tafi industries berhad 2 0 1 8...100% (1)t.a. furniture trading (m) sdn. bhd. (837983 - w)...

TAFIINDUSTRIESBERHAD (640935-P)

2 0 1 8ANNUAL REPORT

www.tafurniture.com.my

1

CCOONNTTEENNTTSS

Pages

1. Corporate Vision and Mission 2

2. Corporate Information 3

3. Group Structure 4

4. Profile of Directors 5

5. Key Senior Management 10

6. Management Discussion and Analysis 12

7. Sustainability Report 18

8. Corporate Governance Statement 24

9. Additional Compliance Information Disclosures 52

10. Audit Committee Report 55

11. Statement on Risk Management and Internal Control 60

12. Statement of the Directors’ Responsibilities 64

13. Financial Statements

Directors’ Report 65

Independent Auditors’ Report 71

Consolidated Statement of Financial Position

Consolidated Statement of Profit or Loss and

79

Other Comprehensive Income 81

Consolidated Statement of Changes in Equity 82

Consolidated Statement of Cash Flows 83

Statement of Financial Position 85

Statement of Profit or Loss and Other Comprehensive Income 86

Statement of Changes in Equity 87

Statement of Cash Flows 88

Notes to the Financial Statements 90

Statement by Directors

Statutory Declaration

168

169

14. Analysis of Shareholdings as at 29 March 2019 170

15. List of Properties 173

16. Notice of Fifteenth Annual General Meeting 175

17. Statement Accompanying Notice of Annual General Meeting 179

18. Annexure A 180

19. Proxy Form

2

Vision

To be a Global Enterprise with Sustainable Growth

Mission

To Continuously Develop Core Competencies to Achieve

Competitive Advantage and Building a Global Enterprise that Lasts

• To delight our customers by providing quality support through

value added products and services

• To provide conducive environment where employees can excel through our commitment to continuous training and development

• Having corporate sustainability practices and a culture that is environmentally friendly and sustainable

• To build strategic partnership in the supply chain for sustainable growth

• To continuously deliver above average industry returns to shareholders

3

CCOORRPPOORRAATTEE IINNFFOORRMMAATTIIOONN

BOARD OF DIRECTORS PRINCIPAL BANKERS

� Group Managing Director HSBC Bank Malaysia Berhad

Dato’ Saw Eng Guan Citibank Berhad

RHB Bank Berhad

- Executive Director

Au Gek Keng REGISTERED OFFICE

PLO 3 Kawasan Perindustrian Bukit Pasir

- Independent Non-Executive Directors Mukim Sungai Raya

Siew Chee Choong 84300 Bukit Pasir, Muar, Johor

Ratna Rajah Selvaduray Tel: +606-9859781

Lau Kee Sern Fax: +606-9858232

AUDIT COMMITTEE BUSINESS ADDRESS

Siew Chee Choong (Chairman) PLO 3 Kawasan Perindustrian Bukit Pasir

Ratna Rajah Selvaduray Mukim Sungai Raya

Lau Kee Sern 84300 Bukit Pasir, Muar, Johor

Tel: +606-9859781

NOMINATING COMMITTEE Fax: +606-9858232

Lau Kee Sern (Chairman) Siew Chee Choong Ratna Rajah Selvaduray REMUNERATION COMMITTEE Lau Kee Sern (Chairman) Dato’ Saw Eng Guan

Person to contact: Mr. Tay Ek Kuan Email: [email protected] Ms. Faezah Tamimah Binti Ahmad Bassim Email : [email protected] Ms. Afiqah Binti Azman Email : [email protected]

Siew Chee Choong

Ratna Rajah Selvaduray REGISTRARS

Tricor Investor & Issuing House Services

COMPANY SECRETARY Sdn. Bhd. (11324-H)

Ng Bee Lian (MAICSA 7041392) Unit 32-01, Level 32, Tower A

Vertical Business Suite, Avenue 3,Bangsar South

AUDITORS No. 8 Jalan Kerinchi, 59200 Kuala Lumpur

Peter Chong & Co. Wilayah Persekutuan, Malaysia

Audit Firm No. 0165 Tel: 03 – 2783 9299

SOHO Suites @ KLCC

Block A2, Level 31-3 STOCK EXCHANGE LISTING

No. 20 Jalan Perak Incorporated on 29 January 2004 as a private

50450 Kuala Lumpur company and converted to a public company

limited by shares on 18 March 2004.

Listed on Bursa Malaysia Securities Berhad on

4 February 2005

Stock Name: TAFI

Stock Code: 7211

WEBSITES

www.tafi.com.my

www.tafurniture.com.my

4

GGRROOUUPP SSTTRRUUCCTTUURREE

*

(1) T.A. Rubber Reforestation (Johor) Sdn. Bhd. (837986-V) and T.A. Furniture Trading (M) Sdn. Bhd. (837983-W) had been struck off by the Registrar of Companies, upon an application by the directors under Section 550 of the Companies Act 2016 and they had been dissolved upon the publication of the notice of striking off in the Gazette on 4 July 2018.

TAFI INDUSTRIES BERHAD (640935 – P)

Date of Incorporation : 29 January 2004 Principal Activities : Investment holding and provision of management services

100% T.A. Furniture Industries Sdn. Bhd. (80101 – W) Date of Incorporation : 15 January 1982 Principal Activities : Manufacturing and marketing of furniture products.

100% Penquo Resources Sdn. Bhd. (531152 – H) Date of Incorporation : 6 November 2000 Principal Activities : Investment in properties.

100% T.A. E-Furnishings Sdn. Bhd. (821254 – V) Date of Incorporation : 11 June 2008 Principal Activities : Trading of furniture products and provision of related services.

100% (1)

T.A. Rubber Reforestation (Johor) Sdn. Bhd. (837986 - V) (Deregistered on 4 July 2018) Date of Incorporation : 10 November 2008 Principal Activities : Dormant.

100% (1)

T.A. Furniture Trading (M) Sdn. Bhd. (837983 - W) (Deregistered on 4 July 2018) Date of Incorporation : 10 November 2008 Principal Activities : Dormant.

100% T.A. Systems Furniture Industries Sdn. Bhd. (301216 – V) Date of Incorporation : 20 May 1994 Principal Activities : Investment holding.

100% Home & Office Furniture Sdn. Bhd. (766315 – X) Date of Incorporation : 20 March 2007 Principal Activities : General trading, manufacturing and exporting of furniture.

100% Gerak Mahir Sdn. Bhd. (312795 – U) Date of Incorporation : 23 August 1994 Principal Activities : Dormant.

5

PPRROOFFIILLEE OOFF DDIIRREECCTTOORRSS

DATO’ SAW ENG GUAN

Group Managing Director

Member of Remuneration Committee

Male, Malaysian, Age 61

Dato’ Saw Eng Guan was appointed to the TAFI Board on 26 November 2004 and is the

Executive Chairman of the Company since 28 August 2007. Dato’ Saw was re-designed as

Group Managing Director of the Company on 6 April 2018. Dato’ Saw is a member of the

Remuneration Committee of the Company.

Dato’ Saw is a member of the Malaysian Institute of Accountants and has a Diploma in

Marketing from the University of Malaya, Malaysia and a Master of Business Administration

from the University of Nottingham, United Kingdom.

Under the helm of Dato’ Saw, the Group expanded its global outreach considerably to

include more markets worldwide as well as ventured into online B2B ecommerce sales.

Dato’ Saw is not a director of any other public companies and he sits on the board of T.A.

Furniture Industries Sdn. Bhd., Penquo Resources Sdn. Bhd., T.A. E-Furnishings Sdn. Bhd.,

T.A. Systems Furniture Industries Sdn. Bhd., Gerak Mahir Sdn. Bhd. and Home & Office

Furniture Sdn. Bhd. He is the son of the late Mr. Saw Han Lim, a substantial shareholder

and promoter of the Company. Apart from this, he does not have family relationship with any

directors and/or other substantial shareholders of the Company. He has not been convicted

of any offences within the past five (5) years.

Dato’ Saw has not entered into any transactions, whether directly or indirectly, which has a

conflict of interest with TAFI other than those disclosed in Note 29 in the accompanying

financial statements.

Dato’ Saw Eng Guan attended all four (4) of the Board meetings held during the financial

year ended 31 December 2018.

Trainings attended by Dato’ Saw during the financial year were as follows:-

- Seminar on “Transfer Pricing” organised by Certified Public Accountants;

- Seminar on “Transitional Issues from GST to SST – Your Questions on SST Answered"

organised by Chartered Tax Institute of Malaysia;

- Seminar on “Percukaian Kebangsaan 2018” organised by Inland Revenue Board; and

- Seminar on “Audit Series: Workshop 5 Auditing of Property Development &

Contractor” organised by Malaysian Institute of Accountants.

6

PPRROOFFIILLEE OOFF DDIIRREECCTTOORRSS ((ccoonntt’’dd))

AU GEK KENG

Executive Director

Female, Malaysian, 54

Ms. Au Gek Keng was appointed to the Board as the Executive Director on 21 April 2017.

Ms. Au graduated from York University, Toronto, Canada with a Bachelor of Mathematics of

Commerce at 1982 and obtained a Diploma in Law from Wolverhampton University,

Wolverhampton, England at 1996.

Ms. Au is currently the Chairman and Managing Director of Chi Peninsular Development Sdn.

Bhd., a construction company, and D.A. Dynasty Corporation Sdn. Bhd., a hotel & service

company.

Ms. Au is not a director of any other public companies and she sits on the board of T.A.

Furniture Industries Sdn. Bhd., Penquo Resources Sdn. Bhd., T.A. E-Furnishings Sdn. Bhd.,

T.A. Systems Furniture Industries Sdn. Bhd., Gerak Mahir Sdn. Bhd. and Home & Office

Furniture Sdn. Bhd. She does not have family relationship with any directors and/or other

substantial shareholders of the Company. She has not been convicted of any offences within

the past five (5) years.

Ms. Au Gek Keng attended all four (4) of the Board meetings held during the financial year

ended 31 December 2018.

Training attended by Ms. Au during the financial year was as follows:-

- Seminar on “Percukaian Kebangsaan 2018” organised by Inland Revenue Board.

7


SIEW CHEE CHOONG

Independent Non-Executive Director

Chairman of Audit Committee, Member of Nominating Committee and Remuneration

Committee


Siew Chee Choong was appointed to the Board on 15 November 2010 as an Independent

Non-Executive Director. He is Chairman of the Audit Committee, member of the Nominating

Committee and the Remuneration Committee of the Company.

Mr. Siew holds a Master in Business Administration from the University of Bath, United

Kingdom. He is a member of the Malaysian Institute of Certified Public Accountants and the

Malaysian Institute of Accountants.

Mr. Siew started his career with an international firm of accountants and has over thirty (30)

years of extensive experience in financial management, operational management, corporate

finance and auditing.

He has served in various senior management positions in public listed companies and large

organisations involved in diverse industries ranging from property development,

construction, education, general insurance, manufacturing, trading, information technology,

resource-based to auditing. He is currently a business consultant providing business

management and financial consultancy related services.

Mr. Siew is not a director of any other public companies. He does not have family

relationship with any directors and/or substantial shareholders of the Company nor has any

personal interest in any business arrangement involving the Company. He has not been

convicted of any offences within the past five (5) years.

Mr. Siew Chee Choong attended all four (4) of the Board meetings held during the financial


Trainings attended by Mr. Siew during the financial year were as follow:-

- Seminar on “Heightened Expectations of Directors under the New Companies Act 2016”

organised by Malaysian Institute of Accountants.

- Seminar on “Strategic Risk Management” organised by Malaysian Institute of

Management.

8


RATNA RAJAH SELVADURAY


Member of Audit Committee, Nominating Committee and Remuneration Committee

Male, Malaysian, 56

Mr. Ratna Rajah Selvaduray was appointed to the Board as the Independent Non-

Executive Director on 21 April 2017 as well as a member of the Audit Committee,

Nominating Committee and Remuneration Committee.

Mr. Ratna graduated from The University of New South Wales in 1986 with a Bachelor in

Mechanical Engineering (BE) and registered with the Board of Engineers Malaysia as well

as the Institution of Engineers Malaysia.

Mr. Ratna has 30 years’ work experience in the field of Engineering Sales and Project

Services to various industries as a vendor to Power Utilities, Petrochemical, Oil & Gas and

Steel Making industries. He is a licensed Radiation Safety Officer under the purview of the

Atomic Energy Licensing Board to import, export and transport radioactive materials. As the

Managing Director of Panaron Engineering Sdn. Bhd., they have been doing Sales &

Service of Industrial Instrumentation products to major clients such as Tenaga Nasional,

Petronas Refineries, Amsteel, Southern Steel, Eastman Chemical, Huntsman-Tioxide, Titan-

Lotte Chemical and Gula Padang Terap Sugar Mill. He is also the Co-founder of Pemalik, a

Non-Government Organisation involving the harmonisation of family ties.

Mr. Ratna is not a director of any other public companies. He does not have family

relationship with any directors and/or substantial shareholders of the Company nor has any

personal interest in any business arrangement involving the Company. He has not been

convicted of any offences within the past five (5) years.

Mr. Ratna attended all four (4) of the Board meetings held during the financial year ended 31

December 2018.

Trainings attended by Mr. Ratna during the financial year were as follows:-

- Seminar on “Heightened Expectations of Directors under the New Companies Act 2016”


- Seminar on “Strategic Risk Management” organised by Malaysian Institute of

Management.

9


LAU KEE SERN


Member of Audit Committee, Chairman of Nominating Committee and Remuneration

Committee

Male, Malaysian, 43

Mr. Lau Kee Sern was appointed to the Board on 11 August 2017 as an Independent Non-

Executive Director. He is a member of Audit Committee and is Chairman of both the

Nominating Committee and Remuneration Committee.

Mr. Lau Kee Sern is a lawyer by profession. He graduated from the University of London

with a LLB (Hons) degree in 1998 and obtained his Certificate of Legal Practice in 1999.

Mr. Lau has been maintaining an active practice and had vast experience in representing

and/or advising many leading Malaysian companies and international clients in corporate

and commercial dispute resolution.

Mr. Lau is not a director of any other public companies. He does not have family relationship

with any directors and/or substantial shareholders of the Company nor has any personal

interest in any business arrangement involving the Company. He has not been convicted of

any offences within the past five (5) years.

Mr. Lau attended all four (4) of the Board meetings held during the financial year ended 31

December 2018.

Trainings attended by Mr. Lau during the financial year were as follows:-

- Malaysia Insolvency Conference 2018 organised by Malaysian Institute of Accountants.

