) in 1984 as General Manager. She resigned from her post in KREI in 1998 to become a Director of the Company. She currently sits on the Board of several other private limited companies in Taiwan. Mdm Wu is the spouse of Shiue, Jong-Zone, the Managing Director of the Company and mother of Hsueh, Chih-Yu, an Executive Director of the Company. She is also the sister of Wu, Chung- Jung, who is a Non-Independent Non-Executive Director of the Company. 06 ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

8 PROFILE OF DIRECTORS (CONT'D) HSUEH, CHIH-YU Taiwanese, Male, aged 45 Executive Director Mr. Hsueh Chih Yu was appointed as an Executive Director of the Company on November 26, He joined King Royal Electric Incorporation (KREI) as Engineer in year He participate in the whole design process of General Purpose Interfaces Bus Cable, IEEE-488 and also the SCSI Hard Disk Extension Box. After working 7 years with KREI, Mr. Hsueh continued career advancement to Supercomal Advanced Cables Sdn. Bhd. (SAC) as senior manager in year 2001 where he leads a team to design, testing and produce internet wire like CAT-5, CAT-5E, CAT-6 and HDMI., he served SAC for 6 years and in year 2008, he was given golden opportunity to head the production department in Supercomal Medical Products Sdn. Bhd. producing medical wire for the usage of medical surgical equipment. He is the son of Shiue, Jong-Zone, the Managing Director of the Company and Wu, Huei-Chung who is an Executive Director of the Company. WU, CHUNG-JUNG Taiwanese, Male, aged 72 Non-Independent Non-Executive Director Mr. Wu, Chung-Jung was re-appointed into the Board on May 26, He joined Royal Navy in 1969 after graduating from the Republic of China Navy Academy. In 1978, he left Royal Navy and joined King Royal Electric Incorporation until 1983 as a General Manager. He then joined Three Talents Co. Ltd as General Manager from 1983 to He held the same position in Ming Chau Construction Co. Ltd from 1992 to 1993 before being appointed as Chairman of Supercomal Wire and Cable Sdn. Bhd. from 1993 to He also sits in the Audit Committee and Nominating Committee of the Company since August 26, He is the brother in law of Shiue, Jong-Zone, the Managing Director of the Company and is also the brother of Wu, Huei-Chung who is an Executive Director of the Company. GOH CHOOI EAM Malaysian, Male, aged 56 Independent Non-Executive Director Mr. Goh Chooi Eam was appointed to the Board on August 27, He is a Member of the Malaysian Institute of Accountant, Fellow of Chartered Tax Institute of Malaysia, Fellow of the Association of Chartered Certified Accountants and also a Certified Financial Planner of Financial Planning Association of Malaysia. He was attached to Messrs. Allan Ong & Co., Sateras Managament Sdn. Bhd. and Messrs. Tor & Co. between 1984 and 1988, from which he acquired both statutory and internal audit training. Mr. Goh qualified as a Chartered Certified Accountant in He joined Messrs. Coopers & Lybrand (now merged under the firm Messrs. PricewaterhouseCoopers) in 1989 as an Audit Assistant and was promoted to Assistant Audit Manager in He left Messrs. Coopers & Lybrand in 1994 to set up his own practice under the name of Messrs. CE Goh & Associates providing audit, accounting and other related services. He is a Director of CE Goh Taxation Services Sdn. Bhd. providing tax consultancy services. He is the Chairman of Audit Committee and a member of Nominating Committee of the Company. 07

9 PROFILE OF DIRECTORS (CONT'D) ADDITIONAL INFORMATION ON DIRECTORS: (i) Directorship in Public Companies and Listed Corporations All Directors of the Company do not have other directorship in public companies and listed issuers. (ii) Family Relationships with any Director and/or Major Shareholder Save for Shiue, Jong-Zone, Wu, Huei-Chung, Hsueh, Chih-Yu and Wu, Chung-Jung as mentioned above, none of the Directors has family relationship with any other Directors and/or Major Shareholders of the Company. (iii) Directors Shareholdings Details of the Directors shareholdings in the Company are provided in page 38 of this Annual Report (iv) No Conflict of Interest All Directors of the Company do not have any conflict of interest with the Company. (v) Non-Conviction of Offences Other than traffic offences (if applicable), none of the Director convicted for any offences within the past 5 years and no public sanction or penalty imposed by the relevant regulatory bodies to the Directors during the financial year. (vi) Attendance at Board Meetings Please refer to Statement on Corporate Governance on page 22 of this Annual Report. 08 ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

10 PROFILE OF KEY SENIOR MANAGEMENT LIM ENG CHUAN Malaysian, Male, aged 49 Mr. Lim Eng Chuan was appointed to the position of Assistant General Manager of Supercomnet Technologies Berhad on September 1, He holds a Bachelor of Economic (Hons) in Economic Development and Planning from National University of Malaysia. He is also a certified Quality Management System Trainer and Lead Assessor. During his 20 years of service with Supercomnet Technologies Berhad, he has held key positions and handled a variety of responsibilities in the areas of Research and Development, Sales and Marketing, overall development, implementation and review of Quality Management System. Prior to join Supercomnet Technologies Berhad, he started his career with Teco Industry (M) Sdn Bhd in year 1993 as a Quality Assurance Officer. As at March 31, 2017, he holds 670,000 Ordinary Shares in Supercomnet Technologies Berhad. SONG GUIK TEIK Malaysian, Male, aged 54 Mr. Song Guik Teik holds a Diploma in Accounting, he has 27 years working experience in accounting, human resource, finance, audit, tax, internal audit and corporate governance. He joined the Company as Assistant Finance Manager in April 2005 and promoted to the position as Finance Manager on April 1, 2011 until present. As at March 31, 2017, he does not hold any shares in Supercomnet Technologies Berhad. WANG, YU-CHUAN Taiwanese, Male, aged 50 Mr. Wang, Yu-Chuan is the plant manager of Supercomnet Technologies Berhad. He obtained a Diploma in Technical Skills from Pau Chong Technical Training Centre, Taiwan. He worked in Pan International Wire & Cable Co. Ltd as Production Technician in 1985 before joining Shih Lin Wire & Cable Co. Ltd in 1987 assume the same position as before. In 1989 he joined Supercom Wire & Cable Co. Ltd as Production Supervisor, and was transferred to Supercomnet Technologies Berhad on January 1, 1991 as Plant Manager. He assume the same position until present. He has more than 25 years experience in the wire and cable manufacturing industry. As at March 31, 2017, he holds 900,000 Ordinary Shares in Supercomnet Technologies Berhad. 09

11 PROFILE OF KEY SENIOR MANAGEMENT (CONT'D) ADDITIONAL INFORMATION ON KEY SENIOR MANAGEMENT: (i) Directorship in Public Companies and Listed Issuers None of the Key Senior Management sit on the Board of any public companies and listed issuers. (ii) Family Relationships with any Director and/or Major Shareholder None of the Key Senior Management has family relationship with any Directors and/or Major Shareholders of the Company. (iii) No Conflict of Interest All the Key Senior Management of the Company do not have any conflict of interest with the Company. (iv) Non-Conviction of Offences Other than traffic offences (if applicable), none of the Key Senior Management convicted for any offences within the past 5 years and no public sanction or penalty imposed by the relevant regulatory bodies to the Key Senior Management during the financial year. 10 ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

12 MANAGEMENT DISCUSSION & ANALYSIS 1. INTRODUCTION Supercomnet Technologies Berhad (STB or the Company) commenced its business in August 1991 and was listed on the ACE market on April 30, It has 25 years experience in the cable and wire business. The Group consists of one subsidiary company and holds 20% equity interest in Supercomal Medical Products Sdn. Bhd. 2. BUSINESS OPERATION REVIEW Business Operation The Group engaged in the business of manufacturing, assembling and selling cable and wires for industrial usage. The manufacturing operation is located at Sungai Petani, Kedah, Malaysia. Our business objective is to enhance the shareholders value. We take pride in maintaining efficiency in our operation while adopting industry best practices in our quality control and delivery system. The Company has been building our brand through quality products that meet internationally recognized quality standards such as ISO, TUV, etc. The company-wide human resource development and long-term succession planning have been one of the core focus of the organisation in the past 3 years. Products and Markets The Company produces a wide range of cables and wires catering for the following market: Automotive industry - Cables are produced for the local wire-harness assembly house for passenger vehicle sector. Our cables have adhered to the most stringent quality control and testing and as such, has met and surpassed industry standard such as JASO and has been widely accepted by the industry. Home appliances UL and CSA certified cables that make hook up wire for home appliance usage and its related wires to customers like Panasonic, Sony, and Yamaha. General usage Cables used for audio, video, computer, air-conditioner and refrigerator. Medical industry Cable and wire used for medical devices for export market. The Company also produces cable related ancillary products to enhance product range. Supercomal Advanced Cables Sdn. Bhd. (SAC) SAC is our wholly owned subsidiary with principal business activities in the manufacture and assembly of wires and cables. Though the sales volume contributed by the subsidiary has been insignificant in the past, the Group is cautiously optimistic about the prospect of the business and will be pursuing new market opportunities to further enhance the income contribution of this segment. Supercomal Medical Products Sdn. Bhd. (SMP) STB has 20% equity interest in SMP. SMP is principally involved in the manufacture of cables for medical devices. 11

13 MANAGEMENT DISCUSSION & ANALYSIS (CONT'D) 2. BUSINESS OPERATION REVIEW (cont'd) Materials for production Copper and Polyvinyl Chloride (PVC) are main components in the making of wire. Both raw materials are imported from overseas and subject to the supply and demand situation in the international market. At the same time, the company is also exposed to foreign exchange risk due to the volatility of the foreign currency, in particularly the fluctuation of USD vs Ringgit. In addition, since the Copper price is quoted on the London Metal Exchange (LME), the cost of Copper is further subject to price fluctuation on the exchange. To mitigate the volatility of the raw material cost, we are compelled to take special measures to protect the product margin, including close monitoring of both copper and PVC price on a day to day basis, strict raw material supply lead time, precise sales-purchase matching and close collaboration with suppliers to ensure minimal stock holding with zero production interruption. Based on the current market scenario, we do not anticipate any interruption in the supply of such materials in the prevailing market condition in the short term. Business environment In line with the current tight labour situation and the overall trend in the market condition, we will continue to strive to penetrate the high-end product in the market through continual research and new product development to sustain our future growth. While maintaining the current product portfolios, the Group will endeavor to fully exploit the manufacturing capability of the subsidiary and strive to further integrate our production resources and efficiency within the subsidiary company. The Group will continue to embark on further automation for high product mix and precision manufacturing capability to enhance future performance. Objective and strategy The Company will derive additional business from the sub-contracting of medical cable and sub-assembly of medical related products to drive revenue and margin in The Group will invest additional resources including the upgrading of machinery in relation to the production of cable and wire for the medical industry. The upgrading is anticipated to enhance productivity up to 1.5 million pieces per month. With further automation of the soldering division of Printed Circuit Board Assembly (PCBA), we anticipate the production capacity to reach 1 million pieces of PCBA per month upon full deployment of the new capacity. Outlook The current wire and cable market remain saturated with thin margin and little prospect for growth, however, the Group remains optimistic about the prospect of 2017 and in anticipation in exploring new product range and customer base in the wire and cable product for the medical industry. The on-going reengineering of production capability will keep our cost manageable and should translate the effort into profitability in the current year. At the same time, the Group will continue to seek viable and synergistic business opportunities to enhance future performance and profit sustainability. 12 ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

14 MANAGEMENT DISCUSSION & ANALYSIS (CONT'D) FINANCIAL REVIEW FINANCIAL HIGHLIGHT Financial year ended 31 December RM 000 RM 000 RM 000 RM 000 RM 000 Turnover 34,643 26,278 33,528 34,941 30,413 Profit before tax 1, ,972 2,332 Profit after tax attributable to the owners of company 1, ,982 2,346 sen sen sen sen sen Net earnings per share Net asset per share Payment of dividend per share Revenue The Group recorded turnover of RM million for the financial year ended 31 December 2016, a decrease of 13% over the Group s revenue of RM million in the previous financial year. The decrease in the sales resulted from the lesser demand of wire and cables from customers in year 2016 who produced assembled wire harness used for passenger cars. The data below shows that there is a 10.7% decrease in the passenger car production and assembled in year 2016 as compared to year Similarly the same downward trend of 13% was also recorded for the demand for new passenger car in the market. SUMMARY OF PASSENGER CARS PRODUCED AND ASSEMBLED IN MALAYSIA , ,883 SUMMARY OF NEW PASSENGER CARS REGISTERED IN MALAYSIA , ,298 (The above data are extracted from the source in Malaysian Automotive Association ) Manufacturing Costs Total cost of sales for the Group for the year was RM million against RM million in the previous year. The reduction in the manufacturing cost is in tandem with the decrease in revenue. Copper and PVC are the main material used to manufacture cable. Both are major cost components of manufacturing cost. 13

15 MANAGEMENT DISCUSSION & ANALYSIS (CONT'D) Expenses Increase noted in the administrative expenses were due to the yearly increment exercise and minimum wage requirement. Other operating expenses are higher due to the impairment loss, provision for slow moving stocks, and customs duty underpaid. Finance costs The Group presently do not have any borrowings with bank and thus no interest was paid to the bank. Liquidity and Capital Resources The Group's cash position increased by RM 379,000 from RM million as at December 31, 2015 to RM million as at December 31, Cash used in operations was RM 582,000. RM 434,000 was spent on capital expenditure to acquire machinery to enhance productivity. Gearing There was no gearing as the Company do not have any bank borrowings. Dividend Payout During the 26 th Annual General Meeting held on May 27, 2016, the Shareholders of the Company approved the Single Tier Final Dividend of 0.40 sen per share for the year ended December 31, 2015 to depositors registered in the Register of Depositors on June 9, The said dividend of RM972,000 was paid to the respective depositors on July 8, ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

16 STATEMENT ON CORPORATE GOVERNANCE The Board of Directors ( the Board ) of Supercomnet Technologies Berhad ( STB or the Company ) recognises the importance of good corporate governance and is committed to ensure that good corporate governance is being practised by the Group in order to safeguard stakeholders interests as well as enhancing shareholders value. This Statement sets out the manner in which the Group has applied and the extent of compliance with the principles and recommendations as set out in the Malaysian Code on Corporate Governance 2012 ( MCCG 2012 or the Code ). 1. CLEAR ROLES AND RESPONSIBILITIES 1.1 Functions of the Board To ensure the effective discharge of its function and responsibilities, the Board established an internal governance model for delegating of specific powers of the Board to the relevant Board Committees, the Managing Director ( MD ) and the Senior Management of the Company. Key matters reserved for the Board s approval including but not limited to the business continuity plan, issuance of new securities, business restructuring, acquisition and disposals of significant property, plant and equipment. All Board s decisions are recorded in the minutes, including the deliberation for each decision, along with actions to be taken and the individuals responsible for implementation. Relevant Board decisions are communicated to the Management for implementation within a reasonable timeframe. The MD plays an important role in ensuring the matters delegated to the Management are efficiently executed. The Board has direct access to Senior Management and has unrestricted and immediate access to information relating to the Group s business and affairs in the discharge of their duties. The Board will invite the Senior Management to attend meetings for reporting on major issues relating to their respective responsibility. Periodic briefings on the Group s prospects and performance are also conducted for the Directors to ensure that the Board is well informed on the Group s operational, financial and corporate issues. The Board Committees are entrusted with specific responsibilities to oversee the Group s affairs, with authority to act on behalf of the Board in accordance with their respective Terms of Reference ( ToR ). At each Board meeting, minutes of Board Committee meetings will be circulated to the Board to keep the Board informed. The Chairman of the relevant Board Committees also report to the Board on key issues deliberated by the Board Committees at their respective meetings. 1.2 Roles and responsibilities of the Board In discharging its stewardship, the Board is constantly mindful of safeguarding the interests of the Group s stakeholders and is ultimately responsible for the performance of the Group. The Board assumes the following core responsibilities:- Reviewing and adopting strategic plans for the Group; Overseeing the conduct of the Group s business to evaluate whether the business is being properly managed; Identifying principal risks and ensuring the implementation of appropriate systems to manage these risks; Succession planning including appointing, training, fixing the compensation of the Senior Management and, where appropriate, replacing senior management; Developing and implementing an investor relation programme or shareholder communication policy for the Company; and Reviewing the adequacy and the integrity of the Group s internal control systems and management information systems, including systems for compliance with applicable laws, regulations, rules, directives and guidelines. 15

17 STATEMENT ON CORPORATE GOVERNANCE (CONT'D) 1. CLEAR ROLES AND RESPONSIBILITIES (cont'd) 1.3 Ethical standards through Code of Ethics The Company s Code of Ethics for Directors continue to govern the standards of ethics and good conduct expected of Directors. The Code of Ethics for Directors includes principles relating to their duties, conflict of interest and dealings in securities are available at the Company s website. As a measure to govern the conduct of its employees, the Company has in place its Whistleblower Policy and Procedures ( WPP ). The WPP seek to foster an environment where integrity and ethical behaviour are maintained and any illegal or improper action and/or wrongdoing in the Company may be exposed. The Board has overall responsibility to oversee the implementation of the WPP and all whistle-blowing reports are to be addressed to the respective personnel as assigned pursuant to the Groups WPP. This mechanism will allows the stakeholders of STB to report concerns about alleged unethical behaviour, actual or suspected fraud within the Group, or improper business conduct affecting the Group and about business improvement opportunities. The WPP of STB is available at its corporate website. 1.4 Strategies promoting sustainability The Board promotes good corporate governance in the application of sustainability practices throughout the Group, the benefits of which are believed to translate into better corporate performance. A report on sustainability activities, demonstrating STB s commitment to the global environmental, social and governance, is detailed in the Corporate Social Responsibility Statement of this Annual Report. 1.5 Access to information and advice The Directors have individual and independent access to the advice and dedicated support services of the Company Secretaries in ensuring the effective functioning of the Board. The Directors may seek advice from the Management on issues under their respective purview. The Directors may also interact directly with the Management, or request further explanation, information or updates on any aspect of the Company s operations or business concerns from them. In addition, the Board may seek independent professional advice at the Company s expense on specific issues to enable it to discharge its duties in relation to matters being deliberated. Individual Directors may also obtain independent professional or other advice in furtherance of their duties, subject to the approval of the Chairman or the Board, depending on the quantum of the fees involved. The Board meetings are chaired by the Chairman who has the responsibility of ensuring that there is adequate and sufficient time for discussion of items on the agenda. To facilitate productive and meaningful deliberations, the proceedings of the Board meetings are conducted in accordance with a structured agenda. The Notice of Meetings were circulated to the Directors at least 7 days before convening the Board meeting. 1.6 Qualified and competent Company Secretaries Both Company Secretaries of the Company have legal credentials, and are qualified to act as company secretary under Section 235(2) of the Companies Act The Company Secretaries play an advisory role to the Board in relation to the Company s constitution, Board s policies and procedures and compliance with the relevant regulatory requirements, codes or guidance and legislations. The Company Secretaries provides support to the Chairman to ensure the effective functioning of the Board and also organises and attends all Board meetings and Board Committees meetings, ensuring that an accurate and proper record of deliberation of issues discussed, decisions and conclusions are taken. The Board ensures that all its Directors have access to the advice and services of the Group Company Secretaries. 16 ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

