Supercomnet Technologies Berhad ( H) Annual Report

Transcription

1 Supercomnet Technologies Berhad ( H) Annual Report

2 CONTENTS Notice of Annual General Meeting Corporate Information Corporate Structure Profile of Directors Profile of Key Senior Management Management Discussion & Analysis Corporate Governance Overview Statement 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 Group Properties Analysis of Shareholdings Enclosed Proxy Form

3 NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN that the Twenty-Eighth Annual General Meeting of the Company will be held at Ifrah Hall, Cinta Sayang Resort, Persiaran Cinta Sayang, Sungai Petani, Kedah on Friday, May 25, 2018 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, together with the reports of the Directors and Auditors thereon. 2. To approve a Directors Fees of up to 214,500 for the period from June 1, 2018 until the next Annual General Meeting of the Company. 3. To approve the Directors benefits (excluding Directors Fee) payable of up to 83,800 for the period from June 1, 2018 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) Hsueh, Chih-Yu; b) Goh Chooi Eam. 5. To re-appoint Messrs. Deloitte PLT as Auditors of the Company for the ensuing year and to authorise the Directors to fix their remuneration. (Resolution 3) (Resolution 4) (Resolution 5) 6. AS SPECIAL BUSINESSES To consider and, if thought fit, to pass the following Resolution:- Ordinary Resolution a) Authority to Issue Shares That pursuant to Companies Act 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) 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 30, Supercomnet Technologies Berhad ( H) Annual Report

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 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-Eighth Annual General Meeting, the Company shall be requesting the Record of Depositors as at May 10, Only a depositor whose name appears on the Record of Depositors as at May 10, 2018 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. by Thursday, May 24, 2018 at 9.30 a.m. or at any adjournment thereof. Explanatory Note On Special Business: 1. Authority to issue Shares The proposed Resolution No. 6 [Item 6(a)], if passed, will grant a renewed general mandate (Mandate 2018) 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 number of issued shares 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 2018 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-Seventh Annual General Meeting. did not issue any share pursuant to the mandate granted because there was no investment, acquisition or working capital that required fund raising activity. Supercomnet Technologies Berhad ( H) Annual Report 3

5 CORPORATE INFOATION 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 Goh Chooi Eam - Chairman (Independent Non-Executive Director) (Redesignated w.e.f. April 12, 2018) Ng Ngoon Weng - Member (Independent Non-Executive Chairman) Wu, Chung-Jung - Member (Non-Independent Non-Executive Director) (Appointed w.e.f April 12, 2018) Shiue, Jong-Zone - Chairman (Managing Director) (Resigned w.e.f. April 12, 2018) Auditors Messrs. 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, 2nd 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 : Supercomnet Technologies Berhad ( H) Annual Report

6 CORPORATE STRUCTURE AS AT DECEMBER 31, INFOATION 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 INFOATION 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 Supercomnet Technologies Berhad ( H) Annual Report 5

7 PROFILE OF DIRECTORS NG NGOON WENG Independent Non- Executive Chairman Nationality Malaysian Gender Male Age 60 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 1984 to He possesses vast board experience from having sat on board on other listed companies both as Executive Director and Independent Director in the past. He is also the Chairman of Nominating Committee and Risk Management Committee as well as member of the Audit Committee and Remuneration Committee of the Company. SHIUE, JONG-ZONE Managing Director Nationality Taiwanese Gender Male Age 72 Mr. Shiue, Jong-Zone was appointed to the Board of Directors 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 Electrical 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 a member of the Risk Management Committee of the Company. He is the husband of Wu, Huei-Chung who is an Executive Director of the Company and also the brother-in-law of Wu, Chung-Jung who is a Non-Independent Non-Executive Director of the Company. He is also the father of Hsueh, Chih-Yu (an Executive Director) and Shiue, Jyh-Jeh (a Major Shareholder of the Company). WU, HUEI-CHUNG Executive Director Nationality Taiwanese Gender Female Age 70 Mdm. Wu, Huei-Chung was appointed to the Board of Directors 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 Electrical Inc. in 1984 as General Manager. She resigned from her post in King Royal Electrical in 1998 to become a Director of the Company. She currently sits on the Board of several other private limited companies in Taiwan. She is the spouse of Shiue, Jong-Zone, the Managing Director of the Company and is also the sister of Wu, Chung-Jung, who is a Non-Independent Non-Executive Director of the Company. She is also the mother of Hsueh, Chih-Yu (an Executive Director) and Shiue, Jyh-Jeh (a Major Shareholder of the Company). 6 Supercomnet Technologies Berhad ( H) Annual Report

8 PROFILE OF DIRECTORS (Cont d) HSUEH, CHIH-YU Executive Director Nationality Taiwanese Gender Male Age 46 Mr. Hsueh, Chih-Yu was appointed as an Executive Director of the Company on November 26, He joined King Royal Electrical Incorporation (KREI) as Engineer in year He participated 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 led a team to design, testing and producing internet wire like CAT-5, CAT-5E, CAT-6 and HDMI. He served SAC for 6 years and in year 2008, he was given a 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 Mr. Shiue, Jong-Zone (the Managing Director of the Company) and Mdm. Wu, Huei-Chung (an Executive Director of the Company). He is also the brother of Shiue, Jyh-Jeh (a Major Shareholder of the Company). WU, CHUNG-JUNG Non-Independent Non- Executive Director Nationality Taiwanese Gender Male Age 73 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 Electrical Inc. 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 1995 before being appointed as Chairman of Supercomal Wire and Cable Sdn. Bhd. from 1993 to He is a member of the Audit Committee, Nominating Committee and Remuneration Committee of the Company. 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 Independent Non- Executive Director Nationality Malaysian Gender Male Age 57 Mr. Goh Chooi Eam was appointed to the Board of Directors 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 Allan Ong & Co., Sateras Managament Sdn. Bhd. and 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 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 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 Remuneration Committee of the Company. He is also a member of Nominating Committee of the Company. Supercomnet Technologies Berhad ( H) Annual Report 7

9 PROFILE OF DIRECTORS (Cont d) ADDITIONAL INFOATION 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 Corporations. ii) Family Relationships with any Director and/or Major Shareholder Save for Shiue, Jong-Zone (Managing Director and Major Shareholder), Wu, Huei-Chung (Executive Director), Hsueh, Chih-Yu (Executive Director) and Wu, Chung-Jung (Non-Independent Non-Executive Director) 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 the Analysis of Shareholdings, page 79 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 None of the Directors were convicted of any offences, other than traffic offences (if applicable) within the past five (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 Director No. of meetings attended Shiue, Jong- Zone 5/5 Wu, Huei-Chung 4/5 Wu, Chung-Jung 4/5 Hsueh, Chih-Yu 5/5 Ng Ngoon Weng 5/5 Goh Chooi Eam 5/5 vii) Training programmes and seminars attended During the financial year ended December 31, ("FY"), the training programmes and seminars attended by the Directors are as follows:- Director Date Description Organiser Shiue, Jong-Zone 28/11/ How to create high profit business Tax Evolution Consultancy Sdn Bhd. Wu, Huei-Chung 28/11/ How to create high profit business --- do --- Hsueh, Chih-Yu 28/11/ How to create high profit business ----do --- Ng Ngoon Weng 21/08/ Malaysian Code on Corporate Governance: New Dimension Wu, Chung-Jung 21/08/ Malaysian Code on Corporate Governance: New Dimension Goh Chooi Eam 16/05/ 21/08/ Tax and Your Property Transaction Malaysian Code on Corporate Governance: New Dimension Securities Industry Development Corporation ---- do --- SH Tax Services Sdn. Bhd. Securities Indusrty Development Corporation 14-15/09/ 07/11/ Practical Auditing Methodology for-smp National Tax Conference Malaysia Institute of Accountants Inland Revenue 8 Supercomnet Technologies Berhad ( H) Annual Report

10 PROFILE OF DIRECTORS (Cont d) ADDITIONAL INFOATION ON DIRECTORS: (Cont'd) viii) Details of Directors remuneration for the FY are as follows: Aggregate remuneration of the Directors categorized into appropriate components: Fees () Salaries () Bonus & Other Emoluments () Meeting, travelling and other allowances () Shiue, Jong-Zone 29, ,400 53,616 - Wu, Chung-Jung 29, ,700 Wu, Huei-Chung 29, ,600 33,296 - Ng Ngoon Weng 33, ,500 Goh Chooi Eam 33, ,500 Hsueh, Chih-Yu 26,400-13,440 - The Subsidiary Fees () Salaries () Bonus & Other Emoluments () Meeting, travelling and other allowances () Hsueh, Chih-Yu 18, Supercomnet Technologies Berhad ( H) Annual Report 9

11 PROFILE OF KEY SENIOR MANAGEMENT LIM ENG CHUAN Nationality Malaysian Gender Male Age 50 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 joining Supercomnet Technologies Berhad, he started his career with Teco Industry (M) Sdn Bhd in year 1993 as a Quality Assurance Officer. SONG GUIK TEIK Nationality Malaysian Gender Male Age 55 Mr. Song Guik Teik holds a Diploma in Accounting. He has 28 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 is promoted to the position as Finance Manager on April 1, 2011 until present. WANG, YU-CHUAN Nationality Taiwanese Gender Male Age 51 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 assuming 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 assumes the same position until present. He has more than 25 years' experience in the wire and cable manufacturing industry. 10 Supercomnet Technologies Berhad ( H) Annual Report

12 PROFILE OF KEY SENIOR MANAGEMENT (Cont d) ADDITIONAL INFOATION 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/Public sanction or penalty None of the Key Senior Management were convicted of any offences, other than traffic offences (if applicable) within the past five (5) years and no public sanction or penalty imposed by the relevant regulatory bodies to the Key Senior Management during the financial year. Supercomnet Technologies Berhad ( H) Annual Report 11

13 MANAGEMENT DISCUSSION & ANALYSIS 1. INTRODUCTION STB was incorporated in Malaysia as a private limited company under the Companies Act on May 10, 1990 under the name of Suprecomal Wires and Cables Sdn Bhd. changed its name to Supercomal Technologies Sdn Bhd on July 4, 1998 and was converted to a public company on August 1, Subsequently, the Company changed its name to Supercomnet Technologies Berhad on July 1, STB commenced its business in August 1991 and was listed on the ACE Market of Bursa Malaysia Securities Berhad on April 30, The principal activities of the Company, its subsidiary and associate company are manufacturing, assembling and selling cables and wires for industrial usage. It has 26 years of experience in the cable and wire business. consists of one subsidiary company and holds 20% equity interest in Supercomal Medical Products Sdn Bhd. 2. BUSINESS OPERATION REVIEW Business Operation is principally involved in the manufacture of PVC Compound and cables/wires for electronic devices and data control switches. In recent years, the group has also diversified into the manufacturing and assembling of automotive cables, medical cable and general usage cables. The manufacturing operation is located at Sungai Petani, Kedah, Malaysia. Our overall operations have been in accordance to the best practices in the industry to ensure quality management and delivery systems such as ISO, TUV, etc. The group has also given priority to a company-wide human resource development and long-term succession planning to nurture staffs personal growth and career advancement, while simultaneously maintaining a pool of human capital in anticipation of future expansion. Products and Markets produces a wide range of cables and wires catered for industrial usage and a diversified range of cable related ancillary products. Our product range can be classified under the following broad categories: Automotive Cables Cables produced for local wire-harness assembly houses for the passenger vehicle sector have been endorsed by various car manufacturers of international standing and complied to stringent quality and industry standard tests, such as JASO, JIS which has enabled us to meet the demand for domestic and international markets. Home appliances and General usage Cables Cables for categories comprising of nonmetallic cables, UF cables, THWN (Thermoplastic, heat resistant, rated for wet location and Nylon-coated) wire, Low-Voltage Wire, Phone and Data cable, etc that meets the international safety standard certified by UL,CSA, F-Mark, etc. Our customers are international brand name such as Panasonic, Sony, and Yamaha and more. Cable for Medical Products and Devices High quality nonmetalic cables (mainly THWN) for medical products sub assembly such as video and electrical signal transfer for medical devices mainly for indirect export market. Supercomal Advance Cables Sdn Bhd ("SAC") SAC is our wholly owned subsidiary with paid up capital of 24.4 million. The principal business activities of SAC is in manufacturing and sub-assembly of cables for automotive, home appliances, and other general cables. In recent years, SAC has also commenced sales with overseas markets such as the ASEAN and US market. Supercomal Medical Products Sdn Bhd ("SMP") STB has 20% equity interest in SMP. SMP is principally involved in the manufacturing of cables for medical devices. Materials for production Copper and Polyvinyl Chloride ("PVC") are main components in the making of wires. Raw materials are imported from overseas and subject to supply and demand in the international market. At the same time, the company is also susceptible to foreign exchange risk due to the volatility of the foreign exchange, in particularly the fluctuation of USD vs Ringgit. In addition, since the price of Copper is quoted on the London Metal Exchange (LME), the cost of Copper is further subject to price fluctuation on the LME. To date, we have successfully mitigated the volatility of the raw material cost through JIT (just in time) strategy. Based on the current market scenario, we remain comfortable with the pricing and the supply of the raw materials and do not anticipate any major departure of the current materials management policy for the current financial year. 12 Supercomnet Technologies Berhad ( H) Annual Report