-- Seminar on “Heightened Expectations of Directors under the New Companies Act 2016”


10

KKEEYY SSEENNIIOORR MMAANNAAGGEEMMEENNTT

The Management team is headed by Dato’ Saw Eng Guan, and assisted by the Executive

Director, Ms. Au Gek Keng, and their profiles could be found under the Profile of Directors

on pages 5 and 6. The profiles of other key senior management are as follows:-

LEE KIEN HEONG

Factory Manager


Mr. Lee Kien Heong joined the Company as Factory Manager on November 2018 and he

has 18 years’ experience in this industry.

Mr. Lee does not have family relationship with any directors and/or other substantial

shareholders of the Company. He has not been convicted of any offences within the past (5)

years nor was there any public sanction or penalty imposed on him by any relevant

regulatory bodies during the financial year. He is not a substantial shareholder in the

Company and does not have any conflict of interest with the Company.

TAY EK KUAN

Finance & Administrative Manager


Mr. Tay Ek Kuan was employed by the Company as Finance & Administrative Manager

since October 2017.

Mr. Tay holds Accountancy Professional Certificate from ACCA, United Kingdom. He has 25

years’ experience in manufacturing environment, involving in Finance & Accounting, Costing,

operation and administration of manufacturing company.

Mr. Tay does not have family relationship with any directors and/or other substantial





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KKEEYY SSEENNIIOORR MMAANNAAGGEEMMEENNTT ((ccoonntt’’dd))

LIM SENG SOON

Operation Manager


Mr. Lim Seng Soon was employed by the Company as Operation Support Manager since

October 2017.

Mr. Lim has over 30 years of experience in furniture industry, especially on the construction

and design of furnitures.

Mr. Lim does not have family relationship with any directors and/or other substantial





12

MMAANNAAGGEEMMEENNTT DDIISSCCUUSSSSIIOONN AANNDD AANNAALLYYSSIISS

Operations in Malaysia

TAFI INDUSTRIES BERHAD (“TAFI”) and its group of subsidiaries (“known as TA’s”) are

principally involved in the manufacturing of home and office furniture. The Group’s products

are sold domestically and internationally either in the form of TA’s house brand and/or

original equipment manufacturer (“OEM”) and/or original design manufacturer (“ODM”).

Currently its manufacturing plant and distribution warehouses are located at:-

i) PLO 3 Kawasan Perindustrian Bukit Pasir , Mukim Sungai Raya , 84300 Bukit Pasir ,

Muar Johor Darul Takzim (Production and office);

ii) GM163 , Lot 267 Mukim Sungai Terap , 84300 Bukit Pasir , Muar , Johor Darul Takzim

(Production); and

iii) Batu 6 ¼ , Mukim Sungai Raya , Jalan Bukit Pasir , 84000 Muar , Johor Darul Takzim

(Warehouse).

Operating Environment

The operating environment in 2018 was just as tough in terms of business challenges in

comparison to previous year 2017. The manufacturing business continued to face

challenges due to increase manufacturing cost, shortage of foreign workers, stiff competition

in terms of pricing and declining profit margin. Although Malaysia registered a commendable

Gross National Product of more than 4.5%, the orders received did not reflect such a growth

rate.

Financial Performance

(i) Revenue and Sales

For the financial year ended 31 December 2018, TAFI Group had registered total

revenue of RM22.896 million and when compared against last year revenue of

RM27.770 million, it reflected a decrease of RM4.874 million or 17.5%. The revenue

generated comprised mainly of 12.0% local sales and 88.0% export sales. Comparing

with the previous year sales, local sales had increased from 8.4% to 12.0%. Main

reasons which contributed to the aforesaid decrease in revenue were due to teething

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MMAANNAAGGEEMMEENNTT DDIISSCCUUSSSSIIOONN AANNDD AANNAALLYYSSIISS ((ccoonntt’’dd))

and organizing start up for new and potential customers and/or products, change in

consumers’ design taste and increase in online sales and thus affecting their retails

customer’s sale.

For the financial year ended 31 December 2018, the Group continues to penetrate into

home knock down furniture and also had divested its focus to the manufacturing of

customized bedroom sets. Office furniture albeit scale down, continues to be a division

of the manufacturing arm.

Its overseas market covers not only in the African and Middle East countries but has

expanded to United Kingdom, Australia, Europe and United States of America.

The increase in the sales of customized bedroom furniture was mainly due to increase

on export sales to USA. The Group had registered loss before tax of RM4.613 million

as compared against the loss of RM3.024 million suffered in the last financial year due

to higher manufacturing cost, higher material cost and lower sales procured.

Capital Structure and Capital Expenditure

For the financial year ended 31 December 2018, the equity attributable to the owners

of the Company had decreased slightly from RM49.156 million to RM44.543 million by

RM4.613 million.

The Group incurred capital expenditure amounting to RM499,529. Significant portion of

this expenditure relates to the purchase of tools and equipment, plant and machinery

and is mainly funded by internally generated funds.

Gearing

Our total borrowings currently stand at RM2.201 million as compared to RM3.108

million recorded in the previous year. Its deposits, cash and bank balances as at 31

December 2018 was RM3.478 million and investment management funds as at 31

December 2018 was RM4.472 million. The Group reported net cash used from

operating activities of RM2.834 million during the year.

14


To boost sales, the sales division of the Group had aggressively market its existing

products and its newly innovated products through active visitation and penetration of

its past and existing customers respectively both domestic and export markets with

respect to new sales leads and opening new market, the Group continues to

participate in the local and oversea furniture expo and exhibition centers for the

purpose of creating awareness of TA’s house brand and its capacity and capability to

manufacture OEM and ODM’s furniture.

The Group continues to develop new furniture products and increasing its clientele

base whilst its Research and Development division continues to develop new designs

of office and home furniture to meet the current trends of the customers. More creative

displays and promotions of the Group’s products were initiated and in place to attract

customers to purchase.

44.3% of its revenue for the financial year ended 31 December 2018 was generated

from its supply of home furniture to international wholesale group in North America.

The Group has taken steps to innovate more new cost-saving designs for home

furniture e.g. knock down home furniture with better profit margin for marketing to its

customers both locally and overseas.

(ii) Results of Operations

For the financial year ended 31 December 2018, the Group had suffered a higher loss

after taxation of RM4.613 million as compared against last financial year loss after tax

of RM3.024 million. Total cost of sales for the Group for the financial year ended 31

December 2018 was RM23.445 million against RM27.308 million in the preceding

year.

Couple with lower sale turnover in 2018, the increase in labour cost as well as the

utility cost arising from operating equipment and machinery and training cost incurred

to train the staff on the handling and operating of such equipment and machinery had

contributed to a hike in its operating costs although measures had been taken by the

management to reduce its operating costs and to be more cost efficient. As a result,

the gross profit margin was much affected compared to 2017. However, all these

adverse factors are now mitigated by garnering more sales revenue and continue to

15


strive for operation efficiency to improve the financial performance of the group of

companies in coming years.

Total assets of the Group as at 31 December 2018 stood at RM53.322 million from

RM55.808 million recorded in the last financial year.

Shareholders Fund as at 31 December 2018 stood at RM44.543 million.

Loss per share on equity for the financial year ended 31 December 2018 and financial

year ended 31 December 2017 were as follows:-

2018 2017

Basic Loss per share (5.96) sen (3.90) sen

Return on Equity (10.36) % (6.15) %

2018 2017

Cash Liquidity/Cash Flow

Deposits, Cash and Bank Balances RM3,478,424 RM6,411,249

Investment Management Funds RM4,471,594 RM4,314,002

Borrowings:-

Short Term Borrowings RM 948,407 RM830,403

Long Term Borrowings RM1,252,382 RM2,277,274

Total Borrowings RM2,200,789 RM3,107,677

(iii) Finance Cost

Total finance cost had reduced from RM212,102 to RM159,239 due to lower servicing

cost of interest on borrowings. Repayment of term loan had been made to reduce the

term loan borrowings during the financial year under review.

(iv) Trade Receivables

The trade receivables of the Group increased from RM1.403 million as at 31

December 2017 to RM2.465 million as at 31 December 2018.

16


The Group will make impairment of receivables based on an assessment on the

recoverability of receivables. Impairment will be applied to receivables where events or

changes in circumstances indicated that the carrying amounts might not be

recoverable.

For the financial year ended 31 December 2018, the management has indicated that

all trade receivables are collectible. Therefore, no impairment was provided.

(v) Capital Commitment

Moving forward, the management does not foresee there will be any major capital

expenditure required in the near future. As of date of this report, there was no capital

commitment in respect of the purchase of property, plant and equipment.

(vi) Anticipated / Future Risks

Currently the Group relies on several customers for the export sale of its home

furniture which amounted to 44.3% of the Group’s revenue and there is no assurance

that these customers will continue to place orders for the Group’s furniture indefinitely.

As such, the Group will continue its efforts to take the necessary steps to grow its

customers based by initiating strategic partnership to increase its market reach.

Like most business entities, any change in government regulations and policies may

have an impact on our Group’s operations. Being a manufacturing based Group,

change to the labour law may have an impact on the earnings of the Group.

To mitigate this, we are always looking at automating our processes to reduce manual

work and improve efficiency as well as output. We also strive to provide good

customers services beginning on the first contact with potential customers, product

review, selection and development, order negotiation and production co-ordination,

customers’ quality control and shipment co-ordination and delivery. As the Group

manufacturing business is involved heavily in exports, any movement in foreign

currency will have a significant impact to both revenue and profit after taxation.

Malaysian Ringgit has strengthened against other major currencies especially US

dollars in early 2018. This could have some impact to our exports revenue and profit

after taxation.

17


Dividends

For the financial year ended 31 December 2018, the Board of Directors of TAFI has not

recommended any final dividend for consideration at the forthcoming Annual General

Meeting. TAFI Group strives to maintain an adequate and regular payment of dividend by

reviewing its financial results and the availability of distributable retained earnings. The

Board would take into account the market conditions, capital commitments and the Group’s

cash flow requirements to carry out business plans to generate better profits for all

shareholders.

Growth

Our strategy to deliver our vision begins with growth by building strategic partnership in the

supply chain for sustainable growth and we aim to increase our market share, both locally

and in oversea. The management target to continuously improve on our cost base to release

funds to help us to grow our business and to deliver higher returns for shareholders. The

Group will also continue to explore for viable business ventures and opportunities to

increase its profitability.

Discussion with Auditors on Audited Financial Statements for the year ended 31

December 2018

The Auditors, Messrs. Peter Chong & Co. had indicated that they had issued an unqualified

audited financial statement for the year ended 31 December 2018. During the course of their

audit, they had discussion with the management on several audit issues on the said

accounts and the management had furnished explanations and documentations to

substantiate its explanations which the Auditors had accepted to their satisfaction.

The Auditors had identified the following as a key audit matters:-

a) Impairment of property, plant and equipment; and

b) Impairment assessment of the carrying amount of cost of investment in subsidiary

companies and amount due from subsidiary companies.

Please refer to Pages 72 to 74 of the Annual Report for details on the said key audit matter.

18

SSUUSSTTAAIINNAABBIILLIITTYY RREEPPOORRTT

The Board of TAFI Group (the “Board”) is mandated to develop sustainability strategies and

policies and to guide decision making efforts for the Group. The Board will also have a role

to ensure that TAFI meets both its compliance and sustainable development responsibilities.

The Management will report to the Board on the sustainability performance.

The Role of Management:-

- To ensure consistent implementation of sustainability practices and standards;

- To raise sustainability practices awareness amongst employees; and

- To continue stakeholders engagement efforts.

In this regard, the Management focuses on four areas – Environment, Workplace,

Community and Marketplace which aims to deliver sustainable value to society at large.

THE ENVIRONMENT

Environment is of upmost importance due to the increasing depletion of the earth’s natural

resources and global climate change issues. As a business entity, we rely on natural

resources every day and climate change issues will affect the supply chain and the source of

many products. Therefore, it is essential to embed environmental sustainability principles

into our business operations and practices.

Wood which is the major raw material input in our products is environmentally friendly. We

have invested in dust control facilities to ensure that its manufacturing plants are kept as low

as possible with wood / chipboard particles. The Management will continue its on-going due

diligence compliance with environmental regulations for protection against pollution,

enhance its processes in recycling its wood wastages to other small furniture items so that

its waste reduction will continue to be our on-going efforts to conserve natural resources and

protect the environment. The Group met all regulations and compliance standards as

imposed by the Malaysian Department of Environment (“DOE”).

For the financial year ended 31 December 2018, the Group had incurred RM255,000 capital

expenditure in upgrading its dust control facilities.

19

SSUUSSTTAAIINNAABBIILLIITTYY RREEPPOORRTT ((ccoonntt’’dd))

The efficient use of energy and raw materials such as chipboards, lamination materials in all

our operations are, among the approaches to heighten the positive impact and minimize

negative impacts of the Group’s operations on the environment. We have adopted a variety

of energy management practices and in 2018, we used an average of 12 kws / units of

electricity for our furniture production. The Management had met regularly to come up with

and implement ideas with an aim to preserve, conserve and improve the efficiency of energy

utilization.

Collecting recyclable items such as paper, carton, boxes etc for sale to recycling companies

and the income generated were channeled towards employees’ welfare.

The Group was accredited with the FSC (Forest Stewardship Council) Certification in 2008

which accorded the Group a competitive edge when marketing to its overseas customers

especially those in the North and South America. The FSC promotes responsible

management of the world forests and its certification is an endorsement that the Group’s

production processes play a role in such sustainable forestry. FSC certified products are

products where the entire supply chain is FSC compliance.

To promote a greenery environment in its workplace, the Group has enhanced plant

landscaping and greening the factory premises. The Group has continued to nuture and

upkeep its greenery environment in its factory premises for the financial year ended 31

December 2018.

Other Sustainability Policy adopted includes:-

Social - Employees:-

- Respect and support Human Labour Rights

- No Forced Child Labour

- Occupational Safety and Health

- Access to Education

- Employment Contracts & Equal Employment Opportunities

- Intolerance towards Harassment and Violence

20


THE WORKPLACE

The Board believes that our employees as stakeholders are an essential asset of the Group.

Accordingly, we strive to provide them with a conducive and safe environment by providing

safety and job-related training. The Company had organised in-house safety programme to

ensure the workers know how to effectively handle the Company’s machinery and

equipment, tool and vehicles. The Company promotes awareness on safety precautions and

health issues. Safety gears are provided to relevant workers and employees to reduce the

consequences of serious accidents.

For the financial year ended 31 December 2018, the following activities have been carried

out for employees’ awareness:-

- Safety training: - fire drill, first aid training, safety and health talks, promote “injury-

free campaigns provided by Fire and Rescue Department;

- Regular and medical and physical check-ups: - Healthcare monitoring; and

- Controls: - fencing of moving machinery plants, construction of noise reduction areas

and placement of guardrails and handrails, where needed and noise monitoring to

ensure within permissible levels within the factories.