18 STATEMENT ON CORPORATE GOVERNANCE (CONT'D) 1. CLEAR ROLES AND RESPONSIBILITIES (cont'd) 1.6 Qualified and competent Company Secretaries (cont'd) The Company Secretaries record, prepare and circulate the minutes of the meetings of the Board and Board Committees and ensure that the minutes are properly kept at the registered office of the Company and produced for inspection, if required. The Company Secretaries also serve notices to the Directors and Principal Officers on the closed periods for trading in STB shares pursuant to Chapter 14 of the Bursa Malaysia Securities Berhad ACE Market Listing Requirements ( ACE LR ). Besides, Company Secretaries also keep the Board update on new statutes and directives issued by the regulatory authorities, and the resultant implications to the Company and the Directors in relation to their duties and responsibilities. 1.7 Board Charter The Board has made available its Board Charter on the corporate website. The document clearly sets out the roles and responsibilities of the Board and Board Committees and the processes and procedures for convening their meetings. It serves as a reference and primary induction literature providing prospective and existing Board members and Management insights into the fiduciary and leadership functions of the Directors of STB. The Board reviews its charter as and when required, to keep it up to date with changes in regulations and best practices and ensure its effectiveness and relevance to the Board s objectives. The Board last reviewed its charter on March 28, STRENGTHEN COMPOSITION 2.1 Nominating Committee ("NC") STB established its NC which comprising exclusively non-executive directors, a majority of whom must be independent to assist the Board in recommending appointment of new Directors and assessing the effectiveness of the Board. The composition of the Nominating Committee is as follows: Chairman: Ng Ngoon Weng (Independent Non-Executive Chairman) Members: Wu, Chung-Jung (Non-Independent Non-Executive Director) Goh Chooi Eam (Independent Non-Executive Director) The NC assumes the following core responsibilities:- formulating the nomination, selection and succession policies for members of the Board; review the structure, size and diversity (including without limitation, gender, age, cultural and educational background, ethnicity, professional experience, skills, knowledge and length of service) of the Board; consider the election criteria and develop procedures for the sourcing and election of candidates to stand for election by STB s shareholders ( Shareholders ) or to fill casual vacancies of Directors; identify and nominate candidates to the Board for it to recommend to Shareholders for election as Directors; undertake an assessment of its Independent Directors annually; review the training needs for the Directors regularly; and establishing a set of quantitative and qualitative performance criteria to evaluate the performance of each member of the Board, each Board Committee and reviewing the performance of the Board as a whole. 17

19 STATEMENT ON CORPORATE GOVERNANCE (CONT'D) 2. STRENGTHEN COMPOSITION (cont'd) 2.1 Nominating Committee ("NC") (cont'd) Details of the ToR for NC of STB are available at its corporate website. The activities carried out by the NC during the financial year ended December 31, 2016 ( FYE 2016) in discharging its functions are as follows: reviewed the structure, size and diversity (including without limitation, gender, age, cultural and educational background, ethnicity, professional experience, skills, knowledge and length of service) of the Board; reviewed the training needs for the Directors; established a set of quantitative and qualitative performance criteria to evaluate the performance of each member of the Board, each Board Committee and reviewing the performance of the Board as a whole; established an assessment form for assessment of independency of its Independent Directors; undertaken review of independency of Independent Directors. 2.2 Nominating Committee should develop, maintain and review criteria for recruitment and annual assessment of Directors The Company has in place its procedures and criteria for appointment of new directors. All candidates for appointment are first considered by the NC, taking into account the mix of skills, competencies, experience, professionalism and other relevant qualities required to well manage the business, with the aim to meet the current and future needs of the Board composition. The NC also evaluates the candidates character and ability to commit sufficient time to the Group. Other factors considered for appointment of Independent Director will include the level of independence of the candidates. The NC will also be reviewing the composition of respective board committee of the Group to ensure its effectiveness in functioning. The NC also established a set of quantitative and qualitative performance criteria to evaluate the performance of each member of the Board, each Board Committee and reviewing the performance of the Board as a whole. The Board s effectiveness is assessed in the areas of composition, administration, accountability and responsibility, conduct and the performance of the Chairman. The criteria for assessment of each Director or Committee member shall include attendance record, intensity of participation at meetings, quality of interventions, special contributions to demonstrate a high level of professionalism and integrity in the decision-making process. The performance of those Directors who are subject to re-appointment and re-election of Directors at the Annual General Meeting ("AGM") will be assessed by the NC where upon recommendations are submitted to the Board for decision on the tabling of the proposed re-appointment or re-election of the Director concerned for shareholders approval at the next AGM. On March 28, 2017, an assessment of the effectiveness of the Board, respective Board Committee and Independence ( the Assessment ) were carried out in respect of the FYE Appraisal form which comprising quantitative and qualitative performance criteria to evaluate the performance of each member of the Board as well as each Board Committee, were being circulated at the Meeting for assessment. The NC reviewed the required mix of skills, experience and other qualities of the Board and Board Committee and agreed that it has the necessary mix of skill, experience and other necessary qualities to serve effectively. In accordance with the Company s Articles of Association ( AA ), all Directors are subject to re-election by shareholders at the AGM following their appointment. At least one-third (1/3) of the remaining Directors shall retire from office at each AGM at least once in every three (3) years, but shall be eligible for re-election. 18 ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

20 STATEMENT ON CORPORATE GOVERNANCE (CONT'D) 2. STRENGTHEN COMPOSITION (cont'd) 2.2 Nominating Committee should develop, maintain and review criteria for recruitment and annual assessment of Directors (cont'd) Notwithstanding the recommendation of the MCCG 2012, the Board is presently of the view that there is no necessity to fix a specific gender diversity policy. Presently, Madam Wu, Huei-Chung is the only female director sits in the Board of STB as its Executive Director. The Board will endeavor to tap talent from human capital market from time to time with the aim to have more female directors in its Board in the future. 2.3 Remuneration policies The Remuneration Committee ("RC") was established with responsibility for recommending to the Board on the remuneration framework as well as the remuneration package of Executive Directors to ensure that rewards commensurate with their contributions to the Group s growth and profitability in order to align the interest of the Directors with those of the shareholders. The Committee also ensures the level of remuneration for Non-Executive Directors and Executive Directors are linked to their level of responsibilities undertaken and contributions to the effective functioning of the Board. The composition of the RC is as follows: Chairman: Shiue, Jong-Zone (Managing Director) Members: Ng Ngoon Weng (Independent Non-Executive Chairman) Goh Chooi Eam (Independent Non-Execitove Director) The Company s remuneration policy for Directors is formulated to attract and retain individuals of the necessary calibre needed to run the business of the Group successfully. The remuneration is structured to link experience, expertise and level of responsibility undertaken by the Directors. The Directors play no part in deciding their own remuneration and shall abstain from discussing or voting on their own remuneration. The current remuneration policy of the Group is summarised as follows:- a) The Directors salary for Executive Directors are set at a competitive level for similar roles within comparable markets, reflect the performance of the director, skills and experience as well as responsibility undertaken. b) Directors Fee are based on a standard fixed fee and are subject to approval by its shareholders at the AGM. c) Meeting Allowance All the Non-Executive Directors are entitled to a fixed amount of allowance paid in accordance with the number of meeting attended during the year. d) Benefits-in-kind only Executive Directors of the Group are entitle to benefits-in-kind provided by the Group. e) The RC may obtain independent professional advice in formulating the remuneration package of its Directors. 19

21 STATEMENT ON CORPORATE GOVERNANCE (CONT'D) 2. STRENGTHEN COMPOSITION (cont'd) 2.3 Remuneration policies (cont'd) The details of the Directors remuneration comprising remuneration received/receivable from the Company and its subsidiary company during FYE 2016 are as follows: I. Aggregate remuneration of the Directors categorized into appropriate components: Bonus & Other Category Fee Salaries emoluments Allowances Total (RM) (RM) (RM) (RM) (RM) Executive Directors - Company 93, ,000 60, ,500 - Subsidiary Non-Executive Directors - Company 91, , ,340 - Subsidiary Total 184, ,000 60,220 14, ,840 II. The number of Directors whose total remuneration fall within the following bands: Number of Directors Range of Remuneration Executive Non-Executive Below RM50, RM200,001 RM250, RM250,001 to RM300, Details of the remuneration of each Director are not disclosed as the Board is of the view that the transparency and accountability aspects of corporate governance on disclosure of Directors remuneration are appropriately served by the above disclosures. 3. REINFORCE INDEPENDENCE 3.1 Annual Assessment of Independence The NC played an important role to assist the Board in assessing the independence of Non-Executive Directors of the Company on annual basis. Based on the assessment conducted by the NC, the Board is generally satisfied with the level of independence demonstrated by all the Independent Directors of the Company and their ability to act in the best interest of the Company. The NC is also developing the criteria to assess independence of Independent Director, include but not limited to directors background, family relationships, interest of shareholdings in the Company and related party transactions with the Group (if any). 20 ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

22 STATEMENT ON CORPORATE GOVERNANCE (CONT'D) 3. REINFORCE INDEPENDENCE (cont'd) 3.2 Tenure of Independent Directors Notwithstanding the recommendation of the MCCG 2012, the Board is presently of the view that there is no necessity to fix a maximum tenure limit for Directors as there are significant advantages to be gained from the long-serving Directors who possess tremendous insight and knowledge of the Company s businesses and affairs. Similarly, the Board does not set a time-frame on how long an Independent Director should serve on the Board, mainly for the following reasons:- The ability of a Director to serve effectively as an Independent Director is very much dependent on his caliber, qualification, experience and personal qualities, particularly his integrity and objectivity, and has no real connection to his tenure as an Independent Director. NC conducts an annual assessment of Independent Directors in respect of inter alia their skills, experience and contributions, and whether the Independent Directors are able to discharge their duties with unbiased judgement. Furthermore, the NC also reviews the Directors' Profile of Independent Directors and assess its family relationship, interest of shareholdings in the Company and related party transactions with the Group (if any). 3.3 Shareholders approval for retain of Independent Director who has served for more than 9 years Currently, all the Independent Directors of the Company served less than a tenure of 9 years in the Company. 3.4 Separation of roles of Chairman and Managing Director The Company practises a division of responsibilities between the Independent Non-Executive Chairman and the Managing Director. Their roles are separated and clearly defined to ensure a balance of power and authority, increased accountability and greater capacity of the Board for Independent decision-making. The Chairman is not related to the Managing Director. The Chairman is responsible for the Board s effectiveness and conduct. He also promotes an open environment for debate and ensures effective contributions from Non-Executive Directors. The Chairman also exercises control over the quality, quantity and timeliness of information flow between the Board and Management. At a general meeting, the Chairman plays a role in fostering constructive dialogue between shareholders, Board and Management. The Managing Director is in charge of the day-to-day operations of the business, making strategic business decisions and implementing Board policies. 3.5 Composition of the Board The Board currently has Six (6) members comprising the Independent Non-Executive Chairman, one (1) Managing Director, two (2) Executive Directors, One (1) Independent Non-Executive Director and one (1) Non-Independent Non-Executive Director. This composition complies with Rule of the ACE LR whereby the Company must have at least two (2) Directors or one-third (1/3) of the Board, whichever is higher, who are Independent Directors. In the event of any vacancy in the Board resulting in the non-compliance with the above, the Company must fill the vacancy within three (3) months. The Board is of the opinion that the interests of shareholders of the Company are fairly represented by the current Board composition and its size constitutes an effective Board of the Company. The presence of at least two (2) Independent Non-Executive Directors is essential in providing guidance, unbiased, fully balanced and independent views, advice and judgement to many aspects of the Group s strategy so as to safeguard the interests of minority shareholders and to ensure that high standards of conduct and integrity are maintained by the Group. 21

23 STATEMENT ON CORPORATE GOVERNANCE (CONT'D) 3. REINFORCE INDEPENDENCE (cont'd) 3.5 Composition of the Board (cont'd) The Chairman of the Company is an independent director. The Board is of the opinion that Mr. Ng Ngoon Weng has demonstrated that he is independent from the Management and free from business relationship that might interfere with the exercise of independent judgement. Mr. Ng Ngoon Weng has not hold any shares in STB. The Board has not nominate a Senior Independent Non-Executive Director to whom concerns may be conveyed as the Board is of the opinion that given the strong independent element of the Board, any concern regarding the Group may be conveyed by shareholders or investors to any of the Independent Directors at the following address and such concerns will be reviewed and addressed by the Board accordingly:- Mr. Ng Ngoon Weng / Mr. Goh Chooi Eam Supercomnet Technologies Berhad 57-G Persiaran Bayan Indah, Bayan Bay, Sungai Nibong, Penang 4. FOSTER COMMITMENT 4.1 Time Commitment The Board meets at least, quarterly, to consider all matters relating to the overall control, business performance and strategy of the Company. Additional meeting will be called when and if necessary. The relevant reports and Board Papers are distributed to all Directors in advance of the Board Meeting to allow the Directors sufficient time to peruse for effective discussion and decision making during the meetings. All pertinent issues discussed at the meetings in arriving at decisions and conclusions are properly recorded in the discharge of the Board s duties and responsibilities. The Board is satisfied with the level of time commitment given by the Directors towards fulfilling their roles and responsibilities as Directors of STB. This is evidenced by the attendance record of the Directors at Board meetings. The Board meets on a quarterly basis with additional meetings held whenever necessary. The Board met five (5) times during the year under review. The meeting attendance record for the FYE 2016 of the Directors is as follows: Meeting Attendance Shiue, Jong-Zone 5/5 Wu, Huei-Chung 4/5 Wu, Chung-Jung 4/5 Goh Chooi Eam 5/5 Ng Ngoon Weng 5/5 Hsueh, Chih-Yu 5/5 To ensure that the Directors have the time to focus and fulfill their roles and responsibilities effectively and in line with the ACE LR, a Director of STB must not hold directorships of more than five (5) Public Listed Companies and must be able to commit sufficient time to STB. The Directors are required to submit an update on their other directorships from time to time for monitoring of the number of directorships held by the Directors of STB and for notification to Companies Commission of Malaysia accordingly. To facilitate the Directors time planning, the Directors will always pre-fix its forthcoming meeting at each of its Board of Directors Meeting. 22 ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

24 STATEMENT ON CORPORATE GOVERNANCE (CONT'D) 4. FOSTER COMMITMENT (cont'd) 4.2 Continuing Training Programme The Directors are mindful that they should continue to attend training programmes to enhance their skills and knowledge where relevant, as well as to keep abreast with the changing regulatory and corporate governance developments. The details of trainings attended by the Directors of the Company during the FYE 2016 are as follows:- Director Date Description Day Shiue, Jong-Zone November 23, 2016 Understanding the Directors Obligations and Risk Management Wu, Huei-Chung November 23, 2016 Understanding the Directors Obligations and Risk Management Wu, Chung-Jung November 23, 2016 Understanding the Directors Obligations and Risk Management Goh Chooi Eam February 18 & 19, 2016 A Comprehensive Review of Malaysian Private Entity Reporting Standards (MPERS) February 25, 2016 May 18, 2016 Goods & Services Tax: Essential Compliance Updates & Commercial Properties Scope Post-GST Implementation Issues: Latest DG s Decision & Orders ½ Day ½ Day ½ Day 2 Days 1 Day 1 Day August 9 & 10, 2016 National Tax Conference Days November 23, 2016 Understanding the Directors Obligations and Risk Management Ng Ngoon Weng November 23, 2016 Understanding the Directors Obligations and Risk Management Hsueh, Chih-Yu November 23, 2016 Understanding the Directors Obligations and Risk Management ½ Day ½ Day ½ Day 5. UPHOLD INTEGRITY IN FINANCIAL REPORTING 5.1 Compliance with applicable financial reporting standards The Board ensures that shareholders are provided and presented a balanced and meaningful assessment of the Group s financial performance, its position and future prospects through the issuance of Annual Audited Financial Statements, quarterly financial reports and corporate announcements on significant developments affecting the Company in accordance with the LR. Details of the Directors Responsibilities in the preparation of the Group s financial statements are disclosed in page 35 of this Annual Report