14 MANAGEMENT DISCUSSION & ANALYSIS (Cont'd) 2. BUSINESS OPERATION REVIEW (Cont'd) Business environment The Malaysian economy is forecasted to continue its strong growth momentum with real GDP expanding between 5.0% and 5.5% in Growth is anticipated to be driven mainly by resilient domestic demand amid a favorable external sector. The services and manufacturing sector are projected to grow by 5.8% and 5.3% respectively. Output of export-oriented industries is anticipated to expand on account of sustained demand for electrical and electronic products, refined petroleum products and wood-based products. Likewise, growth in domestic oriented industries is expected to remain resilient, supported by the ongoing construction of infrastructure projects, as well as strong demand for consumer products, especially food and transport equipment. However, we anticipate business will continue to be constrained by the following factors: a) Price competition from existing competitors; b) Current tight labor situation; c) Impact of forex risk on raw materials cost; d) Uncertainty in the economic environment arising from the current international trade deficits between United States and the rest of the world. Objective and strategy will derive business from the sub-assembly of cable for products by taking advantage of market niches such as automotive, medical device and customized cable harnessing and sub-assembly to drive revenue and margin in After the capacity enhancement in, the Group will continue to invest and upgade additional production capacity in relation to products that have distinct market niche and leadership. Outlook remains optimistic about the prospect of Over the years, the group has maintained a well diversified customer base in cable harness production particularly in sectors relating to the automotive industry, consumer products and medical devices. We see opportunities to further explore the above businesses for the export market. In light of the continual liberalisation of the automotive sector, the Group is also seeking viable and synergistic partnerships for increased profitability and alliances. In terms of productivity, we shall continue to explore opportunities to integrate within the group to achieve better production efficiency and cost effectiveness in FINANCIAL REVIEW FINANCIAL HIGHLIGHT Financial year ended December Turnover 26,278 33,528 34,941 30,413 34,447 Profit before tax ,972 2,332 2,034 Profit after tax attributable to the owners of company ,982 2,346 2,590 sen sen sen sen sen Net earnings per share Net asset per share Dividend per share Revenue recorded a turnover of million for the financial year ended December 31,, an increase of 13% over the Group s revenue of million in the previous financial year. The increase in the sales resulted from more demand for wire and cables from customers in securing new contract in addition to the existing contract for assembled wire harness used for passenger cars. Manufacturing Costs Total cost of sales for the Group for the year was million against million in the previous year. The increase in cost of sales was due to the increased pricing of copper and PVC and also a weakened Ringgit Malaysia against US dollar apart from the addition cost in upkeeping of plant and machinery. Supercomnet Technologies Berhad ( H) Annual Report 13

15 MANAGEMENT DISCUSSION & ANALYSIS (Cont'd) 2. BUSINESS OPERATION REVIEW (Cont'd) Expenses Other expenses are higher due to the expenses incurred in the corporate exercise of acquiring the remaining shares in Supercomal Medical Products Sdn Bhd. Finance costs presently do not have any borrowings from banks and thus no interest is payable to the banks. Liquidity and Capital Resources 's cash position decreased by 1.07 million from million as at December 31, to 9.36 million as at December 31,. Cash used in operations was 2.59 million. 783,577 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 is not declaring any dividend for the year ended December 31,. 14 Supercomnet Technologies Berhad ( H) Annual Report

16 CORPORATE GOVERNANCE OVERVIEW STATEMENT The Board of Directors ( the Board ) of Supercomnet Technologies Berhad ( STB or the Company ) presents this statement to provide shareholders and investors with an overview of the corporate governance practices of the Company under the leadership of the Board during the financial year. This overview takes guidance from the key corporate governance principles as set out in the Malaysian Code on Corporate Governance ( the Code or MCCG ). This statement is prepared in compliance with Bursa Malaysia Securities Berhad ( Bursa Securities ) ACE Market Listing Requirements ( ACE LR ) and it is to be read together with the Corporate Governance Report of the Company ( CG Report ) which is available on the Company s website: The CG Report provides the details on how the Company has applied each Practice as set out in the MCCG during the financial year. STB and its subsidiary ( STB Group ) recognises the importance of adopting good corporate governance and acknowledges the importance of the principles set out in the MCCG and is committed to ensure high standards of good corporate governance are in place and practiced within our Group in order to safeguard the shareholders and relevant stakeholders interests as well as enhancing shareholders value. After the introduction of MCCG in April, the Board has reviewed the gap analysis report on comparison between the current corporate governance practices in the Group and the standards as set out in the MCCG in August. The Board then planned and has progressively raised the bar in the Group s corporate governance standards set out in the Code through various measures for implementation from time to time. PRINCIPLE A - BOARD LEADERSHIP AND EFECTIVENESS I. BOARD RESPONSIBILITIES The Board is always mindful of the long-term success of our Company and the delivery of sustainable value to its stakeholders. In discharging its fiduciary duties and leadership functions, the Board govern and set the strategic direction of the Company and exercising oversight on management. The Board will continue playing its role in setting the appropriate tone at the top, providing thought leadership and championing good governance and ethical practices throughout the Company. Following the top-down strategic planning process adopted by the Group, the Executive Directors will periodically formulate Group s strategy and communicate it down to the organisation for implementation. The Chairman will continue leading the Board in establishing and monitoring good corporate governance practices in the Company by focusing on strategy, governance and compliance. continue practices a division of responsibilities between the Chairman and the CEO (known as the Managing Director in the Company). Their roles are separated and clearly defined in the Board Charter of the Company. The Board Charter serves as a reference and primary induction literature providing all Board members and Management insights into the fiduciary and leadership functions of the Board. It also clearly sets out the respective roles and responsibilities of the Board, Board Committees, individual directors and management. The Board has established four (4) Committees, namely the Audit Committee, Nominating Committee, Remuneration Committee and Risk Management Committee, the primary functions of which are to assist the Board in overseeing the affairs of the Company and these Committees have been entrusted with specific responsibilities and authority. The authorities and functions of these Board committees are properly set out in their respective Terms of Reference. On March 28,, the Board reviewed the Board Charter to keep it up to date with changes in regulations and best practices and ensure its effectiveness and relevance to the Board s strategic intent as well as relevant standards of corporate governance. s Codes 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. A copy each of the Board Charter, Codes of Ethics and WPP are available at the Company s website, The Board of STB is supported by two (2) Company Secretaries, both have legal credentials, and are qualified to act as Company Secretary under Section 235(2) of the Companies Act. Supercomnet Technologies Berhad ( H) Annual Report 15

17 CORPORATE GOVERNANCE OVERVIEW STATEMENT (Cont'd) PRINCIPLE A - BOARD LEADERSHIP AND EFECTIVENESS (Cont'd) II. BOARD COMPOSITION 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 order to achieve the intended outcome of the Code, the Board decisions are made objectively in the best interests of the Company taking into account diverse perspectives and insights, our Group has met most of the good practices recommended by the Code as follows as detailed in the CG Report. The Board has through its Nominating Committee (NC) conduct the annual assessment on its size and composition. Based on the assessment, the NC was satisfied that the Board comprises a mixture of qualified and experienced directors with diverse experience, background and expertise. The combination of diverse professionals with varied background, experience and expertise in finance and corporate affairs have also enables the Board to discharge its responsibilities effectively and efficiently. The skillsets and diversity of the existing Board are as follows:- Industry / Background Experience By Composition Age Ethnic Gender Directors Nationality Designation Shiue, Jong- Zone Taiwanese Managing Director Wu, Huei-Chung Taiwanese Executive Director Hsueh, Chih-Yu Taiwanese Executive Director Wu, Chung-Jung Taiwanese Non- Independent Non-Executive Director Ng Ngoon Weng Malaysian Independent Non-Executive Chairman Goh Chooi Eam Malaysian Independent Non-Executive Director Technology Marketing Industrial Corporate Accounting / Finance Internal Audit years years years 71 years and above Chinese Foreigner Male Female Notwithstanding the recommendation of the MCCG, the Company does not practice any form of gender, ethnicity and age group biasness as all candidates shall be given fair and equal treatment. The Board believes that there is no detriment to the Company in not adopting a formal gender, ethnicity and age group diversity policy as the Company is committed to provide fair and equal opportunities and nurturing diversity within the Company. The Board is of the view that the appointment of Board member or management should be determined based on objective criteria, merit and with due regard for diversity in skills, experience and other qualities regardless of gender but will nevertheless consider appointing more directors of the female gender where suitable to be in line with the Code s target. Besides, the Board has also made progress broadening the diversity of the Board and senior management from time to time. Moving forward, this shall be one of the key focus for the Board s Corporate Agenda in Supercomnet Technologies Berhad ( H) Annual Report

18 CORPORATE GOVERNANCE OVERVIEW STATEMENT (Cont'd) PRINCIPLE A - BOARD LEADERSHIP AND EFECTIVENESS (Cont'd) II. BOARD COMPOSITION (Cont'd) The activities carried out by the NC during the financial year ended 31 December ( FY ) 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; undertaken review of independency of Independent Directors; reviewed and deliberated on the proposed restructuring of Board composition subsequent to the retirement and resignation of former Directors. To facilitate the Directors time planning, an annual meeting calendar is prepared and circulated to all Directors before the beginning of every year. The time table for the proposed Board meeting in the year 2018 was fixed in November. III. REMUNERATION The Board has in place policies and procedures to determine the remuneration of Directors and Senior Management, which takes into account the demands, complexities and performance of the Company as well as skills and experience required. s remuneration policies and decisions are made through a transparent and independent process. The policies and procedures are periodically reviewed to ensure it remain competitive and consistent with the Company s business strategy and long-term objectives. PRINCIPLE B EFFECTIVE AUDIT AND RISK MANAGEMENT I. AUDIT COMMITTEE Our Audit Committee ( AC ) comprises solely of Non-Executive Directors, majority of which are Independent. The Chairman of the AC is not the Chairman of the Board. This composition of our AC meets the requirements of paragraph 15.09(1)(a) and (b) of the ACE LR. STB recognised the need to uphold independence by putting in place a policy that requires a former key audit partner to observe a cooling-off period of at least two financial year ends before being appointed as a member of the AC. None of the members of the Audit Committee or the Board were former key audit partners within the cooling-off period of two (2) years. The Board had on April 12, 2018 adopted such policy and incorporated such practice into the ToR of AC. II. RISK MANAGEMENT AND INTERNAL CONTROL FRAMEWORK The Board fulfils its responsibilities in the risk governance and oversight functions through its Risk Management Committee ( C ) in order to manage the overall risk exposure of the Group. The C assessed and monitored the efficacy of the risk management controls and measures taken, whilst the adequacy and effectiveness of the internal controls were reviewed by the AC in relation to internal audit function for the Group. The Board through the AC reviewed the Group s internal control based on the audit test carried out by the Internal Auditors. The Risk Management Committee ( C ) is accountable to the Board for the implementation of the processes in identifying, evaluating, monitoring and reporting of risks and internal control. In essence, Risk Management is conducted through an ongoing process between the Board, the Management and employees in 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. Further details of the Risk Management and Internal Audit activities are set up in the Statement on Risk Management and Internal Control of this Annual Report. Supercomnet Technologies Berhad ( H) Annual Report 17