Accident Monitoring

For 2018, TAFI has achieved a zero fatal accident record and zero accident severity rate

which refers to absentism of more than 5 days due to an accident, remains low with most

accident cases involved minor injuries. The Group has conducted the fire drill to the staffs by

Fire and Rescue officers in every six months period.

The Group, in fulfilling its corporate responsibility as a caring employer, places emphasis on

building long lasting relationships with the employees. We ensure that two-way open

communication channels are available to all employees so as to facilitate better

understanding of the Company’s objectives and direction.

The Management conducted talk sessions to provide an avenue for employees to engage

with the Management and network among each other. These sessions provide opportunities

for employees to provide their feedback and provide inputs for business and operational

improvement.

21


To encourage employees’ engagement, the Management encourages employees to

participate in various activities to maintain a good work-life balance and lifestyle. These

activities carried out include potluck party, sports tournament, annual sports, health

campaigns, religious and festive get-together with an aim to promote team spirit and foster a

close working relationship amongst our employees.

The Group also provides industrial trainings for university and vocational students. This will

open a new avenue for the Group to recruit candidates to fill job vacancies. The

Management is mindful of diversity in gender, ethnicity and age of its staff force when

selecting its candidates.

Retention of key employees is crucial to ensure business success. The Group continues to

ensure that medical benefits, hospitalization, reward packages remain competitive to attract,

retain and motivate the right talents. Succession plans are put in place for key positions to

ensure sustainability in terms of continuous effective and efficient operations within Group

and a healthy leadership pipeline.

THE COMMUNITY

The Group recognises the co-relation between business growth and social well-being and

welfare. Therefore, in fulfilling its corporate responsibility to the community in which it

conducts its business, the Group is obligated to improve the quality of the society at large.

The Group also encourages its employees to participate in voluntary work for charitable

cause.

THE MARKETPLACE

To achieve sustainable development of the marketplace, the Group endeavors to carry out

activities to promote responsible practices among our investors, suppliers and customers

where high ethical standards in the respective areas are consistently applied.

22


(i) Investors

The Group strives to enhance corporate value by maintaining a stable and long term

growth strategy for the benefit of its shareholders. The Group continues its efforts to

engage with its shareholders through the following initiatives:

- to maximize shareholders’ wealth through continuous efforts to achieve

operational excellence and sustainable growth;

- disclose and disseminate all materials information in a timely, open, fair and

transparent manner;

- ensuring a robust system of corporate governance, implementing policies that

promote ethical behavior and conducting business responsibly through high

standards and business ethics;

- engages with its shareholders and investors through various channels of

communication such as general meetings of shareholders and regular press

releases; and

- accessible in the public domain and regular investors updates on our website.

Stakeholders Engagement

At the AGM, the Board had kept the stakeholders updated on the latest development within

our company and communicates information on our Company’s activities and discusses

issues that might impact our stakeholders’ interest. Our website at www.tafi.com.my is one of

the channels to further enhance stakeholders’ communication. Information pertaining to the

Group including announcements, quarterly financial announcements and reports are made

available online. All such communications are guided by our Corporate Disclosure Policy.

We also have a dedicated email account, [email protected] for direct communication with

us.

(ii) Suppliers

The Group respects its suppliers and works closely with them through long-term

relationships to realize mutual growth based on mutual trust. In this respect, the

Group engages its suppliers through the following manner:-

- engages in ethical procurement practices by adopting standard and equitable

procedures;

23


- ensures the products supplied are in accordance to the Group’s required

specification; and

- conducts in-depth suppliers’ audits to ensure the required standards are met

in the supply chain.

(iii) Customers

TAFI is committed in:-

- Producing good quality products at competitive prices to its customers;

- Provision of technical services to its customers as and when required;

- Organizing product seminar and participating in product exhibition so as to

share the information of its furniture products with its customers and other

relevant parties such as developers etc.

- Always sourcing for competitively priced and better quality products and

services from reliable sources and passing on the savings to its customers

where possible;

- Adhering to its vision of being a trustworthy and excellent furniture company in

Malaysia as well as in America;

-- Obtaining product certification such as the Forest Stewardship Council (FSC)

for eco-friendly products; and

- Upholding its Operating Policy to continuously improve its productivity

constantly developing higher value-added products and environmental friendly

products, to continually pursue excellence in quality and service exceeding

customers’ expectation.

The Group provides quality products and services that meet the customers’ demands to earn

the trust of its customers. The Group strives to create value for its customers through

competitive pricing without compromising the interest of other stakeholders. In achieving

this, the Group initiates the following:-

- enhances customers’ satisfaction and confidence by providing quality products in full

on a timely basis;

- adopts the “do it right the first time” motto to achieve operational excellence in order

to reduce overall costs for the benefits of both customers and shareholders of the

Company; and

- implement a customers’ complaint system to address and ensure all customer

feedbacks and complaints are acknowledged and resolved promptly.

24

CCOORRPPOORRAATTEE GGOOVVEERRNNAANNCCEE SSTTAATTEEMMEENNTT

The Board of Directors (the “Board”) and the Management of TAFI, being mindful of the trust

and expectations placed on them by the shareholders and stakeholders alike, endeavours to

comply with the best practices of the principles of good corporate governance as set out in

the Malaysian Code on Corporate Governance 2017 (the “MCCG 2017”) issued by the

Securities Commission of Malaysia and the Main Market Listing Requirements (“MMLR”) of

Bursa Malaysia Securities Berhad (“Bursa Securities”).

The Board presents this statement to provide the shareholders an insight into the corporate

governance practices of the Company under the leadership of the Board during the financial


1. BOARD OF DIRECTORS

1.1 Principal Responsibilities

The Board is responsible for the oversight and overall stewardship of the

Company. The Board’s responsibility covers the overall corporate governance

of the TAFI Group including its ethical behaviour, strategic direction,

establishing goals for management and monitoring the achievement of those

goals with a view to optimising the Group’s performance to maximise

shareholder value and safeguarding stakeholders’ interest.

The matters that are reserved for decision by the Board are broadly defined

into financial, statutory and administrative, regulatory and conduct of the

Board. Major responsibilities of the Board include reviewing and adopting the

strategic plan for the Group, overseeing the conduct of the Group’s business,

identifying principal risks and ensuring the implementation of appropriate

internal controls and mitigation measures, succession planning, overseeing

the development and implementation of a shareholder communications policy

for the Group, reviewing the adequacy and the integrity of the Management

information and internal controls system of the Group.

25

CCOORRPPOORRAATTEE GGOOVVEERRNNAANNCCEE SSTTAATTEEMMEENNTT ((ccoonntt’’dd))

Key matters reserved for the Board’s approval while not exhaustive, include

the annual business plan and budget, dividend policy, business continuity

plan, new issues of securities, business restructuring, capital and operating

expenditure above certain limits, disposals of significant fixed assets and the

acquisition or disposal of companies within the Group.

The Company does not have a Chairman of the Board for the time being.

Currently, Dato’ Saw held the position as Group Managing Director. The

Board as a whole would take on the responsibility of the position of Chairman

to oversight management. The Board as a whole, also supported by an able

management team, is responsible to lead and ensures the effectiveness of

the Board by encouraging healthy debates by all directors, allowing sufficient

time for discussion of issues and ensuing that the board’s decision fairly

reflect board consensus. Their responsibilities include facilitating the effective

contribution of the Board’s supervisory role, conducting the Board’s functions

and meetings, briefing all directors in relation to issues arising at meetings

and scheduling regular and effective evaluations of the Board performance.

At the Board meeting, the Chairman of the Board meeting will be elected

among all the Directors. The Group Managing Director together with

Executive Director, save for the above, is also responsible for strategic

business direction, plans and policies of the Group, overseeing the

Management in its day-to-day running of the Group. The Group Managing

Director keeps the Board updated on the Group activities and performance

through periodic updates and on ad-hoc basis, or as and when needed.

These periodic updates are in addition to the operational updates by the

Executive Director at the meeting to the Board during the quarterly meetings.

The Board has set up three (3) committees namely the Audit Committee, the

Nominating Committee and the Remuneration Committee with specific

responsibilities to assist it to oversee the Group’s affairs. The specific duties

and responsibilities of these three (3) Board committees are specified in their

respective terms of reference. Although specific powers are delegated to

these Board committees, the Board keeps itself abreast of the key issues

26


deliberated and recommendations of the Board committees through the

briefings conveyed by the respective committee chairman at Board meetings

which are usually held on the same day as the committee meetings.

Notwithstanding the decisions forwarded by the respective Board committees,

the final decision concerning a matter tabled for discussion ultimately lies with

the Board after considering the recommendations of its respective

committees.

1.2 Composition

The TAFI Board has a total of five (5) members comprising three (3)

members are Independent Non-Executive Directors and two (2) members

with executive roles are the Group Managing Director and Executive Director

of the Company. Subsequent to the re-designation of the Group Managing

Director, the role of Chairman is held by the Board members as a whole. The

role of Chief Executive Officer is held by the Group Managing Director and

assisted by the key senior management.

The Board composition of the Company complies with the MMLR of Bursa

Securities which stipulates that at least two (2) directors or one-third (1/3) of

the board of directors of a listed issuer, whichever is the higher, are

independent directors.

Practice 4.1 of the MCCG 2017 provides that the Board must comprise of at

least half of independent directors.

In this context, the TAFI Board is in line with the MCCG recommendation as

its entire Board, saves for the Group Managing Director and an Executive

Director, is made up entirely of independent directors. A list of the TAFI Board

and their respective profiles are found on page 3 and pages 5 to 9 of this

Annual Report.

The Independent Non-Executive Directors bring with them an element of

check and balance to the Board and are crucial in providing objective,

independent views, advice and judgement to the Board in the interest of

shareholders and stakeholders.

27


The composition of Directors with their diverse mix of skills and experience in

business, corporate, finance and law, adds a dimension of not only essential

commercial skills needed for sound investment decisions but also invaluable

practical and operational experience to professionally manage the Group.

1.3 Board Charter

The Board Charter of the Company, available on the Company’s website at

www.tafi.com.my, was adopted by the Board in 2014.

The Charter serves to provide guidance to the Board in the fulfilment of its

roles, duties and responsibilities which are in line with the principles of good

corporate governance. The Board Charter will be reviewed on a periodic

basis but at least once every two (2) years, and may be amended by the

Board from time to time to be relevant and up-to-date.

1.4 Board Meetings

Board meetings are held at least once every quarter upon finalisation of the

results of each financial quarter to facilitate the review and approval of that

quarter’s financial results. As a measure to ensure the Directors’ timetable is

blocked for all Committee and Board meetings and the Annual General

Meeting (“AGM”) of the Company for the ensuing year, an annual meeting

calendar is prepared by the Secretary and tabled at the last Board meeting

prior to the start of a new financial year. This calendar also serves to ensure

that Directors achieve full attendance at all meetings convened by the

Company. Regardless, Paragraph 15.05(3) (c) of the provision of the MMLR

of Bursa Securities that directors of listed issuers are required to clock an

attendance of at least 50% of the total board of directors’ meetings held

during a financial year, failing which his office shall become vacant.

28


Besides the schedule of meeting dates, information of the closed periods for

dealing in the quoted securities of TAFI by Directors based on the targeted

dates of announcements of the Group’s quarterly results are set out in the

calendar. Notwithstanding the yearly pre-set meeting dates, additional ad-hoc

meetings may be called should the need arise. Any changes in the pre-set

meeting date will be notified to the Directors in advance and a new meeting

date will be fixed based on their concerns.

During the financial year ended 31 December 2018, a total of four (4) Board

meetings were held and the attendance record of each Director is as follows:-

Directors Attendance

Dato’ Saw Eng Guan (Group Managing Director) 4/4

Au Gek Keng 4/4

Siew Chee Choong 4/4

Ratna Rajah Selvaduray 4/4

Lau Kee Sern 4/4

Based on the above Board meeting attendance record, each Board member

has met the minimum attendance requirement of 50% as stipulated in

Paragraph 15.05(3) (c) of Bursa Securities’s MMLR. The Finance &

Administrative Manager attends every Board meeting, as well as each Audit

Committee meeting, at the invitation of the Audit Committee Chairman. Whilst

the Company Secretary attended each Board and Board committee meeting

of the Company and minute the proceedings thereof.

Board and Board committee meetings are conducted in accordance with a

structured formal agenda prepared by the Secretary in consultation with the

Management. Meeting agendas while not exhaustive, includes review and

updates of various aspects of the Group’s operations, quarterly financial

performance, business plans, strategic decisions, major investments, findings

from both the external and internal auditors and any other proposals or other

29


significant matters that require the expeditious direction of the Board including

deliberations on any principal risks that may have significant impact on the

Group’s business or its financial position and the mitigating factors when

assessing the viability of business propositions and corporate proposals.

At the Board meeting, the Chairman of the Board meeting will be elected

among all the directors, the elected Chairman will have the responsibility of

ensuring that each agenda item is adequately reviewed and deliberated upon

within a reasonable timeframe. A full set of the Board papers for each

Committee and Board meeting including financial reports and notices are

submitted to the Directors about a week prior to such meetings to provide

them with sufficient time to evaluate the matters to be

discussed and to enable a more informed decision-making process.

The Board is also made aware of the decisions and salient issues deliberated

by Board committees through the minutes of these board committees

furnished to them.

The Directors have a duty to declare immediately to the Board should they

have any direct or indirect interest in transactions to be entered into by the

Company or the Group. The interested Directors would serve notice to the

Board and thereupon, abstain from deliberations and decisions of the Board on

the transaction concerned. In the event a corporate proposal is required to be

approved by shareholders, the interested Directors and persons connected to

them are also required to abstain from voting in respect of their shareholdings

relating to that corporate proposal.

1.5 Access to and Supply of Information to the Board

The Directors have independent access to the advice and dedicated support

of the Company Secretary to ensure effective functioning of the Board. The

Directors may seek the management on any issues pertaining to their

respective jurisdictions. The Directors may also interact directly with, or

request further explanation, information or updates on any aspect of the

Company’s operations or business concerns from respective key members of

the Management.

30


The Board is authorised to seek independent professional advice at the

Company’s expense in the discharge of its various duties for the Company.

Individual Directors may also obtain independent professional or other advice

in fulfilling their duties in accordance to the procedure set and subject to

approval by the Chairman or the Board, and depending on the quantum of the

fees involved.

1.6 Qualified and Competent Company Secretary

The Company Secretary of TAFI is a member of the Malaysian Institute of

Chartered Secretaries and Administrators (“MAICSA”) and is qualified to act

as company secretary pursuant to Section 235(2) of the Companies Act,

2016. On 7 January 2019, Ms. Tay Peck Kee had resigned as a Company

Secretary whom is a licensed Company Secretary approved by Registrar of

Companies.