25 STATEMENT ON CORPORATE GOVERNANCE (CONT'D) 5. UPHOLD INTEGRITY IN FINANCIAL REPORTING (cont'd) 5.1 Compliance with applicable financial reporting standards (cont'd) The Board is assisted by the AC in overseeing the Group s financial reporting processes and the quality of its financial reporting. The AC reviews the Group s annual financial statements and the quarterly condensed financial statements focusing particularly on changes in accounting policies, Management s judgement in applying these accounting policies as well as assumptions and estimates applied in accounting for certain material transactions. In this regard, the main activities, amongst others, undertaken by the AC during the financial year are detailed in page 30 to 32 of this Annual Report. 5.2 Assessment of suitability and independence of external auditors The AC undertakes an annual assessment of the suitability and independence of the external auditors. The Board maintains a transparent relationship with external auditors. Members of the AC meet the external auditors at least twice a year without the presence of the executive Board members to discuss the results and concerns arising from their audit. Two discussion sessions between the AC and the external auditors were held on March 29, 2016 and November 23, 2016 respectively. The AC had obtained written assurance from its external auditors, Deloitte PLT, confirmed that they are, and have been independent throughout the conduct of the audit engagement in accordance with the terms of all relevant professional and regulatory requirements. The AC recommended the re-appointment of Deloitte PLT as the External Auditors of the Group for the ensuing year ending December 31, 2017 after having satisfied with its audit independence and the performance of Deloitte PLT throughout its course of audit for the FYE 2016, amongst others:- satisfied that the quality processes/ performance of External Auditors; able to give adequate technical support when audit issue arise; and adequate experience and resources of Deloitte PLT and audit engagements. 6. RECOGNISE AND MANAGE RISK 6.1 Sound framework to manage risk With the assistance of its outsourced Internal Auditors ("IA"), the AC oversees the Risk Management framework of the Group and reviews the risk management framework formulated by the Management. The Company had also formed its Risk Management Committee ("RMC") to closely monitor the Group s risk profile. The RMC will continue review and recommend to the Board the type and level of business risks of STB Group and the appropriate framework and policies for managing such risks. 6.2 Internal Audit Function The Group has engaged the services of an independent professional firm to provide much of the assurance it requires regarding the effectiveness as well as the adequacy and integrity of the Group s systems of internal control. The internal auditors report directly to the Audit Committee on its activities based on the approved annual Internal Audit Plans. Its principal role is to provide independent assurance on the adequacy and effectiveness of governance, risk management and internal control processes. Further details of the Internal Audit activities are set up in the Statement on Risk Management and Internal Control of this Annual Report. 24 ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

26 STATEMENT ON CORPORATE GOVERNANCE (CONT'D) 7. ENSURE TIMELY AND HIGH QUALITY DISCLOSURE 7.1 Corporate Disclosure Policy The Board is mindful on the importance of maintaining a proper corporate disclosure procedures with the aim to provide shareholders and investors with comprehensive, accurate and quality information on a timely basis. Personnel and working team for preparing the disclosure will conduct due diligence and proper verification, as well as coordinate the efficient disclosure of material information to the investing public. The Board exercise close monitoring of all price sensitive information potentially required to be released to Bursa Securities and makes material announcements to Bursa Securities in a timely manner as required. In line with best practices, the Board strives to disclose price sensitive information to the public as soon as practicable through Bursa Malaysia Securities Berhad ("Bursa Securities") and the company s website. 7.2 Leverage on information technology for effective dissemination of information In line with the recommendation by the ACE LR and the Code, material information is disseminated to shareholders and investors on a timely basis. These information, which could be accessed through Bursa Securities website at include: Quarterly announcements Annual reports Circular to shareholders Other important announcements The Group also maintains a website at which provides information, qualitative and quantitative, on the Group s operations and corporate developments. 8. STRENGTHEN RELATIONSHIP BETWEEN COMPANY AND SHAREHOLDERS 8.1 Encourage shareholder participation at general meetings STB will dispatch its notice of AGM to shareholders at least 21-days before the AGM, in advance of the notice period as required under the Companies Act 2016 and ACE LR. The additional time given to shareholders allows them to make necessary arrangements to attend and participate either in person, by corporate representative, by proxy or by attorney. The Company allows a member to appoint a proxy who may be a member of the Company. If the proxy is not a member of the Company, he/she need not be an advocate, an approved company auditor or a person approved by the Companies Commission of Malaysia. STB has also removed the limit on the number of proxies to be appointed by an exempt authorised nominee with shares in the Company for Omnibus account to allow greater participation of beneficial owners of shares at general meetings of the Company. The AA of the Company further accord proxies the same rights as members to speak at the general meeting. Essentially, a corporate representative, proxy or attorney is entitled to attend, speak and vote both as if they were a member of the Company. The Board will consider adopting electronic voting to facilitate greater shareholder participation at general meetings, and to ensure accurate and efficient outcomes of the voting process. 25

27 STATEMENT ON CORPORATE GOVERNANCE (CONT'D) 8. STRENGTHEN RELATIONSHIP BETWEEN COMPANY AND SHAREHOLDERS (cont'd) 8.2 Encourage poll voting At the 26 th AGM and Extraordinary General Meeting of the Company held on May 27, 2016, no substantive resolutions were put forth for approval, thus, the resolutions were voted on by a show of hands. In compliance with Rule 8.31A of the ACE LR, all resolutions set out in the notice of forthcoming 27 th AGM of the Company will be voted by poll. 8.3 Effective Communication and proactive engagement During the General Meeting of the Company, the Chairman will invite shareholders to raise questions pertaining to the Company s accounts and other items for adoption at the meeting, before putting a resolution to vote. The Directors, Management and External Auditors were in attendance to respond to the shareholders queries. In addition to the above, the Company will look into allocation of time during AGM for dialogue with shareholders to address the issues concerning the Group and to make arrangement for Officers of the Company to present and handle other face-to-face enquiries from shareholders. This statement was made in accordance with a resolution of the Board dated March 28, ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

28 STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL The Malaysian Code on Corporate Governance 2012 ( MCCG 2012 ) requires public listed companies to maintain a sound system of risk management and internal control to safeguard shareholders investments and company s assets. Under the provisions of the Bursa Malaysia Securities Berhad ACE Market Listing Requirements ( Listing Requirements ), Rule 15.26(b), Directors of public listed companies are required to produce a statement on the state of the company s internal control in their Annual Report. The Board of Directors ( Board ) continues with its commitment to maintain sound systems of risk management and internal control throughout Supercomnet Technologies Berhad and its subsidiaries ( Group ) and in compliance with the Listing Requirements and the Statement of Risk Management and Internal Control (Guidelines for Directors of Listed Issuers) ( Internal Control Guidelines ), the Board is pleased to provide the following statement which outlines the nature and scope of risk management and internal control of the Group during the financial year in review. BOARD RESPONSIBILITY The Board acknowledges the importance of sound risk management and internal control being embedded into the culture, processes and structures of the Group. The systems of internal control cover risk management and financial, organizational, operational, project and compliance controls. The Board affirms its overall responsibility for the Group s systems of internal control and for reviewing the effectiveness and efficiency of those systems to ensure its viability and robustness. It should be noted, however, that such systems are designed to manage, rather than eliminate, risks of failure to achieve corporate objectives. Inherently, it can only provide reasonable and not absolute assurance against material misstatement or loss. RISK MANAGEMENT COMMITTEE S ROLE The Risk Management Committee ( RMC ) is accountable to the Board for the implementation of the processes in identifying, evaluating, monitoring and reporting of risks and internal control. The RMC is chaired by the Managing Director and comprises key senior management personnel. The Group Managing Director and Finance Manager have provided the Board the assurance that the Group s risk management and internal control systems are operating adequately and effectively, in all material aspects, to ensure achievement of corporate objectives. CONTROL STRUCTURE AND ENVIRONMENT In furtherance to the Board s commitment to maintain sound systems of risk management and internal control, the Board continues to maintain and implement a structure and environment for the proper conduct of the Group s business operations as follows: The Board meets at least quarterly and has set a schedule of matters which is required to be brought to its attention for discussion, thus ensuring that it maintains full and effective supervision over appropriate controls. In addition, the Board is kept updated on the Group s activities and its operations on a regular basis; An organization structure with well-defined scopes of responsibility, clear lines of accountability, and levels of delegated authority; A process of hierarchical reporting which provides for a documented and auditable trail of accountability; A set of documented internal policies and procedures, which is subject to review and improvement. A documented delegation of authority with clear lines of accountability and responsibility serves as a tool of reference in identifying the approving authority for various transactions including matters that require Board s approval; Regular and relevant information provided by management, covering financial and operational performance and key business indicators, for effective monitoring and decision making. 27

29 STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (CONT'D) RISK MANAGEMENT The Group has established risk management practices to safeguard the Group s business interest from risk events that may impede the achievement of business strategy and provide assurance to the Groups various stakeholders. The Group, with the support of an independent professional accounting and consulting firm, has implemented the Enterprise Risk Management ( ERM ) processes to identify, assess, monitor, report and mitigate risks impacting the Group s business and supporting activities. The risk profile of the Group has been compiled to help the Board and management to prioritize their focus on areas of high risk in the risk profile, the existence of significant risks of the Group have been identified and quantified. The corresponding controls to manage the risks have also been documented together with the management action plan to improve on the system of controls in order to manage the risks more effectively. The main components of the Group s risk governance and structure consists of the Board, the Audit Committee and the RMC. The structure allows for strategic risk discussions to take place between the Board, the Audit Committee and the RMC on a periodical basis. The summary of the accountabilities for the Board, the Audit Committee and the RMC under the risk governance structure are as follows: a. Board of Directors Overall risk oversight responsibility; Determines that the principal risks are identified, and appropriate as well as robust systems are implemented to manage these risks; Reviews the adequacy and the integrity of the Group s internal control systems and information systems, including systems for compliance with applicable laws, regulations, rules, directives and guidelines. b. Audit Committee Reviews and endorses policies and frameworks and other key components of risk management for implementation within the Group; Reviews and endorses the corporate risk profile for the Group, and the progress of ongoing risk management activities to identify, evaluate, monitor and manage critical risks. c. Risk Management Committee Oversees the effective implementation of risk policies and guidelines, ERM and cultivation of risk management culture within the organization; Reviews and monitors periodically the status of the Group s principal risks and their mitigation actions and update the Board and Audit Committee accordingly. Risk awareness sessions have been incorporated in the monthly management meetings attended by the Group s senior and middle management and key employees. This is part of the ongoing initiative to sustain risk awareness and risk management capabilities. In essence, Risk Management is conducted through an ongoing process between the Board, the Management and employees in the Group. The Group believes that the risk management framework and guidelines adopted and implemented have strengthened the risk ownership and risk management culture amongst the employees. INTERNAL AUDIT FUNCTION The Board acknowledges the importance of the internal audit function and has engaged the services of an independent professional accounting and consulting firm, to provide much of the assurance it requires regarding the effectiveness as well as the adequacy and integrity of the Group s systems of internal control. The internal audit adopts a risk-based approach in developing its audit plan which addresses the core business processes of the Group based on their risk profile. Scheduled internal audits are carried out by the Internal Auditors based on the audit plan presented to and approved by the Audit Committee. The Audit Committee has full and direct access to the Internal Auditors and the Audit Committee receives reports on all internal audits performed. The Internal Auditors continue to independently and objectively monitor compliance with regard to policies and procedures, and the effectiveness of the internal controls systems. Significant findings and recommendations for improvement are highlighted to Management and the Audit Committee, with periodic follow-up of the implementation of action plans. The Management is responsible for ensuring that corrective actions were implemented accordingly. 28 ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

30 STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (CONT'D) INTERNAL AUDIT FUNCTION (cont'd) Based on the internal auditors reports for the financial year ended December 31, 2016, the Board has reasonable assurance that the Group s systems of internal control are generally adequate and appear to be working satisfactorily. A number of minor internal control weaknesses were identified during the financial year, all of which have been, or are being, addressed. None of the weaknesses have resulted in any material losses, contingencies or uncertainties that would require disclosure in the Group s annual report. Internal audit fee incurred in the financial year 2016 was RM26,882. The Board continues to review and implement measures to strengthen the internal control environment of the Group. This risk management and internal control statement excludes the state of risk management and internal control of the associated company, Supercomal Medical Products Sdn. Bhd. This statement is issued in accordance with a resolution of the Directors dated March 28,

31 AUDIT COMMITTEE REPORT The purpose of the setting up of the Audit Committee is to assist the Board in discharging its duties to identify principal risks, ensuring the implementation of appropriate systems of internal controls to manage such risks, and that such systems are working effectively to safeguard shareholders' investment and the long term viability of the Group. AUDIT COMMITTEE Mr. Goh Chooi Eam Chairman Independent Non-Executive Director Mr. Ng Ngoon Weng Member Independent Non-Executive Chairman Mr. Wu, Chung-Jung Member Non-Independent Non-Executive Director This composition meets the requirements of paragraph 15.09(1)(a) and (b) of the Bursa Securities Ace Market Listing Requirements ( ACE LR ). Mr. Goh Chooi Eam, the Chairman of the Audit Committee is a Member of the Malaysian Institute of Accountant as well as a Fellow of the Association of Chartered Certified Accountants. Accordingly, the Company complies with paragraph 15.09(1)(c)(i) of the ACE LR. Attendance at Meetings The information on the attendance of each member at the Committee meetings held during the Financial Year 2016 (FY 2016) is as follows: Name of Director Attendance Mr. Goh Chooi Eam 5/5 Mr. Ng Ngoon Weng 5/5 Mr. Wu, Chung-Jung 4/5 Activities of the Audit Committee The activities carried out by the Committee during the FY 2016 in the discharge of its duties and responsibilities are as follows:- 1. Financial Reporting In overseeing the Company s financial reporting, the Committee reviewed the quarterly financial statements for the fourth quarter of 2015 and the annual audited financial statements for the financial year ended December 31, 2015 ( FY2015 ) at its meeting on February 22, 2016 and March 29, 2016 respectively. The Committee also reviewed the first, second and third quarterly financial statements of the Group for FY2016 and recommended the same to the Board for approval during its Audit Committee held on May 27, 2016, August 30, 2016 and November 23, 2016 respectively. The Committee reviewed and satisfied that the said quarterly financial statements are prepared in compliance with the Malaysian Financial Reporting Standards ("MFRS") Interim Financial Reporting, issued by Malaysian Accounting Standards Board and paragraph 9.22 of the ACE LR. 30 ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

32 AUDIT COMMITTEE REPORT (CONT'D) Activities of the Audit Committee (cont'd) 2. External Audit The Committee has on March 29, 2016, November 23, 2016 and March 28, 2017 respectively met with the External Auditors without the presence of the Executive Members. During the Meeting on March 29, 2016, the External Auditors tabled the Final Report to those charged with Governance for FY2015 for the Committee s information and discussion. On November 23, 2016, the External Auditors tabled the Audit Planning Memorandum prior to the commencement of audit of financial statements for FY 2016, more particularly outlined the nature and scope of audit, audit timetable, list of management communication term and audit engagement team to the Audit Committee. On March 28, 2017, the External Auditors met up with the Committee to update the status of audit progress for FY2016 and also, the outstanding information/documents in relation to the audit. On March 28, 2017, the External Auditors Performance and Independence Checklist in respect for the FY 2016, duly completed by the Management and key finance staff were compiled and tabled at the Meeting for review (the Assessment). The Committee concluded that based on the Assessment, amongst others as set out below, the External Auditors Performance for year 2016 was found adequate and thereby recommended the re-appointment of Deloitte PLT as the External Auditors of the Group for the ensuing year ending December 31, 2017 to the Board for approval by its shareholders:- after having satisfied with its audit independence and the performance of Deloitte PLT throughout its course of audit FY 2016; satisfied that the quality processes/ performance of External Auditors; able to give adequate technical support when audit issue arise; and adequate experience and resources of Deloitte PLT and audit engagements. 3. Internal Audit Function The Group has engaged the services of an independent professional accounting and consulting firm to provide much of the assurance it requires regarding the effectiveness as well as the adequacy and integrity of the Group s systems of internal control. In order to further enhance the Group s internal control, the Committee has on May 27, 2017 recommended JWC Consulting Sdn Bhd (JWC), a reputable firm with vast exposure and having adequate resources and expertise in internal audit, for its appointment as the new Internal Auditors of the Group. Internal Auditors reports directly to the Committee on its activities based on the approved annual Internal Audit Plans. Its principal role is to provide independent assurance on the adequacy and effectiveness of governance, risk management and internal control processes. Internal audit fee incurred for the FY 2016 was RM26,882. During the FY 2016, JWC also carry out the Enterprise Risk Assessment exercise of the Group. The exercise was completed in August 2016 and the Risk Assessment Report of the Group were tabled to the Audit Committee for review and discussion on November 23, On August 30, 2016, the Internal Audit Plan 2016 was tabled for Committee s discussion and the Committee approved the said Plan. The risk-based Internal Audit Plan 2016 was developed based on the Enterprise Risk Assessment carried out, focusing on the principal risk associated with the core business process of the Group. 31

33 AUDIT COMMITTEE REPORT (CONT'D) Activities of the Audit Committee (cont'd) 3. Internal Audit Function (cont'd) During the FY 2016, the Internal Auditors have conducted review on internal control of the Group, focusing on the following areas:- Financial Period Audit Areas Reporting Date Second half financial period ended December 31, 2015 Financial quarter ended June 30, Customer relationship management 2. Accounts receivable and credit control 3. Sales transactions 1. Sales and Marketing 2. Procurement Financial quarter ended December 31, Human Resources Management 2. General Affairs February 22, 2016 November 23, 2016 February 27, 2017 The Internal Auditors also presented its findings together with recommendation and management action plan to the Committee at the Meetings on February 22, 2016, November 23, 2016 and February 27, 2017 respectively. The Audit Committee reviewed the Statement on Risk Management and Internal Control in respect of FY 2016 on March 28, 2017 for publication in the Annual Report Information pertaining to the Company s internal controls is shown in the Statement on Internal Control and Risk Management set out on page 27 to 29 of this Annual Report. 32 ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

34 ADDITIONAL COMPLIANCE INFORMATION PURSUANT TO THE BURSA MALAYSIA SECURITIES BERHAD ACE MARKET LISTING REQUIREMENTS 1. Utilization of Proceeds There were no proceeds raised by the Company from any corporate proposals during the financial year. 2. Audit and Non-Audit Fees The amount of audit and non-audit fees incurred for services rendered to the Company and its subsidiary for the financial year ended December 31, 2016 (FYE 2016) by the Company s Auditors, or a firm or company affiliated to the Auditors firm are as follows:- Category Audit Fees Non-Audit Fees (RM) (RM) Company 49,000 10,700 Subsidiary 16,000 6,300 Total 65,000 17, Material Contracts There were no material contracts entered into by the Company and its subsidiary involving Directors and substantial shareholders interests either still subsisting as at December 31, 2016 or entered into since the end of the previous financial year. 4. Employee Share Scheme There was no Employee Share Scheme implemented by the Company during the financial year. 5. Recurrent Related Party Transactions (RRPT) of a Revenue or Trading nature Details of the RRPT of a revenue and trading nature entered into during FYE 2016, in accordance with the shareholders mandate obtained at the Extraordinary General Meeting of the Company held on May 27, 2016, were as follows:- No. Related Parties Nature of Transactions Actual amount (RM) Interested Related Party 1. STB (Landlord) SMP (Tenant) Monthly Rental of factory space at Lot 172, Jalan PKNK 3/8, Kawasan Perusanaan Sungai Petani, Sungai Petani, Kedah measuring 17,983 sq feet 232,729 Mr. Shiue, Jong-Zone (SJZ). Mdm. Wu, Huei-Chung (WHC) and Mr. Hsueh, Shiue, Jyh- Yeu (HCY) are Directors and major shareholders of both STB and SMP. Mr. Wu, Chung-Jung (WCJ), the brother-in-law of SJZ and brother of WHC, being a related party, is a Director and major shareholder of STB and major shareholder of SMP. Mr. Shiue, Jyh-Jeh, the son of SJZ and WHC, brother of HCY and nephew of WCJ, being a related party, is a common major shareholder of STB and SMP. 33

