n2n connect - annual report 2011 - part 2

7/31/2019 N2N Connect - Annual Report 2011 - part 2

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Corporate Sect ion11

N2N Connect Berhad Annual Report 2011

ProfleCho Wai Loon was rst appointed to the Board o the Company on 22

August 2005. He is a ellow member o the Association o Chartered Certied

Accountants (ACCA) and Malaysian Institute o Taxation as well as a member

o the Malaysian Institute o Accountants. He has more than 20 years oexperience in the eld o management consulting, accounting and taxation.

He started out his accountancy career as a trainee in 1982. From 1982 to

1994, he was attached to several public accounting rms gaining multiple

experiences. He currently operates his own practice providing management

consultancy, secretarial and accounting services.

He sits as a Chairman o the Audit Committee and as a member o the

Nomination Committee, Remuneration Committee and Option Committee.

He does not hold any directorships on the Board o other public listed

companies in Malaysia.

He has no amily relationship with any other directors or major shareholders

o the Company. There is no conict o interest with the Company. Within the

last 10 years, he has not been convicted or any oences, other than trac

oences, i any. Please reer to page 85 o this Annual Report or his securities

holding.

Tan Boon Leng was rst appointed to the Board o the Company on 15 April

2009. He is currently an Executive Director o Century Bond Bhd (Century

Bond) and he has over 25 years o business experience and contributed tothe growth and expansion o the business o Century Bond and its subsidiaries

especially in the areas o sales and marketing o the Century Bond Groups

products.

He also sits as the Chairman o the Nomination Committee and Remuneration

Committee and as a member o the Audit Committee.

He has no amily relationship with any other directors or major shareholders

o the Company. There is no conict o interest with the Company. Within the

last 10 years, he has not been convicted or any oences, other than trac

oences, i any. Please reer to page 85 o this Annual Report or his securitiesholding.

Cho Wai Loon47 years o age, Malaysian

Independent Non-Executive Director

Tan Boon Leng46 years o age, Malaysian

Independent Non-Executive Director


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12Corporate Sect ion


Event Highlights

a MAY

N2N FamilyTreasure Hunt

@ Pavilion

b JUNE

N2N ConnectAnnual General

Meeting

c JUNE

The winner oSME Innovation

Award 2011 inICT & Electrical

& Electronicscategory

d JUNE

N2N participatedat SME Innovation

Showcase 2011 atthe Kuala Lumpur

Convention Centre

e JULY

A visit toPertubuhan Kebajikan

Kanak-kanak Yatimdan Miskin Wawasan

Port Dickson,Negeri Sembilan

JULY

N2N AmazingTreasure Hunt to

Port Dickson&Telematch

g AUGUST

N2N ConnectExtraordinary

General Meetingin relation to

the proposedacquisition o

oce building in

Bangsar South.

a

c

f

b

d

e


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Corporate Sect ion13


h AUGUST

BloodDonation

Campaign,A Community

Project byN2N Connect

i SEPTEMBER

N2N participated as anEducation Partner at

Shares InvestmentConerence 2011

at Rafes CityConvention Centre,

Singapore

j NOVEMBER

TCPro AdvanveTrading Workshop

organised byN2N Connect

Singapore

k NOVEMBER

PIKOM 25thAnniversary

Gala Dinner &ICT Leadership

Awards @Istana Hotel

l DECEMBER

N2NThanksgiving

Annual Dinner at7atenite, Ascott

Kuala Lumpur

m JANUARY 2012

N2N BootCamp& HOD Retreat

at Resort World,Singapore

n JANUARY 2012

Completion oacquisition o new

oce building atBangsar South,

known as WismaN2N

g

i

k

m n

l

j

h


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14Corporate Section


Governance Statement

Corporate

THE CODE

The Board o N2N Connect Berhad (Company) is committed to ensuring that the highest standards o corporate governanceare practiced as a undamental guide in discharging its principal duty to act in the best interests o the Company as well asmanaging the businesses and aairs o the Group eciently. The Board will also ensure the Malaysian Code on CorporateGovernance (the Code) is strictly adhered to.

The Board is pleased to share the manner in which the Group has applied the principles o good corporate governance andbest practices during the nancial year ended 31 December 2011. The Board believes that the Principles o the Code andBest Practices outlined in the Code have, in all material respects, been adhered to and complied with.

THE BOARD OF DIRECTORS

The Group is led and controlled by an eective Board consisting o proessionals and competent individuals o caliberwith diverse backgrounds, expertise and experience in various elds such as business, technical, marketing and nanceconsidered suitable or managing the Groups businesses. The appointment o Independent Non-Executive Directorswho are not members o the management will ensure that they are ree o any relationship which could interere with theexercise o independent judgement or ability to act in the best interests o the Group ensuring that any decision o theBoard is deliberated ully and objectively with regard to the long term interest o all stakeholders. The Executive Directorsare responsible or implementing the corporate strategies and management o day-to-day operations o the business.

Within the powers accorded by the Companys Articles o Association (Articles), the Board is charged with among others,the development o corporate objectives and the review and approval o corporate plans, acquisitions and disposal oundertakings and properties o substantial value, major investments and nancial decisions and changes to the managementand control structure within the Group including key risk management, treasury, nancial and operational policies anddelegated authority limits.

i Composition

The Board currently consists o six (6) Directors, three (3) o whom are Independent Non-Executive Directors.The Board composition is in compliance with the ACE Market Listing Requirement (ACE LR) where at leastone-third o the Board comprises o Independent Directors.

ii Board Meetings

During the nancial year ended 31 December 2011, seven (7) Board Meetings were held and all Board membersattended more than 75% o the Board Meetings. The Directors attendance records at the Board Meetings or

the last nancial year are as ollows:

Directors No. o Board Meetings attended

Izlan bin Izhab 7/7Tiang Boon Hwa 7/7Lai Su Ping 7/7Chua Tiong Hoong 7/7Cho Wai Loon 7/7Tan Boon Leng 6/7


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Corporate

iii Directors Training and Continuing Education Program

The Board is constantly encouraged to attend programmes and seminars to keep abreast with the latestdevelopment in the industry and market place.

All members o the Board have attended the Mandatory Accreditation Programme prescribed by BursaSecurities. Apart rom attending various conerences and seminars organized by external organizers, the Boardalso beneted rom technical briengs which were conducted by in-house proessionals. During the year, theDirectors attended the N2N Core Technical Analysis Intensive Workshop by Master Li Xin Jing, Strategic RiskManagement Workshop, Seminars on Creating & Maintaining Boardroom Excellence, Related Party Transactionsand Investor Relations & Financial Communications and other relevant seminars and trainings in order to meet

the requirement o continuous proessional development.

The Board will continue to identiy other training programs that can urther enhance their knowledge in thelatest development relevant to the Group, especially in the area o corporate governance and regulatorydevelopment, to enable them to discharge their responsibilities eectively.

iv ReElection o Directors

In accordance with the Companys Articles o Association, at least one-third o the Board, including ManagingDirector, shall retire and is subject to re-election and each Director shall stand or re-election at least once everythree (3) years.

v Appointments to the Board

The Nomination Committee recommends the appointment o new Directors to the Board.

vi Board Eectiveness Assessment

The Company Secretary acilitates the yearly eectiveness assessment o the Board o Directors, Committeesand individual Directors. The objective is to improve the Boards eectiveness by identiying gaps, maximizestrengths and address weaknesses. The Chairman o the Board oversees the overall evaluation process andresponses are analysed by the Nomination Committee, beore being discussed at the Board.

SUPPLY OF INFORMATION

The Directors will be provided with all relevant inormation in sucient time, prior to the date o scheduled Board Meetings.

This is to enable the Board members to obtain urther explanation or clarication to acilitate the decision making processand meaningul discharge o their duties.

The Directors will be able to seek proessional advice as and when necessary and the Board will ormalise the proceduresor Directors to take independent advice, in the urtherance o their duties.

All Directors will have direct access to the advice and services o the Company Secretary who ensures that all appointment areproperly made and that all necessary inormation is obtained rom the Directors, both or the Companys own records or orthe purposes o meeting statutory obligations, as well as obligations arising rom the ACE LR or other regulatory requirements.


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16Corporate Section


BOARD COMMITTEES

The Board has established the ollowing committees:

i Nomination Committee

The Nomination Committee ensures that the Directors o the Board bring characteristics to the Board, whichprovides a required mix o responsibilities, skills and experience. The Nomination Committee will also assistthe Board in reviewing on an annual basis the appropriate balance and size o Non-Executive participation andin establishing procedures and processes towards an annual assessment o the eectiveness o the Board as awhole, the Committees o the Board and contribution o each individual Director.

This Committee is chaired by Tan Boon Leng and the members are Izlan bin Izhab and Cho Wai Loon.