19 CORPORATE GOVERNANCE OVERVIEW STATEMENT (Cont'd) PRINCIPLE C INTEGRITY IN CORPORATE REPORTING AND MEANINGFUL RELATIONSHIP WITH STAKEHOLDERS I. COMMUNICATION WITH STAKEHOLDERS STB would always ensure there is continuous communication between the Company and stakeholders to facilitate mutual understanding of each other s objectives and expectations. Presently, the Board and management of Company communicate regularly with its shareholders and other stakeholders through the following channels of communication: 1) Website of Bursa Malaysia Securities Berhad 2) Company Website II. CONDUCT OF GENERAL MEETINGS STB s Annual General meetings are the important and effective platforms for directors and senior management to communicate with the shareholders. Shareholders are able to participate, engage the Board and senior management effectively and make informed voting decisions at general meetings. The Code was issued on April 26, and the Company despatched the notice of 27 th AGM on April 28, for holding the said AGM on May 26,. The Board is mindful that dispatch of the notice of AGM at least 28 days before the meeting and would provide more time to the shareholders to make necessary arrangements to attend and participate either in person, by corporate representative, by proxy or by attorney. This would also enable the shareholders to properly consider the resolutions that will be discussed and decided at the meeting. In line with the Practice 12.3 of the MCCG in promoting electronic voting, moving forward the Board will consider adopting electronic voting taking into consideration the advantages of electronic voting versus the cost involved. This Statement is made in accordance with a resolution of the Board of Directors dated April 12, Supercomnet Technologies Berhad ( H) Annual Report

20 STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL The Malaysian Code on Corporate Governance ( MCCG ) 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 Listing Requirements ( Listing Requirements ), paragraph 15.26(b), Directors of public listed companies are required to produce a statement on the state of the company s risk management and 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 and covers all of its operations during the financial year in review except for an associated company in which the Group does not have full management and control over. 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 ( C ) is accountable to the Board for the implementation of the processes in identifying, evaluating, monitoring and reporting of risks and internal control. The C is chaired by the Managing Director and comprises key management personnel. 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 to implement a structure 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; Regular visits to operating units by members of the Board and senior management. RISK MANAGEMENT has established risk management practices to safeguard the Group s business interests from risk events that may impede the achievement of business strategy and provide assurance to the Groups various stakeholders., with the support of an independent professional accounting and consulting firm, has implemented the Enterprise Risk Management ( E ) 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, and 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 C. The structure allows for strategic risk discussions to take place between the Board, the Audit Committee and the C on a periodical basis. The summary of the accountabilities for the Board, the Audit Committee and the C under the risk governance structure are as follows: Supercomnet Technologies Berhad ( H) Annual Report 19

21 STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (Cont'd) RISK MANAGEMENT (Cont'd) 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, E 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. In essence, Risk Management is conducted through an ongoing process between the Board, the Management and employees in 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 Auditors adopt a risk-based approach in developing their 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. Based on the Internal Auditors reports for the financial year ended December 31,, 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 was 24,000. The Board continues to review and to implement measures to strengthen the internal control environment of the Group. This statement is made in accordance with a resolution of the Board of Directors dated April 12, Supercomnet Technologies Berhad ( H) Annual Report

22 AUDIT COMMITTEE REPORT The purpose of the setting up of the Audit Committee ( AC or the 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 Chairman Mr. Goh Chooi Eam Independent Non-Executive Director Members Mr. Ng Ngoon Weng Independent Non-Executive Chairman Mr. Wu, Chung-Jung Non-Independent Non-Executive Director This composition meets the requirements of paragraph 15.09(1)(a) and (b) of the Bursa Malaysia Securities Berhad 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. All AC members are financially literate to review and analyse Company s financial statement, possess the necessary knowledge, experience, expertise and skills which contributed to the overall effectiveness of the AC. The Nominating Committee had on April 12, 2018 assessed the performance of the AC and its members through an annual board committee effectiveness evaluation. The Nominating Committee is satisfied that the AC and its members have discharged their functions, duties and responsibilities in accordance with the AC s Terms of Reference and supported the Board in ensuring the Group upholds appropriate corporate governance standards. Attendance at Meetings The information on the attendance of each member at the Committee meetings held during the Financial Year (FY) 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 in discharging 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 and the annual audited financial statements for the financial year ended December 31, ( FY ) at its meeting on February 27, and March 28, respectively. The Committee also reviewed the first, second and third quarterly financial statements of the Group for FY and recommended the same to the Board for approval during its Audit Committee Meetings held on May 26,, August 23, and November 24, respectively. The Committee reviewed and satisfied that the said quarterly financial statements are prepared in compliance with the Malaysian Financial Reporting Standards ( MFRS ) 134 Interim Financial Reporting, issued by Malaysian Accounting Standards Board and paragraph 9.22 of the ACE LR. 2) External Audit The AC has on March 28,, November 24, and April 12, 2018 respectively met with the External Auditors without the presence of the Executive Members. During the Meeting on March 28,, the External Auditors tabled the Final Report to those charged with Governance for FY for the AC s information and discussion. Supercomnet Technologies Berhad ( H) Annual Report 21

23 AUDIT COMMITTEE REPORT (Cont'd) Activities of the Audit Committee (Cont'd) 2) External Audit (Cont'd) On November 24,, the External Auditors tabled the Audit Planning Memorandum in relation to the audit of financial statements for FY. This Audit Planning Memorandum particularly outlined the nature, approach, scope of audit and audit timetable to the Audit Committee. On April 12, 2018, the External Auditors tabled the Final Report for FY audit to the AC. On April 12, 2018, the External Auditors Performance and Independence Checklist in respect for the FY, 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 FY 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, 2018 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; satisfied that the quality processes/performance of External Auditors; able to give adequate technical support when audit issue arises; and adequate experience and resources of Deloitte PLT and audit engagements. 3) Internal Audit Function has engaged the services of an independent professional accounting and consulting firm to provide the assurance it requires regarding the effectiveness as well as the adequacy and integrity of the Group s systems of internal control. The appointed Internal Auditors, JWC Consulting Sdn Bhd (JWC) is a reputable firm with vast exposure and having adequate resources and expertise in internal audit. Internal Auditors report directly to the AC on its activities based on the approved annual Internal Audit Plans. Their 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 was 24,000. During the FY, the Internal Auditors have conducted review on internal control of the Group, focusing on the following areas:- Financial Period Audit Areas Reporting Date Financial period ended June 30, 1. Management Information System August 23, 2. Inventory Management Financial period ended December 31, 3. Conversion and Production February 27, General Safety and Security The findings of internal audits including the audit recommendations made by the Internal Auditors and the Management responses to those recommendations are reported directly to the AC at the Meetings held on August 23,, February 27, 2018 respectively. Where appropriate, the AC directed the Management to rectify and improve control and workflow procedures based on the Internal Auditors recommendations and suggestion for improvements. Besides, the AC also follow up from time to time the updates and corrective actions by the Management on reported weaknesses reported in the prior quarters. On February 27, 2018, the Internal Audit Plan for year 2018 was tabled for AC s review and approval. The AC reviewed the Internal Audit Plan and approved the said Plan accordingly. The Audit Committee reviewed the Statement on Risk Management and Internal Control in respect of FY on April 12, 2018 for publication in the Annual Report. Information pertaining to the Company s internal controls is shown in the Statement on Risk Management and Internal Control set out on page 19 to 20 of this Annual Report. 22 Supercomnet Technologies Berhad ( H) Annual Report

24 AUDIT COMMITTEE REPORT (Cont'd) Activities of the Audit Committee (Cont'd) 4) Related Party Transactions During the financial year, the AC reviewed and discussed the following Proposals:- a) Proposed acquisition of 8,000,000 ordinary shares in Supercomal Medical Products Sdn. Bhd. ( SMP ), representing 80.00% equity interest in SMP from the following parties for a total consideration of 80,000,000 to be satisfied via the issuance of 400,000,000 Ordinary Shares in STB and cash of 4,000,000:- i) Shiue, Jong-Zone ( SJZ ); ii) Wu, Chung-Jung ( WCJ ); iii) Wu, Huei-Chung ( WHC ); iv) Hsueh, Shiue, Jyh-Yeu ( HCY ); v) Shiue, Jyh-Jeh ( SJJ ); and vi) Lim Eng Chuan ( LEC ), [Hereinafter referred to as Proposed Acquisition ] b) Proposed exemption under paragraph 4.08(1)(a) of the Rules on Take-overs, Mergers and Compulsory Acquisitions ( Rules ) for SJZ and persons acting in concert with him ( PACs ), from the obligation to undertake a mandatory take-over offer to acquire the remaining ordinary shares in STB not already owned by them after the Proposed Acquisition ( Proposed Exemption ). After having considered all aspects of the Proposed Acquisition and Proposed Exemption, including its rationale, the views of the appointed independent advisor and the salient terms of the Proposed Acquisition, the AC has formed its opinion that the Proposed Acquisition and Proposed Exemption are in the best interest of the Company, fair, reasonable and on an arm s length basis and on normal commercial terms. The AC also reviewed and discussed the recurrent related party transactions on quarterly basis to ensure that they were undertaken on an arm s length basis and on normal commercial terms not more favourable to the related party than those generally available to the public. This Statement is made in accordance with the resolution of the Board of Directors dated April 12, Supercomnet Technologies Berhad ( H) Annual Report 23

25 ADDITIONAL COMPLIANCE INFOATION PURSUANT TO THE BURSA MALAYSIA SECURITIES BERHAD ACE MARKET LISTING REQUIREMENTS 1) Utilisation of Proceeds There were no proceeds raised by the Company 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, (FY) by the Company s Auditors, or a firm or company affiliated to the Auditors firm are as follows:- Non-Audit Category Audit fees () Fees^ () Company 52, ,200 Subsidiary 18,000 6,300 Total 70, ,500 ^Included herein were amounts of 93,000, 13,500 and 3,000 for Reporting Accountants work in relation to the Proposed Acquisition of Supercomal Medical Products, tax compliance works and review of Statement on Risk Management and Internal Control respectively. 3) Material contracts Save as disclosed below, 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, or entered into since the end of the previous financial year:- STB had on October 13, entered in the a conditional Share Sale Agreement ( SSA ) with the following parties for the proposed acquisition of 8,000,000 ordinary shares in SMP ( SMP Shares ), representing 80.00% equity interest in SMP for a total consideration of 80,000,000 ( Purchase Consideration ) to be satisfied via the issuance of 400,000,000 Ordinary Shares in STB and cash of 4,000,000:- i) Shiue, Jong-Zone ( SJZ ); ii) Wu, Chung-Jung ( WCJ ); iii) Wu, Huei-Chung ( WHC ); iv) Hsueh, Chih-Yu ( HCY ); v) Shiue, Jyh-Jeh ( SJJ ); and vi) Lim Eng Chuan ( LEC ), (collectively referred to as Vendors ). The SSA is expected to be completed on April 16, ) Employee Share Scheme There was no Employee Share Scheme implemented by the company during the financial year. 24 Supercomnet Technologies Berhad ( H) Annual Report

26 ADDITIONAL COMPLIANCE INFOATION (Cont d) PURSUANT TO THE BURSA MALAYSIA SECURITIES BERHAD ACE MARKET LISTING REQUIREMENTS 5) Recurrent Related Party Transactions (RRPT) of Revenue or Trading nature Details of the RRPT of a revenue and trading nature entered into during FY, in accordance with the shareholders mandate obtained at the Extraordinary General Meeting of the Company held on May 26,, were as follows:- No. Related Parties Nature of Transactions 1) STB SMP Monthly Rental (Landlord) (Tenant) of factory space at Lot 172, Jalan PKNK 3/8, Kawasan Perusahaan Sungai Petani, Sungai Petani, Kedah measuring 43,917 Sq feet Actual amount () Interested Related Party 263,496 Mr. Shiue, Jong -Zone (SJZ). Mdm. Wu, Huei-Chung (WHC) and Mr. Hsueh, Chih-Yu (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. 2) STB (Owner) SMP (Tenant) Monthly Rental of following machineries located at Lot 172, Jalan PKNK 3/8, Kawasan Perusahaan 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 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. 82,609 Same as above 3) STB (Seller) 4) SAC (Landlord) SMP (Buyer) SMP (Tenant) Sales of finished goods by STB to SMP Monthly Rental of factory space at Lot 171, Jalan PKNK 3/8, Kawasan Perusahaan Sungai Petani, Sungai Petani, Kedah measuring 15,500 sq feet 3,805,818 Same as above 93,000 Same as above 5) SAC (Provider) SMP (Recipient) Sub-contracting of labour works - Same as above 6) Corporate Social Responsibility (CSR) 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 an 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. Supercomnet Technologies Berhad ( H) Annual Report 25

27 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 judgements 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 the subsidiary 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. This Statement is made in accordance with the resolution of the Board of Directors dated April 12, Supercomnet Technologies Berhad ( H) Annual Report