35 ADDITIONAL COMPLIANCE INFORMATION PURSUANT TO THE BURSA MALAYSIA SECURITIES BERHAD ACE MARKET LISTING REQUIREMENTS (CONT'D) 5. Recurrent Related Party Transactions (RRPT) of a Revenue or Trading nature (cont'd) No. Related Parties Nature of Transactions Actual amount (RM) Interested Related Party 2. STB (Owner) SMP (Tenant) Monthly Rental of following Machineries located at Lot 172, Jalan PKNK 3/8, Kawasan Perusanaan Sungai Petani, Sungai Petani, Kedah:- - Moulding Machine - Crimping Machine - Cable Testing Machine - Wire Striping and Stranding Machine - Payoff Machine - Double Twist Stranding Machine - Twister Machine - Cutting Off Machine 69,831 Same as above 3. STB (Seller) SMP (Buyer) Sales of finished goods by STB to SMP 4,486,907 Same as above 4. SAC (Landlord) SMP (Tenant) Monthly Rental of factory space at Lot 171, Jalan PKNK 3/8, Kawasan Perusanaan Sungai Petani, Sungai Petani, Kedah measuring 25,833 sq feet 69,750 Same as above 5. SAC (Provider) SMP (Recipient) Sub-contracting of labour works - Same as above 6. Corporate Social Responsibility (CSR) The Group subscribes to the belief that pursuit of business objectives needs to be balanced with social and environmental responsibilities for any business to remain sustainable. As such, the Group uses its best endeavour on ongoing basis to integrate CSR practices into its day to day business operations. These include providing a healthy and safe working environment for staff, using materials free from toxic components which are in line with the Sony Green partner guideline especially in the assembly department and safety training like handling fire hazards. The Board is highly aware of its responsibilities towards the society and the environment. 34 ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

36 STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF AUDITED FINANCIAL STATEMENTS The Directors are required to prepare audited financial statements that give a true and fair view of the state of affairs, including the cashflows and results, of the Group and of the Company as at the end of each financial year. In preparing these financial statements, the Directors have considered the following: That the Group and the Company have used appropriate accounting policies, and these are consistently applied; That reasonable and prudent judgments and estimates were made; That the approved accounting standards in Malaysia have been adopted; and That the financial statements have been prepared on a going concern basis. The Directors are responsible for ensuring that the Company and subsidiary company maintain proper accounting records which disclose with reasonable accuracy the financial position of the Group and of the Company, and which enable them to ensure that the financial statements comply with the Companies Act, The Directors have general responsibility for taking such steps that are reasonably available to them to safeguard the assets of the Group and of the Company, and to prevent and detect fraud and other irregularities. 35

37 DIRECTORS' REPORT The directors of SUPERCOMNET TECHNOLOGIES BERHAD have pleasure in submitting their report and the audited financial statements of the Group and of the Company for the financial year ended December 31, PRINCIPAL ACTIVITIES The Company is principally involved in the manufacture of PVC Compound and cables/ wires for electronic devices and data control switches. The information on the name, place and incorporation, principal activities and percentage of issued share capital held by the Company in subsidiary is as disclosed in Note 14 to the financial statements. RESULTS OF OPERATIONS The results of operations of the Group and of the Company for the financial year are as follows: The Group RM The Company RM Profit for the year 2,346,097 1,079,521 In the opinion of the directors, the results of 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. DIVIDENDS An interim single tier dividend of 0.4 sen per ordinary share, amounting to RM972,000 was declared and paid in respect of the previous financial year. No dividend has been paid or declared in respect of the current financial year. RESERVES AND PROVISIONS There were no material transfers to or from reserves or provisions during the financial year other than those disclosed in the financial statements. ISSUE OF SHARES AND DEBENTURES The Company has not issued any new shares or debentures during the financial year. SHARE OPTIONS No options have been granted by the Company to any parties during the financial year to take up unissued shares of the Company. No shares have been issued during the financial year by virtue of the exercise of any option to take up unissued shares of the Company. As of the end of the financial year, there were no unissued shares of the Company under options. 36 ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

38 DIRECTORS' REPORT (CONT'D) OTHER STATUTORY INFORMATION Before the financial statements of the Group and of the Company were prepared, the directors took reasonable steps: (a) (b) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts, and had satisfied themselves that there were no known bad debts to be written off and that adequate allowance had been made for doubtful debts; and to ensure that any current assets which were unlikely to be realised in the ordinary course of business including the value of current assets as shown in the accounting records of the Group and of the Company had been written down to an amount which the current assets might be expected so to realise. At the date of this report, the directors are not aware of any circumstances: (a) (b) (c) (d) which would require the writing off of bad debts or render the amount of the allowance for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent; or which would render the values attributed to current assets in the financial statements of the Group and of the Company misleading; or 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 not otherwise dealt with in this report or financial statements which would render any amount stated in the financial statements of the Group and of the Company misleading. At the date of this report, there does not exist: (a) (b) any charge on the assets of the Group and of the Company which has arisen since the end of the financial year which secures the liability of any other person; or any contingent liability of the Group and of the Company which has arisen since the end of the financial year. No contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the directors, will or may substantially affect the ability of the Group and of the Company to meet their obligations as and when they fall due. In the opinion of the directors, no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of operations of the Group and of the Company for the financial year in which this report is made. 37

39 DIRECTORS' REPORT (CONT'D) DIRECTORS The directors of the Company in office during the financial year and during the period from the end of the financial year to the date of this report are: Shiue, Jong-Zone Wu, Chung-Jung Wu, Huei-Chung Goh Chooi Eam Ng Ngoon Weng Hsueh, Chih-Yu The directors who held office in the subsidiary of the Company during the financial year and up to the date of this report are: Shiue, Jong-Zone Wu, Huei-Chung Hsueh, Chih-Yu DIRECTORS INTERESTS The interest in shares in the Company and in related companies of those who were directors at the end of the financial year according to the Register of Directors Shareholdings kept by the Company under Section 59 of the Companies Act, 2016, are as follows: Number of ordinary shares of RM0.10 each Shares in the Company Balance as of Bought Sold Balance as of Registered in the name of the directors: Shiue, Jong-Zone 46,393, ,393,600 Wu, Chung-Jung 26,837, ,837,200 Wu, Huei-Chung 3,552, ,552,000 Hsueh, Chih-Yu 1,344, ,344,700 Indirect interest: Shiue, Jong-Zone (a) 33,090, ,090,600 Wu, Chung-Jung (b) 52,647, ,647,000 Wu, Huei-Chung (c) 75,932, ,932,200 Hsueh, Chih-Yu (d) 78,139, ,139,500 (a) Deemed interest through Mr. Wu, Chung-Jung, Madam Wu, Huei-Chung and his sons. (b) Deemed interest through Mr. Shiue, Jong-Zone, Madam Wu, Huei-Chung and his nephews. (c) Deemed interest through Mr. Shiue, Jong-Zone, Mr. Wu Chung-Jung and her sons. (d) Deemed interest through Mr. Shiue, Jong-Zone, Mr. Wu Chung-Jung, Madam Wu, Huei-Chung and his brother. * Upon the effective date of the Companies Act, 2016 of January 31, 2017, the ordinary shares do not have any par value. By virtue of their interest in the shares of the Company, Mr. Shiue, Jong-Zone, Mr. Wu, Chung-Jung, Madam Wu, Huei-Chung and Mr. Hsueh, Chih-Yu are also deemed to have interest in the shares of the subsidiary to the extent that the Company has an interest. 38 ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

40 DIRECTORS' REPORT (CONT'D) DIRECTORS BENEFITS Since the end of the previous financial year, none of the directors of the Company has received or become entitled to receive any benefit (other than those disclosed as directors remuneration in Note 8 to the financial statements) by reason of a contract made by the Company or a related corporation with the director or with a firm of which he is a member, or with a company in which he has a substantial financial interest. During and at the end of the financial year, no arrangement subsisted to which the Company was a party whereby directors of the Company might acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate. INDEMNITY AND INSURANCE FOR DIRECTORS AND OFFICERS There were no indemnity given to or insurance effected for any directors, officers and auditors of the Company in accordance with Section 289 of the Companies Act AUDITORS The auditors, Deloitte PLT, have indicated their willingness to continue in office. AUDITORS REMUNERATION The amount paid as remuneration of the auditors for the financial year ended December 31, 2016 is as disclosed on Note 10 to the financial statements. Signed on behalf of the Board, as approved by the Board in accordance with a resolution of the Directors/ Signed by the Director, SHIUE, JONG-ZONE WU, HUEI-CHUNG April 13,

41 INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF SUPERCOMNET TECHNOLOGIES BERHAD (Incorporated in Malaysia) Report on the Audit of the Financial Statements Opinion We have audited the financial statements of Supercomnet Technologies Berhad, which comprise the statements of financial position 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 43 to 87. 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 of December 31, 2016, 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, 1965 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 Auditor s 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. Key audit matter How the scope of our audit responded to the key audit matter Inventories obsolescence The Company makes an allowance for slow moving/ obsolete inventories based on an assessment of the net realisable value of the inventories. When estimating the net realisable value of inventories, significant management estimates is involved. Where the expectation is different from the original estimate, such difference will impact the carrying value of the inventories in the period in which such estimate has been changed. As disclosed in Note 16 to the financial statements, the carrying amount of inventories of the Company as of December 31, 2016 is RM7,116,754. The amount recognised as an expense during the year in respect of write-down of inventories to net realisable value and allowance for obsolete inventories of the Company is RM313,332. We assessed the process, methods and assumptions used to develop the provision for slow moving, excess or obsolete items. This included comparing management s calculations for consistency against those used in the prior year and considering whether there was any indication of management bias in the established methodology. We assessed the management assumptions with regards to the completeness of the inventory provisions and made an assessment of its adequacy, considering the age and volumes to expected usage. We also performed a retrospective review of the appropriateness of the prior year inventory provision. We tested the reliability of the underlying data used by management to calculate the inventory obsolescence provisions, specifically checking the last movement dates of a sample of products to assess whether they have been aged correctly and appropriate provision percentage has been applied. 40 ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

42 INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF SUPERCOMNET TECHNOLOGIES BERHAD (Incorporated in Malaysia) (CONT'D) Information Other than the Financial Statements and Auditors Report Thereon The directors of the Company are responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements of the Group and of the Company and our auditors report thereon. Our opinion on the financial statements of the Group and of the Company does not cover the 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. Responsibility 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, 1965 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 on auditing in Malaysia and International Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: (a) (b) (c) 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. 41

43 INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF SUPERCOMNET TECHNOLOGIES BERHAD (Incorporated in Malaysia) (CONT'D) Auditors Responsibilities for the Audit of the Financial Statements (cont'd) (d) (e) (f) Conclude on the appropriateness of the directors use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group s or the Company s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the financial statements of the Group and of the Company or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Group or the Company to cease to continue as a going concern. 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. 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 significant 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. Other Reporting Responsibilities The supplementary information set out in Note 34 to the financial statements is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the financial statements. The directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1 Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements as issued by the Malaysian Institute of Accountants ( MIA Guidance ) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad. Other Matter This report is made solely to the members of the Company, as a body, in accordance with Section 266 of the Companies Act, 2016 in Malaysia and for no other purpose. We do not assume responsibility towards any other person for the contents of this report. DELOITTE PLT (LLP LCA) Chartered Accountants (AF 0080) LEE CHENG HEOH Partner 2225/04/18(J) Chartered Accountant April 13, 2017 Penang 42 ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

44 STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31, 2016 The Group The Company Notes RM RM RM RM Revenue 30,412,825 34,940,565 28,702,996 34,174,396 Investment income 5 743, ,016 2,673,421 1,586,016 Other gains and losses 6 (1,218,022) 710,827 (786,386) 147,032 Other income 7 916, , , ,960 Changes in inventories of finished goods and work-in-progress 602,873 (1,104,620) 416,991 (633,618) Raw materials consumed (23,580,243) (28,050,196) (23,073,802) (27,727,182) Employee benefits expense 8 (4,722,940) (4,491,899) (4,015,729) (4,192,640) Depreciation and amortisation expenses (745,872) (742,918) (602,000) (587,547) Other expenses (3,321,055) (2,767,448) (3,147,813) (2,658,569) Share of profits of associate 3,244,534 3,364, Profit before tax 2,332,342 2,971,831 1,065, ,848 Tax income 9 13,755 10,516 13,755 10,516 Profit for the year attributable to the owners of the Company 10 2,346,097 2,982,347 1,079, ,364 Other comprehensive income, net of income tax Total comprehensive income for the year attributable to the owners of the Company 2,346,097 2,982,347 1,079, ,364 Earnings per share: Basic (sen per share) The accompanying notes form an integral part of the financial statements. 43

45 STATEMENTS OF FINANCIAL POSITION AT DECEMBER 31, 2016 The Group The Company Notes RM RM RM RM Assets Non-current assets Property, plant and equipment 12 6,823,232 7,391,131 5,847,293 6,087,160 Prepaid lease payments on leasehold land 13 2,076,151 2,130, , ,758 Investment in subsidiary ,691,303 3,123,297 Investment in associate 15 11,199,406 9,954, , ,000 Total non-current assets 20,098,789 19,476,153 9,946,526 10,643,215 Current assets Inventories 16 7,521,883 6,779,679 7,116,754 6,106,917 Trade and other receivables 17 7,851,510 6,836,149 9,145,900 7,951,795 Current tax assets 544, , , ,794 Other assets , ,084 81,661 79,398 Short-term deposits with licensed banks 19 8,001,500 8,501,500 8,000,000 8,500,000 Cash and bank balances 20 2,428,612 1,550,045 1,848,866 1,340,516 Total current assets 26,513,928 24,397,251 26,737,211 24,586,420 Total assets 46,612,717 43,873,404 36,683,737 35,229,635 Equity and liabilities Capital and reserves Share capital 21 24,300,000 24,300,000 24,300,000 24,300,000 Reserve 22 5,936,954 5,936,954 5,936,954 5,936,954 Retained earnings 23 12,039,569 10,665,472 1,290,163 1,182,642 Total equity 42,276,523 40,902,426 31,527,117 31,419,596 Non-current liabilities Deferred tax liabilities , , , ,592 Current liabilities Trade and other payables 25 3,940,357 2,561,386 4,760,783 3,400,447 Total liabilities 4,336,194 2,970,978 5,156,620 3,810,039 Total equity and liabilities 46,612,717 43,873,404 36,683,737 35,229,635 The accompanying notes form an integral part of the financial statements. 44 ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

46 STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31, 2016 The Group Notes Share capital Share premium Retained earnings Total RM RM RM RM Balance as of January 1, ,300,000 5,936,954 7,683,125 37,920,079 Profit for the year - - 2,982,347 2,982,347 Other comprehensive income for the year, net of income tax Total comprehensive income for the year - - 2,982,347 2,982,347 Balance as of December 31, ,300,000 5,936,954 10,665,472 40,902,426 Balance as of January 1, ,300,000 5,936,954 10,665,472 40,902,426 Profit for the year - - 2,346,097 2,346,097 Other comprehensive income for the year, net of income tax Total comprehensive income for the year - - 2,346,097 2,346,097 Dividend (972,000) (972,000) Balance as of December 31, ,300,000 5,936,954 12,039,569 42,276,523 The Company Balance as of January 1, ,300,000 5,936, ,278 30,602,232 Profit for the year , ,364 Other comprehensive income for the year, net of income tax Total comprehensive income for the year , ,364 Balance as of December 31, ,300,000 5,936,954 1,182,642 31,419,596 Balance as of January 1, ,300,000 5,936,954 1,182,642 31,419,596 Profit for the year - - 1,079,521 1,079,521 Other comprehensive income for the year, net of income tax Total comprehensive income for the year - - 1,079,521 1,079,521 Dividend (972,000) (972,000) Balance as of December 31, ,300,000 5,936,954 1,290,163 31,527,117 The accompanying notes form an integral part of the financial statements. 45

47 STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2016 The Group The Company RM RM RM RM Cash flows from operating activities Profit for the year 2,346,097 2,982,347 1,079, ,364 Inventories written down 976, , ,332 - Depreciation and amortisation of noncurrent assets 745, , , ,547 Impairment loss on property, plant and equipment 309, Property, plant and equipment written off Share of profits of associate (3,244,534) (3,364,983) - - Interest income recognised in profit or loss (371,124) (214,089) (370,861) (214,089) Gain on disposal of property, plant and equipment (22,042) Tax income recognised in profit or loss (13,755) (10,516) (13,755) (10,516) Unrealised (gain)/loss on foreign exchange (3,207) (91,698) 10,668 (87,652) Reversal of inventories written down - (891,935) - (891,935) Impairment of investment in subsidiary , ,902 Dividend income from associate - - (2,000,000) (1,200,000) 724,036 (561,743) 53,649 (145,904) Movements in working capital: (Increase)/ decrease in inventories (1,718,537) 2,458,084 (1,323,169) 1,926,917 Increase in trade and other receivables (906,365) (261,718) (1,096,019) (633,500) Decrease/(increase) in other assets (44,309) 38,978 (2,263) 26,718 Increase/(decrease) in trade and other payables 1,363,174 (1,816,673) 1,201,774 (1,166,090) Cash (used in)/generated from operations (582,001) (143,072) (1,166,028) 8,141 Income taxes refunded 327, , , ,728 Income taxes paid (263,741) (346,041) (263,741) (346,041) Net cash used in operating activities (518,237) (318,385) (1,102,264) (167,172) 46 ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