The Company Secretary plays an advisory role to the Board particularly with

regard to the Company’s Memorandum and Articles of Association, Board

policies and procedures and its compliance with regulatory requirements

especially with Bursa Securities’ MMLR and the Companies Act, 2016.

She attends all Board and Committee meetings of the Company and besides

taking minutes of the proceedings and decisions of the Board and Committee

meetings, other duties of the Secretary include ensuring that proceedings of

Board and Committee meetings are properly adhered to, meetings are

properly conducted, providing advice and ensuring that related statutory

obligations are complied with.

The Company Secretary dutifully advises the Board on matters relating to

corporate governance issues and directors’ responsibilities to ensure

compliance with the relevant legislations and regulations and updating them

of new statutory and regulatory requirements imposed by Bursa Securities as

well as pre-empting them of upcoming compliance and regulatory trends,

directions and focus.

31


The Company Secretary constantly keeps herself abreast of regulatory

changes and developments in governance through the updates from Bursa

Securities, MAICSA and the Companies Commission of Malaysia.

The Board had at its meeting in November 2018 recorded their satisfaction

with the performance and support rendered by the Company Secretary to the

Board in discharging her functions.

1.7 Appointments and Re-Election

The Board delegates to the Nominating Committee the responsibility of

making recommendation on any potential candidate for the appointment as a

new Director. The Nominating Committee is responsible to ensure that the

procedures for appointing new Directors are transparent and the

appointments are made on merits. Such appointments would take place only

if approved by the Board as a whole.

The process for the appointment of a new director is summarised in the

following manner:

- The candidate identified upon the recommendation by the existing

directors, senior management staff, shareholders and/or other

consultants;

- In evaluating the suitability of candidates to the Board, the Nominating

Committee considers the competency, experience, commitment,

contribution and integrity of the candidate’s independence;

- Conduct interview with the potential candidate;

- Deliberate the suitability of the candidate by Nominating Committee

and recommend to the Board which also includes recommendation for

appointment as a member of the various board committees, where

necessary; and

- Board’s deliberation and decision to be made by the Board on the

proposed new appointment, including appointment to the various

board committees.

32


In accordance with the Memorandum and Articles of Association of the

Company, all directors of the Company including the Group Managing

Director, if any, shall retire from office at least once every three (3) years at

the AGM but they shall be eligible for re-election and all retiring directors can

offer themselves for re-election. Directors numbering one-third (1/3) of the

Board to be selected for retirement by rotation are those who have been the

longest in office since their last election.

The Company’s Memorandum and Articles of Association also provide that

directors appointed by the Board during the financial period before an AGM

are subject to retirement and shall be eligible for re-election by the

shareholders at the Company’s next AGM to be held following their

appointments.

The Nominating Committee is responsible for recommending to the Board

those directors who are scheduled for retirement by rotation and are eligible

to stand for re-election. This recommendation is based on formal reviews of

the performance of the Directors concerned taking into account the results of

their latest Board assessment, their participation at meeting discussions and

contribution to the Board through their skills, experience, strengths and

qualities, level of independence and ability to act in the best interests of the

Company in decision-making.

In addition, Practice 4.2 of MCCG 2017 recommends that the tenure of an

independent director should not exceed a cumulative term of nine (9) years.

The tenure of an independent director does not exceed a cumulative term

limit of nine years. Upon completion of the nine years, an independent

director may continue to serve on the board as a non-independent director. If

the board intends to retain an independent director beyond nine years, it

should justify and seek annual shareholders’ approval. If the board continues

to retain the independent director after the twelfth year, the board should seek

annual shareholders’ approval through a two-tier voting process.

Currently, the Company did not have any independent directors who serve

more than 9 years and has adopted a policy which limits the tenure of its

independent directors to nine years.

33


1.8 Time Commitment

The Board meets regularly on a quarterly basis with additional meetings being

convened as and when necessary to consider urgent proposals or matters

that required the Board’s review or consideration. The Board is satisfied with

the level of time commitment given by the Directors towards fulfilling their

roles and responsibilities as Directors of the Company.

All the Directors of the Company had confirmed that they do not hold more

than five (5) directorships in listed issuers pursuant to Paragraph 15.08 of

Bursa Securities’s MMLR. They are required to notify the Chairman of the

Board before accepting new directorships outside the Group and indicating

the time that will be spent on the new directorship. The Chairman of the

Board shall also do the same before taking up any additional appointment of

directorships.

1.9 Directors’ Training

Bursa Securities has placed the onus to identify seminars suitable to the

Directors’ needs on the Board.

Each member of the TAFI Board is encouraged to regularly undergo suitable

training programmes appropriate to their needs to keep themselves abreast of

the latest changes and to update their knowledge as required under

Paragraph 15.08(3) of Bursa Securities’ MMLR.

While Board members have the liberty to determine on their own, the

appropriate type of trainings needed for their personal development, they are

highly encouraged to attend the talks and seminars, frequently organised by

Bursa Securities, which are highly relevant to directors and management of

listed issuers.

The trainings attended by each Director during the financial year 2018 are set

out in their respective profile on pages 5 to 9 of this Annual Report. The

Nominating Committee would assess the appropriateness of trainings

attended by the Board members annually.

34


1.10 Directors’ Remuneration

The Company aims to set remuneration at levels which are sufficient to attract

and retain the Directors needed to run the Company successfully, taking into

consideration all relevant factors including the function, workload and

responsibilities involved, but without paying more than is necessary to

achieve this goal.

The Remuneration Committee takes into consideration the contribution,

responsibilities and performance of the directors, when deliberating on and

making recommendations to the Board on the fees and remuneration

package of the directors of the Company.

For the financial year ended 31 December 2018, the fees and remuneration

packages of the executive Directors and non-executive Directors and top key

senior management of the Company are as follows:-

35


Remuneration of Executive Directors and Non-Executive Directors

Name of Directors Fees (RM)

Salaries (RM)

Bonus (RM) Benefits-in-

Kind (RM)

Other Emoluments

(RM) Executive Directors

Dato’ Saw Eng Guan

(Group Managing Director) 21,000 240,000 - 4,839 45,600

Au Gek Keng 21,000 60,000 - - 4,550

Non-Executive Directors

Siew Chee Choong 36,000 - - - -

Ratna Rajah Selvaduray 24,000 - - - -

Lau Kee Sern 24,000 - - - -

Note: Details of directors’ remuneration above during the year ended 31 December 2018. The Code also recommended the Board to disclose on a named basis the top five (5) Senior Management’s remuneration component including salary, bonus, benefits-in-kind and other emoluments in bands of RM50,000. However, the Company has only top four (4) Senior Managements and the Board are of the view that this disclosure is disadvantageous to the Company as it could potentially give rise to security concerns, staff poaching by competitors and conflict between staffs. As an alternative for this disclosure, the Board views that the aggregate remunerations of top four (4) Senior Management’s remuneration is suffice to set out as follows:- Remuneration of Top Four (4) Senior Managements

Salary, EPF and Bonuses

(RM)

Other Emoluments

(RM)

Benefit-in- Kind

(RM)

Total (RM)

Total Top Four (4) Senior Managements

468,946 - - 468,946

Note: Details of Top Four (4) Senior Managements’ remuneration above during the year ended 31 December 2018.

36


In addition to the above, the Directors have the benefit of Directors & Officers

(“D&O”) Insurance in respect of liabilities arising from acts committed in their

capacity as D&O of TAFI.

The aggregate annual Directors’ fees, as recommended by the Board, are tabled

for approval by the shareholders at the AGM of the Company. The shareholders

had at the Fourteenth AGM of the Company held on 25 May 2018 approved

aggregate Directors’ fees of RM120,000 for the financial year ended 31

December 2018 and the sum recommended as Directors’ fees for an aggregate

sum of not exceeding RM200,000 and Directors’ benefits for an amount not

exceeding RM10,000 in respect of the financial year ending 31 December 2019

for shareholders’ approval at the coming Fifteenth AGM scheduled on 24 May

2019.

It is the practice for the directors concerned to abstain from deliberating their

individual remuneration.

2. COMMITTEES OF THE BOARD

The three (3) Board committees set up to assist the Board have specific powers and

responsibilities. Chairman of the respective Committees reports the outcome of

decisions and recommendations to the Board and minutes of Committee meetings are

tabled for the Board’s notation. Notwithstanding recommendations from the respective

Committees, the ultimate decision on all matters lies with the entire Board.

2.1 Audit Committee

The main purpose of the Audit Committee is to assist the Board in fulfilling its

responsibilities relating to the internal controls, accounting and reporting

practices of the Group.

The report of the Audit Committee, its salient terms of reference, the list of

committee members and its activities during the financial year are set out on

pages 55 to 59 of this Annual Report.

37


2.2 Nominating Committee

The roles and responsibilities of the Nominating Committee are governed by its

Terms of Reference and the Board Charter of the Company (the Terms of

Reference of the Nominating Committee are set out in Appendix B of the Board

Charter and can be viewed in the Company’s website at www.tafi.com.my).

The key role of the Nominating Committee is to ensure 1) A formal and

transparent procedure for the appointment of new directors to the Board and to

key management posts such as the appointment of a chief executive officer and

chief financial officer, 2) To recommend to the Board, candidates for all

directorships and on board committees, 3) To select, compensate, monitor and

oversee to the succession planning and 4) To review the term of office and

performance of the Audit Committee.

The Nominating Committee also assesses the effectiveness of the Board as a

whole and the contribution of each Board committee as well as each individual

director on an annual basis and to ensure that the Board and its respective Board

committees have the appropriate balance of expertise and ability.

The Nominating Committee of TAFI adopts the peer evaluation method to

evaluate the performance of the directors of the Company. Annual review is

conducted to assess the required mix of skills, experience and other qualities

including core competencies which the executive and non-executive directors of

the Company should bring to the Board, identify areas for improvement and

review the succession plan for senior management in the Group.

Pursuant to its Terms of Reference, the Nominating Committee of the Company

shall be appointed amongst the Board members and shall comprise no fewer

than two (2) members who shall be exclusively non-executive directors of the

Company where a majority of whom must be independent and the term of a

Nominating Committee member shall automatically terminate when he ceases to

be a director of the Company.

38


The Chairman of the Nominating Committee should be selected amongst the

Nominating Committee members and should be the Senior Independent Non-

Executive Director identified by the Board.

The Nominating Committee will also review the term of office and performance of

Audit Committee as well as each of its members annually.

The TAFI Nominating Committee has three (3) members, all of whom are

Independent Non-Executive Directors of the Company, and the sole meeting held

during the financial year ended 31 December 2018 recorded a full attendance of

the members as follows:-

The following were the activities undertaken by the Nominating Committee during

the financial year ended 31 December 2018:-

i) reviewed the size and composition of the Board of Directors of TAFI and

its board balance;

ii) reviewed the required mix of skills and experience and other qualities

including core competencies the non-executive directors and executive

directors of the Company should have;

iii) reviewed the effectiveness of the Board as a whole, contribution of each

individual director and committees of the Board;

iv) reviewed the performance of the Finance & Administrative Manager in

discharging the role of the Chief Financial Officer;

v) discussed the Board’s succession plan;

vi) assessed the training programmes of the Board members;

Members Attendance

Lau Kee Sern

(Chairman/Independent Non-Executive Director) 1/1

Siew Chee Choong

(Member/Independent Non-Executive Director) 1/1

Ratna Rajah Selvaduray


39


vii) assessed the independence of the Independent Directors of the

Company;

viii) reviewed the Directors retiring and standing for re-election by the

shareholders at the forthcoming AGM; and

ix) reviewed the term of office and performance of Audit Committee and

each of its members annually to determine whether such audit committee

and members have carried out their duties in accordance with the term of

reference.

During its meeting in November 2018, the Committee was overall satisfied with

the size, composition and Board balance of the Company and the current

composition of the Board comprised of two (2) Executive Directors and three (3)

Independent Non-Executive Directors and the Company has a female director,

Ms. Au Gek Keng, on its Board.

However, in regards to boardroom diversity, the Board does not adopt any formal

diversity policy as the selection of Board candidate(s) is performance-based

premised the candidate’s background achievements and a proven track record.

Other factors which would be considered is the candidate’s ability to commit

sufficient time and energy to act as a director of TAFI and for appointment as

independent director, passing the test of independence which takes into account

the candidate’s character, integrity and professionalism.

In TAFI Group, all appointments and employment are based on merits and not

determined by gender, ethnicity and age bias. The current structure of gender,

ethnicity and age of the employees of the Group are as follows:

Gender Number of Employee Percentage (%)

Male 187 82.0

Female 41 18.0

Total 228 100.0

40


Age Number of Employee Percentage (%)

19-30 years 85 37.3

31-40 years 87 38.2

41-50 years 50 21.9

Above 50 years 6 2.6

Total 228 100.0

Ethnicity Number of Employee Percentage (%)

Malaysian Bumiputra 83 36.4

Malaysian Chinese 25 11.0

Malaysian Indian 0 0

Foreigners 120 52.6

Total 228 100.0

With regard to the required mix of skills, experience and other qualities including

core competencies which both the non-executives and executive directors of the

Company should have, were assessed to be satisfactory and each member had

contributed their expertise which add value to the Board as a whole.

The annual appraisal of the contribution of the Board, Board committees and

individual directors were conducted by referencing to the assessment forms

contained in the “Corporate Governance Guide” issued by Bursa Malaysia

Berhad and consideration is also given to that directors’ ability to commit

sufficient time and energy to perform his roles and responsibilities and his ability

to satisfy the test of independence taking into account his character, integrity and

professionalism. The Nominating Committee was overall satisfied with the

performance and contribution from the Board, Board Committees and individual

Directors.

41


The Nominating Committee was unanimous that the Finance & Administrative

Manager has performed commendably and to their satisfaction in discharging his

role of Chief Financial Officer as defined by Bursa Securities, based on the

quarterly reports received, feedback from the external auditors and the

comprehensive and timely reporting to the Board, the Committee is satisfied with

his work performed so far.

The Committee was satisfied that the Directors had attended adequate trainings

as required by the Company during the financial year under review and that each

Board member shall continue to identify suitable trainings appropriate to their

respective needs.

The members were on the whole satisfied with the independence of the

independent non-executive directors of the Company premised the respective

self-declaration received.

The Committee had recommended that Dato’ Saw Eng Guan and Ms. Au Gek

Keng, who have given their intention to seek for re-election, being eligible to

stand for re-election at the coming Fifteenth AGM.

The Nominating Committee were of unanimous view that the AC have carried

out their roles and responsibilities as required under the AC Terms of Reference

to the hilt during the financial year ended 31 December 2018.

The Nominating Committee considered that they have discharged its duties as

required under Paragraph 15.08A (3) of Bursa Securities’ MMLR and has

complied with Paragraph 2.20A of the MMLR.