The Nomination Committee meets as and when necessary and may decide by way o circular resolutions. TheNomination Committee held one (1) meeting during the nancial year ended 31 December 2011 with ullattendance.

ii Remuneration Committee

The Remuneration Committee acts as a committee o the ull Board to assist in assessing the remuneration othe Directors refecting the responsibility and commitment undertaken by the Board membership.

This Committee is chaired by Tan Boon Leng and the other members include Izlan bin Izhab, Cho Wai Loon andTiang Boon Hwa.

The Remuneration Committee meets as and when necessary and may decide by way o circular resolutions.The Remuneration Committee held one (1) meeting during the nancial year ended 31 December 2011 withull attendance.

iii Option Committee

The Company obtained approvals rom the shareholders at a general meeting on 13 October 2005 and 18October 2005 to establish the Employees Share Option Scheme (ESOS). An Option Committee was set upto administer the ESOS in accordance with the By-Laws. Pursuant to the Boards approval on 24 August 2010,the tenure o the ESOS has been extended or a urther 5 years, expiring on 22 December 2015.

This Committee is chaired by Izlan bin Izhab and the other members include Cho Wai Loon and Tiang Boon

Hwa.

The Option Committee meets as and when necessary and may decide by way o circular resolutions. The OptionCommittee held one (1) meeting during the nancial year ended 31 December 2011 with ull attendance.

iv Audit Committee

The Audit Committee is chaired by Cho Wai Loon and the other members include Izlan bin Izhab and Tan BoonLeng. Fuller details o the composition o the Committee are ound in the Audit Committee Report.


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DIRECTORS REMUNERATION

Details o the remuneration o Directors or the nancial year are as ollows:

(i) Aggregate remuneration o Directors categorized into appropriate components:

Eecutive NonEecutive

RM RM

Fees 99,360 60,000Salaries and bonuses 847,279 Other benets 5,064

Total 951,703 60,000

(ii) Number o Directors whose remuneration alls into the ollowing bands:

No o Directors

Remuneration Band Eecutive NonEecutive

RM1,001 RM50,000 3RM50,001 RM100,000 1

RM100,001 RM150,000 RM150,001 RM200,000 RM200,001 RM250,000 1 RM250,001 RM300,000 RM300,001 RM350,000 RM350,001 RM400,000 RM400,001 RM450,000 RM450,001 RM500,000 RM500,001 RM550,000 RM550,001 RM600,000 RM600,001 RM650,000 1

Total number o directors 3 3

SHAREHOLDERS COMMUNICATION AND INVESTORS RELATIONS POLICY

Dialogue between the Company and Investors

The Company recognizes the importance o being accountable to its shareholders and investors through maintenance oan open communication policy with investors and shareholders alike. In ensuring eective communication, the Companycommunicates with its shareholders and investors through various means and orums such as the annual report, companyvisits, site visits, annual general meetings, exhibition and other Group activities.

Any inormation that may be regarded as undisclosed material inormation about the Group will not be given to any singleshareholder or shareholder group. To ensure that shareholders and investors are well inormed o major developments othe Group, inormation is disseminated to shareholders and investors through various disclosures and announcements toBursa Securities which include quarterly nancial results and press release rom media.

At each Annual General Meeting, Executive Directors and, where appropriate, the Chairman are available to respond toshareholders questions during the meeting.


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18Corporate Section


Annual General Meeting

Notice o the Annual General Meeting and Annual Reports are sent out to shareholders at least 21 days beore the date othe meeting.

Besides the normal agenda or Annual General Meeting, the Board also provides opportunities or shareholders to raisequestions pertaining to the business activities o the Group. All Directors are available to provide responses to shareholdersquestions during these meetings.

ACCOUNTABILITY AND AUDIT

Financial Reporting

The Board takes responsibility or presenting a balanced and meaningul assessment o the Groups operations and prospectseach time it releases its quarterly and annual nancial results. The Board is assisted by the Audit Committee to overseethe Groups nancial reporting processes and the quality o its nancial reporting. The Statement by Directors pursuant toSection 169(15) o the Companies Act, 1965 is set out on page 32 o this Annual Report.

Directors Responsibility in Financial Reporting

In preparing the nancial statements o the Group or the nancial year ended 31 December 2011, the Directors have:

Adopted suitable accounting policies and then apply them consistently;

Made judgments and estimates that are reasonable and prudent;

Ensured compliance with applicable accounting standards;

Prepared nancial statements on the going concern basis unless otherwise stated; and

Ensured proper maintenance o accounting records, disclosing reasonable accuracy in the nancial positiono the Group.

The Directors are also responsible or saeguarding the assets o the Group, and hence or taking reasonable steps to saeguardthe assets o the Group and to detect and prevent raud and other irregularities.

Internal Control

The Board o Directors is aware o its responsibility to maintain a sound system o internal controls to saeguard shareholders

investment and the Groups assets. It will be an ongoing process or identiying, evaluating and managing the signicant riskaced by the Group in the uture and this will be regularly reviewed by the Board up to the date o approval o the AnnualReport. The main elements o this system are designed to manage rather than eliminate the risk o ailure to achieve businessobjectives and can only provide reasonable and not absolute assurance against material misstatement or loss.

For the nancial year ended 31 December 2011, the Board and Audit Committee have appointed IBDC (Malaysia) Sdn Bhd,the outsourced proessional rm or the establishment o an independent internal audit unction which is in compliancewith the ACE LR. The Board and the Audit Committee also work closely with external auditors on the unctions o internalcontrols rom time to time, to ensure the smooth running o the Companys operations.

Relationship with the Auditors

The Board is aware that it should, through the Audit Committee, maintain a transparent and ormal relationship with theexternal auditors, in the review o the external auditors plan, report and procedures and the assistance given by the Groups

employees to the external auditors. The Board is also aware that the Audit Committee will review any letter o resignationrom the external auditors, the suitability o the external auditors or re-appointment and recommends the nomination oother person or persons as external auditors.


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Corporate Section19


Introduction

The Board, as guided by the Statement on Internal Control: Guidance or Directors o Public Listed Companies is pleased toprovide the ollowing Statement on Internal Control which outlines the nature and scope o internal controls o the Groupduring the nancial year.

The Boards Responsibilities

The Board acknowledges their responsibility to maintain a system o internal control and or reviewing its adequacy andintegrity. The system is designed to manage rather than eliminate the risk o ailure in achieving the Groups corporate

objectives and can only provide reasonable but not absolute assurance against any material misstatement or loss.

The Risk Management Process

Apart rom nancial controls, the Groups system o internal controls also cover operational and compliance controls and,most importantly, risk management. As part o the risk management process, the Board assisted by the Audit Committee, iscontinuously identiying, assessing and managing signicant business risks aced by the Group throughout the nancial year.

The process will be regularly reviewed by the Board through the Audit Committee and is in accordance with the Guidanceas contained in the Statement on Internal Control: Guidance or Directors o Public Listed Companies.

The Internal Control Process

The other key eatures o the Groups internal control system include the ollowing:

An organization structure with dened lines o responsibility and appropriate reporting structure includingproper approval and authorization limit or approving capital expenditure and expenses within the Group;

An Internal Audit unction which perorms regular and systematic review o the internal controls to assess andprovide sucient assurance on the eectiveness o the systems o internal control and to highlight signicantrisks impacting the Group with recommendation or improvement; and

The Audit Committee will regularly review reports by the Internal Audit unction and conducts annual assessmenton the adequacy o the unctions scope o work and resources.

The Group continues to take measures to enhance and strengthen the internal control environment.

Internal Control

Statement on


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20Corporate Section


The Board o Directors o N2N Connect Berhad is pleased to present the report o the Audit Committee or the year ended31 December 2011.

The Audit Committee was established by a resolution o the Board on 13 October 2005.

Members and Meetings

The Members o the Audit Committee comprising the ollowing directors.

Attendance at the Committee

Meetings held during theComposition o the Audit Committee Financial Year ended 31 December 2011

Chairman Cho Wai Loon(Independent Non-Executive Director) 5/5

Member Izlan Bin Izhab

(Independent Non-Executive Director) 5/5Member Tan Boon Leng

(Independent Non-Executive Director) 5/5

TERMS OF REFERENCE OF THE AUDIT COMMITTEE

COMPOSITION

(1) The company must appoint an audit committee rom amongst its directors which ulls the ollowingrequirements:-

(a) the Committee must be composed o no ewer than 3 members;

(b) all the Committee members must be non-executive directors, with majority o them being independent;

(c) at least one member o the Committee:-

(i) must be a member o the Malaysian Institute o Accountants; or

(ii) i he is not a member o the Malaysian Institute o Accountants, he must have at least 3 years

working experience and:-

he must have passed the examinations specied in Part I o the 1st Schedule o the AccountantsAct 1967; or

he must be a member o one o the associations o accountants specied in Part II o the 1stSchedule o the Accountants Act 1967.

(iii) ullls such other requirements as prescribed or approved by the Exchange.

(2) No alternate Director shall be appointed as a member o the Committee.

(3) The members o the Committee shall elect a Chairman rom among their member who shall be an independentdirector.