48 STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2016 (CONT'D) The Group The Company Notes RM RM RM RM Cash flows from investing activities Dividends received 2,000,000 1,200,000 2,000,000 1,200,000 Interest received 268, , , ,089 Proceeds from disposal of property, plant and equipment 22,042 3,861-3,861 Payments for property, plant and equipment (434,370) (200,054) (338,055) (200,054) Repayment by associate - 12, (Amount advanced to)/ repayment by subsidiary - - (699) 285,731 Net cash generated by investing activities 1,855,708 1,230,804 1,929,019 1,503,627 Cash flows from financing activities Amount advanced from associate 8, Dividend paid (972,000) - (972,000) - Amount advanced from subsidiary ,408 50,943 Net cash (used in)/ generated by financing activities (963,820) - (819,592) 50,943 Net increase in cash and cash equivalents 373, ,419 7,163 1,387,398 Cash and cash equivalents at the beginning of the year 10,050,045 9,095,057 9,840,516 8,414,595 Effects of exchange rate changes on the balances of cash held in foreign currencies 4,916 42,569 1,187 38,523 Cash and cash equivalents at the end of the year 27 10,428,612 10,050,045 9,848,866 9,840,516 The accompanying notes form an integral part of the financial statements. 47

49 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, GENERAL INFORMATION The Company is a public limited liability company, incorporated and domiciled in Malaysia, and is listed on the ACE Market of Bursa Malaysia Securities Berhad. The Company is principally involved in the manufacture of PVC Compound and cables/ wires for electronic devices and data control switches. The information on the name, place of incorporation, principal activities and percentage of issued share capital held by the Company in subsidiary is as disclosed in Note 14. The registered office of the Company is located at 57-G, Persiaran Bayan Indah, Bayan Bay, Sungai Nibong, Penang, Malaysia. The principal place of business of the Company is located at Lot 172, Jalan PKNK 3/8, Kawasan Perusahaan Sungai Petani, Sungai Petani, Kedah, Malaysia. The financial statements of the Group and of the Company were authorised by the Board of Directors for issuance in accordance with a resolution of the directors on April 13, BASIS OF PREPARATION OF FINANCIAL STATEMENTS 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 and the provisions of the Companies Act, 1965 in Malaysia. Adoption of new and revised MFRSs In the current year, the Group and the Company have applied a number of amendments to MFRSs issued by the Malaysian Accounting Standards Board ( MASB ) that are mandatorily effective for an accounting period that begins on or after January 1, The adoption of new and revised MFRSs has had no material impact on the disclosures or on the amounts recognised in the financial statements. New and revised standards in issue but not yet effective The directors anticipate that the following Standards and Issues Committee Interpretations ( IC Int. ) will be adopted in the annual financial statements of the Group and of the Company when they become mandatorily effective for adoption. The adoption of these Standards and Issues Committee Interpretations is not expected to have a material impact on the financial statements of the Group and of the Company except as further discussed below. MFRS 9 MFRS 15 MFRS 16 Amendments to MFRS 107 Amendments to MFRS 112 IC Int. 22 Amendments to MFRSs Financial Instruments (b) Revenue from Contracts with Customers (and the related Clarifications) (b) Leases (c) Disclosure Initiative (a) Recognition of Deferred Tax Assets for Unrealised Losses (a) Foreign Currency Transactions and Advance Consideration (b) (a) or (b) Annual Improvements to MFRSs Cycle (a) (b) (c) Effective for annual periods beginning on or after January 1, 2017, with earlier application permitted. Effective for annual periods beginning on or after January 1, 2018, with earlier application permitted. Effective for annual periods beginning on or after January 1, 2019, with earlier application permitted. 48 ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

50 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2016 (CONT'D) 2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS (cont'd) MFRS 9 Financial Instruments MFRS 9 (IFRS 9 issued by IASB in November 2009) introduced new requirements for the classification and measurement of financial assets. MFRS 9 (IFRS 9 issued by IASB in October 2010) include requirements for the classification and measurement of financial liabilities and for derecognition, and in February 2014, the new requirements for general hedge accounting was issued by MASB. Another revised version of MFRS 9 was issued by MASB MFRS 9 (IFRS 9 issued by IASB in July 2014) mainly to include (a) impairment requirements for financial assets and (b) limited amendments to the classification and measurement requirements by introducing a fair value through other comprehensive income (FVTOCI) measurement category for certain simple debt instruments. Key requirements of MFRS 9: (a) (b) (c) (d) All recognised financial assets that are within the scope of MFRS 139 Financial Instruments: Recognition and Measurement are required to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. Debt instruments that are held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets, and that have contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding, are measured at FVTOCI. All other debt investments and equity investments are measured at their fair value at the end of subsequent accounting periods. In addition, under MFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss. With regard to the measurement of financial liabilities designated as at fair value through profit or loss, MFRS 9 requires that the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability s credit risk are not subsequently reclassified to profit or loss. Under MFRS 139, the entire amount of the change in the fair value of the financial liability designated as fair value through profit or loss is presented in profit or loss. In relation to the impairment of financial assets, MFRS 9 requires an expected credit loss model, as opposed to an incurred credit loss model under MFRS 139. The expected credit loss model requires an entity to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition. In other words, it is no longer necessary for a credit event to have occurred before credit losses are recognised. The new general hedge accounting requirements retain the three types of hedge accounting mechanisms currently available in MFRS 139. Under MFRS 9, greater flexibility has been introduced to the types of transactions eligible for hedge accounting, specifically broadening the types of instruments that qualify for hedging instruments and the types of risk components of non-financial items that are eligible for hedge accounting. In addition, the effectiveness test has been overhauled and replaced with the principle of an economic relationship. Retrospective assessment of hedge effectiveness is also no longer required. Enhanced disclosure requirements about an entity s risk management activities have also been introduced. The directors of the Group and of the Company anticipate that the application of MFRS 9 in the future may have an impact on amounts reported in respect of the Group s and the Company s financial assets and financial liabilities. However, it is not practicable to provide a reasonable estimate of the effect of MFRS 9 until the Group and the Company complete a detailed review. 49

51 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2016 (CONT'D) 2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS (cont'd) MFRS 15 Revenue from Contracts with Customers MFRS 15 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. MFRS 15 will supersede the current revenue recognition guidance including MFRS 118 Revenue, MFRS 111 Construction Contracts and the related Interpretations when it becomes effective. The core principle of MFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the Standard introduces a 5-step approach to revenue recognition: (a) (b) (c) (d) (e) Step 1: Identify the contract(s) with a customer Step 2: Identify the performance obligations in the contract Step 3: Determine the transaction price Step 4: Allocate the transaction price to the performance obligations in the contract Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation Under MFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when control of the goods or services underlying the particular performance obligation is transferred to the customer. Far more prescriptive guidance has been added in MFRS 15 to deal with specific scenarios. Furthermore, extensive disclosures are required by MFRS 15. The directors of the Group and of the Company anticipate that the application of MFRS 15 in the future may have an impact on the amounts reported and disclosures made in these financial statements. However, it is not practicable to provide a reasonable estimate of the effect of MFRS 15 until the Group and the Company complete a detailed review. MFRS 16 Leases MFRS 16 specifies how an MFRS reporter will recognise, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or finance, with MFRS 16 s approach to lessor accounting substantially unchanged from its predecessor, MFRS 117. At lease commencement, a lessee will recognise a right-of-use asset and a lease liability. The right-of-use asset is treated similarly to other non-financial assets and depreciated accordingly and the liability accrues interest. The lease liability is initially measured at the present value of the lease payments payable over the lease term, discounted at the rate implicit in the lease if that can be readily determined. If that rate cannot be readily determined, the lessees shall use their incremental borrowing rate. The directors of the Group and of the Company anticipate that the application of MFRS 16 in the future may have an impact on the amounts reported and disclosures made in the financial statements. However, it is not practicable to provide a reasonable estimate of the effect of MFRS 16 until the Group and the Company perform a detailed review. 3. SIGNIFICANT ACCOUNTING POLICIES Basis of accounting The financial statements have been prepared on the basis of historical cost, except for certain financial instruments that are measured at fair values at the end of each reporting period, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. 50 ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

52 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2016 (CONT'D) 3. SIGNIFICANT ACCOUNTING POLICIES (cont'd) Basis of accounting (cont'd) 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, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/ or disclosure purposes in these consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of MFRS 2, leasing transactions that are within the scope of MFRS 117, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in MFRS 102 or value in use in MFRS 136. Subsidiary and basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities (including structured entities) controlled by the Company and its subsidiaries. Control is achieved when the Company: (a) (b) (c) has power over the investee; is exposed, or has rights, to variable returns from its involvement with the investee; and has the ability to use its power to affect its returns. The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. When the Company has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company considers all relevant facts and circumstances in assessing whether or not the Company s voting rights in an investee are sufficient to give it power, including: (a) (b) (c) (d) the size of the Company s holding of voting rights relative to the size and dispersion of holdings of the other vote holders; potential voting rights held by the Company, other vote holders or other parties; rights arising from other contractual arrangements; and any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders meetings. Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the date the Company gains control until the date when the Company ceases to control the subsidiary. Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. Where necessary, adjustments are made to the financial statements of subsidiary to bring their accounting policies into line with the Group s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. 51

53 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2016 (CONT'D) 3. SIGNIFICANT ACCOUNTING POLICIES (cont'd) Subsidiary and basis of consolidation (cont'd) Changes in the Group s ownership interests in subsidiaries that do not result in the Group losing control are accounted for as equity transactions. The carrying amounts of the Group s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company. When the Group loses control of a subsidiary, a gain or loss is recognised in profit or loss and is calculated as the difference between (a) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (b) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. When assets of the subsidiary are carried at revalued amounts or fair values and the related cumulative gain or loss has been recognised in other comprehensive income and accumulated in equity, the amounts previously recognised in other comprehensive income are accounted for as if the Group had directly disposed of the relevant assets (i.e. reclassified to profit or loss or transferred directly to retained earnings as specified by applicable Standards). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under MFRS 139 Financial Instruments: Recognition and Measurement or, when applicable, the cost on initial recognition of an investment in an associate or joint venture. Subsidiary Investment in subsidiary which is eliminated on consolidation, is stated at cost less impairment losses, if any, in the Company s separate financial statements. Business combinations Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value which is calculated as the sum of the acquisition-date fair values of assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and equity instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred. Investment in associate An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. The results and assets and liabilities of associate are incorporated in these consolidated financial statements using the equity method of accounting, except when the investment, or a portion thereof, is classified as held for sale, in which case it is accounted for in accordance with MFRS 5. Under the equity method, an investment in an associate is initially recognised in the consolidated statement of financial position at cost and adjusted thereafter to recognise the Group s share of the profit or loss and other comprehensive income of the associate. When the Group s share of losses of an associate exceeds the Group s interest in that associate (which includes any long-term interests that, in substance, form part of the Group s net investment in the associate), the Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate. An investment in an associate is accounted for using the equity method from the date on which the investee becomes an associate or a joint venture. On acquisition of the investment in an associate, any excess of the cost of the investment over the Group s share of the net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill, which is included within the carrying amount of the investment. Any excess of the Group s share of the net fair value of the identifiable assets and liabilities over the cost of the investment, after reassessment, is recognised immediately in profit or loss in the period in which the investment is acquired. 52 ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

54 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2016 (CONT'D) 3. SIGNIFICANT ACCOUNTING POLICIES (cont'd) Investment in associate (cont'd) The requirements of MFRS 139 are applied to determine whether it is necessary to recognise any impairment loss with respect to the Group s investment in an associate. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with MFRS 136 Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount. Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with MFRS 136 to the extent that the recoverable amount of the investment subsequently increases. The Group discontinues the use of the equity method from the date when the investment ceases to be an associate, or when the investment is classified as held for sale. When the Group retains an interest in the former associate and the retained interest is a financial asset, the Group measures the retained interest at fair value at that date and the fair value is regarded as its fair value on initial recognition in accordance with MFRS 139. The difference between the carrying amount of the associate at the date the equity method was discontinued, and the fair value of any retained interest and any proceeds from disposing of a part interest in the associate is included in the determination of the gain or loss on disposal of the associate. In addition, the Group accounts for all amounts previously recognised in other comprehensive income in relation to that associate on the same basis as would be required if that associate had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognised in other comprehensive income by that associate would be reclassified to profit or loss on the disposal of the related assets or liabilities, the Group reclassifies the gain or loss from equity to profit or loss (as a reclassification adjustment) when the equity method is discontinued. The Group continues to use the equity method when an investment in an associate becomes an investment in a joint venture. There is no remeasurement to fair value upon such changes in ownership interests. When the Group reduces its ownership interest in an associate but the Group continues to use the equity method, the Group reclassifies to profit or loss the proportion of the gain or loss that had previously been recognised in other comprehensive income relating to that reduction in ownership interest if that gain or loss would be reclassified to profit or loss on the disposal of the related assets or liabilities. When a group entity transacts with an associate of the Group, profits and losses resulting from the transactions with the associate are recognised in the Group s consolidated financial statements only to the extent of the Group s interest in the associate that are not related to the Group. Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. (a) Sale of goods Revenue from the sale of goods is recognised when the goods are delivered and titles have passed, at which time all the following conditions are satisfied: (i) (ii) (iii) (iv) (v) the Group and the Company have transferred to the buyer the significant risks and rewards of ownership of the goods; the Group and the Company retain neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; the amount of revenue can be measured reliably; it is probable that the economic benefits associated with the transaction will flow to the Group and the Company; and the costs incurred or to be incurred in respect of the transaction can be measured reliably. 53

55 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2016 (CONT'D) 3. SIGNIFICANT ACCOUNTING POLICIES (cont'd) Revenue recognition (cont'd) (b) Rental income Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term. (c) Dividend and interest income Dividend income from investments is recognised when the shareholder s right to receive payment has been established (provided that the economic benefits will flow to the Group and the Company and the amount of revenue can be measured reliably). Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Group and the Company and the amount of revenue can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset s net carrying amount on initial recognition. (d) Other income Taxation Other income are recognised on an accrual basis. Income tax expense represents the sum of the tax currently payable and deferred tax. (a) Current tax The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the statements of profit or loss and other comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group s and the Company s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. (b) Deferred tax Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profits will be available against which those deductible temporary differences, unused tax losses and unused tax credits can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiary and associate, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future. 54 ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

56 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2016 (CONT'D) 3. SIGNIFICANT ACCOUNTING POLICIES (cont'd) Taxation (cont'd) (b) Deferred tax (cont'd) The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group and the Company expect, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group and the Company intend to settle its current tax assets and liabilities on a net basis. (c) Current and deferred tax for the period Current and deferred tax are recognised as an expense or income in profit or loss, except when they relate to items that are recognised outside profit or loss (whether in other comprehensive income or directly in equity), in which case the tax is also recognised outside profit or loss, or where they arise from the initial accounting for a business combination. In the case of a business combination, the tax effect is included in the accounting for the business combination. Foreign currencies The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each entity are expressed in Ringgit Malaysia ( RM ), which is the functional currency of the Company, and the presentation currency for the consolidated financial statements. In preparing the financial statements of the individual entities, transactions in currencies other than the entity s functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Nonmonetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences are recognised in profit or loss in the period in which they arise except for exchange differences arising on the retranslation of non-monetary items carried at fair value in respect of which gain and losses are recognised in other comprehensive income. For such non-monetary items, the exchange component of that gain or loss is also recognised in other comprehensive income. Short-term employee benefits Wages, salaries, paid annual leave, bonuses and social security contributions are recognised as expenses in the year in which the associated services are rendered by employees of the Group and of the Company. Short-term accumulating compensated absences such as paid annual leave are recognised when services are rendered by the employees that increase their entitlement to future compensated absences. Short-term non-accumulating compensated absences such as sick leave are recognised when the absences occur. 55

57 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2016 (CONT'D) 3. SIGNIFICANT ACCOUNTING POLICIES (cont'd) Retirement benefit costs Contributions to defined contribution retirement benefit plans are recognised as an expense when employees have rendered service entitling them to the contributions. The Group and the Company have no further payment obligations once these contributions have been paid. Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. (a) The Group as lessor Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term. (b) The Group as lessee Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred. In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straightline basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Property, plant and equipment Factory buildings held for use in the production or supply of goods or services, or for administrative purposes, are stated in the statements of financial position at deemed cost, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. All property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Depreciation is recognised so as to write off the cost of assets less their residual values over their useful lives, using the straight-line method, on the following bases: Factory buildings 2% Plant and machinery 10% - 23% Furniture and fittings 10% - 23% Office equipment 10% Tools and equipment 10% - 23% Motor vehicles 20% Electrical installation 10% Moulds and dies 20% - 23% The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis. 56 ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

58 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2016 (CONT'D) 3. SIGNIFICANT ACCOUNTING POLICIES (cont'd) Property, plant and equipment (cont'd) An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss. Impairment of tangible assets At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss. Inventories Inventories are stated at the lower of cost and net realisable value. Costs comprise direct materials and, where applicable, includes an appropriate portion of fixed and variable overhead expenses that have been incurred in bringing the inventories to their present location and condition. Cost is determined based on the first-in, first-out method. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale. Provisions Provisions are recognised when the Group and the Company have a present obligation (legal or constructive) as a result of a past event, it is probable that the Group and the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of time value of money is material). 57

59 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2016 (CONT'D) 3. SIGNIFICANT ACCOUNTING POLICIES (cont'd) Provisions (cont'd) When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. Financial instruments Financial assets and financial liabilities are recognised when, and only when, the Group and the Company become a party to the contractual provisions of the financial instruments. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of the financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs that are directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss. Financial assets Financial assets are classified into the following specified category: loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace. (a) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial. (b) Impairment of financial assets Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the financial asset have been affected. For all other financial assets, objective evidence of impairment could include: (i) (ii) (iii) (iv) significant financial difficulty of the issuer or counterparty; or breach of contract, such as default or delinquency in interest or principal payments; or it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or the disappearance of an active market for that financial asset because of financial difficulties. For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit periods of 30 to 77 days, as well as observable changes in national or local economic conditions that correlate with default on receivables. 58 ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