2.3 Remuneration Committee

The roles and responsibilities of the Remuneration Committee are governed by its

Terms of Reference, the text of which is set out in Appendix C of the Company’s

Board Charter accessible via the Company’s website at www.tafi.com.my. The

key role of the Remuneration Committee is to establish a formal and transparent

42


procedure for developing policy on remuneration packages of individual directors

taking into consideration that for executive directors and senior management, the

component parts of remuneration should be structured to link rewards to

corporate and individual performance and for non-executive directors, the level of

remuneration should reflect the experience and level of responsibility undertaken

by the non-executive director concerned.

Pursuant to its Terms of Reference, the Remuneration Committee of the

Company shall be appointed amongst the Board members and shall comprise

no fewer than three (3) members who shall be a majority of non-executive

directors and the term of a Remuneration Committee member shall automatically

terminate when he ceases to be a director of the Company.

The Remuneration Committee meets at least once a year to review and

recommend to the Board on the directors fees and remuneration package of the

directors of the Company.

The TAFI Remuneration Committee has four (4) members and the sole meeting

held during the financial year ended 31 December 2018 recorded a full

attendance of the members as follows:-

Members Attendance

Lau Kee Sern

(Chairman/Independent Non-Executive Director) 1/1


(Member/Group Managing Director) 1/1

Siew Chee Choong




43


The following were the activities undertaken by the Remuneration Committee

during the financial year ended 31 December 2018:-

i) reviewed the existing remuneration policy framework and procedure to

ensure levels of remuneration is sufficiently attractive and able to retain

directors of the calibre needed to successfully run the Company;

(ii) reviewed the component parts of remuneration link rewards to corporate

and individual performance and to assess the needs of the Company for

talent at Board level; and

(iii) discussed the remuneration packages/proposed remuneration services

arrangements and any other employment conditions for the Executive

Directors of the Company in all form for the financial year ended 31

December 2018.

The Committee has unanimously recommended the quantum of directors’ fees

not exceeding of RM200,000 for the financial year ended 31 December 2018 of

which the shareholders of the Company had at its Fourteenth AGM approved the

aforesaid amount.

The Committee was also unanimous that the existing remuneration policy

framework and procedure on levels of remuneration, the remuneration package

of the Executive Directors in all form, and the component parts of remuneration

linked to rewards to corporate and individual performance shall remain status quo

for the ensuing year; that the existing remuneration package of the for the both

Executive Directors commensurate with their performance of the Company at this

point in time and shall remain unchanged from last year for the financial year

ending 31 December 2019.

The Board collectively agreed with the Committee’s recommendation and had

recommended for the shareholders’ approval, an aggregate sum of not

exceeding RM200,000 as Directors’ Fees for the financial year ended 31

December 2019.

The Directors concerned had abstained from participating in decisions respecting

their individual remuneration.

44


3. SHAREHOLDERS

3.1 Shareholders’ Communication and Investor Relation

The Company is committed to maintaining good communications with its

shareholders and stakeholders alike. In this respect, information on the Group’s

financial performance and/or major developments are disseminated to the public

as soon as practicable via appropriate channels of communication, chief of

which is the Bursa LINK provided by Bursa Securities as well as the Company’s

website at www.tafi.com.my.

Information is also channelled by way of the Annual Reports and relevant

circulars, press releases and press conferences, if so applicable, the quarterly

financial results and the various disclosures and announcements issued to Bursa

Securities in compliance with the MMLR.

The AGM of the Company is the principal forum for interaction between the

management and its private and institutional investors. The Extraordinary

General Meeting (“EGM”) would also serve as a forum for such an interaction.

All Board members are personally present at each AGM of the Company to

engage directly with the shareholders and to account for their stewardship of the

Company. The Chairman of the Board has a tradition of giving a summary of the

performance of the Company for the financial year just ended for the benefit of

the shareholders present.

Also at hand at each AGM yearly to address any questions that the shareholders

may have are key management staff and the external auditors of the Company.

Status of all resolutions proposed at the AGM of the Company would be

released to Bursa Securities on that day itself as required pursuant to the MMLR

of Bursa Securities.

45


3.2 Annual General Meeting (“AGM”)

Bursa Securities had on 27 December 2013 issued a directive that annual

reports of listed issuers in respect of the financial year ended on 31 December

2018 be issued to the members within four (4) months from the close of its

financial year end.

In compliance with this requirement, TAFI’s Annual Report 2018 will be issued

on 26 April 2019 which is also the date of despatch of the notice of its Fifteenth

AGM. The coming Fifteenth AGM, scheduled on 24 May 2019 (Friday), at its

business premises in Muar, Johor, would provide the Company’s shareholders

with an avenue to raise any queries that they may have on the Company and the

Group.

The Notice provides information to the shareholders regarding details of the

AGM such as their entitlement to attend the AGM, their right to appoint

proxy(ies) and information as to who may count as a proxy. The Company allows

a member to appoint a proxy who may but need not be a member of the

Company.

If the proxy is not a member of the Company, he need not be an advocate, an

approved company auditor or a person approved by the Companies Commission

of Malaysia. In addition, the Memorandum and Articles of Association of the

Company entitles a member to vote in person or by corporate representative,

proxy or attorney.

Essentially, a corporate representative, proxy or attorney shall be entitled to vote

both on a show of hands and on a poll as if they were a member of the

Company.

Each item of special business set out in the notice of AGM is accompanied with

an explanatory statement in respect of the resolutions proposed and where

relevant, Circular to Shareholders setting out the relevant information, would be

submitted to the shareholders at least twenty-one (21) days prior to the meeting

in compliance with Paragraph 7.15 of MMLR of Bursa Securities and Article 61

of the Articles of Association of the Company.

46


3.3 Poll Voting

The latest amendments to the MMLR require all resolutions set out in the notice

of general meetings be voted by poll. As such, the Company will make sure the

necessary arrangements to conduct poll voting at the forthcoming AGM for all the

proposed resolutions. The poll voting will be conducted manually for the purpose

of determining the outcome of resolutions more efficiently.

The Company will brief the shareholders the proper procedure of poll voting at

the commencement of the AGM. A scrutineer, who must be independent of the

person undertaking the polling process, will be appointed to validate the votes

casted at the general meeting and announce the results of voting.

The Board ensures that shareholders are provided with a balanced and

meaningful evaluation of the Company’s financial performance, including its

position and future prospects through the issuance of the Annual Audited

Financial Statements and quarterly financial reports, and through corporate

announcements on significant developments affecting the Company in

accordance with the MMLR.

4. ACCOUNTABILITY AND AUDIT

4.1 Financial Reporting

The Board ensures that shareholders are provided with a balanced and

meaningful evaluation of the Company’s financial performance, including its

position and future prospects through the issuance of the Annual Audited

Financial Statements and quarterly financial reports, and through corporate

announcements on significant developments affecting the Company in

accordance with the MMLR.

Chairman of the Audit Committee, Mr. Siew Chee Choong, a member of two

professional accounting organisations with strong credentials backed by years

of extensive experience in a senior capacity especially in the area of finance and

47


accounting, together with his other two (2) fellow Audit Committee members,

reviews the Company’s financial statements in the presence of both the external

and internal auditors and with the Finance & Administrative Manager at hand to

clarify and address any queries the Audit Committee may have, prior to

recommending the financials for approval and issuance to the stakeholders.

As part of the governance process in reviewing the quarterly and yearly financial

statements by the Audit Committee, the Finance & Administrative Manager provides

assurance to the Audit Committee on a quarterly basis that appropriate accounting

policies had been adopted and applied consistently; that the going concern basis

applied in the Condensed Consolidated Financial Statements (“CCFS”) and Annual

Financial Statements (“AFS”) was appropriate and that prudent judgements and

reasonable estimates had been made in accordance with the requirements set out

in the Malaysian Financial Reporting Standards (“MFRS”); that adequate processes

and controls were in place for effective and efficient financial reporting and

disclosures under the MFRS, International Financial Reporting Standards and

MMLR; and that the CCFS and AFS did not contain material misstatement and gave

a true and fair view of the financial position of the Group and the respective

companies within the Group in 2018.

In addition, Internal Audit Personnel of the Company undertakes independent

assessments of the internal control systems of the Group and reports its findings

to the Audit Committee on a quarterly basis. Throughout the financial year ended

31 December 2018, the Internal Audit Personnel had in her quarterly reports

stated that no material issue or major deficiencies had been noted which would

pose a high risk to the overall system of internal controls under review.

Premised on the above, the Board considers that it has provided a fair, balanced

and representative assessment of the Company’s and the Group’s business in

its quarterly results and annual financial statements.

The financial statements of the Company and the Group for the financial year

ended 31 December 2018 are set out on pages 79 to 167 of this Annual Report

and a statement by the Board of its responsibilities in preparing the financial

statements is on page 64.

48


4.2 Internal Control and Risk Management

The Board has overall responsibility for maintaining a sound system of internal

controls to safeguard shareholders’ investments and protect the Company’s

assets.

It must be noted that while the internal control system is devised to cater for the

particular needs of the Group as well as risk management, such controls by their

nature can only provide reasonable assurance but are not an absolute

assurance against any material misstatements, loss or fraud.

Besides the quarterly internal audit reports from the Internal Audit Personnel to

the Audit Committee, the Board also relies on a report identifying the

risks/threats faced by the Group which carries a rating on the risk exposure level

that is tabled at each quarterly meeting of the Board.

A statement on the risk management and internal control within the Group is set

out on pages 60 to 63 of this Annual Report.

4.3 Relationship with External Auditors

The Board maintains a formal, objective, professional and transparent

relationship with its external auditors.

The Audit Committee meets with the external auditors of the Company, for a

private discussion without the presence of executive board members and

employees of the Company at least twice during each financial year.

The first meeting during the financial year just ended was held in February 2018

primarily to review the Audit Management Letter from Messrs. Deloitte PLT

(“Deloitte”) following the completion of its audit of the TAFI Group for the financial

year ended 31 December 2017. However, TAFI had received a notice in writing

given pursuant to Section 281 of the Companies Act, 2016 from Deloitte on their

resignation as Auditors of the Company on 24 October 2018 due to the Company

not able to reach a consensus on the proposed increase to the audit fees and

costs for the financial years ending 31 December 2018 and 31 December 2019.

49


On 16 November 2018, TAFI had appointed Messrs. Peter Chong & Co. (“Peter

Chong”) as the new Auditors to fill the vacancy arising from the resignation of

Deloitte as Auditors of the Company.

The Audit Committee met in April 2019 to review the draft audited Financial

Statements of the Company and of the Group for the financial year ended 31

December 2018. It also undertook its annual assessment of the suitability and

independence of the external auditors by considering the factors mentioned

below to arrive at its recommendation on the re-appointment of Peter Chong as

the Group’s auditors for the ensuing financial year.

It is the duty of the Company to undertake an annual assessment of the quality of

audit which encompassed the performance and quality of the External Auditors

and their independence, objectivity and professionalism. The Company has

delegated this duty to the Audit Committee to undertake the assessment. The

areas of assessment includes the External Auditors’ calibre, quality processes,

audit team, audit scopes, audit communication, audit governance, independence

and audit fees. These information were obtained by the Company’s personnel

who had constant with the external audit team throughout the year.

To support the Audit Committee’s assessment of the External Auditors’

independence, the External Auditors will provide the Audit Committee with a

declaration on their independence throughout the conduct of the audit

engagement in accordance with the relevant professional and regulatory

requirements. The External Auditors are required to declare their independence

annually to the Audit Committee as specified by the By-Laws issued by the

Malaysian Institute of Accountants. The External Auditors have provided the

declaration in their annual audit plan presented to the Audit Committee of the

Company.

The Audit Committee ensures that the External Auditors are independent of the

activities they audit and will review the contracts for provision of non-audit

services by the External Auditors. The recurring non-audit services were in

respect of tax compliance and annual review of the Statement of Risk

Management and Internal Control. The non-recurring non-audit services are

amounted to RM23,500.

50


During the financial year, the amount of statutory audit fees and non-audit fees

paid / payable to the External Auditors by the Company and the Group

respectively for the financial year ended 31 December 2018 were as follows:

The Board had accepted the recommendation from the Audit Committee and

approved the proposal to the shareholders at the Fifteenth AGM for the re-

appointment of Peter Chong as external auditors of the Company to audit the

Group for the financial year ending 31 December 2019.

The role of the Audit Committee in relation to the internal auditors is set out in the

Report of the Audit Committee on page 57 of this Annual Report.

5. WHISTLEBLOWING POLICY

The Group has in place a formal whistleblowing policy and is available on the

Company’s website at www.tafi.com.my. As for stakeholders, the Company’s email

address on its website is the key avenue for making any reports on the Group.

Company Group

FYE 2018

RM

FYE 2017

RM

FYE 2018

RM

FYE 2017

RM

Statutory audit fees paid / payable to:

Deloitte - 23,500 - 78,000

Peter Chong 20,000 - 61,500 -

Total (a) 20,000 23,500 61,500 78,000

Non-Audit fees paid / payable to:

Affiliates of Deloitte - 7,500 - 29,700

Peter Chong 2,500 - 2,500 -

Affiliates of Peter Chong 4,600 - 21,000 -

Total (b) 7,100 7,500 23,500 29,700

% of non-audit fees (b/a) 35.5% 31.9% 38.2% 38.1%

51


6. STATEMENT OF COMPLIANCE WITH BEST PRACTICES OF THE MCCG 2017

Based on the above, the Board considers that it has taken steps to comply as far as

possible with the principles and recommendations of the MCCG 2017 for the financial


52

ADDITIONAL COMPLIANCE INFORMATION DISCLOSURES

1. Utilisation of Proceeds

There were no corporate proposals to raise any proceeds during the financial year


2. Share Buy-Backs

The Company did not seek the approval from its shareholder for authority to buy back its

own share last year.

Since the Company’s first share buy-back on 5 January 2006 till its last share buy-back

conducted on 26 November 2013, the Company had bought-back a total of 2,540,500 of

its own shares from the Bursa Securities for a total consideration of RM1,040,933.94

(including brokerage), all of which are kept as treasury shares and none have been

resold or cancelled.

3. Options or Convertible Securities

The Company has not issued any options or convertible securities during the financial


4. Depository Receipt Programme

The Company has not sponsored any depository receipt programme during the financial


5. Sanctions and/or Penalties

The Company and its subsidiaries, Directors and Management have not been imposed

with any sanctions and/or penalties by any regulatory bodies during the financial year


53

AADDDDIITTIIOONNAALL CCOOMMPPLLIIAANNCCEE IINNFFOORRMMAATTIIOONN DDIISSCCLLOOSSUURREESS ((ccoonntt’’dd)) 6. Non-Audit Fees

The amount of non-audit fees incurred for services rendered to the Company and its

subsidiaries for the financial year by the Company’s auditors or corporation affiliated to

the auditors’ firm is RM23,500.