28 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 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: Profit/(loss) for the year 2,589,511 (257,089) 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 No dividend has been paid or declared by the Company since the end of the previous financial year. The directors also do not recommend any dividend payment 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 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. OTHER STATUTORY INFOATION Before the financial statements of the Group and of the Company were prepared, the directors took reasonable steps: a) 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 b) 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) 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 b) which would render the values attributed to current assets in the financial statements of the Group and of the Company misleading; or c) which have arisen which would render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate; or Supercomnet Technologies Berhad ( H) Annual Report 27

29 DIRECTORS REPORT (Cont'd) OTHER STATUTORY INFOATION (Cont'd) At the date of this report, the directors are not aware of any circumstances: (Cont'd) d) not otherwise dealt with in this report or financial statements of the Group and of the Company which would render any amount stated in the financial statements misleading. At the date of this report, there does not exist: a) any charge on the assets of the Group and of the Company which has arisen since the end of the financial year which secures the liabilities of any other person; or b) any contingent liability of the Group and of the Company which has arisen since the end of the financial year. 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. 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, are as follows: Number of ordinary shares Shares in the Company Balance as of 1.1. 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, Supercomnet Technologies Berhad ( H) Annual Report

30 DIRECTORS REPORT (Cont'd) DIRECTORS INTERESTS (Cont'd) (a) (b) (c) (d) Deemed interest through Mr. Wu, Chung-Jung, Madam Wu, Huei-Chung and his sons. Deemed interest through Mr. Shiue, Jong-Zone, Madam Wu, Huei-Chung and his nephews. Deemed interest through Mr. Shiue, Jong-Zone, Mr. Wu Chung-Jung and her sons. Deemed interest through Mr. Shiue, Jong-Zone, Mr. Wu Chung-Jung, Madam Wu, Huei-Chung and his brother. By virtue of their interests 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 interests in the shares of the subsidiary to the extent that the Company has an interest. DIRECTORS BENEFITS Since the end of the previous financial year, none of the directors of the Company has received or become entitled to receive a 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 REMUNERATION The amount paid/payable as remuneration of the auditors for the financial year ended December 31, is as disclosed on Note 10 to the financial statements. AUDITORS The auditors, Deloitte PLT, have indicated their willingness to continue in office. Signed on behalf of the Board, as approved by the Board in accordance with a resolution of the Directors, SHIUE, JONG-ZONE WU, HUEI-CHUNG April 12, 2018 Supercomnet Technologies Berhad ( H) Annual Report 29

31 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 33 to 74. 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,, 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 in Malaysia. Basis for Opinion We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditors Responsibilities for the Audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence and Other Ethical Responsibilities We are independent of the Group and of the Company in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants ( By-Laws ) and the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants ( IESBA Code ), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the Group and of the Company for the current year. These matters were addressed in the context of our audit of the financial statements of the Group and of the Company as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matter How the scope of our audit responded to the key audit matter Inventories obsolescence and the Company recognised allowance for slow moving/obsolete inventories based on an assessment of the net realisable values of the inventories. When estimating the net realisable values of inventories, significant management estimates is involved. Where the expectation is different from the original estimate, such difference will impact the carrying values 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 Group and the Company as of December 31, are 7,520,194 and 7,016,263 respectively. The amount recognised as expenses during the year in respect of write-down of inventories to net realisable values and allowance for obsolete inventories of the Group and of the Company are 237,321 and 248,040 respectively. We obtained an understanding of internal controls relevant to the recognition of allowance for slow moving/obsolete inventories and tested its operating effectiveness. We assessed the process, methods and assumptions used to develop the allowance 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 allowance of inventory recognised 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 allowance. We tested the reliability of the underlying data used by management to calculate the inventory obsolescence allowance, specifically checking the last movement dates of a sample of products to assess whether they have been aged correctly and appropriate allowance percentage has been applied. 30 Supercomnet Technologies Berhad ( H) Annual Report

32 INDEPENDENT AUDITORS REPORT (Cont'd) TO THE MEMBERS OF SUPERCOMNET TECHNOLOGIES BERHAD (Incorporated in Malaysia) 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 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 scepticism throughout the audit. We also: a) Identify and assess the risks of material misstatement of the financial statements of the Group and of the Company, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. b) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group s and the Company s internal control. c) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. d) Conclude on the appropriateness of the directors use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group s or the Company s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the financial statements of the Group and of the Company or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Group or the Company to cease to continue as a going concern. e) Evaluate the overall presentation, structure and content of the financial statements of the Group and of the Company, including the disclosures, and whether the financial statements of the Group and of the Company represent the underlying transactions and events in a manner that achieves fair presentation. f) Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial statements of the Group. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. Supercomnet Technologies Berhad ( H) Annual Report 31

33 INDEPENDENT AUDITORS REPORT (Cont'd) TO THE MEMBERS OF SUPERCOMNET TECHNOLOGIES BERHAD (Incorporated in Malaysia) Auditors Responsibilities for the Audit of the Financial Statements (Cont'd) We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most 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 Matters This report is made solely to the members of the Company, as a body, in accordance with Section 266 of the Companies Act in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report. DELOITTE PLT (LLP LCA) Chartered Accountants (AF 0080) LIM KENG PEO Partner 02939/01/2020 J Chartered Accountant Penang April 12, Supercomnet Technologies Berhad ( H) Annual Report

34 STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31, Notes Revenue 34,446,790 30,412,825 31,951,963 28,702,996 Investment income 5 759, ,434 2,655,746 2,673,421 Other gains and losses 6 (202,226) (1,218,022) (236,880) (786,386) Other income 7 877, , , ,088 Changes in inventories of finished goods and work-in-progress 205, , , ,991 Raw materials consumed (27,548,221) (23,580,243) (26,630,264) (23,073,802) Employee benefit expenses 8 (4,844,552) (4,722,940) (4,150,832) (4,015,729) Depreciation and amortisation expenses (661,218) (745,872) (602,987) (602,000) Other expenses (4,288,270) (3,321,055) (4,136,519) (3,147,813) Finance cost (457) - (457) - Share of profits of associate 3,288,688 3,244, Profit/(loss) before tax 2,033,559 2,332,342 (270,844) 1,065,766 Tax income 9 555,952 13,755 13,755 13,755 Profit/(loss) for the year attributable to the owners of the Company 10 2,589,511 2,346,097 (257,089) 1,079,521 Other comprehensive income, net of income tax Total comprehensive income/(loss) for the year attributable to the owners of the Company 2,589,511 2,346,097 (257,089) 1,079,521 Earnings per share: Basic (sen per share) Diluted (sen per share) The accompanying notes form an integral part of the financial statements. Supercomnet Technologies Berhad ( H) Annual Report 33

35 STATEMENTS OF FINANCIAL POSITION AT DECEMBER 31, Assets Notes Non-current assets Property, plant and equipment 12 6,998,918 6,823,232 6,052,039 5,847,293 Prepaid lease payments on leasehold land 13 2,022,152 2,076, , ,930 Investment in subsidiary ,691,303 2,691,303 Investment in associate 15 12,488,094 11,199, , ,000 Deferred tax assets , Total non-current assets 22,093,164 20,098,789 10,126,444 9,946,526 Current assets Inventories 16 7,520,194 7,521,883 7,016,263 7,116,754 Trade and other receivables 17 9,506,218 7,851,510 9,112,961 9,145,900 Current tax receivable 462, , , ,030 Other assets , , ,231 81,661 Short-term deposits with licensed banks 19 6,001,500 8,001,500 6,000,000 8,000,000 Cash and bank balances 20 3,363,416 2,428,612 2,552,017 1,848,866 Total current assets 27,201,130 26,513,928 25,427,896 26,737,211 Total assets 49,294,294 46,612,717 35,554,340 36,683, Supercomnet Technologies Berhad ( H) Annual Report

36 STATEMENTS OF FINANCIAL POSITION (Cont'd) AT DECEMBER 31, Equity and liabilities Notes Capital and reserves Share capital 21 30,236,954 24,300,000 30,236,954 24,300,000 Reserve 22-5,936,954-5,936,954 Retained earnings 23 14,629,080 12,039,569 1,033,074 1,290,163 Total equity 44,866,034 42,276,523 31,270,028 31,527,117 Non-current liabilities Deferred tax liabilities , , , ,837 Current liabilities Trade and other payables 25 4,034,156 3,940,357 3,902,230 4,760,783 Current tax payable 12, Total current liabilities 4,046,178 3,940,357 3,902,230 4,760,783 Total liabilities 4,428,260 4,336,194 4,284,312 5,156,620 Total equity and liabilities 49,294,294 46,612,717 35,554,340 36,683,737 The accompanying notes form an integral part of the financial statements. Supercomnet Technologies Berhad ( H) Annual Report 35

37 STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31, Note Share capital Share premium Retained earnings Balance as of January 1, 24,300,000 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, 24,300,000 5,936,954 12,039,569 42,276,523 Balance as of January 1, 24,300,000 5,936,954 12,039,569 42,276,523 Profit for the year - - 2,589,511 2,589,511 Other comprehensive income for the year, net of income tax Total comprehensive income for the year - - 2,589,511 2,589,511 Transfer arising from no par value regime 21 5,936,954 (5,936,954) - - Balance as of December 31, 30,236,954-14,629,080 44,866,034 Total 36 Supercomnet Technologies Berhad ( H) Annual Report

38 STATEMENTS OF CHANGES IN EQUITY (Cont'd) FOR THE YEAR ENDED DECEMBER 31, Note Share capital Share premium Retained earnings Balance as of January 1, 24,300,000 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, 24,300,000 5,936,954 1,290,163 31,527,117 Balance as of January 1, 24,300,000 5,936,954 1,290,163 31,527,117 Loss for the year - - (257,089) (257,089) Other comprehensive income for the year, net of income tax Total comprehensive loss for the year - - (257,089) (257,089) Transfer from no par value regime 21 5,936,954 (5,936,954) - - Balance as of December 31, 30,236,954-1,033,074 31,270,028 Total The accompanying notes form an integral part of the financial statements. Supercomnet Technologies Berhad ( H) Annual Report 37

39 STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, Cash flows from operating activities Profit/(loss) for the year 2,589,511 2,346,097 (257,089) 1,079,521 Depreciation and amortisation of non-current assets 661, , , ,000 Inventories written down 237, , , ,332 Unrealised loss/(gain) on foreign exchange 6,977 (3,207) (10,886) 10,668 Property, plant and equipment written off Share of profits of associate (3,288,688) (3,244,534) - - Tax income recognised in profit or loss (555,952) (13,755) (13,755) (13,755) Interest income recognised in profit or loss (320,365) (371,124) (309,641) (370,861) Gain on disposal of property, plant and equipment (57,730) (22,042) (2,169) - Impairment loss on property, plant and equipment - 309, Impairment of investment in subsidiary ,994 Dividend income from associate - - (2,000,000) (2,000,000) (727,036) 724,036 (1,741,841) 53,649 Movements in working capital: Increase in: trade and other receivables (1,547,126) (906,365) (132) (1,096,019) inventories (235,632) (1,718,537) (147,549) (1,323,169) other assets (183,274) (44,309) (202,570) (2,263) Increase/(decrease) in trade and other payables 102,303 1,363,174 (321,296) 1,201,774 Cash used in operations (2,590,765) (582,001) (2,413,388) (1,166,028) Income taxes refunded 305, , , ,505 Income taxes paid (253,958) (263,741) (224,177) (263,741) Net cash used in operating activities (2,538,940) (518,237) (2,331,782) (1,102,264) 38 Supercomnet Technologies Berhad ( H) Annual Report

40 STATEMENTS OF CASH FLOWS (Cont'd) FOR THE YEAR ENDED DECEMBER 31, Note Cash flows from investing activities Dividends received 2,000,000 2,000,000 2,000,000 2,000,000 Interest received 192, , , ,773 Proceeds from disposal of property, plant and equipment 57,730 22,042 2,169 - Payments for property, plant and equipment (783,577) (434,370) (783,577) (338,055) Repayment by/(advanced to) subsidiary ,118 (699) Net cash generated by investing activities 1,467,080 1,855,708 1,558,913 1,929,019 Cash flows from financing activities Amount advanced from associate 12,390 8, Dividend paid - (972,000) - (972,000) Amount (repayment to)/advanced from subsidiary - - (521,906) 152,408 Net cash generated by/(used in) financing activities 12,390 (963,820) (521,906) (819,592) Net (decrease)/increase in cash and cash equivalents (1,059,470) 373,651 (1,294,775) 7,163 Cash and cash equivalents at the beginning of the year 10,428,612 10,050,045 9,848,866 9,840,516 Effects of exchange rate changes on the balances of cash held in foreign currencies (5,726) 4,916 (2,074) 1,187 Cash and cash equivalents at the end of the year 27 9,363,416 10,428,612 8,552,017 9,848,866 The accompanying notes form an integral part of the financial statements. Supercomnet Technologies Berhad ( H) Annual Report 39