(4) In the event o any vacancy in the Committee resulting in the non-compliance o subparagraph 15.09(1) othe ACE LR, the Board o Directors shall, within three (3) months o that event, appoint such number o newmembers as may be required to make up the minimum number o three (3) members.

Committee Report

Audit


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22Corporate Section


PROCEDURE

The Committee may regulate its own procedure, in particular:-

(a) the calling o meetings;

(b) the notice to be given o such meetings;

(c) the voting and proceedings o such meetings;

(d) the keeping o minutes; and

(e) the custody, production and inspection o such minutes.

AUDIT COMMITTEE REPORT

(1) The Committee shall ensure that an Audit Committee Report be prepared at the end o each nancial year thatcomplies with sub-Rules (2) and (3) below.

(2) The Committee report must be clearly set out in the annual report o the Company.

(3) The Committee report shall include the ollowing:-

(a) the composition o the Committee, including the name, designation (indicating the chairman) anddirectorship o the members (indicating whether the directors are independent or otherwise);

(b) the terms o reerence o the Committee;

(c) the number o Committee meetings held during the nancial year and details o attendance o eachCommittee member;

(d) a summary o the activities o the Committee in the discharge o its unctions and duties or that nancialyear o the Company ; and

(e) a summary o the activities o the internal audit unction or activity.

RIGHTS OF THE AUDIT COMMITTEE

The Committee shall, wherever necessary and reasonable or the perormance o its duties in accordance with a procedureto be determined by the Board o Directors and at the cost o the Company:-

(a) have authority to investigate any matter within its terms o reerence;

(b) have the resources which are required to perorm its duties;

(c) have ull and unrestricted access to any inormation pertaining to the Company;

(d) have direct communication channels with the external auditors and person(s) carrying out the internal auditunction or activity;

(e) be able to obtain independent proessional or other advice; and

( ) be able to convene meetings with the external auditors, the internal auditors or both, excluding the attendanceo other directors and employees o the Company, whenever deemed necessary.

Committee Report

Audit


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Corporate Section23


REPORTING OF BREACHES TO BURSA SECURITIES

Where the Committee is o the view that a matter reported by it to the Board o Directors o the Company has not beensatisactorily resolved resulting in a breach o the ACE LR, the Committee shall promptly report such matter to Bursa Securities.

REVIEW OF THE AUDIT COMMITTEE

The Board o Directors must review the term o oce and perormance o the Committee and each o its members at leastonce every 3 years to determine whether the Committee and members have carried out their duties in accordance withtheir terms o reerence.

SECRETARY

The Secretary to the Committee shall be the company secretary.

SUMMARY OF ACTIVITY OF THE COMMITTEE

The Audit Committee had undertaken the ollowing activities during the nancial year ended 31 December 2011:

(i) reviewed the unaudited quarterly nancial results or the quarters ended 31 December 2010, 31 March 2011,30 June 2011, and 30 September 2011 or submission to the Board;

(ii) reviewed the drat audited nancial statements or the nancial year ended 31 December 2010 and discussedwith the external auditors in relation to audit issues, audit reports, assistance provided by the management,management letter;

(iii) reviewed the related party transactions, i any, arising within the Company and/or the Group;

(iv) reviewed the Statement on Allocation o Options Under the Employees Share Options Scheme (ESOS);

(v) reviewed Chairmans Statement, Statement on Corporate Governance, Statement on Internal Control, Statementon Corporate Social Responsibility, and Audit Committee Report or inclusion in the Annual Report 2011;

(vi) reviewed the drat Statement in relation to the Proposed Renewal o the Authority or Share Buy-Back;

(vii) recommended to the Board the re-appointment o the external auditors or the nancial year ended 31 December

2011 and their audit ees;

(viii) considered and approved the External Auditors Audit Planning Memorandum or the nancial year ended 31December 2011;

(ix) reviewed the Internal Audit Strategy and Planning Memorandum or the nancial year ended 31 December2011; and

(x) reviewed the Internal Audit Report or the nancial year ended 31 December 2011.

Committee Report

Audit


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24Corporate Section


INTERNAL AUDIT FUNCTION

For the nancial year ended 31 December 2011, the Board and Audit Committee have appointed IBDC (Malaysia) Sdn Bhd,the outsourced proessional rm or the establishment o an independent internal audit unction which is in compliancewith the ACE LR. The costs incurred or this internal audit unction was RM15,000.

SUMMARY OF ACTIVITY OF THE INTERNAL AUDIT FUNCTION

The internal audit unction had reviewed the internal control systems o the Company or the year ended 31 December2011, which covered the ollowing areas:

Management & Financial Control Revenue Control Invoicing process Expenditure Control payment and expenses Procurement Credit Control and Collection Insurance Coverage Sales and Marketing Research and Development Property, Plant & Equipment Saeguards and Substantiation and Evaluation

ESOS

During the nancial year, no allocation o share options was made by the Company pursuant to the ESOS and no shareoptions was oered to and exercised by non-executive directors under the ESOS.

Committee Report

Audit


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Corporate Section25


SHARE BUYBACK

During the nancial year ended 31 December 2011, the Company purchased a total o 1,774,900 ordinary shares o RM0.10each o the issued share capital rom the open market at an average price o RM0.244 per share. The total consideration orthe share buy-back was RM433,667 and was nanced by internally generated unds. All the shares purchased during thenancial year ended 31 December 2011 had been retained as treasury shares, and the total number o shares retained astreasury shares as at 31 December 2011 was 1,774,900 ordinary shares o RM0.10 each.

Inormation on the shares purchased by the Company during the nancial year ended 31 December 2011are as ollows:

MonthlyBreakdown

No. o sharespurchased

and retained as

treasury shares

Purchase PricePer Share

RM

Average CostPer Share

TotalConsideration

Lowest Highest RM RM

June 2011 1,183,000 0.240 0.245 0.244 289,462

July 2011 200,000 0.240 0.240 0.240 48,187

August 2011 100,000 0.240 0.245 0.243 24,395

September 2011 95,000 0.230 0.240 0.235 22,463

October 2011 122,100 0.230 0.230 0.230 33,735

November 2011 74,800 0.255 0.295 0.278 15,425

Total 1,774,900 0.244 433,667

None o the treasury shares held were resold or cancelled during the nancial year ended 31 December 2011.

OPTIONS, WARRANTS AND CONVERTIBLE SECURITIES

There are no options, warrants or convertible securities issued by the Company during the nancial year.

AMERICAN DEPOSITORY RECEIPT ADR OR GLOBAL DEPOSITORY RECEIPT GDR

During the nancial year, the Company did not sponsor any ADR or GDR programme.

SANCTIONS OR PENALTIES

There were no sanctions or penalties imposed on the Group, directors or management by the relevant regulatory bodies

during the nancial year.

NONAUDIT FEES

There was no non-audit ees paid to the external auditors by the Group during the nancial year.

VARIATION IN RESULTS

There was no signicant variation between the nancial results in the Annual Audited Financial Statements 2011 and theunaudited nancial results or the year ended 31 December 2011 announced by the Company on 29 February 2012.

PROFIT ESTIMATES, FORECAST OR PROJECTION

The Company did not issue any prot estimates, orecast or projection or the nancial year.

Compliance Information

Additional


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26Corporate Section


PROFIT GUARANTEE

The Company did not issue any prot guarantee during the nancial year.

MATERIAL CONTRACT INVOLVING DIRECTORS AND SUBSTANTIAL SHAREHOLDERS

There were no material contracts involving directors and substantial shareholders during the nancial year except or aService Agreement dated 29 September 2004 entered into with Tiang Boon Hwa (TBH) or the appointment o TBH toact as Managing Director or in such other capacity as the Company may designate at a salary o RM18,000 per month ora term commencing 1 October 2004 and subject to termination by either party giving 6 months notice in writing (Term).The Company shall have the discretion to terminate TBHs employment lawully (without notice or on notice less than

that required under the Term above), by paying to TBH a sum equal to RM2,000,000 in addition to his salary and value ocontractual benets due to him in respect o that part o the period o the Term, which the Company has not given to TBHor the unexpired part o such xed term.

REVALUATION POLICY

The Company did not revalue any o its property, plant and equipment during the nancial year.

CORPORATE SOCIAL RESPONSIBILITY CSR

The Group understands the importance o its stakeholders, i.e. shareholders, employees, customers, suppliers, and localcommunities, in the successulness o Company business. Pursuant to that, the Company will be constantly trying to balancethe return o each o its stakeholders group. Above and beyond a continuous eort to maximize the wealth o its ordinaryshareholders, the ollowing actions have been conducted in Year 2011 to look to the needs o the broader stakeholder groupand to take on a wider social responsibility:

Type o stakeholder Action

Employees Constant review on sta benet and allowance and disseminate the decision viaissuance o circulars, directives, rules & regulations or other instructions as a ormo communication rom management to employees. All conrmed employeesare covered by Personal Accident Insurance, Group Hospitalisation Insurance andother medical benets.