7. Variation in Results

There was no profit forecast issued by the Company and its subsidiary companies

during the financial year ended 31 December 2018.

8. Profit Guarantee

There was no profit guarantee given by the Company during the financial year ended 31

December 2018.

9. Material Contracts

There were no material contracts entered into by the Company and its subsidiaries

involving the interests of directors and substantial shareholders of the Company either

subsisting at the end of the financial year or entered into since the end of the previous

financial year.

10. Recurrent Related Party Transactions (“RRPT”)

Save as disclosed in Note 21 of the Financial Statements, there are no existing and

proposed related party transactions and conflict of interest in relation to the TAFI Group

and its promoters, substantial shareholders and directors.

The MMLR of Bursa Securities provides that a listed issuer with an issued and paid-up

capital which is less than RM60 million is required to make an immediate announcement

in respect of RRPT where:

54

AADDDDIITTIIOONNAALL CCOOMMPPLLIIAANNCCEE IINNFFOORRMMAATTIIOONN DDIISSCCLLOOSSUURREESS ((ccoonntt’’dd))

(i) the consideration, value of the assets, capital outlay or costs of the Recurrent

Transaction is equal to or exceeds RM1 million; or

(ii) the percentage ratio of such Recurrent Transaction is equal to or exceeds 1%,

whichever is the lower.

In view of this provision, no shareholders’ mandate on RRPT was sought last year.

Similarly, the Board does not foresee the need to obtain shareholders’ mandate for

RRPT in respect of the financial year ended 31 December 2018.

Nonetheless, the Board, through the Audit Committee and the Management, will

continue to review and monitor the status of RRPT in every quarter to ensure

compliance with the MMLR.

55

AAUUDDIITT CCOOMMMMIITTTTEEEE RREEPPOORRTT

The Board of Directors of TAFI presents the Audit Committee Report which provides insights

into the manner in which the Audit Committee discharges its functions for the Group in the

financial year ended 31 December 2018.

1. COMPOSITION

Pursuant to its Terms of Reference, the text of which is set out in Appendix A of the

Company’s Board Charter found on its website at www.tafi.com.my, the Audit Committee

of the Company shall be appointed amongst the Board members and shall comprise no

fewer than three (3) members who shall be exclusively non-executive directors of the

Company where a majority of whom, including the committee chairman, shall be

independent directors and the term of an Audit Committee member shall automatically

terminate when he ceases to be a director of the Company. The Audit Chairman of TAFI,

Mr. Siew Chee Choong, fulfils the below mentioned requirements.

At least one (1) member must be a member of the Malaysian Institute of Accountants

(“MIA”) or possesses such other qualifications and/or experience as approved and

prescribed by Bursa Malaysia Securities Berhad (“Bursa Securities”).

The members of the Audit Committee of the Company are as follows:-

- Siew Chee Choong

(Chairman, Independent Non-Executive Director and a member of MIA)

- Ratna Rajah Selvaduray

(Member, Independent Non-Executive Director)

- Lau Kee Sern

(Member, Independent Non-Executive Director)

The composition of the Audit Committee during the financial year ended 31 December

2018 has complied with the Terms of Reference of the Audit Committee.

56

AAUUDDIITT CCOOMMMMIITTTTEEEE RREEPPOORRTT ((ccoonntt’’dd))

2. MEETINGS

Pursuant to its Terms of Reference, the Audit Committee of TAFI is required to meet at

least four (4) times in each financial year and additional meetings may be convened if so

required. The quorum for a meeting shall be the majority of members present, who shall

be the independent directors.

The Audit Committee is also required to have a private discussion with the external

auditors of the Company without the presence of the executive board members and

employees of the Company at least twice a year.

The external auditors and internal auditors may be invited to attend Audit Committee

meetings on invitation by Chairman of the Audit Committee. The external auditors and

internal auditors may also respectively request a meeting with the Audit Committee if

they consider it necessary.

During the financial year ended 31 December 2018, the Audit Committee held a total of

five (5) meetings, each of which were dutifully attended by the Company Secretary, the

Finance & Administrative Manager and the Internal Audit staff on the invitation of the

Committee Chairman. Messrs. Deloitte PLT (“Deloitte”), the ex-external auditors of the

Company, held a private session with the Audit Committee in February 2018. However,

TAFI had received a notice in writing given pursuant to Section 281 of the Companies

Act, 2016 from Deloitte on their resignation as Auditors of the Company on 24 October

2018 due to the Company not able to reach a consensus on the proposed increase to

the audit fees and costs for the financial years ending 31 December 2018 and 31

December 2019.

On 16 November 2018, TAFI had appointed Messrs Peter Chong & Co. as Auditors of

the Company in place of Deloitte who had resigned on 12 November 2018.

Details of attendances of the Committee members are as follows:-

Members Attendance

Siew Chee Choong

(Chairman/MIA member/Independent Non-Executive Director) 5/5



Lau Kee Sern


57


3. INTERNAL AUDIT FUNCTION

The internal audit function plays a key role in undertaking independent, regular and

systematic reviews of risk management, internal control and governance systems to

provide the Group with reasonable assurance that the said systems are operating and

will continue to operate satisfactorily and effectively.

The Internal Audit Function of the TAFI Group reports functionally to the Audit

Committee and administratively to the Group Managing Director during the financial

year 2018.

It is the responsibility of the internal audit function to provide the Audit Committee with

independent and objective reports on the state of the risk management, control and

governance processes pertaining to the various operating units within the Group and the

extent of their compliance with the Group’s established policies, procedures and

relevant statutory requirements.

The internal audit function would report to the Audit Committee the results of its audit

findings, management’s response and the status of completion of the required follow-up

actions by management and any outstanding audit issues which still required corrective

actions to ensure an adequate and effective internal control system within the Group.

To ensure the responsibilities of the Internal Audit Function are fully discharged, the

Audit Committee reviews the adequacy of the scope, functions and resources of the

Internal Audit Function.

More information on the Internal Audit Function of TAFI is found in the “Statement on

the Risk Management and Internal Control” within the Group as set out on pages 61 to

62 of this Annual Report.

58


4. SUMMARY OF ACTIVITIES OF THE AUDIT COMMITTEE

A brief summary to provide an overall view of the activities of the Audit Committee

during the financial year ended 31 December 2018 in discharging its duties and

responsibilities are as follows:-

• Reviewed each unaudited quarterly financial results of the Group before making

their recommendations on the same to the Board of Directors prior to its release

to Bursa Securities.

• Reviewed the draft audited financial statements of the Company and the Group

for the financial year ended 31 December 2017, and the accompanying Audit

Completion Memorandum issued by Deloitte, before making their

recommendations on the same to the Board of Directors prior to the release of

the said audited financial statements to Bursa Securities.

• Recommended the re-appointment of Deloitte as external auditors of the Group

for the financial year ending 31 December 2018.

• Reviewed and recommended actions on the quarterly internal audit report of the

Group presented by the internal audit personnel and briefing the Board of

Directors on the same.

• Reviewed the Recurrent Related Party Transactions for compliance with the

MMLR of Bursa Securities.

• Reviewed the “Statement of Risk Management and Internal Control” and “Audit

Committee Report” prior to their inclusion into the Company’s Annual Report

2017.

• Met with Deloitte for a private discussion without the presence of executive

board members and employees of the company in February 2018.

• Reviewed and recommended to the Board to accept the resignation of Deloitte

as external auditors of the Company on 25 October 2018.

• Reviewed and recommended to the Board to accept the appointment of Peter

Chong as external auditors of the Company for financial year ending 31

December 2018 on 13 November 2018.

• Reviewed the Audit Planning Memorandum from Peter Chong in respect of the

audit for the financial year ending 31 December 2018 in November 2018.

59


5. STATEMENT VERIFYING ALLOCATION OF SHARES UNDER EMPLOYEES

SHARE SCHEME (“ESS”)

To date, the Company has not established any ESS and thus the need to review or

verify allocation of options pursuant to such share scheme does not arise.

In the event the Company does establish such ESS, the Audit Committee would

shoulder the responsibility of reviewing all allocations granted to eligible employees to

ensure compliance with the criteria as would have been spelt out in the by-laws of the

Company’s proposed ESS.

60

SSTTAATTEEMMEENNTT OONN RRIISSKK MMAANNAAGGEEMMEENNTT AANNDD IINNTTEERRNNAALL CCOONNTTRROOLL

Introduction

The Board acknowledges the importance of maintaining a good internal control system

covering risk management and the financial, operational and compliance controls as set out

under Practice 9.1 of the Malaysian Code on Corporate Governance 2017 (“MCCG 2017”) to

safeguard shareholders’ investments and the Group’s assets. For the purpose of disclosure,

this Statement takes into account the Guidelines for Directors of Listed Issuers (“Guidelines”)

on the issuance of the Internal Control Statement pursuant to Paragraph 15.26(b) of the Main

Market Listing Requirements (“MMLR”) of Bursa Malaysia Securities Berhad (“Bursa

Securities”).

Board’s Responsibility

The Board affirms its overall responsibility for the Group’s system of internal control and risk

management, which includes the review of its adequacy and effectiveness to ensure

compliance to policies and procedures and operating standards, so as to enable the Group to

achieve its business objectives. The process of identifying, evaluating, monitoring and

managing significant risks affecting the achievement of its business objectives is an ongoing

process. The Board however, reiterates that such a system is designed to manage risk rather

than eliminate risk of failure to achieve business objectives and provides only reasonable

assurance but not absolute assurance against material misstatement or loss.

Risk Management

The Board recognises that an important element for a sound system of internal control is to

have in place a risk management framework in order to identify principal risks and implement

appropriate controls to manage such risks. Key performance indicators to monitor risks have

been clearly identified for each business process.

61

SSTTAATTEEMMEENNTT OONN RRIISSKK MMAANNAAGGEEMMEENNTT AANNDD IINNTTEERRNNAALL CCOONNTTRROOLL ((ccoonn’’tt))

Internal Audit Function

The internal audit department functions as an independent party to test the existing controls put in

place in accordance to risk-based approach and the internal audit plan. The internal audit plan is

reviewed quarterly and if necessary, adjusted to reflect the changes in the Group’s operating

environment. The internal audit plan is approved by the Audit Committee on an annual basis, and

any significant change to the plan will be referred to the Audit Committee for notification prior to the

commencement of the internal audit.

Audit findings and recommendations on possible improvement to the internal controls of the Group

are submitted to the Audit Committee for review and recommendations followed by implementation

of corrective actions as and when needed.

During the financial year, the former Internal Audit Personnel (“IA Personnel”) was dismissed due

to his absence from reporting to work without notification with reasons on June 2018. However,

Audit Committee had recommended to the Board a new Internal Audit Personnel on August 2018

to fill the vacancy. During the period, the internal audit function was alternatively carried out by the

newly appointed IA personnel of the Company with close supervision from the Audit Committee.

The cost incurred to maintain the internal audit function for the financial year ended 31 December

2018 amounted to RM19,335.

System of Internal Control

The Board confirms that there is a continuous process for identifying, evaluating and managing the

significant risks faced by the Group. Key activities that have been established in reviewing the

adequacy and integrity of the system of internal control are as follows:

Establishment of Audit Committee

� The Audit Committee examines and monitors the Group’s system of internal control on

behalf of the Board.

� The Audit Committee reviews the report from the internal audit department, usually on a

quarterly basis.

62


Limits of authority and responsibility

� Establishing a clear organisational structure with key job functions and well-defined

responsibilities communicated to all levels of the organisation.

Key responsibilities are properly segregated so that no employee has total control of a

transaction.

Written policies and procedures

� The management sets well defined authorisation procedures and exercises strict control

to ensure compliance by all levels of employees.

Planning, monitoring and reporting

� The Audit Committee reviews the quarterly unaudited financial results to monitor the

Group’s progress in achieving the Group’s objectives.

� Review of key performance indicators (KPIs) by Senior Management team on quarterly

basis.

Assurance provided by the Group Managing Director and Finance & Administrative

Manager

In line with the Guidelines, The Group Managing Director and Finance & Administrative

Manager have provided assurance to the Board in writing stating that the Group’s risk

management and internal control systems have operated adequately and effectively, in all

material aspects, to meet the Group’s objectives during the financial year under review.

Conclusion

The Board is satisfied that, during the financial year ended 31 December 2018, the risk

management and internal control system has not resulted in any material losses, contingencies

or uncertainties that would require disclosure in the Group’s annual report. The Board continues

to take pertinent measures to sustain and, where required, to improve the Group’s risk

management and internal control system in meeting the Group’s strategic objectives.

63


Review of the Statement by External Auditor

Pursuant to paragraph 15.23 of the MMLR of Bursa Securities, the external auditors have

reviewed this statement for inclusion in the Annual Report of Group for the year ended 31

December 2018 and reported to the Board that nothing has come to their attention that caused

them to believe that the Statement on Internal Control intended to be included in the annual

report is inconsistent with their understanding of the process the Board of Directors has

adopted in the review of the adequacy and integrity of internal control of the Group.

The external auditors performed the limited assurance review in accordance with Audit and

Assurance Practice Guide (“AAPG”) 3 issued by the Malaysian Institute of Accountants. AAPG

3 does not require the external auditors to form an opinion on the adequacy and effectiveness

of the risk management and internal control systems of the Group.

This statement is made in accordance with the resolution of the Board of Directors dated 12

April 2019.

64

SSTTAATTEEMMEENNTT OOFF TTHHEE DDIIRREECCTTOORRSS’’ RREESSPPOONNSSIIBBIILLIITTIIEESS IINN RREELLAATTIIOONN TTOO TTHHEE

FFIINNAANNCCIIAALL SSTTAATTEEMMEENNTTSS

The Directors are required to prepare the financial statements for each financial year which give

a true and fair view of the state of affairs of the Company and of the Group at the end of the

financial year and of the results and cash flows of the Company and of the Group for the

financial year then ended.

The Directors consider that, in preparing the financial statements for the financial year ended

31 December 2018, the Group has used appropriate accounting policies and applied them

consistently and made judgements and estimates that are reasonable and prudent.

The Directors also consider that all applicable approved accounting standards have been

followed and confirm that the financial statements have been prepared on a going concern

basis.

The Directors are responsible for ensuring that the Company and the Group keep accounting

records which disclose with reasonable accuracy at any time, the financial position of the

Company and of the Group and which enable them to ensure adherence of the financial

statements with the requirements of the Companies Act 2016 and approved accounting

standards applicable in Malaysia.

65

FFIINNAANNCCIIAALL SSTTAATTEEMMEENNTTSS

DIRECTORS’ REPORT

The Directors of TAFI Industries Berhad have pleasure in presenting their report together with

the audited financial statements of the Group and of the Company for the financial year ended

31 December 2018.

PRINCIPAL ACTIVITIES

The Company is principally involved in investment holding and provision of management

services.