41 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 1. GENERAL INFOATION is a public limited liability company, incorporated and domiciled in Malaysia, and is listed on the ACE Market of Bursa Malaysia Securities Berhad. 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 12, 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 ( MFRS ), International Financial Reporting Standards and the provisions of the Companies Act in Malaysia. Adoption of Amendments to MFRS In the current year, the Group and the Company have applied a number of amendments to MFRS 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 amendments to MFRS has had no material impact on the disclosures or on the amounts recognised in the financial statements of the Group and of the Company. New and Amendments to Standards in Issue but Not Yet Effective The directors anticipate that the abovementioned new and amended Standards will be adopted in the annual financial statements of the Group and of the Company when they become effective and that the adoption of these MFRS will have no material impact on the financial statements of the Group and of the Company in the period of initial application except as discussed below. MFRS 9 MFRS 15 MFRS 16 Amendments to MFRS 2 Amendments to MFRS 9 Amendments to MFRS 140 IC Int. 22 IC Int. 23 Amendments to MFRSs Amendments to MFRSs Financial Instruments (a) Revenue from Contracts with Customers (and the related Clarifications) (a) Leases (b) Classification and Measurement of Share-based Payment Transactions (a) Prepayment Features with Negative Compensation (b) Transfer of Investment Property (a) Foreign Currency Transactions and Advance Consideration (a) Uncertainty over Income Tax Payments (b) Annual Improvements to MFRSs Cycle (a) Annual Improvements to MFRSs Cycle (b) (a) (b) 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. MFRS 9 Financial Instruments MFRS 9 issued in November 2009 introduced new requirements for the classification and measurement of financial assets. MFRS 9 was subsequently amended in October 2010 to include requirements for the classification and measurement of financial liabilities and for derecognition, and in November 2013 to include the new requirements for general hedge accounting. Another revised version of MFRS 9 was issued 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. 40 Supercomnet Technologies Berhad ( H) Annual Report

42 NOTES TO THE FINANCIAL STATEMENTS (Cont'd) DECEMBER 31, 2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Cont'd) MFRS 9 Financial Instruments (Cont'd) Key requirements of MFRS 9: a) All recognised financial assets that are within the scope of MFRS 9 are required to be subsequently measured at amortised cost or at 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 that give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding, are generally 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 nor contingent consideration recognised by an acquirer in a business combination) in other comprehensive income, with only dividend income generally recognised in profit or loss. b) 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 a financial liability that is attributable to changes in the credit risk of that liability to be presented in other comprehensive income, unless the recognition of such changes 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. c) In relation to the impairment of financial assets, MFRS 9 requires an expected credit loss model, as opposed to an incurred 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. d) 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. Based on an analysis of the Group s and the Company s financial assets and financial liabilities as at December 31, on the basis of the facts and circumstances that exist at that date, the directors have assessed the impact of MFRS 9 to the Group s and the Company s financial statements as follows: Classification of financial assets Based on the directors assessment, the financial assets held by the Group and the Company as at December 31, will be reclassified to the following classifications: Financial assets Existing classification under MFRS 139 New classification under MFRS 9 Cash and bank balances 3,363,416 Loans and receivables Amortised cost Short-term deposits with licensed banks 6,001,500 Loans and receivables Amortised cost Loans and receivables: Trade and other receivables 9,506,218 Loans and receivables Amortised cost Cash and bank balances 2,552,017 Loans and receivables Amortised cost Short-term deposits with licensed banks 6,000,000 Loans and receivables Amortised cost Loans and receivables: Trade and other receivables 9,112,961 Loans and receivables Amortised cost Supercomnet Technologies Berhad ( H) Annual Report 41

43 NOTES TO THE FINANCIAL STATEMENTS (Cont'd) DECEMBER 31, 2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Cont'd) MFRS 9 Financial Instruments (Cont'd) Impairment Financial assets measured at amortised cost will be subject to the impairment provisions of MFRS 9. expects to apply the simplified approach to recognise lifetime expected credit losses for its trade receivables as permitted by MFRS 9. In general, the directors anticipate that the application of the expected credit loss model of MFRS 9 will result in earlier recognition of credit losses for the respective items and will increase the amount of loss allowance recognised for these items. Classification of financial liabilities MFRS 9 largely retains the existing requirements in MFRS 139 for the classification of financial liabilities. s and the Company s assessment did not indicate any material impact regarding the classification of financial liabilities of the Group and of the Company. 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: Step 1: Step 2: Step 3: Step 4: Step 5: Identify the contract(s) with a customer Identify the performance obligations in the contract Determine the transaction price Allocate the transaction price to the performance obligations in the contract 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. In April, the International Accounting Standard Board issued Clarifications to MFRS 15 in relation to the identification of performance obligation, principal versus agent considerations, as well as licensing application guidance. and the Company recognise revenue from sale of manufactured goods. The directors of the Group and of the Company have preliminarily assessed that there is only one performance obligation, which is sale of manufactured goods and accordingly, revenue will be recognised when control over the corresponding goods is transferred to the customer. This is similar to those revenue components identified under MFRS 118. Furthermore, the timing of revenue recognition of the performance obligations and the transaction price for each performance obligations is also expected to be consistent with current practice. The directors intend to use the full retrospective method for transition to MFRS 15. Apart from providing more extensive disclosures on the Group s and the Company s revenue transactions, the directors do not anticipate that the application of MFRS 15 will have a significant impact on the financial position and/ or financial performance of the Group and of the Company. MFRS 16 Leases MFRS 16 introduces a comprehensive model for the identification of lease arrangements and accounting treatments for both lessees. MFRS 16 will supersede the current lease guidance including MFRS 117 Leases and the related interpretations when it becomes effective. MFRS 16 distinguishes leases and service contracts on the basis of whether an identified asset is controlled by a customer. Distinctions of operating leases and finance leases are removed of lessee accounting, and is replaced by a model where a right-of-use asset and a corresponding liability have to be recognised for all leases by lessees except for short-term leases and leases of low value assets. 42 Supercomnet Technologies Berhad ( H) Annual Report

44 NOTES TO THE FINANCIAL STATEMENTS (Cont'd) DECEMBER 31, 2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Cont'd) MFRS 16 Leases (Cont'd) The right-of-use asset is initially measured at cost and subsequently measured at cost (subject to certain exceptions) less accumulated depreciation and impairment losses, adjusted for any remeasurement of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at that date. Subsequently, the lease liability is adjusted for interest and lease payments, as well as the impact of lease modifications, amongst others. Furthermore, the classification of cash flows will also be affected as operating lease payments under MFRS 117 are presented as operating cash flows; whereas under MFRS 16 model, the lease payments will be split into a principal and interest portion which will be presented as financing and operating cash flows respectively. In contrast to lessee accounting MFRS 16 substantially carries forward the lessor accounting requirements in MFRS 117, and continues to require a lessor to classify a lease either as an operating lease or a finance lease. Furthermore, extensive disclosures are required by MFRS 16. As the Group and the Company have already recognised an asset and a related finance lease liability for finance lease arrangement as a lessee, and in cases where the Group and the Company are lessors (for operating leases), the directors of the Group and of the Company do not anticipate that the application of MFRS 16 will have a significant impact on the amounts recognised in the Group s and the Company s financial statements. However, the Group and the Company will comply with any additional disclosure introduced by MFRS 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 value 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. 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 a liability, the Group and the Company take 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) has power over the investee; b) is exposed, or has rights, to variable returns from its involvement with the investee; and c) has the ability to use its power to affect its returns. 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) the size of the Company s holding of voting rights relative to the size and dispersion of holdings of the other vote holders; b) potential voting rights held by the Company, other vote holders or other parties; c) rights arising from other contractual arrangements; and d) 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. Supercomnet Technologies Berhad ( H) Annual Report 43

45 NOTES TO THE FINANCIAL STATEMENTS (Cont'd) DECEMBER 31, 3. SIGNIFICANT ACCOUNTING POLICIES (Cont'd) Subsidiary and basis of consolidation (Cont'd) 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. 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 noncontrolling 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 interests 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. 44 Supercomnet Technologies Berhad ( H) Annual Report

46 NOTES TO THE FINANCIAL STATEMENTS (Cont'd) DECEMBER 31, 3. SIGNIFICANT ACCOUNTING POLICIES (Cont'd) Investment in associate (Cont'd) An investment in an associate is accounted for using the equity method from the date on which the investee becomes an associate. 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. 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. 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. 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 interests 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) the Group and the Company have transferred to the buyer the significant risks and rewards of ownership of the goods; ii) the Group and the Company retain neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; iii) the amount of revenue can be measured reliably; iv) it is probable that the economic benefits associated with the transaction will flow to the Group and the Company; and v) the costs incurred or to be incurred in respect of the transaction can be measured reliably. 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. Supercomnet Technologies Berhad ( H) Annual Report 45

47 NOTES TO THE FINANCIAL STATEMENTS (Cont'd) DECEMBER 31, 3. SIGNIFICANT ACCOUNTING POLICIES (Cont'd) Revenue recognition (Cont'd) 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. 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. 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 to 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. 46 Supercomnet Technologies Berhad ( H) Annual Report

48 NOTES TO THE FINANCIAL STATEMENTS (Cont'd) DECEMBER 31, 3. SIGNIFICANT ACCOUNTING POLICIES (Cont'd) Taxation (Cont'd) 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 ( ), 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. Non-monetary 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. 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. 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) 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) 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 straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Supercomnet Technologies Berhad ( H) Annual Report 47

49 NOTES TO THE FINANCIAL STATEMENTS (Cont'd) DECEMBER 31, 3. SIGNIFICANT ACCOUNTING POLICIES (Cont'd) 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% Hostel 2% 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. 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 sale 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 and the Company review the carrying amounts of their 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 and the Company estimate 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 cashgenerating 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 cashgenerating 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. 48 Supercomnet Technologies Berhad ( H) Annual Report

50 NOTES TO THE FINANCIAL STATEMENTS (Cont'd) DECEMBER 31, 3. SIGNIFICANT ACCOUNTING POLICIES (Cont'd) 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). 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 assets have been affected. For all other financial assets, objective evidence of impairment could include: i) significant financial difficulty of the issuer or counterparty; or ii) breach of contract, such as default or delinquency in interest or principal payments; or iii) it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or iv) 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. 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. Supercomnet Technologies Berhad ( H) Annual Report 49

51 NOTES TO THE FINANCIAL STATEMENTS (Cont'd) DECEMBER 31, 3. SIGNIFICANT ACCOUNTING POLICIES (Cont'd) Financial assets (Cont'd) b) Impairment of financial assets (Cont'd) 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 debited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. c) Derecognition of financial assets 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 interests 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 assets 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 an 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. 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 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. Segment information For management purpose, the Group is organised into operating segments based on their business segment which is regularly reviewed by the Group s chief operation decision officer for the performance of the respective segments under their charge. The segment chief operation officer reports directly to the chief operating decision maker, to make decisions about resources to be allocated to the segment and assess its performance. 50 Supercomnet Technologies Berhad ( H) Annual Report

52 NOTES TO THE FINANCIAL STATEMENTS (Cont'd) DECEMBER 31, 3. SIGNIFICANT ACCOUNTING POLICIES (Cont'd) 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. Cash and cash equivalents 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. 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. i) Impairment of property, plant and equipment and prepaid lease payments on leasehold land and the Company assess whether there are any indicators of impairment for all non-financial assets at the end of each reporting period. 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, was 6,998,918 (: 6,823,232) after an accumulated impairment loss of 268,473 (: 309,646) recognised in previous financial year. assessed and determined that there was no additional impairment on property, plant and equipment for the current financial year. and the Company assessed and determined that and prepaid lease payments on leasehold land are not impaired. ii) Inventories 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. Supercomnet Technologies Berhad ( H) Annual Report 51