60 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2016 (CONT'D) 3. SIGNIFICANT ACCOUNTING POLICIES (cont'd) Financial assets (coont'd) (b) Impairment of financial assets (cont'd) For financial assets carried at amortised cost, the amount of the impairment loss recognised is 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. For financial assets carried at cost, the amount of the impairment loss measured as the difference between the asset s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods. 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 is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. (c) Derecognition of financial assets The Group and the Company derecognise a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group and the Company neither transfer nor retain substantially all the risks and rewards of ownership and continue to control the transferred asset, the Group and the Company recognise their retained interest in the asset and an associated liability for amounts it may have to pay. If the Group and the Company retain substantially all the risks and rewards of ownership of a transferred financial asset, the Group and the Company continue to recognise the financial asset and also recognise a collateralised borrowing for the proceeds received. On derecognition of a financial asset in its entirety, the difference between the asset s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss. Financial liabilities and equity instruments issued by the Group and the Company (a) Classification as debt or equity Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement and the definition of a financial liability and equity instrument. (b) Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group and the Company are recognised at the proceeds received, net of direct issue costs. (c) Financial liabilities Financial liabilities are initially measured at fair value, net of transaction costs and are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. 59

61 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2016 (CONT'D) 3. SIGNIFICANT ACCOUNTING POLICIES (cont'd) Financial liabilities and equity instruments issued by the Group and the Company (cont'd) (c) Financial liabilities (cont'd) The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition. (d) Derecognition of financial liabilities The Group and the Company derecognise financial liabilities when, and only when, the Group s and the Company s obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid or payable is recognised in profit or loss. Cash and cash equivalents The Group and the Company adopt the indirect method in the preparation of the statements of cash flows. Cash and cash equivalents comprise cash and bank balances, demand deposits which are not pledged and highly liquid investments which are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Contingent liabilities A contingent liability or asset is a possible obligation or asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of uncertain future event not wholly within the control of the Group. Contingent liabilities and assets are not recognised in the statements of financial position of the Group. 4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY In the application of the Group s accounting policies, which are described in Note 3, the directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. (a) Critical judgements in applying the Group s and the Company s accounting policies In the process of applying the Group s and the Company s accounting policies, the directors are of the opinion that there are no instances of application of judgement which are expected to have a significant effect on the amounts recognised in the financial statements. (b) Key sources of estimation uncertainty The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. 60 ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

62 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2016 (CONT'D) 4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (cont'd) (b) Key sources of estimation uncertainty (cont'd) (i) Impairment of property, plant and equipment and prepaid lease payments on leasehold land The Group and the Company assess whether there are any indicators of impairment for all nonfinancial assets at each reporting date. Other non-financial assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable. If there are indicators of impairment in property, plant and equipment and prepaid lease payments on leasehold land, the Group and the Company carry out the impairment test based on a variety of estimation including the value in use of the cash-generating units to which the property, plant and equipment and prepaid lease payments on leasehold land are allocated. Estimating the value in use requires the Group and the Company to make an estimate of the expected future cash flows from the cash-generating units and also to choose a suitable discount rate in order to calculate the present value of those cash flows. The carrying amount of property, plant and equipment of the Group as of December 31, 2016 was RM6,823,232 (2015: RM7,391,131) after an impairment loss recognised of RM309,646 (2015: Nil) during the financial year. The Company assessed and determined that there was no impairment for property, plant and equipment. The Group and the Company assessed and determined that and prepaid lease payments on leasehold land are not impaired. (ii) Inventories The Group and the Company make an allowance for slow moving/ obsolete inventories based on an assessment of the net realisable value of the inventories. When estimating the net realisable value of inventories, management consider all of the facts relating to the inventories and the operating environment at the time the estimates are made. Where the expectation is different from the original estimate, such difference will impact the carrying value of the inventories in the period in which such estimate has been changed. (iii) Impairment of receivables The Group and the Company assess at each reporting date whether there is any objective evidence that a financial asset is impaired. To determine whether there is objective evidence of impairment, the Group and the Company consider factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics. Where the expectation is different from the original estimate, such difference will impact the carrying value of the receivables in the period in which such estimate has been changed. (iv) Deferred tax assets Deferred tax assets are recognised for all deductible temporary differences to the extent that it is probable that taxable profit would be available against which those deductible temporary differences could be utilised. Significant management judgement is required to determine the amount of deferred tax assets that could be recognised, based on the likely timing and level of future taxable profit together with future tax planning strategies. Details of deferred tax assets not recognised in the financial statements at the end of the reporting period due to uncertainty of its realisation are disclosed in Note

63 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2016 (CONT'D) 5. INVESTMENT INCOME The Group The Company RM RM RM RM Rental income 372, , , ,927 Interest income on short-term deposits 371, , , ,089 Dividend income from non-current equity investment in associate - - 2,000,000 1,200,000 The following is an analysis of investment income by category of asset: 743, ,016 2,673,421 1,586,016 The Group The Company RM RM RM RM Interest income for financial assets not designated as at fair value through profit or loss: Investment income earned on nonfinancial assets 372, , , ,927 Loans and receivables (including cash and bank balances) 371, , , ,089 Dividend income from non-current equity investment in associate - - 2,000,000 1,200, , ,016 2,673,421 1,586, OTHER GAINS AND LOSSES The Group The Company RM RM RM RM Net foreign exchange gain/ (loss) 46, ,105 (40,310) 108,474 Gain on disposal of property, plant and equipment 22, Inventories written down (976,333) (285,738) (313,332) - Impairment loss on property, plant and equipment (309,646) Property, plant and equipment written off (750) (475) (750) (475) Reversal of inventories written down - 891, ,935 Impairment of investment in subsidiary - - (431,994) (852,902) (1,218,022) 710,827 (786,386) 147, ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

64 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2016 (CONT'D) 7. OTHER INCOME The Group The Company RM RM RM RM Scrap sales 916, , , ,438 Miscellaneous income , , , , , EMPLOYEE BENEFITS EXPENSE The Group The Company RM RM RM RM Post employment benefits: Defined contribution plan 314, , , ,366 Other employee benefits 4,408,388 4,183,022 3,752,835 3,913,274 Total employee benefits expense 4,722,940 4,491,899 4,015,729 4,192,640 The employees of the Group and of the Company are required by law to make contributions to the Employees Provident Fund ( EPF ), a post-employment plan. The Group and the Company are required to contribute a specified percentage of payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Group and of the Company with respect to the retirement benefit plan is to make the specified contributions. Details of remuneration of directors, who are the key management personnel of the Group and of the Company are as follows: The Group The Company RM RM RM RM Executive: Directors of the Company: Fee 93,280 52,800 81,280 52,800 Contribution to employees provident fund 36,810 30,538 36,810 30,538 Other emoluments 484, , , , , , , ,188 Non-executive: Directors of the Company: Fee 91, ,400 91, ,400 Other emoluments 14,900-14,900 - Directors of subsidiary: Fee - 11, , , , , , , , ,588 63

65 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2016 (CONT'D) 9. TAX INCOME The Group and the Company Adjustments recognised in the current year in relation to the current tax expense of prior years - 3,239 Deferred tax income relating to the origination and reversal of temporary differences (13,755) (13,755) RM RM Total tax income (13,755) (10,516) The total tax income for the year can be reconciled to the accounting profit as follows: The Group The Company RM RM RM RM Profit before tax 2,332,342 2,971,831 1,065, ,848 Tax expense calculated using the statutory income tax rate of 24% (2015: 25%) 560, , , ,000 Effect of expenses that are not deductible in determining taxable profit 40, , , ,245 Effect of income that are not taxable in determining taxable profit - (13,000) (480,000) (313,000) Effect of share of profits of associate (779,000) (841,000) - - Effect of loss relieved from subsidiary - (54,000) - (54,000) Effect of unused tax losses and tax offsets not recognised as deferred tax assets 165, ,000 78,000 - Reversal of deferred tax assets not recognised previously - (90,000) - (90,000) (13,755) (13,755) (13,755) (13,755) Adjustments recognised in the current year in relation to the current tax expense of prior years - 3,239-3,239 Tax income recognised in profit or loss (13,755) (10,516) (13,755) (10,516) 64 ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

66 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2016 (CONT'D) 9. TAX INCOME (cont'd) As of December 31, 2016, the Group and the Company have the following amounts of unused tax losses and unused tax capital allowances which are available for set off against future taxable profits: The Group The Company RM RM RM RM Unused tax losses 12,453,000 12,198, ,000 - Unused tax capital allowances 5,300,000 5,193,000 1,746,000 1,139, PROFIT FOR THE YEAR Profit for the year has been arrived at: The Group The Company RM RM RM RM After charging: Inventories written down 976, , ,332 - Directors remuneration: Directors of the Company: Fee 172, , , ,200 Contribution to employees provident fund 36,810 30,538 36,810 30,538 Other emoluments 499, , , ,850 Directors of subsidiary: Fee 12,000 11, Other emoluments Depreciation of property, plant and equipment 691, , , ,720 Audit fee 65,000 63,000 49,000 47,000 Amortisation of prepaid lease payments on leasehold land 53,999 53,998 24,828 24,827 Rental of: Hostel 12,453 32,016 9,207 29,600 Machinery Property, plant and equipment written off Impairment of investment in subsidiary , ,902 Loss on foreign exchange: Realised ,642 - Unrealised ,668-65

67 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2016 (CONT'D) 10. PROFIT FOR THE YEAR (cont'd) Profit for the year has been arrived at: (cont'd) The Group The Company RM RM RM RM And crediting: Rental income 372, , , ,927 Interest income on short-term deposits 371, , , ,089 Gain on foreign exchange: Realised 43,458 13,407-20,822 Unrealised 3,207 91,698-87,652 Gain on disposal of property, plant and equipment 22, Reversal of inventories written down - 891, ,935 Dividend income from associate - - 2,000,000 1,200, BASIC EARNINGS PER SHARE Basic earnings per share is calculated by dividing profit for the year attributable to owners of the Company by the weighted average number of ordinary shares in issue during the financial year. The Group Profit for the year attributable to owners of the Company (RM) 2,346,097 2,982,347 Weighted average number of ordinary shares in issue (units) 243,000, ,000,000 Basic earnings per share (sen) ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

68 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2016 (CONT'D) 12. PROPERTY, PLANT AND EQUIPMENT The Group Cost Beginning Disposals/ End of year Additions write-off of year RM RM RM RM 2016: Factory buildings 8,050, ,050,010 Plant and machinery 28,753, ,271-29,020,334 Furniture and fittings 1,726,723 54,641 (12,065) 1,769,299 Office equipment 932,474 8,420 (5,097) 935,797 Tools and equipment 5,177,219 13,149-5,190,368 Motor vehicles 577,923 22,042 (57,156) 542,809 Electrical installation 1,275, ,275,461 Moulds and dies 4,639,723 68,847 (737,155) 3,971,415 51,132, ,370 (811,473) 50,755, : Factory buildings 8,050, ,050,010 Plant and machinery 28,856, ,189 (254,500) 28,753,063 Furniture and fittings 1,722,367 5,085 (729) 1,726,723 Office equipment 928,832 19,180 (15,538) 932,474 Tools and equipment 5,191,019 24,600 (38,400) 5,177,219 Motor vehicles 577, ,923 Electrical installation 1,275, ,275,461 Moulds and dies 4,639, ,639,723 51,241, ,054 (309,167) 51,132,596 Accumulated depreciation Beginning of year Charge for the year Disposals/ write-off End of year RM RM RM RM 2016: Factory buildings 2,730, ,000-2,891,475 Plant and machinery 27,444, ,825-27,777,768 Furniture and fittings 1,540,802 39,419 (11,854) 1,568,367 Office equipment 742,221 37,911 (4,558) 775,574 Tools and equipment 4,872,529 53,763-4,926,292 Motor vehicles 558,694 33,008 (57,156) 534,546 Electrical installation 1,259,755 2,701-1,262,456 Moulds and dies 4,592,046 31,246 (737,155) 3,886,137 43,741, ,873 (810,723) 43,622,615 67

69 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2016 (CONT'D) 12. PROPERTY, PLANT AND EQUIPMENT (cont'd) The Group Accumulated depreciation Beginning of year Charge for the year Disposals/ write-off End of year RM RM RM RM 2015: Factory buildings 2,569, ,000-2,730,475 Plant and machinery 27,392, ,046 (254,500) 27,444,943 Furniture and fittings 1,490,812 50,581 (591) 1,540,802 Office equipment 713,821 39,740 (11,340) 742,221 Tools and equipment 4,844,483 66,446 (38,400) 4,872,529 Motor vehicles 518,264 40, ,694 Electrical installation 1,256,652 3,103-1,259,755 Moulds and dies 4,571,472 20,574-4,592,046 43,357, ,920 (304,831) 43,741,465 Accumulated impairment losses Beginning of year Charge for the year Disposals/ write-off End of year RM RM RM RM 2016: Factory buildings Plant and machinery - 67,539-67,539 Furniture and fittings - 39,854-39,854 Office equipment - 10,189-10,189 Tools and equipment - 134, ,237 Motor vehicles Electrical installation Moulds and dies - 57,827-57, , , : Factory buildings Plant and machinery Furniture and fittings Office equipment Tools and equipment Motor vehicles Electrical installation Moulds and dies ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

70 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2016 (CONT'D) 12. PROPERTY, PLANT AND EQUIPMENT (cont'd) The Company Cost Beginning Disposals/ End of year Additions write-off of year RM RM RM RM 2016: Factory buildings 6,597, ,597,000 Plant and machinery 21,121, ,595-21,388,326 Furniture and fittings 1,254,951 49,891 (12,065) 1,292,777 Office equipment 839,380 8,420 (5,097) 842,703 Tools and equipment 3,993,684 13,149-4,006,833 Motor vehicles 542, ,809 Electrical installation 985, ,900 Moulds and dies 3,444, ,444,800 38,780, ,055 (17,162) 39,101, : Factory buildings 6,597, ,597,000 Plant and machinery 20,970, ,189-21,121,731 Furniture and fittings 1,250,595 5,085 (729) 1,254,951 Office equipment 835,738 19,180 (15,538) 839,380 Tools and equipment 3,969,084 24,600-3,993,684 Motor vehicles 542, ,809 Electrical installation 985, ,900 Moulds and dies 3,444, ,444,800 38,596, ,054 (16,267) 38,780,255 Accumulated depreciation Beginning of year Charge for the year Disposals/ write-off End of year RM RM RM RM 2016: Factory buildings 2,282, ,940-2,414,404 Plant and machinery 19,917, ,549-20,213,299 Furniture and fittings 1,111,277 32,276 (11,854) 1,131,699 Office equipment 662,952 34,275 (4,558) 692,669 Tools and equipment 3,849,797 27,197-3,876,994 Motor vehicles 501,538 33, ,546 Electrical installation 970,194 2, ,895 Moulds and dies 3,397,123 20,226-3,417,349 32,693, ,172 (16,412) 33,253,855 69

71 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2016 (CONT'D) 12. PROPERTY, PLANT AND EQUIPMENT (cont'd) The Company Accumulated depreciation Beginning of year Charge for the year Disposals/ write-off End of year RM RM RM RM 2015: Factory buildings 2,150, ,940-2,282,464 Plant and machinery 19,649, ,262-19,917,750 Furniture and fittings 1,075,115 36,753 (591) 1,111,277 Office equipment 638,959 35,333 (11,340) 662,952 Tools and equipment 3,823,472 26,325-3,849,797 Motor vehicles 461,108 40, ,538 Electrical installation 967,091 3, ,194 Moulds and dies 3,376,549 20,574-3,397,123 32,142, ,720 (11,931) 32,693,095 The Group The Company RM RM RM RM Net book value: Factory buildings 5,158,535 5,319,535 4,182,596 4,314,536 Plant and machinery 1,175,027 1,308,120 1,175,027 1,203,981 Furniture and fittings 161, , , ,674 Office equipment 150, , , ,428 Tools and equipment 129, , , ,887 Motor vehicles 8,263 19,229 8,263 41,271 Electrical installation 13,005 15,706 13,005 15,706 Moulds and dies 27,451 47,677 27,451 47,677 6,823,232 7,391,131 5,847,293 6,087,160 The subsidiary suffered continuous loss from its manufacture of wires and cables for automotive industries, and there was no sales generated from the manufacture of wires and cables for automotive industries during the current financial year. The directors of the subsidiary carried out impairment test and reviewed the recoverable amount of its property, plant and equipment, noted that the recoverable amount of certain property, plant and equipment was lower than carrying amount. Accordingly, an impairment loss of RM309,646 (2015: Nil) was recognised by the subsidiary during the financial year. As of December 31, 2016, certain factory buildings of the Group and of the Company with a total carrying value of RM2,991,550 (2015: RM3,088,850) are charged to local licensed banks as securities for bank credit facilities granted to the Group and the Company as disclosed in Note ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

72 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2016 (CONT'D) 13. PREPAID LEASE PAYMENTS ON LEASEHOLD LAND The Group The Company RM RM RM RM Short leasehold land At beginning of the year 2,130,150 2,184, ,758 1,007,585 Amortisation during the year (53,999) (53,998) (24,828) (24,827) At end of the year 2,076,151 2,130, , ,758 As of December 31, 2016, the unexpired lease period of the Group s and of the Company s short leasehold land is 37 years. As of December 31, 2016, a short leasehold land of the Group and of the Company with a carrying value of RM957,930 (2015: RM982,758) is charged to a local licensed bank as security for bank credit facilities granted to the Group and the Company as disclosed in Note INVESTMENT IN SUBSIDIARY The Company RM RM Unquoted shares, at cost 24,400,000 24,400,000 Less: Accumulated impairment losses (21,708,697) (21,276,703) Carrying amount 2,691,303 3,123,297 The Company holds 100% (2015: 100%) equity interest in Supercomal Advanced Cables Sdn. Bhd., a company incorporated in Malaysia. The subsidiary is principally involved in the manufacture and assembly of wires and cables. 15. INVESTMENT IN ASSOCIATE The Group The Company RM RM RM RM Unquoted shares, at cost 450, , , ,000 Group s share of post-acquisition reserve 10,749,406 9,504, ,199,406 9,954, , ,000 The Company holds 20% (2015: 20%) equity interest in Supercomal Medical Products Sdn. Bhd., a company incorporated in Malaysia. The associate is principally involved in the manufacture of cables for medical devices. 71