There have been no significant changes in the nature of these principal activities during the

financial year.

SUBSIDIARY COMPANIES

The details of the subsidiary companies and their business activities are disclosed in Note 6 to

the financial statements.

The auditors’ report on the financial statements of the subsidiary companies did not contain any

qualification.

There have been no significant changes in the nature of the subsidiary companies’ principal

activities during the financial year.

FINANCIAL RESULTS

Group Company

RM RM

Loss for the financial year (4,613,507) (10,052)

DIVIDENDS

No dividend has been paid or declared by the Company since the end of the previous financial

year.

The Directors do not recommend the payment of any dividend in respect of the current financial

year.

66

DIRECTORS’ REPORT (con’t)

RESERVES AND PROVISIONS

There were no material transfers to or from reserves or provisions during the financial year.

ISSUE OF SHARES AND DEBENTURES

The Company has not issued any new shares or debentures during the financial year.

SHARE OPTIONS

No options have been granted by the Company to any parties during the financial year to take up

unissued shares of the Company.

No shares have been issued during the financial year by virtue of the exercise of any option to

take up unissued shares of the Company. As at the end of the financial year, there were no

unissued shares of the Company under options.

DIRECTORS IN OFFICE

The Directors who have held office since the date of the last report are:


Au Gek Keng

Siew Chee Choong


Lau Kee Sern

In accordance with the Company’s Constitution, Dato’ Saw Eng Guan and Ms. Au Gek Keng

retire by rotation at the forthcoming Annual General Meeting and being eligible, offer

themselves for re-election.

The Directors who served on the subsidiary companies of the Company since the date of the last

report are:


Tan Sri Dato’ Dr. Syed Jalaludin Bin Syed Salim

Au Gek Keng

Au Gek Ling

67


DIRECTORS’ BENEFITS

Since the end of the previous financial year, no Director has received or become entitled to

receive any benefit (other than Directors’ remuneration as disclosed in the Note 25 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 the Director is a member, or with a company in which the

Director has a substantial financial interest other than those disclosed in Note 29 to the financial

statements.

Neither during nor at the end of the financial year, no arrangements subsisted to which the

Company or a related corporation 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.

DIRECTORS’ INTEREST

According to the register of Directors’ shareholdings, the interest of Directors in office at the

end of the financial year in shares of the Company and its related corporations were as follows:

Number of ordinary shares

Shareholdings in the Balance as Balance as

Company at 1.1.2018 Bought Sold at 31.12.2018

Direct interest

Dato’ Saw Eng Guan 6,112,500 - - 6,112,500

Au Gek Keng 1,921,000 - - 1,921,000

Deemed interest Dato’ Saw Eng Guan 18,002,200* - - 18,002,200*

* Registered in the name of director’s family member.

By virtue of Dato’ Saw Eng Guan’s interests in the shares of the Company, he is also deemed to

have an interest in the shares of the subsidiary companies to the extent the Director has his

interest.

None of the other Directors in office at the end of the financial year held or dealt in shares in the

Company or its related corporations during the financial year.

68


OTHER STATUTORY INFORMATION

Before the financial statements of the Group and of the Company were made out, 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 impairment on debts, and have satisfied themselves that all known bad

debts had been written off and that adequate allowance had been made for impairment;

and

b) to ensure that any current assets which were unlikely to be realised in the ordinary course

of business including their values as shown in the accounting records of the Group and

the Company have been written down to an amount which they might be expected so to

realise.

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

a) which would render the amount written off for bad debts or the amount of the allowance

for impairment 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 the current assets in the financial statements

of the Group and of the Company misleading; or

c) which have arisen which render adherence to the existing method of valuation of assets

or liabilities of the Group and of the Company misleading or inappropriate; or

d) not otherwise dealt with in this report or financial statements which would render any

amount stated in the financial statements of the Group and of the Company misleading.

69


OTHER STATUTORY INFORMATION (cont’d)

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 to secure the liability 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,

a) the results of the Group’s and the Company’s operations during the financial year have

not been substantially affected by any item, transaction or event of a material and

unusual nature; and

b) there has not arisen in the interval between the end of the financial year and the date of

this report any item, transaction or event of a material and unusual nature 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.

INDEMNITIES TO DIRECTORS OR OFFICERS

The Company maintains Directors’ liability for purposes of Section 289 of the Companies Act

2016, throughout the year, which provides appropriate insurance cover for the Directors of the

Company. The amount of insurance premium paid during the year amounted to RM10,398.

70


AUDITORS

Auditors’ remuneration is set out in Note 21 to the financial statements. No payment has been

made to indemnify auditors during or since the financial year.

The auditors, Messrs. Peter Chong & Co., Chartered Accountants, have indicated their

willingness to accept re-appointment.

Signed on behalf of the Board

in accordance with a resolution of the Directors

……………………………….


Director

……………………………….

SIEW CHEE CHOONG

Director

Muar, Johor Darul Takzim

Date:

71

INDEPENDENT AUDITORS’ REPORT

Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of TAFI INDUSTRIES BERHAD, which comprise

the statements of financial position as at 31 December 2018 of the Group and of the Company,

and the statements of profit or loss and other comprehensive income, statements of changes in

equity and statements of cash flows of the Group and of the Company for the year then ended,

and notes to the financial statements, including a summary of significant accounting policies, as

set out on pages 79 to 167.

In our opinion, the accompanying financial statements give a true and fair view of the financial

position of the Group and of the Company as at 31 December 2018, and of their financial

performance and their cash flows for the year then ended in accordance with Malaysian

Financial Reporting Standards, International Financial Reporting Standards and the

requirements of the Companies Act 2016 in Malaysia.

Basis for Opinion

We conducted our audit in accordance with approved standards on auditing in Malaysia and

International Standards on Auditing. Our responsibilities under those standards are further

described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of

our report. We believe that the audit evidence we have obtained is sufficient and appropriate to

provide a basis for our opinion.

Independence and Other Ethical Responsibilities

We are independent of the Group and of the Company in accordance with the By-Laws (on

Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants (“By-

Laws”) and the International Ethics Standards Board for Accountants’ Code of Ethics for

Professional Accountants (“IESBA Code”), and we have fulfilled our other ethical

responsibilities in accordance with the By-Laws and the IESBA Code.

72

INDEPENDENT AUDITORS’ REPORT (cont’d)

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.

1) Impairment of property, plant and equipment

Refer to Note 2.8 – Significant accounting policy on impairment of non-financial assets;

Note 4(ii) – Significant accounting estimates and judgements on impairment of property,

plant and equipment; Note 5 – Property, plant and equipment and Note 6(ii) – Key

assumptions used in value-in-use calculations.

Background: We focused on this area because the Group’s property, plant and equipment (“PPE”)

represents a significant proportion of the assets in the consolidated statement of financial

position.

The Group registered loss for the financial year amounted to RM4,613,507 which required

the Group to review whether there is any indication that those assets have suffered an

impairment loss. If such indication exists, the recoverable amount of the asset will be

estimated in order to determine the extent of the impairment loss. As such, the

management of the Group has prepared cash flows and profit forecast and projections for

the Cash-Generating Unit (“CGU”) and assessed the market value of the properties to

estimate the recoverable amount of property, plant and equipment.

Our response: Our audit procedures included, but not limited to, the following:

- Performed sighting of property, plant and equipment to ensure that they are in good

working condition.

- Discussed with the management on the basis and key assumptions applied in the cash

flows and profit forecast and projections.

- Assessed the reasonableness of the key assumptions used by the management in the cash


- Performed sensitivity analysis around the key assumptions.

73


Key Audit Matters (cont’d)

1) Impairment of property, plant and equipment (cont’d)

- Reviewed the valuation reports provided by registered valuer, Jordan Lee & Jaafar

(M’CCA) Sdn. Bhd. dated 23 January 2018 on certain properties to estimate the market

value of the Group’s properties.

- Assessed the adequacy and appropriateness of the disclosures made in the financial

statements.

2) Impairment assessment of the carrying amount of cost of investment in subsidiary

companies and amount due from subsidiary companies

Refer to Note 2.8 – Significant accounting policy on impairment of non-financial assets;

Note 2.10(v) – Significant accounting policy on impairment of financial assets; Note 4(v) –

Significant accounting estimates and judgements on impairment of investment in

subsidiary companies and amount due from subsidiary companies; Note 6 – Investment in

subsidiary companies; and Note 11– Receivables.

Background: Certain subsidiary companies recorded losses during the financial year. This indicated that

the carrying amount of the investment in the subsidiary companies may be impaired and

the recoverability of amount due from subsidiary companies may be in doubt.

We identified the potential impairment of investment and impairment on debts as key audit

matter due to the following factors:

- Significance of the assets to the Company’s statement of financial position; and

- The recoverable amount of the investment held are prepared and represented by the

management. This includes significant judgement and assumptions supporting the

underlying cash flows and profit forecast and projections, future sales growth and

profitability of the business operations.

Our response:

Our audit procedures focused on evaluating the cash flows and profit forecast and

projections, among others included:

- Discussed with the management on the basis and key assumptions applied in the cash


74


Key Audit Matters (cont’d)

2) Impairment assessment of the carrying amount of cost of investment in subsidiary

companies and amount due from subsidiary companies (cont’d)

- Assessed the reasonableness of the key assumptions used by the management in the

cash flows and profit forecast and projections.

- Performed sensitivity analysis around the key assumptions.

- Assessed the adequacy and appropriateness of the disclosures made in the financial

statements.

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

the other information, we are required to report that fact. We have nothing to report in this

regard.

Responsibilities of the Directors for the Financial Statements

The Directors of the Company are responsible for the preparation of financial statements of the

Group and of the Company that give a true and fair view in accordance with Malaysian

Financial Reporting Standards, International Financial Reporting Standards and the

requirements of the Companies Act 2016 in Malaysia. The Directors are also responsible for

such internal control as the Directors determine is necessary to enable the preparation of

financial statements of the Group and of the Company that are free from material misstatement,

whether due to fraud or error.

75


Responsibilities of the Directors for the Financial Statements (cont’d)

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 judgement and maintain

professional scepticism throughout the audit. We also:

- Identify and assess the risks of material misstatement of the financial statements of the

Group and of the Company, whether due to fraud or error, design and perform audit

procedures responsive to those risks, and obtain audit evidence that is sufficient and

appropriate to provide a basis for our opinion. The risk of not detecting a material

misstatement resulting from fraud is higher than for one resulting from error, as fraud may

involve collusion, forgery, intentional omissions, misrepresentations, or the override of

internal control.

76


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

- Obtain an understanding of internal control relevant to the audit in order to design audit

procedures that are appropriate in the circumstances, but not for the purpose of expressing

an opinion on the effectiveness of the Group’s and the Company’s internal control.

- Evaluate the appropriateness of accounting policies used and the reasonableness of

accounting estimates and related disclosures made by the Directors.

- Conclude on the appropriateness of the Directors’ use of the going concern basis of

accounting and, based on the audit evidence obtained, whether a material uncertainty exists

related to events or conditions that may cast significant doubt on the Group’s or the

Company’s ability to continue as a going concern. If we conclude that a material

uncertainty exists, we are required to draw attention in our auditors’ report to the related

disclosures in the financial statements of the Group and of the Company or, if such

disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit

evidence obtained up to the date of our auditors’ report. However, future events or

conditions may cause the Group or the Company to cease to continue as a going concern.

- Evaluate the overall presentation, structure and content of the financial statements of the

Group and of the Company, including the disclosures, and whether the financial statements

of the Group and of the Company represent the underlying transactions and events in a

manner that achieves fair presentation.

- Obtain sufficient appropriate audit evidence regarding the financial information of the

entities or business activities within the Group to express an opinion on the financial

statements of the Group. We are responsible for the direction, supervision and performance

of the group audit. We remain solely responsible for our audit opinion.

77


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

We communicate with the Directors regarding, among other matters, the planned scope and

timing of the audit and significant audit findings, including any significant deficiencies in

internal control that we identify during our audit.

We also provide the Directors with a statement that we have complied with relevant ethical

requirements regarding independence, and to communicate with them all relationships and other

matters that may reasonably be thought to bear on our independence, and where applicable,

related safeguards.

From the matters communicated with the Directors, we determine those matters that were of

most significance in the audit of the financial statements of the Group and of the Company for

the current year and are therefore the key audit matters. We describe these matters in our

auditors’ report unless law or regulation precludes public disclosure about the matter or when, in

extremely rare circumstances, we determine that a matter should not be communicated in our

report because the adverse consequences of doing so would reasonably be expected to outweigh

the public interest benefits of such communication.

78


Other Matters

(i) The financial statements of the Group and of the Company as at 31 December 2017,

were audited by another firm of auditors whose report dated 10 April 2018, expressed an

unqualified opinion on those statements.

(ii) This report is made solely to the members of the Company, as a body, in accordance

with Section 266 of the Companies Act 2016 in Malaysia and for no other purpose. We

do not assume responsibility to any other person for the content of this report.

Peter Chong & Co.

No. AF 0165

Chartered Accountants

Tee Yik Bee No. 02938/10/2020 J

Chartered Accountant

Kuala Lumpur

Date:

CCOONNSSOOLLIIDDAATTEEDD SSTTAATTEEMMEENNTT OOFF FFIINNAANNCCIIAALL PPOOSSIITTIIOONN

AASS AATT 3311 DDEECCEEMMBBEERR 22001188

79

2018 2017

Note RM RM

ASSETS

Non-current assets

Property, plant and equipment 5 25,831,405 27,764,803

Intangible asset 7 - 415,854

Investment properties 8 5,425,000 5,425,000

Prepaid lease payments 9 632,320 662,964

Total non-current assets 31,888,725 34,268,621

Current assets

Inventories 10 9,176,854 7,787,368

Receivables 11 4,254,960 2,899,653

Tax assets 12 51,092 126,806

Financial asset at fair value through profit or loss 13 4,471,594 4,314,002

Deposits, cash and bank balances 14 3,478,424 6,411,249

Total current assets 21,432,924 21,539,078

TOTAL ASSETS 53,321,649 55,807,699

The attached notes form an integral part of these financial statements.