53 NOTES TO THE FINANCIAL STATEMENTS (Cont'd) DECEMBER 31, 4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Cont'd) b) Key sources of estimation uncertainty (Cont'd) iii) Impairment of receivables and the Company assess at the end of each reporting period whether there is any objective evidence that a financial asset is impaired. To determine whether there is objective evidence of impairment, the Group and the Company consider factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience 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 INVESTMENT INCOME Rental income 439, , , ,560 Interest income on short-term deposits 320, , , ,861 Dividend income from non-current equity investment in associate - - 2,000,000 2,000,000 The following is an analysis of investment income by category of asset: 759, ,434 2,655,746 2,673,421 Interest income for financial assets not designated as at fair value through profit or loss: Investment income earned on nonfinancial assets 439, , , ,560 Loans and receivables (including cash and bank balances) 320, , , ,861 Dividend income from non-current equity investment in associate - - 2,000,000 2,000, , ,434 2,655,746 2,673, Supercomnet Technologies Berhad ( H) Annual Report

54 NOTES TO THE FINANCIAL STATEMENTS (Cont'd) DECEMBER 31, 6. OTHER GAINS AND LOSSES Gain on disposal of property, plant and equipment 57,730 22,042 2,169 - Inventories written down (237,321) (976,333) (248,040) (313,332) Foreign exchange (loss)/gain: - Realised (14,986) 43,458 (1,223) (29,642) - Unrealised (6,977) 3,207 10,886 (10,668) Property, plant and equipment written off (672) (750) (672) (750) Impairment loss on property, plant and equipment - (309,646) - - Impairment of investment in subsidiary (431,994) 7. OTHER INCOME (202,226) (1,218,022) (236,880) (786,386) Scrap sales 861, , , ,480 Miscellaneous income 15, , , , , , EMPLOYEE BENEFIT EXPENSES Post employment benefits: Defined contribution plan 336, , , ,894 Other employee benefits 4,507,913 4,408,388 3,862,537 3,752,835 Total employee benefit expenses 4,844,552 4,722,940 4,150,832 4,015,729 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. 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. Supercomnet Technologies Berhad ( H) Annual Report 53

55 NOTES TO THE FINANCIAL STATEMENTS (Cont'd) DECEMBER 31, 8. EMPLOYEE BENEFIT EXPENSES (Cont'd) Details of remuneration of directors, who are also the key management personnel of the Group and of the Company, are as follows: Executive: Directors of the Company: Fee 84,480 81,280 84,480 81,280 Contributions to employees provident fund 38,352 36,810 38,352 36,810 Other emoluments 506, , , ,220 Directors of subsidiary: Fee 18,000 12, TAX INCOME 646, , , ,310 Current tax: Income tax expense in respect of current year 25, Adjustments recognised in the current year in relation to the income tax expense of prior years 16, Deferred tax: Relating to the origination and reversal of temporary differences (597,755) (13,755) (13,755) (13,755) (555,952) (13,755) (13,755) (13,755) 54 Supercomnet Technologies Berhad ( H) Annual Report

56 NOTES TO THE FINANCIAL STATEMENTS (Cont'd) DECEMBER 31, 9. TAX INCOME (Cont'd) The total tax income for the year can be reconciled to the accounting profit/(loss) as follows: Profit/(loss) before tax 2,033,559 2,332,342 (270,844) 1,065,766 Tax expense calculated using the statutory income tax rate of 24% (: 24%) 488, ,000 (65,000) 256,000 Effect of expenses that are not deductible in determining taxable profit 341,245 40, , ,245 Effect of unused tax losses and tax offsets not recognised as deferred tax assets 206, , ,000 78,000 Effect of share of profits of associate (790,000) (779,000) - - Effect of recognition of previously unrecognised and unused tax capital allowances and deductible temporary differences (818,000) Effect of income that are not taxable in determining taxable profit - - (480,000) (480,000) (572,755) (13,755) (13,755) (13,755) Adjustments recognised in the current year in relation to the income tax expense of prior years 16, Tax income recognised in profit or loss (555,952) (13,755) (13,755) (13,755) As of December 31,, 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: Unused tax losses 12,396,000 12,453, , ,000 Unused tax capital allowances 5,082,000 5,300,000 2,370,000 1,746, PROFIT/(LOSS) FOR THE YEAR Profit/(loss) for the year has been arrived at: After charging: Directors remuneration: Directors of the Company: Fee 179, , , ,720 Contributions to employees provident fund 38,352 36,810 38,352 36,810 Other emoluments 524, , , ,120 Directors of subsidiary: Fee 18,000 12, Supercomnet Technologies Berhad ( H) Annual Report 55

57 NOTES TO THE FINANCIAL STATEMENTS (Cont'd) DECEMBER 31, 10. PROFIT/(LOSS) FOR THE YEAR (Cont'd) Profit/ (loss) for the year has been arrived at: (Cont'd) After charging: Depreciation of property, plant and equipment 607, , , ,172 Audit fee 70,000 65,000 52,000 49,000 Amortisation of prepaid lease payments on leasehold land 53,999 53,999 24,828 24,828 Rental of: Hostel 25,762 12,453 22,191 9,207 Machinery 1, , Interest expense on bank overdraft EARNINGS PER SHARE Basic/Diluted 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. Profit for the year attributable to owners of the Company () 2,589,511 2,346,097 Weighted average number of ordinary shares in issue (units) 243,000, ,000,000 Basic/Diluted earnings per share (sen) PROPERTY, PLANT AND EQUIPMENT Cost Beginning of year Additions Disposals/ write-off End of year : Factory buildings 8,050, ,050,010 Plant and machinery 29,020, ,733 (541,104) 28,636,963 Furniture and fittings 1,769,299 94,740 (11,653) 1,852,386 Office equipment 935,797 28,976 (1,111) 963,662 Tools and equipment 5,190,368 19,033 (7,270) 5,202,131 Motor vehicles 542,809 68, ,809 Electrical installation 1,275,461 39,500-1,314,961 Moulds and dies 3,971,415 5,595 (51,466) 3,925,544 Hostel - 370, ,000 50,755, ,577 (612,604) 50,926, Supercomnet Technologies Berhad ( H) Annual Report

58 NOTES TO THE FINANCIAL STATEMENTS (Cont'd) DECEMBER 31, 12. PROPERTY, PLANT AND EQUIPMENT (Cont'd) (Cont'd) Cost Beginning of year Additions Disposals/ write-off End of year : 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 Accumulated depreciation : 51,132, ,370 (811,473) 50,755,493 Beginning of year Charge for the year Disposals/ write-off End of year Factory buildings 2,891, ,000-3,052,475 Plant and machinery 27,777, ,284 (541,104) 27,554,948 Furniture and fittings 1,568,367 29,532 (11,653) 1,586,246 Office equipment 775,574 33,121 (439) 808,256 Tools and equipment 4,926,292 26,933 (7,270) 4,945,955 Motor vehicles 534,546 16, ,845 Electrical installation 1,262,456 5,500-1,267,956 Moulds and dies 3,886,137 15,933 (10,293) 3,891,777 Hostel ,622, ,219 (570,759) 43,659,075 : 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 Supercomnet Technologies Berhad ( H) Annual Report 57

59 NOTES TO THE FINANCIAL STATEMENTS (Cont'd) DECEMBER 31, 12. PROPERTY, PLANT AND EQUIPMENT (Cont'd) (Cont'd) Accumulated impairment losses : Beginning of year Charge for the year Disposal/ write-off End of year Factory buildings Plant and machinery 67, ,539 Furniture and fittings 39, ,854 Office equipment 10, ,189 Tools and equipment 134, ,237 Motor vehicles Electrical installation Moulds and dies 57,827 - (41,173) 16, ,646 - (41,173) 268,473 : 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, , ,646 Cost Beginning of year Additions Disposal/ write-off End of year : Factory buildings 6,597, ,597,000 Plant and machinery 21,388, ,733 (541,104) 21,004,955 Furniture and fittings 1,292,777 94,740 (11,653) 1,375,864 Office equipment 842,703 28,976 (1,111) 870,568 Tools and equipment 4,006,833 19,033 (7,270) 4,018,596 Motor vehicles 542,809 68, ,809 Electrical installation 985,900 39,500-1,025,400 Moulds and dies 3,444,800 5,595-3,450,395 Hostel - 370, ,000 39,101, ,577 (561,138) 39,323, Supercomnet Technologies Berhad ( H) Annual Report

60 NOTES TO THE FINANCIAL STATEMENTS (Cont'd) DECEMBER 31, 12. PROPERTY, PLANT AND EQUIPMENT (Cont'd) (Cont'd) Cost Beginning of year Additions Disposal/ write-off End of year : 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 Accumulated depreciation : 38,780, ,055 (17,162) 39,101,148 Beginning of year Charge for the year Disposal/ write-off End of year Factory buildings 2,414, ,940-2,546,344 Plant and machinery 20,213, ,284 (541,104) 19,990,479 Furniture and fittings 1,131,699 29,532 (11,653) 1,149,578 Office equipment 692,669 33,121 (439) 725,351 Tools and equipment 3,876,994 26,933 (7,270) 3,896,657 Motor vehicles 534,546 16, ,845 Electrical installation 972,895 5, ,395 Moulds and dies 3,417,349 15,933-3,433,282 Hostel ,253, ,159 (560,466) 33,271,548 : 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 Supercomnet Technologies Berhad ( H) Annual Report 59

61 NOTES TO THE FINANCIAL STATEMENTS (Cont'd) DECEMBER 31, 12. PROPERTY, PLANT AND EQUIPMENT (Cont'd) (Cont'd) Net book value: Factory buildings 4,997,535 5,158,535 4,050,656 4,182,596 Plant and machinery 1,014,476 1,175,027 1,014,476 1,175,027 Furniture and fittings 226, , , ,078 Office equipment 145, , , ,034 Tools and equipment 121, , , ,839 Motor vehicles 59,964 8,263 59,964 8,263 Electrical installation 47,005 13,005 47,005 13,005 Moulds and dies 17,113 27,451 17,113 27,451 Hostel 369, ,383-6,998,918 6,823,232 6,052,039 5,847,293 The subsidiary suffered continuous losses from its manufacturing of wires and cables for automotive industries. The directors of the subsidiary carried out an impairment test in the prior year and concluded that the recoverable amounts of certain property, plant and equipment were lower than their carrying amounts. Accordingly, an impairment loss of Nil (: 309,646) was recognised by the subsidiary. As of December 31,, certain factory buildings of the Group and of the Company with a total carrying value of 2,893,250 (: 2,991,550) are charged to local licensed banks as securities for bank credit facilities granted to the Group and the Company as disclosed in Note PREPAID LEASE PAYMENTS ON LEASEHOLD LAND Short leasehold land At beginning of the year 2,076,151 2,130, , ,758 Amortisation during the year (53,999) (53,999) (24,828) (24,828) At end of the year 2,022,152 2,076, , ,930 As of December 31,, the unexpired lease period of the Group s and of the Company s short leasehold land is 36 years. As of December 31,, a short leasehold land of the Group and of the Company with carrying value of 933,102 (: 957,930) 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 Unquoted shares, at cost 24,400,000 24,400,000 Less: Accumulated impairment losses (21,708,697) (21,708,697) Carrying amount 2,691,303 2,691, Supercomnet Technologies Berhad ( H) Annual Report

62 NOTES TO THE FINANCIAL STATEMENTS (Cont'd) DECEMBER 31, 14. INVESTMENT IN SUBSIDIARY (Cont'd) holds 100% (: 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 Unquoted shares, at cost 450, , , ,000 Group s share of post-acquisition reserve 12,038,094 10,749, ,488,094 11,199, , ,000 holds 20% (: 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. 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). Current assets 65,012,325 59,564,711 Non-current assets 5,203,426 4,140,925 Current liabilities (7,430,282) (7,363,604) Non-current liabilities (345,000) (345,000) Revenue 58,271,932 51,051,487 Profit for the year 16,443,437 16,222,671 Other comprehensive income for the year - - Total comprehensive income for the year 16,443,437 16,222,671 Dividend received from the associate during the year 2,000,000 2,000,000 Reconciliation of the above summarised financial information to the carrying amount of the Group s interests in Supercomal Medical Products Sdn. Bhd. recognised in the consolidated financial statements is as follows: Net assets of the associate 62,440,469 55,997,032 Proportion of the Group s ownership interests in Supercomal Medical Products Sdn. Bhd. 20% 20% Carrying amount of the Group s interests in Supercomal Medical Products Sdn. Bhd. 12,488,094 11,199,406 Supercomnet Technologies Berhad ( H) Annual Report 61