73 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2016 (CONT'D) 15. INVESTMENT IN ASSOCIATE (cont'd) Summarised financial information in respect of the Group s associate is set out below. The summarised financial information below represents amounts shown in the associate s financial statements prepared in accordance with MFRS (adjusted by the Group for equity accounting purposes). The Group RM RM Current assets 59,564,711 53,539,503 Non-current assets 4,140,925 3,316,589 Current liabilities (7,363,604) (6,736,731) Non-current liabilities (345,000) (345,000) Revenue 51,051,487 45,943,068 Profit for the year 16,222,671 16,824,917 Other comprehensive income for the year - - Total comprehensive income for the year 16,222,671 16,824,917 Dividend received from the associate during the year 2,000,000 1,200,000 Reconciliation of the above summarised financial information to the carrying amount of the interest in Supercomal Medical Products Sdn. Bhd. recognised in the consolidated financial statements: The Group RM RM Net assets of the associate 55,997,032 49,774,361 Proportion of the Group s ownership interest in Supercomal Medical Products Sdn. Bhd. 20% 20% Carrying amount of the Group s interest in Supercomal Medical Products Sdn. Bhd. 11,199,406 9,954, INVENTORIES The Group The Company RM RM RM RM Raw materials 3,138,919 3,073,177 2,921,363 2,465,746 Work-in-progress 1,171,327 1,316,226 1,079,572 1,316,226 Finished goods 3,138,288 2,307,644 3,042,470 2,242,313 Spare parts 73,349 82,632 73,349 82,632 7,521,883 6,779,679 7,116,754 6,106, ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

74 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2016 (CONT'D) 16. INVENTORIES (cont'd) The cost of inventories of the Group and of the Company recognised as an expense during the financial year is RM28,506,481 (2015: RM34,663,483) and RM27,354,910 (2015: RM33,485,330) respectively. The amount recognised as an expense during the year in respect of write-down of inventories to net realisable value and allowance for obsolete inventories of the Group and of the Company are RM976,333 (2015: RM285,738) and RM313,332 (2015: Nil) respectively. The amount of reversal of inventories written down of the Group and of the Company recognised in profit or loss during the financial year is Nil (2015: RM891,935). Previous write-downs have been reversed as a result of utilisation during the financial year. 17. TRADE AND OTHER RECEIVABLES The Group The Company RM RM RM RM Trade receivables 7,083,993 5,827,961 6,719,242 5,827,580 Less: Allowance for doubtful debts (441,419) (441,419) (441,419) (441,419) 6,642,574 5,386,542 6,277,823 5,386,161 Amount owing by subsidiary: Trade - - 1,495, ,827 Non-trade , , ,659,141 1,116,027 Amount owing by associate: Trade 1,113,943 1,284,364 1,113,943 1,284,364 Other receivables 94, ,243 94, ,243 The currency exposure profile of trade and other receivables is as follows: 7,851,510 6,836,149 9,145,900 7,951,795 The Group The Company RM RM RM RM Ringgit Malaysia 7,491,569 6,274,673 9,033,453 7,390,319 United States Dollar 264, ,469 17, ,469 Singapore Dollar 95,007 95,007 95,007 95,007 7,851,510 6,836,149 9,145,900 7,951,795 73

75 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2016 (CONT'D) 17. TRADE AND OTHER RECEIVABLES (cont'd) The credit periods granted by the Group and the Company on sale of goods range from 30 to 77 days (2015: 30 to 60 days). No interest is charged on trade receivables outstanding balance. Allowance for doubtful debts are recognised against trade receivables over credit period based on estimated irrecoverable amounts determined by reference to past default experience of the counterparty and an analysis of the counterparty s current financial position. Trade receivables disclosed above include amounts (see below for aged analysis) that are past due at the end of the reporting period but for which the Group and the Company have not recognised an allowance for doubtful debts because there has not been a significant change in credit quality and the amounts are still considered recoverable. The Group and the Company do not hold any collateral or other credit enhancements over these balances nor does it have a legal right of offset against any amounts owed by the Group and the Company to the counterparty. Ageing of past due but not impaired trade receivables: The Group The Company RM RM RM RM 1 to 30 days 1,677,010 1,954,517 1,504,043 1,954, to 60 days 242, , , ,023 Total 1,919,382 2,059,540 1,746,415 2,059,159 In determining the recoverability of a trade receivable, the Group and the Company consider any change in the credit quality of the trade receivables from the date credit was initially granted up to the end of the reporting period. The concentration of credit risk is limited due to the customer base being large and unrelated. The allowance for doubtful debts on trade receivables are made for individually impaired receivables, relating to entities that are in significant financial difficulties and have defaulted on payments. The Group and the Company do not hold any collateral over these balances. Ageing of impaired trade receivables: The Group The Company RM RM RM RM More than 365 days 441, , , ,419 The credit period granted by the Company for trade transactions with subsidiary is 60 days (2015: 60 days). No interest is charged on trade amount owing by subsidiary. 74 ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

76 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2016 (CONT'D) 17. TRADE AND OTHER RECEIVABLES (cont'd) Ageing of past due but not impaired trade amount owing by subsidiary: The Company RM RM 1 to 30 days 41, to 60 days 24, to 90 days 88, to 120 days 60, to 365 days 247,218 - More than 365 days 952, ,827 1,414, ,827 The non-trade amount owing by subsidiary arose mainly from unsecured advances which are interest free and repayable on demand. The credit period granted by the Company for trade transactions with associate is 60 days (2015: 60 days). No interest is charged on trade amount owing by associate. Ageing of past due but not impaired trade amount owing by associate: The Group The Company RM RM RM RM 1 to 30 days 356, , , , OTHER ASSETS The Group The Company RM RM RM RM Deposits 107,275 93,315 78,025 64,065 Prepayments 59,118 28,769 3,636 15, , ,084 81,661 79, SHORT-TERM DEPOSITS WITH LICENSED BANKS The Group s short-term deposits with licensed banks carry interest at rates ranging from 2.55% to 4.6% (2015: 2.8% to 3.34%) per annum and will mature in January 2017 and April The Company s short-term deposits with a licensed bank carry interest at rates ranging from 2.55% to 4.6% (2015: 2.8% and 3.34%) per annum and will mature in January As of December 31, 2016, a short-term deposit with a licensed bank of the Group with a carrying value of RM1,500 (2015: RM1,500) is pledged to the bank for a bank guarantee facility granted to the subsidiary. 75

77 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2016 (CONT'D) 20. CASH AND BANK BALANCES The currency exposure profile of cash and bank balances is as follows: The Group The Company RM RM RM RM Ringgit Malaysia 2,297,730 1,325,838 1,832,841 1,129,400 United States Dollar 130, ,207 16, ,116 2,428,612 1,550,045 1,848,866 1,340, SHARE CAPITAL The Company RM RM Authorised: 1,000,000,000 ordinary shares of RM0.10 each 100,000, ,000,000 Issued and fully paid: 243,000,000 ordinary shares of RM0.10 each 24,300,000 24,300, RESERVE The Group and the Company RM RM Non-distributable reserve: Share premium 5,936,954 5,936,954 The share premium arose from the issue of shares at premium, net of share issue expense. 23. RETAINED EARNINGS The Group The Company RM RM RM RM Distributable reserve: Retained earnings 12,039,569 10,665,472 1,290,163 1,182,642 As of December 31, 2016, the entire retained earnings of the Company is available for distribution as single-tier dividends. 76 ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

78 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2016 (CONT'D) 24. DEFERRED TAX LIABILITIES The Group Opening balance Recognised in profit or loss Closing balance RM RM RM 2016: Deferred tax liabilities: Property, plant and equipment 903,592 (62,755) 840,837 Others 12,000-12, ,592 (62,755) 852,837 Deferred tax assets: Inventories (230,000) 190,000 (40,000) Unused tax capital allowances (276,000) (141,000) (417,000) (506,000) 49,000 (457,000) Net 409,592 (13,755) 395, : Deferred tax liabilities: Property, plant and equipment 905,347 (1,755) 903,592 Others - 12,000 12, ,347 10, ,592 Deferred tax assets: Inventories (460,000) 230,000 (230,000) Unused tax capital allowances (22,000) (254,000) (276,000) (482,000) (24,000) (506,000) Net 423,347 (13,755) 409,592 77

79 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2016 (CONT'D) 24. DEFERRED TAX LIABILITIES (cont'd) The Company Opening balance Recognised in profit or loss Closing balance RM RM RM 2016: Deferred tax liabilities: Property, plant and equipment 809,592 2, ,837 Others 11,000 (3,000) 8, ,592 (755) 819,837 Deferred tax assets: Unused tax capital allowances (276,000) (141,000) (417,000) Inventories (135,000) 128,000 (7,000) (411,000) (13,000) (424,000) Net 409,592 (13,755) 395, : Deferred tax liabilities: Property, plant and equipment 808,347 1, ,592 Others - 11,000 11, ,347 12, ,592 Deferred tax assets: Unused tax capital allowances (22,000) (254,000) (276,000) Inventories (363,000) 228,000 (135,000) (385,000) (26,000) (411,000) Net 423,347 (13,755) 409,592 Deferred tax balances are presented in the statements of financial position after appropriate offsetting as follows: The Group The Company RM RM RM RM Deferred tax liabilities 395, , , , ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

80 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2016 (CONT'D) 24. DEFERRED TAX LIABILITIES (cont'd) The Finance (No. 2) Act 2014 gazetted on December 30, 2014 enacts the reduction of corporate income tax rate from 25% to 24% with effect from year of assessment The Budget 2017 announced on October 21, 2016 proposed that the incremental portion of chargeable income compared to the immediate preceding year of assessment enjoys reduced income tax rate with effect from year of assessment 2017 and 2018 as follows: Percentage of increase in chargeable income as compared to the immediate preceding year of assessment Percentage point of reduction in tax rate Tax rate after reduction % % % Less than 5% % to 9.99% % to 14.99% % to 19.99% % and above 4 20 Following this, the applicable tax rates to be used for the measurement of any applicable deferred tax will be the respective expected rates. Unrecognised deductible temporary differences, unused tax losses and unused tax credits Deductible temporary differences, unused tax losses and unused tax credits for which no deferred tax assets have been recognised are attributable to the following: The Group The Company RM RM RM RM Unused tax losses 12,453,000 12,147, ,000 - Unused tax capital allowances 3,561,000 4,078,000 7,000 54,000 Inventories 1,557, , Net 17,571,000 16,948, ,000 54,000 As mentioned in Note 3, the tax effects of deductible temporary differences, unused tax losses and unused tax credits which would give rise to deferred tax assets are generally recognised to the extent that it is probable that future taxable profits will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised. 79

81 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2016 (CONT'D) 25. TRADE AND OTHER PAYABLES The Group The Company RM RM RM RM Trade payables 2,963,313 1,567,106 2,875,196 1,567,106 Amount owing to subsidiary: Trade , ,049 Non-trade , , ,036, ,955 Amount owing to associate: Trade 42,467 55,087 42,467 55,087 Non-trade 8, ,647 55,087 42,467 55,087 Other payables 255, , , ,823 Accrued expenses 670, , , ,476 The currency exposure profile of trade and other payables is as follows: 3,940,357 2,561,386 4,760,783 3,400,447 The Group The Company RM RM RM RM Ringgit Malaysia 3,798,785 2,357,534 4,695,930 3,196,595 United States Dollar 141, ,780 64, ,780 Singapore Dollar - 10,072-10,072 3,940,357 2,561,386 4,760,783 3,400,447 The credit periods granted to the Group and the Company for trade purchases range from 30 to 60 days (2015: 30 to 60 days). No interest is charged on trade payables outstanding balance. The Group and the Company have financial risk management policies in place to ensure that all payables are paid within the pre-agreed credit terms. The credit period granted to the Company for trade transactions with subsidiary is 60 days (2015: 60 days). No interest is charged on trade amount owing to subsidiary. The non-trade amount owing to subsidiary arose mainly from unsecured advances which are interest free and repayable on demand. The credit period granted to the Company for trade transactions with associate is 60 days (2015: 60 days). No interest is charged on trade amount owing to associate. The non-trade amount owing to associate arose mainly from unsecured advances which are interest free and repayable on demand. Other payables comprise mainly amounts outstanding for ongoing costs. 80 ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

82 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2016 (CONT'D) 26. DIVIDEND Interim single tier dividend declared and paid in respect of financial year ended December 31, 2015: 0.4 sen (2015: Nil) per ordinary share 972,000 - RM RM 27. CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise the following: The Group The Company RM RM RM RM Short-term deposits with licensed banks 8,001,500 8,501,500 8,000,000 8,500,000 Cash and bank balances 2,428,612 1,550,045 1,848,866 1,340,516 10,430,112 10,051,545 9,848,866 9,840,516 Less: Short-term deposit pledged as security (1,500) (1,500) ,428,612 10,050,045 9,848,866 9,840, BORROWINGS As of December 31, 2016, the Group and the Company have unused credit facilities as follows: The Group The Company RM RM RM RM Secured 3,500,000 3,500,000 3,500,000 3,500,000 Unsecured - 100, ,500,000 3,600,000 3,500,000 3,500,000 The credit facilities are secured by a charge over the Company s short leasehold land and factory buildings and a negative pledge over all the Company s assets, and was guaranteed by the Company for Nil (2015: RM13,200,000). 81

83 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2016 (CONT'D) 29. FINANCIAL INSTRUMENTS a. Capital risk management The Group s objectives when managing capital are to safeguard the Group s ability to continue as a going concern and to maintain an optimal capital structure so as to maximise shareholder value. In order to maintain or achieve an optimal capital structure, the Group may adjust the amount of dividend payment. Management monitors capital based on ability of the Group to generate sustainable profits and availability of retained earnings for dividend payments to shareholders. The Group s overall strategy remains unchanged from b. Categories of financial instruments RM RM The Group Financial assets Cash and bank balances 2,428,612 1,550,045 Short-term deposits 8,001,500 8,501,500 Loans and receivables 7,958,785 6,929,464 Financial liabilities Trade and other payables 3,940,357 2,561,386 The Company Financial assets Cash and bank balances 1,848,866 1,340,516 Short-term deposits 8,000,000 8,500,000 Loans and receivables 9,223,925 8,015,860 Financial liabilities Trade and other payables 4,760,783 3,400,447 c. Financial risk management objectives The operations of the Group and of the Company are subject to a variety of financial risks, including market risk, foreign currency risk, credit risk, interest rate risk, liquidity risk and cash flow risk. The Group and the Company have formulated a financial risk management framework whose principal objective is to minimise the Group s and the Company s exposure to risks and/ or costs associated with the financing, investing and operating activities of the Group and of the Company. Various risk management policies are made and approved by the Board for observation in the day-to-day operations for the controlling and management of the risks associated with financial instruments. i. Market risk management The Group and the Company have in place policies to manage the Group s and the Company s exposures to fluctuation in the prices of the raw materials used in the operations. 82 ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

84 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2016 (CONT'D) 29. FINANCIAL INSTRUMENTS (cont'd) c. Financial risk management objectives (cont'd) ii. Foreign currency risk management The Group and the Company have exposure to foreign exchange risk as a result of transactions, receivables and payables in foreign currencies arising from normal operating activities. The Group and the Company do not speculate in foreign currencies. The carrying amounts of the Group s and of the Company s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows: RM RM The Group Assets United States Dollar 395, ,676 Singapore Dollar 95,007 95,007 Liabilities United States Dollar 141, ,780 Singapore Dollar - 10,072 The Company Assets United States Dollar 33, ,585 Singapore Dollar 95,007 95,007 Liabilities United States Dollar 64, ,780 Singapore Dollar - 10,072 The following table details the sensitivity analysis when the RM strengthens 10% (2015: 10%) against the relevant foreign currencies. 10% (2015: 10%) is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% (2015: 10%) change in foreign currency rates. A positive number below indicates an increase in profit and a negative number indicates a decrease in profit where the RM strengthens 10% (2015: 10%) against the relevant currency. 83

85 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2016 (CONT'D) 29. FINANCIAL INSTRUMENTS (cont'd) c. Financial risk management objectives (cont'd) ii. Foreign currency risk management (cont'd) RM RM The Group Impact on profit or loss: United States Dollar (25,424) (49,690) Singapore Dollar (9,501) (8,494) The Company Impact on profit or loss: United States Dollar 3,139 (48,381) Singapore Dollar (9,501) (8,494) For a 10% (2015: 10%) weakening of the RM against the relevant currency, it would have had equal but opposite effect on the above currencies to the amounts shown above. iii. Credit risk management Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group and the Company. The Group and the Company have adopted a policy of only dealing with creditworthy counterparties, as a means of mitigating the risk of financial loss from defaults. The Group and the Company only transact with entities that are rated the equivalent of investment grade and above. The Group and the Company use its own trading records to rate its major customers. The Group s and the Company s exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties. Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of accounts receivable. At the reporting date, approximately 77% (2015: 58%) and 81% (2015: 68%) of the Group s and of the Company s trade receivables respectively were due from three (2015: two) major customers. Apart from these major customers, the Group and the Company do not have significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The Group and the Company define counterparties as having similar characteristics if they are related entities and concentration of credit risk to any other counterparty did not exceed 10% (2015: 7%) and 10% (2015: 7%) respectively of gross trade receivables at the end of reporting date. The carrying amounts of financial assets recognised in the financial statements, which is net of impairment losses, represents the Group s and the Company s maximum exposure to credit risk. iv. Interest rate risk management The Group s and the Company s exposure to changes in interest rates relate primarily to the Group s and the Company s short-term deposits with licensed banks. It has no significant interest-bearing financial assets or liabilities. No sensitivity analysis is prepared as the Group and the Company do not expect any material effect on the Group s and the Company s profit or loss arising from the effects of reasonably possible changes to interest rates on interest bearing financial instruments at the end of reporting period. 84 ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