Organisation o company trip, gatherings, sports activities and annual dinner orcloser bonding among the Groups employees.

Customers Continuous R&D eorts to improve quality o products.

Involving customers in the Companys events to establish good relationship.

Suppliers Close review on the Companys working capital management to maintain liquiditylevel required to repay its creditors on time.

Involving suppliers in the Companys events to establish good relationship.

Community During the Year 2011, the Company organized a Blood Donation Campaign andencouraged its Group employees to participate as well as the general public.

The Group continues to provide practical training or students rom variousuniversities and polytechnics under its Industrial Internship Training to equipstudents with the necessary working skills and knowledge. In addition to that, theGroup also provides simulated Stock Games to universities in collaboration withits panel o stockbroking clients in Malaysia, Singapore and Indonesia to createawareness, education and inormation on stock trading.

Visit to an orphanage home and contribution o basic necessities to the home.

Compliance Information

Additional


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Directors Report 28..............................................................................................................................................................

Statement by Directors 32

..............................................................................................................................................................Statutory Declaration 32

..............................................................................................................................................................

Independent Auditors Report to the Members 33..............................................................................................................................................................

Statements o Financial Position 35..............................................................................................................................................................

Statements o Comprehensive Income 36..............................................................................................................................................................

Statements o Changes in Equity 37..............................................................................................................................................................

Consolidated Statement o Cash Flows 39..............................................................................................................................................................

Statement o Cash Flows 41..............................................................................................................................................................

Notes to the Financial Statements 43..............................................................................................................................................................


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28Financial Sect ion


Report

Directors

The Directors are pleased to present their report together with the audited nancial statements o the Group and o theCompany or the nancial year ended 31 December 2011.

PRINCIPAL ACTIVITIES

The principal activities o the Company are carrying on the business as researcher and developer o sotware packages,provider o design, programming, consultancy services and related activities.The principal activities o its subsidiary companies are disclosed in Note 4 to the nancial statements.

There have been no signicant changes in the nature o these activities during the nancial year.

FINANCIAL RESULTS

Group CompanyRM RM

Net loss or the nancial yearattributable to equity holders o the Company 1,476,665 1,519,062

In the opinion o the Directors, the results o the operations o the Group and o the Company or the nancial year havenot been substantially aected by any item, transaction or event o a material and unusual nature.

There has not arisen in the interval between the end o the nancial year and the date o this report any item, transactionor event o a material and unusual nature likely to aect substantially the results o the operations o the Group and o theCompany or the current nancial year.

DIVIDENDS

The Board o Directors does not recommend any dividend in respect o the nancial year under review.

RESERVES AND PROVISIONS

There were no material transers to or rom reserves and provisions during the nancial year under review other than thosedisclosed in the nancial statements.

ISSUE OF SHARES AND DEBENTURES

There were no issue o shares or debentures by the Company during the nancial year under review.


19/83

Financial Section29


Report

Directors

EMPLOYEE SHARE OPTION SCHEME

The N2N Connect Berhad (N2N) Employee Share Option Scheme (ESOS) was approved by shareholders at the GeneralMeetings on 13 October 2005 and 18 October 2005. The ESOS was implemented on 23 November 2005 and shall expire on22 November 2010. Pursuant to the Boards approval on 24 August 2010, the tenure o the ESOS has been extended or aurther 5 years, expiring on 22 December 2015.

The salient eatures and other terms o the ESOS are disclosed in Note 24 to the nancial statements.

No other options were granted to any person to take up the unissued shares o the Company during the nancial year.

Details o the options granted to Directors are disclosed in the section on Directors Interests in this report.

REPURCHASE OF SHARES

At the Tenth Annual General Meeting held on 20 June 2011, the shareholders approved the share buy-back o up to 10% orup to 29,893,900 ordinary shares o the issued and paid-up share capital o the Company.

During the nancial year, the Company purchased a total o 1,774,900 ordinary shares o its issued and paid-up share capitalrom the open market at a total cost o RM433,668 at an average price o RM0.24 per share.

The repurchase transactions were nanced by internally generated unds. The repurchased shares are being held as treasuryshares and carried at cost in accordance with the requirements o section 67A o the Companies Act, 1965. There has beenno sale or cancellation o such shares to date.

At 31 December 2011, the total number o treasury shares held by the Company is 1,774,900 ordinary shares.

DIRECTORS

The Directors who served since the date o the last report are as ollows:

Chua Tiong HoongLai Su PingTiang Boon HwaCho Wai LoonIzlan bin IzhabTan Boon Leng

DIRECTORS INTERESTS

Details o holdings and deemed interests in the share capital and options over the shares o the Company or its relatedcorporations by the Directors in oce at the end o the nancial year, according to the register required to be kept underSection 134 o the Companies Act, 1965, were as ollows:

No. o ordinary shares o RM0.10 eachAt At

1.1.2011 Acquired Disposed 31.12.2011

N2N Connect Holdings Sdn. Bhd.Direct interest

Chua Tiong Hoong 20 20Lai Su Ping 280 280Tiang Boon Hwa 646 646


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No. o ordinary shares o RM0.10 eachAt At

1.1.2011 Acquired Disposed 31.12.2011

N2N Connect Berhad Direct interest

Chua Tiong Hoong 779,354 779,354Lai Su Ping 10,096,844 10,096,844Tiang Boon Hwa 10,099,444 485,000 10,584,444Cho Wai Loon 200,000 200,000Tan Boon Leng 1,232,700 1,232,700

Indirect interest

Chua Tiong Hoong 364,000 364,000Lai Su Ping 145,548,954 485,000 146,033,954Tiang Boon Hwa 145,546,354 145,546,354

No. O options over ordinary shareso RM0.10 each ESOS

At At1.1.2011 Eercised Lapsed 31.12.2011

N2N Connect Berhad

Chua Tiong Hoong 1,900,000 1,900,000Lai Su Ping 1,860,000 1,860,000Tiang Boon Hwa 2,180,000 2,180,000

Notes:

Deemed interest through his spouses direct interest in the Company pursuant to Section 134(12)(c) o the Companies Act,1965 in compliance with Companies (Amendment) Act 2007.

Deemed interest through her spouses direct interest in the Company pursuant to Section 134(12)(c) o the Companies Act,1965 in compliance with Companies (Amendment) Act 2007 and her direct interest in the holding company, N2N ConnectHoldings Sdn. Bhd. Pursuant to Section 6A o the Companies Act, 1965.

Deemed interest through his spouses direct interest in the Company pursuant to Section 134(12)(c) o the Companies Act,1965 in compliance with Companies (Amendment) Act 2007 and his direct interest in the holding company, N2N ConnectHoldings Sdn. Bhd. Pursuant to Section 6A o the Companies Act, 1965.

By virtue o their interests in the shares o the Company, Lai Su Ping and Tiang Boon Hwa are also deemed to have interestsin the shares o all its subsidiary companies to the extent the Company has an interest.

En. Izlan bin Izhab who holds oce at the end o the nancial year does not have any interest in the ordinary shares andoptions o the Company or its related corporations during the nancial year under review.

DIRECTORS BENEFITS

Since the end o the previous nancial year, no Director o the Company has received or become entitled to receive anybenet (other than a benet included in the aggregate amount o emoluments received or due and receivable by Directorsas shown in the nancial statements) by reason o a contract made by the Company or a related corporation with the Directoror with a rm o which the Director is a member, or with a company in which the Director has a substantial nancial interest.

Neither during nor at the end o the nancial year, was the Company or its subsidiary companies a party to any arrangement

the object o which is to enable the Directors o the Company to acquire benets by means o the acquisition o shares inor debentures o the Company or any other body corporate, other than those arising rom the share options granted underthe N2N Connect Berhad ESOS.

Report

Directors


21/83

Financial Section31


Report

Directors

OTHER STATUTORY INFORMATION

(a) Beore the statements o comprehensive income and statements o nancial position o the Group and o the Companywere made out, the Directors took reasonable steps:

(i) to ascertain that action had been taken in relation to the writing o o bad debts and the making o allowanceor doubtul debts and satised themselves that all known bad debts had been written o and that adequateallowance had been made or doubtul debts; and

(ii) to ensure that any current assets which were unlikely to realise their value in the ordinary course o businesswere written down to an amount which they might be expected so to realise.

(b) At the date o this report, the Directors are not aware o any circumstances which would render:

(i) the amount written o or bad debts or the allowance or doubtul debts in the nancial statements o theGroup and o the Company inadequate to any substantial extent;

(ii) the values attributed to the current assets in the nancial statements o the Group and o the Companymisleading;

(iii) any amount stated in the nancial statements o the Group and o the Company misleading; and

(iv) adherence to the existing method o valuation o assets or liabilities o the Group and o the Company misleadingor inappropriate.

(c) No contingent or other liabilities o the Group and o the Company have become enorceable, or are likely to becomeenorceable within the period o twelve months ater the end o the nancial year which, in the opinion o the Directors,will or may aect the ability o the Group and o the Company to meet their obligations as and when they all due.