63 NOTES TO THE FINANCIAL STATEMENTS (Cont'd) DECEMBER 31, 16. INVENTORIES Raw materials 2,927,676 3,138,919 2,705,726 2,921,363 Work-in-progress 1,837,850 1,171,327 1,665,086 1,079,572 Finished goods 2,683,739 3,138,288 2,574,522 3,042,470 Spare parts 70,929 73,349 70,929 73,349 7,520,194 7,521,883 7,016,263 7,116,754 The cost of inventories of the Group and of the Company recognised as an expense during the financial year is 33,212,488 (: 28,506,481) and 31,673,942 (: 27,354,910) 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 237,321 (: 976,333) and 248,040 (: 313,332) respectively. 17. TRADE AND OTHER RECEIVABLES Trade receivables 8,291,585 7,083,993 7,703,505 6,719,242 Less: Allowance for doubtful debts (441,419) (441,419) (441,419) (441,419) 7,850,166 6,642,574 7,262,086 6,277,823 Amount owing by subsidiary: Trade ,121 1,495,242 Non-trade - - 5, , ,902 1,659,141 Amount owing by associate: Trade 1,316,515 1,113,943 1,312,514 1,113,943 Other receivables 339,537 94, ,459 94,993 The currency exposure profile of trade and other receivables is as follows: 9,506,218 7,851,510 9,112,961 9,145,900 Ringgit Malaysia 8,960,585 7,491,569 8,964,697 9,033,453 United States Dollar 413, ,934 16,439 17,440 Singapore Dollar 131,825 95, ,825 95,007 9,506,218 7,851,510 9,112,961 9,145,900 The credit periods granted by the Group and by the Company on sale of goods range from 30 to 77 days (: 30 to 77 days). No interest is charged on outstanding trade receivables. 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. 62 Supercomnet Technologies Berhad ( H) Annual Report

64 NOTES TO THE FINANCIAL STATEMENTS (Cont'd) DECEMBER 31, 17. TRADE AND OTHER RECEIVABLES (Cont'd) 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 allowance for doubtful debts because there has not been a significant change in credit quality and the amounts are still considered recoverable. 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: 1 to 30 days 1,846,843 1,677,010 1,605,520 1,504, to 60 days 163, , , , to 365 days 64,066-64,066 - Total 2,074,707 1,919,382 1,833,384 1,746,415 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. and the Company do not hold any collateral over these balances. Ageing of impaired trade receivables: More than 365 days 441, , , ,419 The credit period granted by the Company for trade transactions with subsidiary is 60 days (: 60 days). No interest is charged on trade amount owing by subsidiary. Ageing of past due but not impaired trade amount owing by subsidiary: 1 to 30 days 95,959 41, to 60 days - 24, to 90 days - 88, to 120 days - 60, to 365 days - 247,218 More than 365 days - 952,827 95,959 1,414,407 The non-trade amount owing by subsidiary arose mainly from unsecured advances which are interest free and are repayable on demand. The credit period granted by the Company for trade transactions with associate is 60 days (: 60 days). No interest is charged on trade amount owing by associate. Supercomnet Technologies Berhad ( H) Annual Report 63

65 NOTES TO THE FINANCIAL STATEMENTS (Cont'd) DECEMBER 31, 17. TRADE AND OTHER RECEIVABLES (Cont'd) Ageing of past due but not impaired trade amount owing by associate: 1 to 30 days 285, , , , OTHER ASSETS Deposits 288, , ,035 78,025 Prepayments 59,093 59,118 25,196 3,636 The currency exposure profile of other assets is as follows: 347, , ,231 81,661 Ringgit Malaysia 313, , ,231 81,661 United States Dollar 33, SHORT-TE DEPOSITS WITH LICENSED BANKS 347, , ,231 81,661 s short-term deposits with licensed banks carry interest at rates ranging from 3.00% to 5.50% (: 2.55% to 4.60%) per annum and will mature in January 2018 and April s short-term deposits with a licensed bank carry interest at rates ranging from 3.50% to 5.50% (: 2.55% to 4.60%) per annum and will mature in January As of December 31,, a short-term deposit with a licensed bank of the Group with a carrying value of 1,500 (: 1,500) is pledged to the bank for a bank guarantee facility granted to the subsidiary. 20. CASH AND BANK BALANCES The currency exposure profile of cash and bank balances is as follows: Ringgit Malaysia 3,313,994 2,297,730 2,535,815 1,832,841 United States Dollar 49, ,882 16,202 16,025 3,363,416 2,428,612 2,552,017 1,848, Supercomnet Technologies Berhad ( H) Annual Report

66 NOTES TO THE FINANCIAL STATEMENTS (Cont'd) DECEMBER 31, 21. SHARE CAPITAL No. of shares No. of shares Authorised: Ordinary shares ,000, ,000,000 Issued and fully paid: Ordinary shares At beginning of year 243,000,000 24,300, ,000,000 24,300,000 Transfer from share premium - 5,936, At end of year 243,000,000 30,236,954 24,300,000 24,300,000 s issued and fully paid-up share capital comprised ordinary shares with a par value of 0.10 each. The new Companies Act, which came into effect on January 31,, introduces the no par value regime. Accordingly, the concepts of authorised share capital and par value have been abolished. In accordance with the transitional provisions of the Act, the amount standing to the credit of the Company s share premium has become part of the Company s share capital. These changes do not have an impact on the number of shares in issue or the relative entitlement of any of the shareholders. However, the Company has a period of 24 months from the effective date of the Act to use the existing balances credited in the share premium in a manner as specified by the Act. 22. RESERVE Non-distributable reserve: Share premium and the Company - 5,936,954 The share premium arose from the issue of shares at premium, net of share issue expense. 23. RETAINED EARNINGS Distributable reserve: Retained earnings 14,629,080 12,039,569 1,033,074 1,290,163 As of December 31,, the entire retained earnings of the Company is available for distribution as single-tier dividends to the shareholders of the Company. Supercomnet Technologies Berhad ( H) Annual Report 65

67 NOTES TO THE FINANCIAL STATEMENTS (Cont'd) DECEMBER 31, 24. DEFERRED TAX (ASSETS)/LIABILITIES : Opening balance Recognised in profit or loss Closing balance Deferred tax liabilities: Property, plant and equipment 840,837 45, ,082 Others 12,000 (1,000) 11, ,837 44, ,082 Deferred tax assets: Inventories (40,000) (23,000) (63,000) Unused tax capital allowances (417,000) (619,000) (1,036,000) (457,000) (642,000) (1,099,000) Net 395,837 (597,755) (201,918) : 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, Supercomnet Technologies Berhad ( H) Annual Report

68 NOTES TO THE FINANCIAL STATEMENTS (Cont'd) DECEMBER 31, 24. DEFERRED TAX (ASSETS)/LIABILITIES (Cont'd) : Opening balance Recognised in profit or loss Closing balance Deferred tax liabilities: Property, plant and equipment 811,837 17, ,082 Others 8,000 3,000 11, ,837 20, ,082 Deferred tax assets: Unused tax capital allowances (417,000) 22,000 (395,000) Inventories (7,000) (56,000) (63,000) (424,000) (34,000) (458,000) Net 395,837 (13,755) 382,082 : 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) 395,837 Deferred tax balances are presented in the statements of financial position after appropriate offsetting as follows: Deferred tax assets (584,000) Deferred tax liabilities 382, , , ,837 (201,918) 395, , ,837 The Finance Act, which was gazette on January 16,, enacts 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 and 2018 as follows: Supercomnet Technologies Berhad ( H) Annual Report 67

69 NOTES TO THE FINANCIAL STATEMENTS (Cont'd) DECEMBER 31, 24. DEFERRED TAX (ASSETS)/LIABILITIES (Cont'd) 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 at the expected rates above for years of assessment and 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: Unused tax losses 12,396,000 12,453, , ,000 Unused tax capital allowances 764,000 3,561, ,000 7,000 Inventories 1,684,000 1,557, Net 14,844,000 17,571, , ,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. 25. TRADE AND OTHER PAYABLES Trade payables 2,054,443 2,963,313 1,939,106 2,875,196 Amount owing to subsidiary: Trade ,049 Non-trade , , ,408 1,036,363 Amount owing to associate: Trade 40,775 42,467 40,775 42,467 Non-trade 20,570 8, ,345 50,647 40,775 42,467 Other payables 512, , , ,737 Accrued expenses 1,405, ,985 1,324, ,020 4,034,156 3,940,357 3,902,230 4,760, Supercomnet Technologies Berhad ( H) Annual Report

70 NOTES TO THE FINANCIAL STATEMENTS (Cont'd) DECEMBER 31, 25. TRADE AND OTHER PAYABLES (Cont'd) The currency exposure profile of trade and other payables is as follows: Ringgit Malaysia 3,758,039 3,798,785 3,734,650 4,695,930 United States Dollar 265, , ,580 64,853 Singapore Dollar 10, ,034,156 3,940,357 3,902,230 4,760,783 The credit periods granted to the Group and the Company for trade purchases range from 30 to 60 days (: 30 to 60 days). No interest is charged on outstanding trade payables. 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 (: 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 are repayable on demand. The credit period granted to the Company for trade transactions with associate is 60 days (: 60 days). No interest is charged on trade amount owing to associate. The non-trade amount owing to associate by the Group arose mainly from unsecured advances which are interest free and are repayable on demand. Other payables comprise mainly amounts outstanding for ongoing costs. 26. DIVIDEND Interim single tier dividend declared and paid in respect of financial year ended December 31, 2015: 0.4 sen per ordinary share - 972, CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise the following: Short-term deposits with licensed banks 6,001,500 8,001,500 6,000,000 8,000,000 Cash and bank balances 3,363,416 2,428,612 2,552,017 1,848,866 9,364,916 10,430,112 8,552,017 9,848,866 Less: Short-term deposit pledged as security (1,500) (1,500) CREDIT FACILITIES 9,363,416 10,428,612 8,552,017 9,848,866 As of December 31,, the Group and the Company have unused credit facilities as follows: Secured 3,500,000 3,500,000 3,500,000 3,500,000 The bank overdrafts of the Group and of the Company bear interests at rates of 1.5% (: 1.5%) per annum above the lending banks lending rates. Supercomnet Technologies Berhad ( H) Annual Report 69

71 NOTES TO THE FINANCIAL STATEMENTS (Cont'd) DECEMBER 31, 28. CREDIT FACILITIES (Cont'd) The borrowings of the Group and of the Company secured, either singly or collectively as follows: a) legal charges over certain land and buildings of the Group and of the Company; and b) negative pledges over the assets of the Group and of the Company. 29. FINANCIAL INSTRUMENTS a) Capital risk management s and the Company s objectives when managing capital are to safeguard the Group s and the Company s ability to continue as a going concern and to maintain an optimal capital structure so as to maximise shareholders value. In order to maintain or achieve an optimal capital structure, the Group and the Company 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. s and the Company s overall strategy remain unchanged from. b) Categories of financial instruments Financial assets Loans and receivables: Cash and bank balances 3,363,416 2,428,612 Short-term deposits 6,001,500 8,001,500 Trade and other receivables 9,397,207 7,851,510 Deposits 288, ,275 Financial liabilities Other financial liabilities: Trade and other payables 4,034,156 3,940,357 Financial assets Loans and receivables: Cash and bank balances 2,552,017 1,848,866 Short-term deposits 6,000,000 8,000,000 Loans and receivables 9,142,961 9,145,900 Deposits 259,035 78,025 Financial liabilities Other financial liabilities: Trade and other payables 3,902,230 4,760,783 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. 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. 70 Supercomnet Technologies Berhad ( H) Annual Report

72 NOTES TO THE FINANCIAL STATEMENTS (Cont'd) DECEMBER 31, 29. FINANCIAL INSTRUMENTS (Cont'd) c) Financial risk management objectives (Cont'd) i) Market risk management 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. ii) Foreign currency risk management 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. 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: Assets United States Dollar 497, ,816 Singapore Dollar 131,825 95,007 Liabilities United States Dollar 265, ,572 Singapore Dollar 10,868 - Assets United States Dollar 32,641 33,465 Singapore Dollar 131,825 95,007 Liabilities United States Dollar 167,580 64,853 The following table details the sensitivity analysis when the strengthens 5% (: 10%) against the relevant foreign currencies. 5% (: 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 end of the financial period for a 5% (: 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 strengthens 5% (: 10%) against the relevant currency. Impact on profit or loss: United States Dollar (11,594) (25,424) Singapore Dollar (6,048) (9,501) Supercomnet Technologies Berhad ( H) Annual Report 71