86 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2016 (CONT'D) 29. FINANCIAL INSTRUMENTS (cont'd) c. Financial risk management objectives (cont'd) v. Liquidity risk management Ultimate responsibility for liquidity risk management rests with the board of directors, which has established an appropriate liquidity risk management framework for the management of the Group s and of the Company s funding and liquidity management requirements. The Group and the Company manage liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities. Details of undrawn financing facilities that the Group and the Company have at its disposal to further reduce liquidity risk are set out in Note 28. The Group and the Company do not hold any derivative financial instruments. vi. Cash flow risk management The Group and the Company review their cash flow position regularly to manage its exposures to fluctuations in future cash flows associated with its monetary financial instruments. d. Fair value of financial instruments The directors consider that the carrying amounts of financial assets and financial liabilities recognised at amortised cost in the financial statements approximate their fair values. 30. RELATED PARTY TRANSACTIONS The details of transactions between the Group and the Company with related parties are disclosed below: The Group The Company RM RM RM RM With subsidiary: Sale of finished goods ,529 - Sale of indirect and packing materials Purchase of raw materials, and packing materials With associate: Sale of finished goods 4,487,195 4,980,396 4,486,907 4,980,396 Rental receivable 372, , , ,927 Sale of indirect and packing materials 11,306 2,190 11,306 2,190 Purchase of finished goods 7, Sale of office equipment - 3,861-3,861 85

87 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2016 (CONT'D) 31. SEGMENTAL INFORMATION Products and services from which reportable segments derive their revenue Information reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance comprises single type of goods delivered, namely manufactured products. Accordingly, no industry segment information of the Group has been presented. Geographical information The Group s operations are located in Malaysia. The Group s revenue from external customers attributed to countries from which the Company and its subsidiary derive revenue are detailed below: The Group RM RM Malaysia 27,936,169 32,485,242 United States of America 2,003,977 1,911,955 Republic of Singapore 242, ,536 Taiwan R.O.C. 202,207 - Others 28, ,832 Information about major customers 30,412,825 34,940,565 Included in revenue of the Group are revenue of RM16,241,273 (2015: RM18,881,848) which arose from sales to the Group s two (2015: two) major customers who contribute to 53% (2015: 54%) of the Group s revenue. 32. CONTINGENT LIABILITY The Group and the Company RM RM Unsecured - 8,989,310 On January 12, 2016, the Company received a bill of demand issued by an authority to the Company that demanded the payment of sales tax and import duty. During the period from January 1, 2016 until the date the financial statements for the year ended December 31, 2015 were authorised for issuance, the directors of the Company have been in discussion with the relevant authority. The directors of the Company have obtained advice from a consultant, and based on the advice received, the directors were of the view that the claim of RM8,989,310 was premature and was subject to appeal to the authority. The directors were unable to estimate the amount ultimately payable reliably as of December 31, 2015, and accordingly, no provision was made in the financial statements as of December 31, In December 2016, the authority issued revised bill of demand where the amount demanded on sales tax and import duty has been reduced to RM622,950. The aforesaid amount has been recognised as an expense in the financial statements and full payment has been made during the year. 86 ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

88 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2016 (CONT'D) 33. OPERATING LEASE COMMITMENTS The Group and the Company have entered into operating lease agreements to lease out part of its premises and equipment. The future minimum lease payments receivables are as follows: The Group The Company RM RM RM RM Not later than one year 439,104 42, ,104 42,982 Later than one year and not later than five years 109,776-86, ,880 42, ,630 42,982 87

89 34. SUPPLEMENTARY INFORMATION DISCLOSURE ON REALISED AND UNREALISED PROFITS/ LOSSES On March 25, 2010, Bursa Malaysia Securities Berhad issued a directive to all listed issuers pursuant to Paragraphs 2.06 and 2.23 of the Bursa Securities ACE Market Listing Requirements. The directive requires all listed issuers to disclose the breakdown of the unappropriated profits or accumulated losses as of the end of the reporting period into realised and unrealised profits or losses. On December 20, 2010, Bursa Malaysia Securities Berhad further issued guidance on the disclosure and the prescribed format required. The breakdown of the accumulated losses/ retained earnings of the Group and of the Company as of December 31, 2016 into realised and unrealised amounts, pursuant to the directive, is as follows: The Group The Company RM RM RM RM Total (accumulated losses)/ retained earnings of the Company and its subsidiary Realised (21,933,468) (21,697,486) (210,897) (416,737) Unrealised 1,514,934 1,603,425 1,501,060 1,599,379 (20,418,534) (20,094,061) 1,290,163 1,182,642 Total share of retained earnings of associate Realised 9,253,775 7,892, Unrealised (54,369) 62, ,199,406 7,954, Less: Consolidation adjustments 23,528,697 22,804, Total retained earnings as per statements of financial position 12,039,569 10,665,472 1,290,163 1,182,642 The determination of realised and unrealised profits or losses is based on Guidance of Special Matter No. 1 Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Securities Listing Requirements as issued by the Malaysian Institute of Accountants on December 20, A charge or a credit to the profit or loss of a legal entity is deemed realised when it is resulted from the consumption of resource of all types and form, regardless of whether it is consumed in the ordinary course of business or otherwise. A resource may be consumed through sale or use. Where a credit or a charge to the profit or loss upon initial recognition or subsequent measurement of an asset or a liability is not attributed to consumption of resource, such credit or charge should not be deemed as realised until the consumption of resource could be demonstrated. The supplementary information have been made solely for complying with the disclosure requirements stipulated in the directive of Bursa Malaysia Securities Berhad and is not made for any other purposes. 88 ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

90 STATEMENT BY DIRECTORS The directors of SUPERCOMNET TECHNOLOGIES BERHAD state that, in their opinion, the accompanying financial statements are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the provisions of the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as of December 31, 2016 and of the financial performance and the cash flows of the Group and of the Company for the year then ended on that date. The supplementary information set out in Note 34, which is not part of the financial statements, is prepared in all material respects, in accordance with Guidance on Special Matter No. 1 Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements as issued by the Malaysian Institute of Accountants and the directive of Bursa Malaysia Securities Berhad. Signed in accordance with a resolution of the Directors, SHIUE, JONG-ZONE WU, HUEI-CHUNG April 13, 2017 DECLARATION BY THE DIRECTOR PRIMARILY RESPONSIBLE FOR THE FINANCIAL MANAGEMENT OF THE COMPANY I, SHIUE, JONG-ZONE, the director primarily responsible for the financial management of SUPERCOMNET TECHNOLOGIES BERHAD, do solemnly and sincerely declare that the accompanying financial statements 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, Subscribed and solemnly declared by the abovenamed SHIUE, JONG-ZONE at SUNGAI PETANI in the State of KEDAH on April 13, 2017 Before me, SHAZLIN IZNINA BINTI OEMAR No. K110 COMMISSIONER FOR OATHS 89

91 GROUP PROPERTIES AS AT DECEMBER 31, 2016 Title / Location Description Land area/ Built- up area sq. meters Existing use Tenure Approximate Age of buildings Net book value as at December 31, 2016 RM Date of Last revaluation Lot P.T Two storey 12,158 sq wire and cable Leasehold Building 1 5,140,526^ July 1997 H.S.(D) factory /9,566* manufacturing expiring on is approx /95 buildings plant 05/05/2055 years and Mukim of situated on a Building 2 is Sungai Petani 60 years approx. leasehold 20 years land with the option to extend lease for a further 39 years Lot P.T Two storey 20,234.3 sq wire and cable Leasehold Building 3 2,094,160^^ February H.S.(D) factory /8,470** manufacturing, expiring on is approx /95 buildings cable assembly 05/05/2055 years and Mukim of situated on a plant Building 4 is Sungai Petani 60 years approx. leasehold 13 years land with the option to extend lease for a further 39 years The details of the landed properties owned by the STB Group as at December 31, 2016 are set out below:- Notes:- * There are two main buildings on the land. Building 1 measures 3,350 sq. meters whilst Building 2 measures 5,788 sq. meters. Other structures such as the guard house, pump house, canteen, etc., measure approximately 428 sq. meters ^ Of the total, the net book value for the land as at December 31, 2016 was RM957,930 whilst the net book value of the buildings was RM4,182,596. ** There are two main buildings on the land. Building 3 measures 3,330 sq. meters whilst Building 4 measures 4,840 sq. meters. Other structures such as the guard house, parking, canteen, etc., measure approximately 300 sq. meters ^^ Of the total, the net book value for the land as at December 31, 2016 was RM1,118,221 whilst the net book value of the buildings was RM975, ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

92 ANALYSIS OF SHAREHOLDINGS SHARE CAPITAL AS AT MARCH 31, 2017 Total Number of Issued Shares : 243,000,000 Class of Shares : Ordinary Shares with equal voting right Number of Shareholders : 1,883 DISTRIBUTION OF SHAREHOLDERS AS AT MARCH 31, 2017 Size of Holdings No. of Holders No. of Shares % , , ,001 10, ,879, , , ,275, ,001 12,149, ,913, ,150,000 and above 3 88,878, Total 1, ,000, THIRTY LARGEST SECURITIES HOLDERS AS AT MARCH 31, 2017 No. Name Shareholdings % 1 Shiue, Jong-Zone 46,393, Wu Chung-Jung 26,837, Liu Kuo, Ling-Miao 15,648, Tan Ching Ling 6,800, Pacific Rotary Sdn Bhd 5,432, Wu, Huei-Chung 3,552, Lin Ho, Shu-Li 3,408, Chen Cheng-Chun 3,036, Teo Chin Siong 2,900, Maybank Nominees (Tempatan) Sdn Bhd 2,500, Qualifier: Pledged Securities Account for Tan Lian Hong 11 Lee, Chao-Chih 2,280, Saw Siam Yeng 2,106, Ng Chin Heng 2,100, Yen Tien Fook 1,881, Tan Yoke Ngor 1,750, Lee Kok Ping 1,500, Public Nominees (Tempatan) Sdn Bhd 1,400, Qualifier: Pledged Securities Account for TNT Moving Forward Sdn Bhd (E-SPI) 18 Shiue, Jerry 1,356, Koh Thin Min 1,350, Hsueh, Chih-Yu 1,344,

93 ANALYSIS OF SHAREHOLDINGS (CONT'D) THIRTY LARGEST SECURITIES HOLDERS AS AT MARCH 31, 2017 (cont d) No. Name Shareholdings % 21 RHB Investment Bank Berhad 1,343, Qualifier: Exempt an CLR for DBS Vickers Securities (Singapore) Pte Ltd 22 Oung Siew Peng 1,300, Tan Siew Ean 1,041, TA Nominees (Tempatan) Sdn Bhd 1,000, Qualifier: Pledged Securities Account for Poon Soi Tai 25 Tee Yong 1,000, Kenanga Nominess (Tempatan) Sdn Bhd 950, Qualifier: Pledged Securities Account for Eg Kaa Chee (STC) 27 Teoh Wah Ing 940, Loo Kuat Keng 900, Wang, Yu-Chuan 900, Loo Lip Leong 800, SUBSTANTIAL SHAREHOLDERS AS AT MARCH 31, 2017 Name Direct Shareholding % Indirect Shareholding % Shiue, Jong Zone 46,393, ,090,600 (a) Wu Chung-Jung 26,837, ,647,000 (b) Wu, Huei-Chung 3,552, ,932,200 (c) Hsueh, Shiue, Jyh-Yeu 1,344, ,139,500 (d) Shiue, Jyh-Jeh 1,356, ,127,500 (e) Liu Kuo, Ling-Miao 15,648, Notes:- (a) Deemed interest held through:- Wu, Huei-Chung 3,552,000 Wu, Chung-Jung 26,837,200 Hsueh, Shiue, Jyh-Yeu 1,344,700 Shiue, Jyh-Jeh 1,356,700 (d) Deemed interest held through:- Wu, Huei-Chung 3,552,000 Wu, Chung-Jung 26,837,200 Shiue, Jong-Zone 46,393,600 Shiue, Jyh-Jeh 1,356,700 (b) Deemed interest held through:- Shiue, Jong-Zone 46,393,600 Wu, Huei-Chung 3,552,000 Hsueh, Shiue, Jyh-Yeu 1,344,700 Shiue, Jyh-Jeh 1,356,700 (e) Deemed interest held through:- Wu, Huei-Chung 3,552,000 Wu, Chung-Jun 26,837,200 Shiue, Jong-Zone 46,393,600 Hsueh, Shiue, Jyh-Yeu 1,344,700 (c) Deemed interest held through:- Shiue, Jong-Zone 46,393,600 Wu, Chung-Jung 26,837,200 Hsueh, Shiue, Jyh-Yeu 1,344,700 Shiue, Jyh-Jeh 1,356, ANNUAL REPORT 2016 SUPERCOMNET TECHNOLOGIES BERHAD ( H)

94 ANALYSIS OF SHAREHOLDINGS (CONT'D) DIRECTORS SHAREHOLDING AS AT MARCH 31, 2017 Name Direct Shareholding % Indirect Shareholding % Shiue, Jong-Zone 46,393, ,090,600 (a) Wu, Huei-Chung 3,552, ,932,200 (b) Wu, Chung-Jung 26,837, ,647,000 (c) Hsueh, Shiue, Jyh-Yeu 1,344, ,139,500 (d) Goh Chooi Eam Ng Ngoon Weng Notes:- (a) (b) (c) (d) Deemed interest held through:- Wu, Huei-Chung 3,552,000 Wu, Chung-Jung 26,837,200 Hsueh, Shiue, Jyh-Yeu 1,344,700 Shiue, Jyh-Jeh 1,356,700 Deemed interest held through:- Shiue, Jong-Zone 46,393,600 Wu, Chung-Jung 26,837,200 Hsueh, Shiue, Jyh-Yeu 1,344,700 Shiue, Jyh-Jeh 1,356,700 Deemed interest held through:- Shiue, Jong-Zone 46,393,600 Wu, Huei-Chung 3,552,000 Hsueh, Shiue, Jyh-Yeu 1,344,700 Shiue, Jyh-Jeh 1,356,700 Deemed interest held through:- Wu, Huei-Chung 3,552,000 Wu, Chung-Jung 26,837,200 Shiue, Jong-Zone 46,393,600 Shiue, Jyh-Jeh 1,356,700 93

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96 PROXY FORM SUPERCOMNET TECHNOLOGIES BERHAD (Company No H) (Incorporated in Malaysia) No of ordinary shares held I/We *NRIC No./Company No (FULL NAME IN BLOCK CAPITAL) of (FULL ADDRESS) being *a Member/Members of SUPERCOMNET TECHNOLOGIES BERHAD ( H) (the "Company") hereby appoint (Proxy 1) (FULL NAME IN BLOCK CAPITAL) *NRIC No./Company No of (FULL ADDRESS) and*/or failing him* (Proxy 2) (FULL NAME IN BLOCK CAPITAL) *NRIC No./Company No of (FULL ADDRESS) and*/or failing him*, the Chairman of the Meeting, as my/our proxy(ies), to vote for me/us on my/our behalf at the Twenty-Seventh General Meeting of the Company to be held at Ifrah Hall, Cinta Sayang Resort, Persiaran Cinta Sayang, Sungai Petani, Kedah on Friday, May 26, 2017 at 9.30 a.m. and at any adjournment thereof as indicated below:- The proportions of my/our holdings to be represented by my/our proxy(ies) are as follows:- Proxy 1 - % Proxy 2 - % 100% I/We hereby indicate with an X in the spaces provided how I/we wish my/our votes to be cast. (Unless otherwise instructed, the proxy may vote, as he thinks fit) Resolutions For Against 1. To approve the payment of Directors Fee of up to RM269,280/- for the period from January 1, 2017 until the next Annual General Meeting of the Company. 2. To approve the Directors benefits (excluding Directors Fee) payable of up to RM29,700/- for the period from January 1, 2017 until the next Annual General Meeting of the Company. To re-elect the following Directors who are retiring pursuant to Article 99(1) of the Articles of Association of the Company, and who, being eligible offered themselves for re-election:- 3. Mr. Ng Ngoon Weng 4. Mdm. Wu, Huei-Chung 5. To re-appoint Deloitte PLT as Auditors of the Company for the ensuing year and to authorise the Directors to fix their remuneration. Special Business Ordinary Resolutions 6. To re-appoint Mr. Wu, Chung-Jung to continue in office as Director of the Company. 7. To re-appoint Mr. Shiue, Jong-Zone to continue in office as Director of the Company. 8. Authority to Issue Shares pursuant to the Companies Act * Strike out whichever is inapplicable Signed this: day of 2017 Signature(s) of Member(s) Affix Company s Seal (if applicable) Notes: A. For the purpose of determining a member who shall be entitled to attend and vote at this Twenty-Seventh Annual General Meeting, the Company shall be requesting the Record of Depositors as at May 9, Only a depositor whose name appears on the Record of Depositors as at May 9, 2017 shall be entitled to attend, speak and vote at the said meeting or appoint proxy(ies) to attend, speak and vote on his/her behalf. 1. A member (Except Exempt Authorised Nominee) shall be entitled to appoint up to two (2) proxies to attend and vote at the same meeting. Where a member appoints two (2) or more proxies, the appointment shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy. 2. 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. 3. The instrument appointing a proxy shall be in writing under the hand of the appointor or his attorney duly authorised in writing or, if the appointor is a corporation, either under its common seal or under the hand of an officer or attorney duly authorised. 4. The instrument appointing a proxy must be deposited at the Registered Office of the Company at 57-G Persiaran Bayan Indah, Bayan Bay, Sungai Nibong, Penang not less than twenty-four(24) hours before the time set for holding of the Meeting i.e. Thursday, May 25, 2017 at 9.30 a.m. or at any adjournment thereof.

97 Fold this flap for sealing Then fold here Affix stamp THE COMPANY SECRETARIES SUPERCOMNET TECHNOLOGIES BERHAD 57-G Persiaran Bayan Indah Bayan Bay, Sungai Nibong Penang 1st fold here

98 Cable Harness Automotive Harness Medical Device Products Supercomnet Technologies Berhad ( H) (ACE Market of Bursa Malaysia Securities Berhad) Lot 172, Jalan PKNK 3/8, Kawasan Perusahaan Sungai Petani, Sungai Petani, Kedah D.A., Malaysia Tel : (60-4) (hunting line) Fax : (60-4) Homepage : sales@supercomnet.com.my