(d) At the date o this report, there does not exist:

(i) any charge on the assets o the Group or o the Company which has arisen since the end o the nancial yearwhich secures the liabilities o any other person; and

(ii) any contingent liability in respect o the Group or o the Company which has arisen since the end o the nancialyear.

HOLDING COMPANY

The Directors regard N2N Connect Holdings Sdn Bhd, a company incorporated in Malaysia, as the holding company.

SUBSEQUENT EVENTS

The subsequent events are disclosed in Note 35 to the nancial statements.

AUDITORS

The auditors, Morison Anuarul Azizan Chew, have expressed their willingness to accept re-appointment.

Signed in accordance with a resolution o the Directors.

CHUA TIONG HOONG TIANG BOON HWA

KUALA LUMPUR12 April 2012


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We,CHUA TIONG HOONG and TIANG BOON HWA, being two o the Directors oN2N CONNECT BERHAD, do hereby statethat, in the opinion o the Directors, the nancial statements set out on pages 35 to 83 are drawn up in accordance with theFinancial Reporting Standards in Malaysia and the provisions o the Companies Act, 1965 so as to give a true and air viewo the state o aairs o the Group and o the Company as at 31 December 2011 and o the results o their operations andthe cash fows o the Group and o the Company or the nancial year ended on that date.

Signed in accordance with a resolution o the Directors.

CHUA TIONG HOONG TIANG BOON HWA


I, TIANG BOON HWA, being the Director primarily responsible or the nancial management oN2N CONNECT BERHAD,do solemnly and sincerely declare that the nancial statements set out on pages 35 to 83 are to the best o my knowledgeand belie, correct and I make this solemn declaration conscientiously believing the same to be true and by virtue o theprovisions o the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by )

the abovenamed TIANG BOON HWA )at KUALA LUMPUR in the Federal )Territory this 12 April 2012 )

TIANG BOON HWA

Beore me,

COMMISSIONER FOR OATHS

By Directors Pursuant to Section 169(15) o the Companies Act, 1965

Declaration Pursuant to Section 169(15) o the Companies Act, 1965

Statement

Statutory


23/83

Financial Section33


Auditors Report to the Members o N2N Connect Berhad

Independent

REPORT ON THE FINANCIAL STATEMENTS

We have audited the accompanying nancial statements o N2N Connect Berhad, which comprise the statements o nancialposition as at 31 December 2011 o the Group and o the Company, and the statements o comprehensive income, statementso changes in equity and statements o cash fows o the Group and o the Company or the nancial year then ended, anda summary o signicant accounting policies and other explanatory notes, as set out on pages 35 to 83.

Directors Responsibility or the Financial Statements

The Companys Directors are responsible or the preparation o nancial statements that give a true and air view in accordancewith the provisions o the Companies Act, 1965 and the Financial Reporting Standards in Malaysia, and or such internal

control as the Directors determine are necessary to enable the preparation o nancial statements that are ree rom materialmisstatement, whether due to raud or error.

Auditors Responsibility

Our responsibility is to express an opinion on these nancial statements based on our audit. We conducted our auditin accordance with approved standards on auditing in Malaysia. These standards require that we comply with ethicalrequirements and plan and perorm the audit to obtain reasonable assurance whether the nancial statements are ree omaterial misstatement.

An audit involves perorming procedures to obtain audit evidence about the amounts and disclosures in the nancialstatements. The procedures selected depend on the auditors judgement, including the assessment o the risks o materialmisstatement o the nancial statements, whether due to raud or error. In making those risk assessments, the auditorsconsider internal control relevant to Companys preparation o the nancial statements that give a true and air view in order

to design audit procedures that are appropriate in the circumstances, but not or the purpose o expressing an opinion onthe eectiveness o the Companys internal control. An audit also involves evaluating the appropriateness o accountingpolicies used and the reasonableness o accounting estimates made by the Directors, as well as evaluating the overallpresentation o the nancial statements.

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

Opinion

In our opinion, the nancial statements are properly drawn up in accordance with the Financial Reporting Standards inMalaysia and the Companies Act, 1965 in Malaysia so as to give a true and air view o the nancial position o the Group ando the Company as at 31 December 2011 and o their nancial perormance and cash fows or the nancial year then ended.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

In accordance with the requirements o the Companies Act, 1965 in Malaysia, we also report on the ollowing:

(a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Companyand by its subsidiary companies o which we have acted as auditors have been properly kept in accordance with theprovisions o the Act.

(b) We have considered the nancial statements and the independent auditors reports o the subsidiary company whichwe have not acted as auditors, which are indicated in Note 4 to the nancial statements.

(c) We are satised that the nancial statements o the subsidiary companies that are consolidated with the Companysnancial statements are in orm and content appropriate and proper or the purposes o the preparation o theconsolidated nancial statements o the Group and have received satisactory inormation and explanations asrequired by us or those purposes.

(d) The independent auditors reports on the nancial statements o the subsidiary companies were not subject to anyqualication and did not include any comment made under subsection (3) o Section 174 o the Act.


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OTHER MATTERS

This report is solely made to the members o the Company, as a body, in accordance with Section 174 o the CompaniesAct, 1965 in Malaysia and or no other purpose. We do not assume any responsibility to any other person or the contento this report.

OTHER REPORTING RESPONSIBILITIES

The supplementary inormation set out in Note 36 is disclosed to meet the requirements o Bursa Malaysia SecuritiesBerhad and is not part o the nancial statements. The Directors are responsible or the preparation o the supplementary

inormation in accordance with Guidance on Special Matter No. 1, Determination o Realised and Unrealised Prots orLosses in the Context o Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by theMalaysian Institute o Accountants (MIA Guidance) and the directive o Bursa Malaysia Securities Berhad. In our opinion,the supplementary inormation is prepared, in all material respects, in accordance with the MIA Guidance and the directiveo Bursa Malaysia Securities Berhad.

MORISON ANUARUL AZIZAN CHEW SATHIEA SEELEAN A/L MANICKAM

Firm Number: AF 001977 Approved Number: 1729/05/14 (J/PH)Chartered Accountants Partner o Firm


Auditors Report to the Members o N2N Connect Berhad

Independent


25/83

Financial Section35


Group Company2011 2010 2011 2010

Note RM RM RM RM

NonCurrent Assets

Property, plant and equipment 3 7,885,003 12,917,844 4,518,648 9,902,194Investment in subsidiary companies 4 2,095,000 2,095,000Intangible asset 5 8,999,375 7,799,064 8,999,375 7,799,064

16,884,378 20,716,908 15,613,023 19,796,258

Current AssetsInventories 6 2,150 2,150 2,150 2,150Trade receivables 7 4,739,330 5,484,842 1,687,273 2,353,926Other receivables 8 15,026,293 755,254 14,806,701 600,771Amount owing by holding company 9 29,483 12,898 29,483 12,898Amount owing by subsidiary companies 10 7,649,155 7,558,233Tax recoverable 35,631 16,331 35,631 16,331Marketable securities 11 857,787 12,301,172 857,787 12,301,172Deposits with licensed bank 12 166,525 7,857 166,525 7,857Cash and bank balances 2,674,310 2,723,159 475,260 402,560

23,531,509 21,303,663 25,709,965 23,255,898

Current Liabilities

Trade payables 13 461,974 372,723 449,579 279,030Other payables 14 1,197,358 1,147,555 409,724 406,539Amount owing to directors 15 86,212 36,384 86,212 36,384

1,745,544 1,556,662 945,515 721,953

Net current assets 21,785,965 19,747,001 24,764,450 22,533,945

38,670,343 40,463,909 40,377,473 42,330,203

Financed By:

Share capital 16 29,893,900 29,893,900 29,893,900 29,893,900Share premium 5,229,405 5,229,405 5,229,405 5,229,405Treasury shares 17 (433,668) (433,668) Exchange reserve 18 220,801 213,885 Retained prots 3,620,926 5,097,591 5,687,836 7,206,898

Total equity - attributable to equityholders o the Company 38,531,364 40,434,781 40,377,473 42,330,203

NonCurrent Liability

Deerred tax liabilities 19 138,979 29,128

38,670,343 40,463,909 40,377,473 42,330,203

Financial Position as at 31 December 2011

Statements of

The accompanying notes orm an integral part o the nancial statements.