73 NOTES TO THE FINANCIAL STATEMENTS (Cont'd) DECEMBER 31, 29. FINANCIAL INSTRUMENTS (Cont'd) c) Financial risk management objectives (Cont'd) ii) Foreign currency risk management (Cont'd) Impact on profit or loss: United States Dollar 6,747 3,139 Singapore Dollar (6,591) (9,501) For a 5% (: 10%) weakening of the against the relevant currency, it would have an 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. 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. and the Company only transact with entities that are rated the equivalent of investment grade and above. and the Company use its own trading records to rate its major customers. 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 end of the reporting period, approximately 74% (: 77%) and 80% (: 81%) of the Group s and of the Company s trade receivables respectively were due from three (: three) 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. 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 5% (: 10%) and 5% (: 10%) respectively of gross trade receivables at the end of reporting period. 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 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. There was no interest-bearing financial liabilities for the Group or for the Company as of the end of the reporting period. 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. 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. 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 financial liabilities. Details of undrawn credit facilities that the Group and the Company have at its disposal to further reduce liquidity risk are set out in Note 28. and the Company do not hold any derivative financial instruments. 72 Supercomnet Technologies Berhad ( H) Annual Report

74 NOTES TO THE FINANCIAL STATEMENTS (Cont'd) DECEMBER 31, 29. FINANCIAL INSTRUMENTS (Cont'd) c) Financial risk management objectives (Cont'd) vi) Cash flow risk management 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 the short-term 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: 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 3,805,818 4,487,195 3,805,818 4,486,907 Rental receivable 439, , , ,560 Purchase of finished goods 37,950 7, Purchase of indirect and packing materials 8,600 11,306 8,600 11, SEGMENTAL INFOATION 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 s operations are located in Malaysia. s revenue from external customers attributed to countries from which the Company and its subsidiary derive revenue are detailed below: Malaysia 31,752,703 27,936,169 United States of America 2,079,094 2,003,977 Republic of Singapore 299, ,223 Taiwan R.O.C. 299, ,207 Others 15,567 28,249 34,446,790 30,412,825 Supercomnet Technologies Berhad ( H) Annual Report 73

75 NOTES TO THE FINANCIAL STATEMENTS (Cont'd) DECEMBER 31, 31. SEGMENTAL INFOATION (Cont'd) Information about major customers Included in revenue of the Group are revenue of 21,125,330 (: 16,241,273) which arose from sales to the Group s three (: two) major customers who contribute to 61% (: 53%) of the Group s revenue. 32. OPERATING LEASE COMMITMENTS 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: Not later than one year 109, ,104 86, ,104 Later than one year and not later than five years - 109,776-86, SUBSEQUENT EVENTS Subsequent to the financial year: 109, ,880 86, ,630 a) the Company has on March 23, 2018 entered into Sale and Purchase Agreements with Tan Sok Suan and Poly Feats Sdn. Bhd. respectively for the purchase of five (5) properties for a total cash consideration of 1,120,000. The transactions were completed on March 26, b) the Company acquired 8,000,000 ordinary shares in Supercomal Medical Products Sdn. Bhd. ( SMP ), representing the remaining 80% equity interest in SMP not owned by the Company for a total consideration of 80,000,000 to be satisfied via the issuance of 400,000,000 new ordinary shares at 0.19 per share and cash of 4,000,000. The anticipated completion date of the acquisition shall be on April 16, Supercomnet Technologies Berhad ( H) Annual Report

76 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 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, and of the financial performance and the cash flows of the Group and of the Company for the year then ended on that date. Signed in accordance with a resolution of the Directors, SHIUE, JONG-ZONE WU, HUEI-CHUNG April 12, 2018 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,1960. Subscribed and solemnly declared by the abovenamed SHIUE, JONG-ZONE at SUNGAI PETANI in the State of KEDAH on April 12, 2018 Before me, SHAZLIN IZNINA BINTI OEMAR No. K110 COMMISSIONER FOR OATHS Supercomnet Technologies Berhad ( H) Annual Report 75

77 Group Properties as at December 31, The details of the landed properties owned by the STB Group as at December 31, are set out below:- Title/ Location Description Lot P.T Two storey H.S.(D) factory 2808/95 buildings Mukim of situated on a Sungai Petani 60 years leasehold land with the option to extend lease for a further 39 years Land area/ Built- up area sq. meters Existing use 12,158 /9,566* wire and cable manufacturing plant Tenure Leasehold expiring on 05/05/2055 Approximate Age of buildings Building 1 is approx. 25 years and Building 2 is approx. 21 years Net book value as at December 31, () Date of Last revaluation 4,983,758^ July 1997 Lot P.T H.S.(D) 2807/95 Mukim of Sungai Petani Two storey factory buildings situated on a 60 years leasehold land with the option to extend lease for a further 39 years 20,234.3 /8,470** wire and cable manufacturing cable assembly plant Leasehold expiring on 05/05/2055 Building 3 is approx. 15 years and Building 4 is approx.14 years 2,035,929^^ February 2015 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, was 933,102 whilst the net book value of the buildings was 4,050,656. ** 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, was 1,089,050 whilst the net book value of the buildings was 946, Supercomnet Technologies Berhad ( H) Annual Report

78 ANALYSIS OF SHAREHOLDINGS SHARE CAPITAL AS AT APRIL 16, 2018 Total Number of Issued Shares : 643,000,000 Class of Shares : Ordinary Shares with equal voting right Number of Shareholders : 1,822 DISTRIBUTION OF SHAREHOLDERS AS AT APRIL 16, 2018 Size of Holdings No. of Holders Total Holdings % , , ,001 10, ,457, , , ,570, ,001 32,149, ,738, ,150,000 and above 6 480,154, Total 1, ,000, THIRTY LARGEST SECURITIES HOLDERS AS AT APRIL 16, 2018 No. Name Shareholdings % 1 Shiue, Jong-Zone also known as James Shiue 179,726, Wu, Huei-Chung 92,440, Wu, Chung-Jung 71,281, Shiue, Jerry 45,801, Hsueh, Chih-Yu 45,789, Lim Eng Chuan 45,114, Liu Kuo, Ling-Miao 15,648, HLB Nominees (Tempatan) Sdn Bhd Qualifier: Pledged Securities Account for Chee Sai Mun 5,554, Pacific Rotary Sdn Bhd 5,432, Ng Wai Sim 5,000, Lin Ho, Shu-Li 3,408, Alliancegroup Nominees (Tempatan) Sdn Bhd Qualifier: Pledged Securities Account for Wong Wai Kong ( ) 3,300, Chen Cheng-Chun 3,036, Too Chin Kiong 2,680, Lee, Chao-Chih 2,280, Alliancegroup Nominees (Tempatan) Sdn Bhd Qualifier: Pledged Securities Account for Lim Hung Thiam ( ) 2,166, Soo Ah Mooi 2,140, Maybank Nominees (Tempatan) Sdn Bhd Qualifier: Pledged Securities Account for Joseph Lam Wai 1,826, Low Mooi Choo 1,816, Wang, Yu-Chuan 1,757, Lian Boon Tiam 1,752, Lee Bee Bee 1,600, Lee Kok Ping 1,500, RHB Capital Nominees (Tempatan) Sdn Bhd Qualifier: Pledged Securities Account for Chee Sai Mun 1,385, Supercomnet Technologies Berhad ( H) Annual Report 77

79 ANALYSIS OF SHAREHOLDINGS (Cont'd) THIRTY LARGEST SECURITIES HOLDERS AS AT APRIL 16, 2018 (Cont'd) No. Name Shareholdings % 25 Lim Seh Wie 1,314, Lee Sia King 1,310, Saw Siam Yeng 1,276, Ng Sok Siah 1,257, Cassandra Ng Leigh Cum 1,217, Maybank Nominees (Tempatan) Sdn Bhd Qualifier: Tan Imm Khim 1,160, SUBSTANTIAL SHAREHOLDERS AS AT APRIL 16, 2018 Name Direct Shareholding % Indirect Shareholding % Shiue, Jong Zone 179,726, ,312,850 (a) Wu, Huei-Chung 92,440, ,598,850 (b) Wu Chung-Jung 71,281, ,758,100 (c) Hsueh, Chih-Yu 45,789, ,250,600 (d) Shiue, Jyh-Jeh 45,801, ,238,600 (e) Lim Eng Chuan 45,114, Notes:- (a) (b) (c) Indirect interest held through:- Wu, Huei-Chung 92,440,900 Wu, Chung-Jung 71,281,650 Hsueh, Chih-Yu 45,789,150 Shiue, Jyh-Jeh 45,801,150 Indirect interest held through:- Shiue, Jong-Zone 179,726,900 Wu, Chung-Jung 71,281,650 Hsueh, Chih-Yu 45,789,150 Shiue, Jyh-Jeh 45,801,150 Indirect interest held through:- Shiue, Jong-Zone 179,726,900 Wu, Huei-Chung 92,440,900 Hsueh, Chih-Yu 45,789,150 Shiue, Jyh-Jeh 45,801,150 (d) Indirect interest held through:- Wu, Huei-Chung 92,440,900 Wu, Chung-Jung 71,281,650 Shiue, Jong-Zone 179,726,900 Shiue, Jyh-Jeh 45,801,150 (e) Indirect interest held through:- Wu, Huei-Chung 92,440,900 Wu, Chung-Jung 71,281,650 Shiue, Jong-Zone 179,726,900 Hsueh, Chih-Yu 45,789, Supercomnet Technologies Berhad ( H) Annual Report

80 ANALYSIS OF SHAREHOLDINGS (Cont'd) DIRECTORS SHAREHOLDING AS AT APRIL 16, 2018 Name Direct Shareholding % Indirect Shareholding % Shiue, Jong-Zone 179,726, ,312,850 (a) Wu, Huei-Chung 92,440, ,598,850 (b) Wu, Chung-Jung 71,281, ,758,100 (c) Hsueh, Chih-Yu 45,789, ,250,600 (d) Goh Chooi Eam Ng Ngoon Weng Notes:- (a) (b) (c) (d) Indirect interest held through:- Wu, Huei-Chung 92,440,900 Wu, Chung-Jung 71,281,650 Hsueh, Chih-Yu 45,789,150 Shiue, Jyh-Jeh 45,801,150 Indirect interest held through:- Shiue, Jong-Zone 179,726,900 Wu, Chung-Jung 71,281,650 Hsueh, Chih-Yu 45,789,150 Shiue, Jyh-Jeh 45,801,150 Indirect interest held through:- Shiue, Jong-Zone 179,726,900 Wu, Huei-Chung 92,440,900 Hsueh, Chih-Yu 45,789,150 Shiue, Jyh-Jeh 45,801,150 Indirect interest held through:- Wu, Huei-Chung 92,440,900 Wu, Chung-Jung 71,281,650 Shiue, Jong-Zone 179,726,900 Shiue, Jyh-Jeh 45,801,150 Supercomnet Technologies Berhad ( H) Annual Report 79

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82 SUPERCOMNET TECHNOLOGIES BERHAD (Company No H) (Incorporated in Malaysia) PROXY FO No. of Ordinary Shares held *I/ We *NRIC/ 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./ Passport No. of (FULL ADDRESS) *and/ or failing *him/ her (Proxy 2) (FULL NAME IN BLOCK CAPITAL) *NRIC No./ Passport 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- Eighth General Meeting of the Company to be held at Ifrah Hall, Cinta Sayang Resort, Persiaran Cinta Sayang, Sungai Petani, Kedah on Friday, May 25, 2018 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 - % In case of a vote by show of hands, Proxy 1*/Proxy 2* shall vote on our behalf. 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 a Directors Fees of up to 214,500 for the period from June 1, 2018 until the next Annual General Meeting of the Company. 2. To approve the Directors benefits (excluding Directors Fee) payable of up to 83,800 for the period from June 1, 2018 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. Hsueh, Chih-Yu 4. Goh Chooi Eam 5. To re-appoint Messrs. Deloitte PLT as Auditors of the Company for the ensuing year and to authorise the Directors to fix their remuneration. Special Business Ordinary Resolution 6. Authority to Issue Shares pursuant to the Companies Act. * Strike out whichever is inapplicable Signed this day of 2018 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 10, Only a depositor whose name appears on the Record of Depositors as at May 10, 2018 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. by Thursday, May 24, 2018 at 9.30 a.m. or at any adjournment thereof.

83 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

84 CABLE HARNESS AUTOMOTIVE HARNESS MEDICAL DEVICE PRODUCTS Supercomnet Technologies Berhad (ACE Market of Bursa Malaysia Securities Berhad) ( H) 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: EN ISO ISO 9001