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Group Company2011 2010 2011 2010

Note RM RM RM RM

Revenue 20 20,719,540 14,949,301 12,835,932 10,096,192

Cost o sales (8,364,901) (4,378,096) (3,774,388) (1,837,973)

Gross prot 12,354,639 10,571,205 9,061,544 8,258,219

Other operating income 645,651 769,254 929,734 2,991,464

Administration expenses (14,154,475) (17,786,538) (11,297,711) (16,277,939)

Loss beore taxation 21 (1,154,185) (6,446,079) (1,306,433) (5,028,256)

Taxation 22 (322,480) (778) (212,629) (5,061)

Net loss or the fnancial yearattributable to equity holderso the Company (1,476,665) (6,446,857) (1,519,062) (5,033,317)

Other comprehensive income/(loss):- Exchange dierences arising

rom translation o oreign

operations 6,916 (56,699)

Total comprehensive lossor the fnancial yearattributable to equity holderso the Company (1,469,749) (6,503,556) (1,519,062) (5,033,317)

Loss per share attributable toequity holders o the Company(sen)

Basic 23(a) (0.49) (2.16)Fully diluted 23(b) (0.49) (2.16)

Comprehensive Income or the fnancial year ended 31 December 2011

Statements of



27/83

Financial Section37


Changes in Equity or the fnancial year ended 31 December 2011

Statements of

Attributable to Equity Holders o the Company

Nondistributable DistributableShare Share Echange Retained

Capital Premium Reserve Prots Total

Note RM RM RM RM RM

Group

At 1 January 2010 29,876,080 5,205,775 270,584 11,544,448 46,896,887Issue o shares pursuant to: ESOS 16 17,820 23,630 41,450

Net loss or the nancial year (6,446,857) (6,446,857)Other comprehensive loss (56,699) (56,699)Total comprehensive loss

or the nancial year (56,699) (6,446,857) (6,503,556)At 31 December 2010 29,893,900 5,229,405 213,885 5,097,591 40,434,781

Attributable to Equity Holders o the Company

Nondistributable DistributableShare Share Treasury Echange Retained

Capital Premium Shares Reserve Prots TotalNote RM RM RM RM RM RM

Group

At 1 January 2011 29,893,900 5,229,405 213,885 5,097,591 40,434,781Shares purchased

during the yearheld as treasury shares 17 (433,668) (433,668)

Net loss or the nancial year (1,476,665) (1,476,665)Other comprehensive income 6,916 6,916Total comprehensive loss

or the nancial year 6,916 (1,476,665) (1,469,749)

At 31 December 2011 29,893,900 5,229,405 (433,668) 220,801 3,620,926 38,531,364



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Nondistributable Distributable

Share Share Treasury RetainedCapital Premium Shares Prots Total

RM RM RM RM RM

Company

At 1 January 2010 29,876,080 5,205,775 12,240,215 47,322,070Issue o shares pursuant to:- ESOS 17,820 23,630 41,450

Total comprehensive loss orthe nancial year (5,033,317) (5,033,317)

At 31 December 2010 29,893,900 5,229,405 7,206,898 42,330,203

At 1 January 2011 29,893,900 5,229,405 7,206,898 42,330,203Shares purchased during the

year held as treasury shares (433,668) (433,668)

Total comprehensive loss orthe nancial year (1,519,062) (1,519,062)

At 31 December 2011 29,893,900 5,229,405 (433,668) 5,687,836 40,377,473

Changes in Equity or the fnancial year ended 31 December 2011

Statements of



29/83

Financial Section39


Statement of Cash Flowsor the fnancial year ended 31 December 2011

Consolidated

2011 2010

Note RM RM

Cash Flows From Operating Activities

Loss beore taxation (1,154,185) (6,446,079)Adjustments or:

Allowance or impairment on trade receivables 2,906,080Amortisation o intangible asset 1,363,591 1,113,826Depreciation o property, plant and equipment 6,765,082 7,921,232Property, plant and equipment writteno 6,993Inventories written o 1,880

Impairment loss on trade receivables 271,682Impairment loss on trade receivables written o 1,094 Gain on disposal o marketable securities (142,373) Loss on strike-o o a subsidiary company 2,599 Fair value gain on marketable securities (49,748)Loss on disposal o property, plant and equipment 25 Interest income (218,019) (282,784)Dividend income (37,818)

Operating prot beore working capital changes 6,617,814 5,405,264(Increase)/Decrease in working capital

Trade receivables 767,712 (2,063,177)Other receivables (14,272,481) 916,462Trade payables 82,311 (461,732)Other payables 35,893 (177,128)Amount owing to directors 49,828 (22,205)Amount owing by holding company (16,585) (515)

(13,353,322) (1,808,295)

Cash (used in)/generated rom operations (6,735,508) 3,596,969

Interest received 218,019 282,784Tax paid (231,929) (38)

(13,910) 282,746

Net cash (used in)/rom operating activities (6,749,418) 3,879,715Cash Flows From Investing Activities

Computer sotware development cost (2,563,902) (2,315,156)Purchase o property, plant and equipment (1,707,049) (2,695,962)Proceeds rom disposal o property, plant and equipment 350 Shares buy back (433,668) Cash outfow on strike-o o a subsidiary company 4(c) (2) Net changes in marketable securities 10,876,658 (1,529,033)Proceeds rom disposal o marketable securities 709,100

Net cash rom/(used in) investing activities 6,881,487 (6,540,151)


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2011 2010

RM RM

Cash Flows From Financing Activity

Proceeds rom issue o shares 41,450

Net cash rom nancing activity 41,450Net increase/decrease in cash and cash equivalents 132,069 (2,618,986)Eect o echange rate changes (22,250) (7,329)Cash and cash equivalents at beginning o the nancial year 2,731,016 5,357,331

Cash and cash equivalents at end o the nancial year 2,840,835 2,731,016

Cash and cash equivalents at end o the nancial year comprises:

Deposits with licensed bank 166,525 7,857Cash and bank balances 2,674,310 2,723,159

2,840,835 2,731,016


Statement of Cash Flowsor the fnancial year ended 31 December 2011

Consolidated


31/83

Financial Section41


2011 2010RM RM

Cash Flows From Operating Activities

Loss beore taxation (1,306,433) (5,028,256)Adjustments or:

Allowance or impairment on trade receivables 2,906,080Amortisation o intangible asset 1,363,591 1,113,826Impairment loss on loan and receivables 296,621Depreciation o property, plant and equipment 5,687,939 7,200,456Impairment loss on investment in a subsidiary company 2

Property, plant and equipment written-o 6,993Fair value gain on marketable securities (49,748)Inventories written o 1,880Bad debts written o 1,094 Gain on disposal o marketable securities (142,373) Dividend income (37,818)Interest income (218,019) (282,784)Unrealised oreign exchange (gain)/loss (73,104) 31,052

Operating prot beore working capital changes 5,312,695 6,158,304(Increase)/Decrease in working capital

Trade receivables 666,653 (555,354)Other receivables (14,205,930) 975,134Trade payables 170,549 (472,170)Other payables 3,185 (842,685)Amount owing to directors 49,828 (22,205)Amount owing by subsidiary companies (18,912) (762,004)Amount owing by holding company (16,585) (515)

(13,351,212) (1,679,799)

Cash (used in)/rom operations (8,038,517) 4,478,505

Interest received 218,019 282,784Tax paid (231,929) (38)

(13,910) 282,746

Net cash (used in)/rom operating activities (8,052,427) 4,761,251Cash Flows From Investing Activities

Computer sotware development cost (2,563,902) (2,315,156)Purchase o property, plant and equipment (304,393) (721,223)Shares buy back (433,668) Net changes in marketable securities 10,876,658 (1,529,033)Proceeds rom disposal o marketable securities 709,100

Net cash rom/(used in) investing activities 8,283,795 (4,565,412)

Cash Flows or the fnancial year ended 31 December 2011

Statements of


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2011 2010

RM RM

Cash Flows From Financing Activity

Proceeds rom issue o shares 41,450

Net cash rom nancing activity 41,450Net increase in cash and cash equivalents 231,368 237,289Cash and cash equivalents at beginning o the nancial year 410,417 173,128

Cash and cash equivalents at end o the nancial year 641,785 410,417

Cash and cash equivalents at end o the nancial year comprises:Deposits with licensed bank 166,525 7,857Cash and bank balances 475,260 402,560

641,785 410,417

Cash Flows or the fnancial year ended 31 December 2011

Statements of



33/83

Financial Statements

Notes to the

Financial Section43


1. CORPORATE INFORMATION

The principal activities o the Company are carrying on the business as researcher and developer o sotware packages,provider o design, programming, consultancy services and related activities.

The principal activities o the subsidiary companies are disclosed in Note 4 to the nancial statements.

The Company is a public limited liability company, incorporated under the Companies Act, 1965 and domiciled inMalaysia, and is listed on the Access, Certainty and Eciency (ACE) Market o Bursa Malaysia Securities Berhad.

The registered oce o the Company is located at 3rd Floor, No. 17, Jalan Ipoh Kecil, 50350 Kuala Lumpur.

The principal place o business o the Company is located at Suite 4.03, 4th Floor, Kompleks Antarabangsa, Jalan SultanIsmail, 50250 Kuala Lumpur.

2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES

a Basis o accounting

The nancial statements o the Group and o the Company have been prepared on the historical cost conventionunless otherwise indicated in the accounting policies below and in compliance with the provisions o theCompanies Act, 1965 and the Financial Reporting Standards in Malaysia.

During the nancial year, the Group and the Company have adopted the ollowing applicable amendments toFinancial Reporting Standards (FRSs) and revised FRSs issued by the Malaysian Accounting Standards Board(MASB) which are mandatory and will be eective or nancial periods as stated below:

Eective date ornancial periods

beginning on

or ater

Amendments to Financial Instruments: Presentation 1 March 2010

FRS 132 - paragraphs 11,16 and 97EFRS 3 Business Combinations (revised) 1 July 2010FRS 127 Consolidated and Separate Financial 1 July 2010

Statements (revised)

Amendments to Share-based Payment 1 July 2010FRS 2 - paragraphs 5 and 61Group Cash settled Shares based 1 January 2011

Payment TransactionsAmendments to Intangible Assets 1 July 2010FRS 138

Amendments to Improving Disclosures about 1 January 2011FRS 7 Financial Instruments

Amendments to FRSs contained in the document entitled 1 January 2011Improvements to FRSs (2010)

The Directors o the Group and o the Company anticipate that the application o the above revised FRSs andamendments to FRSs do not have any signicant impact on the nancial statements o the Group and o theCompany, except as disclosed in Note 30 to the nancial statements.


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Notes to the



On 19 November 2011, MASB has issued a new MASB approved accounting ramework, the Malaysian FinancialReporting Standards (MFRS Framework). The MFRS Framework is to be applied by all Entities Other ThanPrivate Entities or annual periods beginning on or ater 1 January 2012, with the exception o entities that arewithin the scope o MFRS 141, Agriculture and IC interpretation 15, Agreement or Construction o Real Estate,including its parent, signicant investor and venturer (Transitioning Entities).

Transitioning Entities will be allowed to deer adoption o the new MFRS ramework or an additional oneyear. The Group and the Company do not qualiy as Transitioning Entities and thereore, the adoption o MFRSramework will be mandatory or annual nancial period beginning on or ater 1 January 2012.

The Directors o the Group and o the Company anticipate that the application o the ollowing FRSs and

Malaysian Financial Reporting Standards (MFRSs) which are mandatory and will be eective or nancialperiods as stated below will have no material impact on the nancial statements o the Group and o theCompany, except as disclosed in Note 31 to the nancial statements:


beginning onor ater

FRSs

IC Interpretation 19 Extinguishing Financial Liabilities with 1 July 2011Equity Instruments

Amendments to IC Prepayments o a Minimum Funding 1 July 2011Interpretation 14 Requirement

FRS 124 Related Party Disclosures (revised) 1 July 2012Amendment to FRS 1 Severe Hyperinfation and Removal o 1 January 2012

Fixed Dates or First-time AdoptersAmendment to FRS 7 Disclosures Transers o Financial 1 January 2012

AssetsAmendment to Deerred tax: Recovery o Underlying 1 January 2012

FRS 112 AssetsAmendment to Presentation o items o Other 1 July 2012FRS 101 Comprehensive Income

FRS 10 Consolidated Financial Statements 1 January 2013FRS 11 Joint Arrangements 1 January 2013FRS 12 Disclosure o Interests in Other 1 January 2013

EntitiesFRS 13 Fair Value Measurement 1 January 2013

FRS 119 Employee Benets (as amended in 1 January 2013 November 2011)FRS 127 Consolidated and Separate Financial 1 January 2013

Statements (as amended in November2011)

FRS 128 Investments in Associates (as amended 1 January 2013in November 2011)

IC Interpretation 20 Stripping Costs in the Production 1 January 2013Phase o a Surace Mine

Amendments to Disclosures Osetting Financial 1 January 2013FRS 7 Assets and Financial Liabilities

Amendments to Osetting Financial Assets and 1 January 2014FRS 132 Financial Liabilities

FRS 9 Financial Instruments (IFRS 9 issued 1 January 2015by IASB in November 2009)

Financial Instruments (IFRS 9 issuedby IASB in October 2010)


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Notes to the

Financial Section45



beginning onor ater

MFRSs

MFRS 1 First-time Adoption o Malaysian 1 January 2012Financial Reporting Standards

MFRS 2 Share-based Payment 1 January 2012MFRS 3 Business Combinations 1 January 2012

MFRS 4 Insurance Contracts 1 January 2012MFRS 5 Non-current Assets Held or Sale and 1 January 2012Discontinued Operations

MFRS 6 Exploration or and Evaluation o Mineral Resources 1 January 2012MFRS 7 Financial Instruments: Disclosures 1 January 2012MFRS 8 Operating Segments 1 January 2012MFRS 101 Presentation o Financial Statements 1 January 2012MFRS 102 Inventories 1 January 2012MFRS 107 Statement o Cash Flows 1 January 2012MFRS 108 Accounting Policies, Changes in 1 January 2012

Accounting Estimates and ErrorsMFRS 110 Events Ater the Reporting Period 1 January 2012MFRS 111 Construction Contracts 1 January 2012MFRS 112 Income Taxes 1 January 2012MFRS 116 Property, Plant and Equipment 1 January 2012

MFRS 117 Leases 1 January 2012MFRS 118 Revenue 1 January 2012MFRS 119 Employee Benets 1 January 2012MFRS 120 Accounting or Government Grants 1 January 2012

and Disclosure o Government AssistanceMFRS 121 The Eects o Changes in Foreign Exchange Rates 1 January 2012MFRS 123 Borrowing Costs 1 January 2012MFRS 124 Related Party Disclosures 1 January 2012MFRS 126 Accounting and Reporting by Retirement Benet Plans 1 January 2012MFRS 127 Consolidated and Separate Financial Statements 1 January 2012MFRS 128 Investments in Associates 1 January 2012MFRS 129 Financial Reporting in Hyperinfationary Economies 1 January 2012MFRS 131 Interests in Joint Ventures 1 January 2012MFRS 132 Financial Instruments: Presentation 1 January 2012

MFRS 133 Earnings Per Share 1 January 2012MFRS 134 Interim Financial Reporting 1 January 2012MFRS 136 Impairment o Assets 1 January 2012MFRS 137 Provisions, Contingent Liabilities and Contingent Assets 1 January 2012MFRS 138 Intangible Assets 1 January 2012MFRS 139 Financial Instruments: Recognition and Measurement 1 January 2012MFRS 140 Investment Property 1 January 2012MFRS 141 Agriculture 1 January 2012IC Interpretation 1 Changes in Existing Decommissioning, 1 January 2012

Restoration and Similar LiabilitiesIC Interpretation 2 Members Shares in Co-operative 1 January 2012

Entities and Similar InstrumentsIC Interpretation 4 Determining whether an Arrangement contains a Lease 1 January 2012IC Interpretation 5 Rights to Interests arising rom Decommissioning, 1 January 2012

Restoration and Environmental Rehabilitation Funds

IC Interpretation 6 Liabilities arising rom Participating in a Specic 1 January 2012Market Waste Electrical and Electronic Equipment


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Notes to the




beginning onor ater

MFRSs

IC Interpretation 7 Applying the Restatement Approach under MFRS 129 1 January 2012Financial Reporting in Hyperinfationary Economies

IC Interpretation 9 Reassessment o Embedded Derivatives 1 January 2012IC Interpretation 10 Interim Financial Reporting and Impairment 1 January 2012

IC Interpretation 12 Service Concession Arrangements 1 January 2012IC Interpretation 13 Customer Loyalty Programmes 1 January 2012IC Interpretation 14 MFRS 119 The Limit on a Dened Benet Asset, Minimum 1 January 2012

Funding Requirements and their InteractionIC Interpretation 15 Agreements or the Construction o Real Estate 1 January 2012IC Interpretation 16 Hedges o a Net Investment in a Foreign Operation 1 January 2012IC Interpretation 17 Distributions o Non-cash Assets to Owners 1 January 2012IC Interpretation 18 Transers o Assets rom Customers 1 January 2012IC Interpretation 19 Extinguishing Financial Liabilities with Equity Instruments 1 January 2012IC Interpretation 107 Introduction o the Euro 1 January 2012IC Interpretation 110 Government Assistance No Specic 1 January 2012

Relation to Operating ActivitiesIC Interpretation 112 Consolidation Special Purpose Entities 1 January 2012IC Interpretation 113 Jointly Controlled Entities Non- 1 January 2012

Monetary Contributions by Venturers

IC Interpretation 115 Operating Leases Incentives 1 January 2012IC Interpretation 125 Income Taxes Changes in the Tax 1 January 2012

Status o an Entity or its ShareholdersIC Interpretation 127 Evaluating the Substance o Transactions Involving the Legal

Form o a Lease 1 January 2012IC Interpretation 129 Service Concession Arrangements: 1 January 2012

DisclosuresIC Interpretation 131 Revenue Barter Transactions Involving Advertising Services 1 January 2012IC Interpretation 132 Intangible Assets Web Site Costs 1 January 2012Amendments to Presentation o items o Other 1 July 2012MFRS 101 Comprehensive Income

MFRS 10 Consolidated Financial Statements 1 January 2013MFRS 11 Joint Arrangements 1 January 2013MFRS 12 Disclosure o Interests in Other Entities 1 January 2013

MFRS 13 Fair Value Measurement 1 January 2013MFRS 119 Employee Benets 1 January 2013MFRS 127 Separate Financial Statements (IAS 27 1 January 2013

as amended by IASB in June 2011)MFRS 128 Investments in Associates and Joint 1 January 2013

Ventures (IAS 28 as amended by IASB in June 2011)IC Interpretation 20 Stripping Costs in the Production Phase o a Surace Mine 1 January 2013Amendments to Disclosures Osetting Financial 1 January 2013MFRS 7 Assets and Financial Liabilities

Amendments to Osetting Financial Assets and 1 January 2014MFRS 132 Financial Liabilities

MFRS 9 Financial Instruments (IFRS 9 issued by IASB in November 2009) 1 January 2015Financial Instruments (IFRS 9 issued by IASB in October 2010)

b Functional and presentation currency

These nancial statements are presented in Ringgit Malaysia (RM), which is the Companys unctional currency.


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Notes to the

Financial Section47


c Signicant accounting estimates and judgements

Estimates, assumptions concerning the uture and judgements are made in the preparation o the nancialstatements. They aect the application o the Groups accounting policies, reported amounts o assets, liabilities,income and expenses, and disclosures made. They are assessed on an on-going basis and are based on historicalexperience and other relevant actors, including expectations o uture events that are believed to be reasonableunder the circumstances.

(I) The key assumptions concerning the uture and other key sources o estimation or uncertainty at thestatement o nancial position date, that have a signicant risk o causing a material adjustment to thecarrying amounts o assets and liabilities within the next nancial year are set out below:

i Depreciation o property, plant and equipment

The costs o property, plant and equipment o the Group and o the Company are depreciated ona straight-line basis over the useul lives o the assets. Management estimates the useul lives othe property, plant and equipment as stated in Note 2(e)(iii). These are common lie expectanciesapplied in the industry. Changes in the expected level o usage and technological developmentscould impact the economic useul lives and the residual values o these assets, thereore uturedepreciation charges could be revised. The carrying amount o the Groups and o the Companysproperty, plant and equipment at 31 December 2011 are stated in Note 3 to the nancial statements.

ii Amortisation o intangible asset

The costs o intangible asset o the Group and o the Company are depreciated on a straight-linebasis over the useul lie o the asset. Management estimates the useul lie o the computer sotwareas stated in Note 2(g). These are common lie expectancies applied in the industry. Changes inthe expected level o usage and technological developments could impact the economic useullie and the residual value o this asset, thereore uture depreciation charges could be revised.The carrying amount o the Groups and o the Companys intangible asset at 31 December 2011is stated in Note 5 to the nancial statements.

iii Income taes

The Group has exposure to income taxes in numerous jurisdictions. There are certain transactionsand computations or which the ultimate tax determination is uncertain during the ordinary courseo business. Signicant judgement is involved especially in determining tax base allowances anddeductibility o certain expenses in determining the Group-wide provision or income taxes. The

Group recognises liabilities or expected tax issues based on estimates o whether additional taxeswill be due. Where the nal tax outcome o these matters is dierent rom the amounts that wereinitially recognised, such dierences will impact the income tax and deerred tax provisions in theperiod in which such determination is made.

(II) The ollowing are the judgements made by the management in the process o applying the Groupsaccounting policies that have signicant eect on the amounts recognised in the nancial statements:

i Impairment o loans and receivables

The policy or impairment o loans and receivables o the Group and the Company is based on theevaluation o collectability and aged analysis o accounts and on the managements judgement.A considerable amount o judgement is required in assessing the ultimate realisation o thesereceivables, including the current creditworthiness and the past collection history o each customer.

I the nancial conditions o customers with which the Group and the Company deals were todeteriorate, resulting in an impairment o the ability to make payments, additional impairmentmay be required.


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Notes to the



ii Classication o nancial assets

The Group classies nancial assets as held-to-maturity investments when it has a positive intentionand ability to hold the investment to maturity. Management exercises judgement based on theGroups nancial risk management policy to determine whether the nancial assets are to beclassied as held-to-maturity.

d Basis o consolidation

The consolidated nancial statements include the nancial statements o the Company and its subsidiarycompanies made up to the end o the nancial year. Investments in subsidiary companies are stated at cost

less impairment losses. The policy o the recognition and measurement o impairment losses is in accordancewith Note 2().

i Subsidiary companies

Subsidiary companies are entities (including special purpose entities) over which the Group has powerto govern the nancial and operating policies, generally accompanying a shareholding o more than onehal o the voting rights. The existence and eect o potential voting rights that are currently exercisableor convertible are considered when assessing whether the Group controls another entity.

The acquisition method o accounting is used to account or the acquisition o subsidiary companies.The cost o an acquisition is measured as the air value o the assets given, equity instruments issued orliabilities incurred or assumed at the date o exchange. Identiable assets acquired and liabilities andcontingent liabilities assumed attributable to the acquirer in a business combination are measured

initially at their air values on the date o acquisition.

Acquisition related costs incurred are expensed and included in the administration expenses. Thedierence between the acquisition cost and the air values o the subsidiary companies net assets isrefected as goodwill or reserve on consolidation as appropriate.

Subsidiary companies are consolidated rom the date on which control is transerred to the Group tothe date on which that control ceases.

I the business combination is achieved in stages, the Groups previously held equity interest in the acquireeis remeasured to air value at the acquisition date and the resulting gain or loss, i any, is recognised inprot or loss.

Any contingent consideration to be transerred by the Group will be recognised at air value at theacquisition date. Subsequent changes in the air value o the contingent consideration which is deemedto be an asset or liability, will be recognised in accordance with FRS139 either in prot or loss or as achange to other comprehensive income. I the contingent consideration is classied as equity, it will notbe remeasured. Subsequent settlement is accounted or within equity. In instances where the contingentconsideration does not all within the scope o FRS139, it is measured in accordance with the appropriateFRS.

ii Transactions eliminated on consolidation

Intra-group balances, and any unrealised income and expenses arising rom intra-group transactions,are eliminated in ull in preparing the consolidated nancial statements.


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Notes to the

Financial Section49


iii Changes in Group composition

A change in the ownership interest o a subsidiary, without a loss o control, is accounted or as an equitytransaction. I the Group loses control over a subsidiary, it:

- Derecognises the assets (including goodwill) and liabilities o the subsidiary;- Derecognises the carrying amount o any non-controlling interest;- Derecognises the cumulative translation dierences, recorded in equity;- Recognises the air value o the consideration received;- Recognises the air value o any investment retained as an associate, joint venture or nancial

asset;

- Recognises any surplus or decit in prot or loss;- Reclassies the Groups share o components previously recognised in other comprehensive

income to prot or loss or retained earnings, as appropriate.

e Property, plant and equipment

i Recognition and measurement

Property, plant and equipment are stated at cost less accumulated depreciation and accumulatedimpairment losses. The policy or the recognition and measurement o impairment losses is in accordancewith Note 2().

Cost includes expenditures that are directly attributable to the acquisition o the asset. The cost o sel-constructed assets includes the cost o materials and direct labour, any other cost directly attributable to

bringing the asset to working condition or its intended use and the costs o dismantling and removingthe items and restoring the site on which they are located.

When signicant parts o an item o property, plant and equipment have dierent useul lives, they areaccounted or as separate items (major components) o property, plant and equipment.

ii Subsequent costs

The cost o replacing part o an item o property, plant and equipment is recognised in the carryingamount o the item i it is probable that the uture economic benets embodied within the part will fowto the Company and its cost can be measured reliably. The costs o the day-to-day servicing o property,plant and equipment are recognised in the statement o comprehensive income as incurred.

iii Depreciation

Depreciation is recognised in the statement o comprehensive income on a straight-line basis over theestimated useul lives o each part o an item o property, plant and equipment. The estimated useullives or the current and comparative periods are as ollows:

Computer equipment 3 to 5 yearsOce equipment 10 yearsFurniture and ttings 10 yearsRenovation 10 yearsMotor vehicles 5 years

The depreciable amount is determined ater deducting the residual value.

Depreciation methods, useul lives and residual values are reassessed at each nancial year end.

Gains or losses on disposals are determined by comparing net disposal proceeds with carrying amountand are included in prot/(loss) rom operations.


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Notes to the



Impairment o nonnancial assets

The carrying amounts o assets are reviewed at each reporting date to determine whether there is any indicationo impairment.

I any such indication exists then the assets recoverable amount is estimated. The recoverable amount isestimated at each reporting date or more requently when indications o impairment are identied.

An impairment loss is recognised i the carrying amount o an asset or its cash-generating unit exceeds itsrecoverable amount unless the asset is carried at a revalued amount,

n2n connect - annual report 2011 - part 2

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