CCOONNSSOOLLIIDDAATTEEDD SSTTAATTEEMMEENNTT OOFF FFIINNAANNCCIIAALL PPOOSSIITTIIOONN

AASS AATT 3311 DDEECCEEMMBBEERR 22001188 ((ccoonntt’’dd))

80

2018 2017

Note RM RM

EQUITY AND LIABILITIES

Equity attributable to owners of the Company

Share capital 15 42,809,166 42,809,166

Treasury shares 15 (1,040,934) (1,040,934)

Reserves 16 2,774,947 7,388,454

Total equity 44,543,179 49,156,686

Non-current liabilities

Deferred tax liabilities 17 43,530 43,530

Borrowing 18 1,252,382 2,277,274

Total non-current liabilities 1,295,912 2,320,804

Current liabilities

Payables 19 6,534,151 3,499,806

Borrowing 18 948,407 830,403

Total current liabilities 7,482,558 4,330,209

Total liabilities 8,778,470 6,651,013

TOTAL EQUITY AND LIABILITIES 53,321,649 55,807,699


CCOONNSSOOLLIIDDAATTEEDD SSTTAATTEEMMEENNTT OOFF PPRROOFFIITT OORR LLOOSSSS AANNDD

OOTTHHEERR CCOOMMPPRREEHHEENNSSIIVVEE IINNCCOOMMEE

FFOORR TTHHEE FFIINNAANNCCIIAALL YYEEAARR EENNDDEEDD 3311 DDEECCEEMMBBEERR 22001188

81

2018 2017

Note RM RM

Revenue 20 22,896,941 27,770,376

Other operating income 346,351 1,276,162

Changes in inventories of finished goods and

work-in-progress (226,116) 533,542

Raw materials and consumables used (12,961,589) (16,071,322)

Staff costs (7,030,372) (8,029,235)

Directors' remuneration (479,150) (420,928)

Depreciation of property, plant and equipment (2,432,927) (2,578,080)

Amortisation of intangible asset (415,854) (704,618)

Amortisation of prepaid lease payments (30,644) (35,119)

Other operating expenses (4,120,570) (4,552,317)

Loss from operations 21 (4,453,930) (2,811,539)

Finance cost 22 (159,239) (212,102)

Loss before taxation (4,613,169) (3,023,641)

Taxation 12 (338) -

Loss for the financial year (4,613,507) (3,023,641)

Other comprehensive income for the financial year - -

Total comprehensive loss attributable to owners

of the Company (4,613,507) (3,023,641)

Loss per share (sen) 23 (5.96) (3.90)


CCOONNSSOOLLIIDDAATTEEDD SSTTAATTEEMMEENNTT OOFF CCHHAANNGGEESS IINN EEQQUUIITTYY


82

Share Share Treasury Total

capital premium shares equity

Note RM RM RM RM RM RM

At 1 January 2017 40,000,000 2,809,166 (1,040,934) 690,000 9,722,095 52,180,327

Total comprehensive income/ (loss) - - - 235,293 (3,258,934) (3,023,641)

Transition to no par value regime 15 2,809,166 (2,809,166) - - - -

At 31 December 2017/ 1 January 2018 42,809,166 - (1,040,934) 925,293 6,463,161 49,156,686

Total comprehensive loss - - - - (4,613,507) (4,613,507)

At 31 December 2018 42,809,166 - (1,040,934) 925,293 1,849,654 44,543,179

Distributable

Reserves

Retained

earnings

Attributable to owners of the Company

Non-Distributable Reserves

Retained

earnings


CCOONNSSOOLLIIDDAATTEEDD SSTTAATTEEMMEENNTT OOFF CCAASSHH FFLLOOWWSS


83

2018 2017

Note RM RM

CASH FLOWS FROM OPERATING ACTIVITIES

Loss before taxation (4,613,169) (3,023,641)

Adjustments for:

Allowance for slow-moving inventories 166,839 170,103

Amortisation of intangible asset 415,854 704,618

Amortisation of prepaid lease payments 30,644 35,119

Bad debts written off - 42,016

Depreciation of property, plant and equipment 2,432,927 2,578,080

Distribution from investment management funds (157,592) (136,312)

Fair value gain on investment properties - (235,293)

Gain on disposal of:

- Investment in an associated company - (251,428)

- Prepaid lease payments - (254,445)

- Property, plant and equipment - (291,792)

Interest expense 159,239 212,102

Interest income (66,569) (65,794)

Reversal for slow-moving inventories (170,103) (102,298)

Unrealised loss on foreign exchange 41,946 159,796

Operating loss before working capital changes (1,759,984) (459,169)

Inventories (1,386,222) 1,800,840

Receivables (1,507,454) 2,401,462

Payables 1,903,521 (2,769,180)

Cash (used in)/ generated from operations (2,750,139) 973,953

Interest paid (159,239) (212,102)

Tax paid 12 (807) -

Tax refunded 12 76,183 112,817

Net cash (used in)/ generated from operating activities (2,834,002) 874,668

The above consolidated statement of cash flows is to be read in conjunction with the notes to the


CCOONNSSOOLLIIDDAATTEEDD SSTTAATTEEMMEENNTT OOFF CCAASSHH FFLLOOWWSS

FFOORR TTHHEE FFIINNAANNCCIIAALL YYEEAARR EENNDDEEDD 3311 DDEECCEEMMBBEERR 22001188 ((ccoonntt’’dd))

84

2018 2017

Note RM RM

CASH FLOWS FROM INVESTING ACTIVITIES

Advance payment for purchase of property, plant

and equipment - (110,271)

Advances from Directors 1,007,899 -

Interest received 66,569 65,794

Net placement of fixed deposits pledged (87,200) (283,211)

and equipment - 599,605

Proceeds from disposal of investment in an

associated company - 1,800,000

Proceeds from disposal of prepaid lease payments - 506,973

Purchase of property, plant and equipment 5(iii) (266,333) (211,697)

Net cash generated from investing activities 720,935 2,367,193

CASH FLOWS FROM FINANCING ACTIVITY

Repayment of term loan (906,888) (1,002,293)

Net cash used in financing activity (906,888) (1,002,293)

NET (DECREASE)/ INCREASE IN CASH

AND CASH EQUIVALENTS (3,019,955) 2,239,568

Effect of exchange rate changes (70) (108,217)

CASH AND CASH EQUIVALENTS

BROUGHT FORWARD 5,112,267 2,980,916


CARRIED FORWARD 27 2,092,242 5,112,267

Proceeds from disposal of property, plant

The above consolidated statement of cash flows is to be read in conjunction with the notes to the


SSTTAATTEEMMEENNTT OOFF FFIINNAANNCCIIAALL PPOOSSIITTIIOONN AASS AATT 3311 DDEECCEEMMBBEERR 22001188

85

2018 2017

Note RM RM

ASSETS

Non-current assets

Investment in subsidiary companies 6 27,013,779 27,013,779

Investment properties 8 3,210,000 3,210,000

Receivables 11 13,561,283 13,648,641

Total non-current assets 43,785,062 43,872,420

Current assets

Receivables 11 9,867 4,814

Tax asset 12 - 27,090

Financial assets at fair value through profit or loss 13 3,346,094 3,228,168

Cash and bank balances 14 16,528 19,496

Total current assets 3,372,489 3,279,568

TOTAL ASSETS 47,157,551 47,151,988

EQUITY AND LIABILITIES

Equity attributable to owners of the Company

Share capital 15 42,809,166 42,809,166

Treasury shares 15 (1,040,934) (1,040,934)

Reserves 16 5,274,999 5,285,051

Total equity 47,043,231 47,053,283

Current liabilities

Payables 19 114,320 98,705

Total liabilities 114,320 98,705

TOTAL EQUITY AND LIABILITIES 47,157,551 47,151,988


SSTTAATTEEMMEENNTT OOFF PPRROOFFIITT OORR LLOOSSSS AANNDD OOTTHHEERR CCOOMMPPRREEHHEENNSSIIVVEE IINNCCOOMMEE


86

2018 2017

Note RM RM

Revenue 20 120,000 120,000

Other operating income 117,931 337,300

Directors' fee (120,000) (114,965)

Other operating expenses (127,983) (201,566)

(Loss)/ Profit before taxation 21 (10,052) 140,769

Taxation 12 - -

(Loss)/ Profit for the financial year (10,052) 140,769

Other comprehensive income for the financial year - -

Total comprehensive (loss)/ income attributable

to owners of the Company (10,052) 140,769


SSTTAATTEEMMEENNTT OOFF CCHHAANNGGEESS IINN EEQQUUIITTYY


87

Share Share Treasury Total

capital premium shares equity

Note RM RM RM RM RM RM

At 1 January 2017 40,000,000 2,809,166 (1,040,934) - 5,144,282 46,912,514

Total comprehensive income/ (loss) - - - 235,293 (94,524) 140,769

Transition to no par value regime 15 2,809,166 (2,809,166) - - - -

At 31 December 2017/ 1 January 2018 42,809,166 - (1,040,934) 235,293 5,049,758 47,053,283

Total comprehensive loss - - - - (10,052) (10,052)

At 31 December 2018 42,809,166 - (1,040,934) 235,293 5,039,706 47,043,231

Distributable

Reserves

Retained

earnings

Attributable to owners of the Company

Non-Distributable Reserves

Retained

earnings


SSTTAATTEEMMEENNTT OOFF CCAASSHH FFLLOOWWSS


88

2018 2017

Note RM RM

CASH FLOWS FROM OPERATING ACTIVITIES

(Loss)/ profit before taxation (10,052) 140,769

Adjustments for:

Distribution from investment management funds (117,926) (102,002)

Fair value gain on investment properties - (235,293)

Interest income (5) (5)

Operating loss before working capital changes (127,983) (196,531)

Receivables (5,053) (2,281)

Payables 15,615 (57,295)

Cash used in operations (117,421) (256,107)

Tax refunded 12 27,090 57,140

Net cash used in operating activities (90,331) (198,967)

CASH FLOWS FROM INVESTING ACTIVITIES

Interest received 5 5

Repayment from subsidiary companies 87,358 192,921

Net cash generated from investing activities 87,363 192,926

The above statement of cash flows is to be read in conjunction with the notes to the financial

statements.

SSTTAATTEEMMEENNTT OOFF CCAASSHH FFLLOOWWSS


89

2018 2017

Note RM RM

NET DECREASE IN CASH AND

CASH EQUIVALENTS (2,968) (6,041)


BROUGHT FORWARD 19,496 25,537


CARRIED FORWARD 27 16,528 19,496

The above statement of cash flows is to be read in conjunction with the notes to the financial

statements.

NNOOTTEESS TTOO TTHHEE FFIINNAANNCCIIAALL SSTTAATTEEMMEENNTTSS


90

1. GENERAL INFORMATION

The Company is principally involved in investment holding and provision of

management services.

The details of the subsidiary companies and their business activities are disclosed in Note

6 to the financial statements.

There have been no significant changes in the nature of these principal activities during

the financial year.

The Company is a public limited liability company, incorporated and domiciled in

Malaysia and listed on the Main Market of Bursa Malaysia Securities Berhad.

The registered office and principal place of business of the Company is located at PLO 3,

Kawasan Perindustrian Bukit Pasir, Mukim Sungai Raya, Bukit Pasir, 84300 Muar,

Johor Darul Takzim.

The Board has authorised the issuance of the financial statements on 12 April 2019.

2. SIGNIFICANT ACCOUNTING POLICIES

2.1 Basis of preparation The financial statements of the Group and the Company have been prepared in

accordance with Malaysian Financial Reporting Standards (“MFRSs”),

International Financial Reporting Standards (“IFRSs”) and the requirements of

the Companies Act 2016 in Malaysia.

The financial statements have been prepared under historical cost basis except as

disclosed in the accounting policies.

This is the first set of the Group’s and of the Company’s financial statements in

which MFRS 9 Financial Instruments and MFRS 15 Revenue from Contracts

with Customers have been applied. Changes to significant accounting policies are

described in Note 3(a).

The financial statements are presented in Ringgit Malaysia (“RM”), which is the

Company’s functional currency, unless otherwise indicated.



91

2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)

2.2 Subsidiary companies and basis of consolidation

(i) Subsidiary companies Subsidiary companies are entities over which the Group has the ability to

control the financial and operating policies so as to obtain benefits from

their activities. Control is achieved when the Group is exposed, or has

rights, to variable returns from its involvement with the investee and has

the ability to affect those returns through its power over the investee. The

existence and effect of potential voting rights that are currently

exercisable or convertible are considered when assessing whether the

Group has such power over another entity.

(ii) Basis of consolidation The consolidated financial statements comprise the financial statements of

the Company and its subsidiary companies as at the reporting date. The

financial statements of the subsidiary companies are prepared as of the

same reporting date as the Company.

Subsidiary companies are consolidated from the date of acquisition, being

the date on which the Group obtains control, and continue to be

consolidated until the date that such control ceases. In preparing

consolidated financial statements, intra-group balances and transactions

and the resulting unrealised profits are eliminated on consolidation.

Unrealised losses are eliminated on consolidation and the relevant assets

are assessed for impairment. Uniform accounting policies are adopted in

the consolidated financial statements for transactions and events in similar

circumstances.

Acquisitions of subsidiary companies are accounted for using the purchase

method. The purchase method of accounting involves allocating the cost

of the acquisition to the fair value of the assets acquired and liabilities and

contingent liabilities assumed at the date of acquisition. The cost of an

acquisition is measured as the aggregate of the fair values, at the date of

exchange, of the assets given, liabilities incurred or assumed, and equity

instruments issued, plus any costs directly attributable to the acquisition.

Any excess of the cost of the acquisition over the Group’s interest in the

net fair value of the identifiable assets, liabilities and contingent liabilities

represents goodwill. Any excess of the Group’s interest in the net fair

value of the identifiable assets, liabilities and contingent liabilities over

the cost of acquisition is recognised immediately in the profit or loss.



92


2.2 Subsidiary companies and basis of consolidation (cont’d)

(ii) Basis of consolidation (cont’d) The gain or loss on disposal of a subsidiary is the difference between the

net disposal proceeds and the Group’s share of its net assets as at the date

of disposal including the cumulative amount of any exchange differences

that relate to the subsidiary. This amount is recognised in the consolidated

profit or loss in the year of disposal.

2.3 Property, plant and equipment and depreciation All items of property, plant and equipment are initially recorded at cost.

Subsequent costs are included in the asset’s carrying amount or recognised as a

separate asset, as appropriate, only when it is probable that future economic

benefits associated with the item will flow to the Group and the Company and the

cost of the item can be measured reliably. The carrying amount of the replaced

part is derecognised. All other repairs and maintenance are charged to the profit

or loss during the financial period in which they are incurred.

Subsequent to recognition, property, plant and equipment are stated at cost less

accumulated depreciation and any accumulated impairment losses.

Freehold land has an unlimited useful life and therefore is not depreciated.

Depreciation is computed on a straight line basis to write off the cost of assets to

their residual values over the following estimated useful lives:

Number of years

Buildings 10 - 50

Plant and machinery 3 - 10

Motor vehicles 5 - 10

Tools, equipment and electrical installation 5 - 10

Furniture, fixtures and fittings 10

The residual values, useful life and depreciation method are reviewed at each

financial year-end to ensure that the amount, method and period of depreciation

are consistent with previous estimates and the expected pattern of consumption of

the future economic benefits embodied in the items of property, plant and

equipment.



93


2.3 Property, plant and equipment and depreciation (cont’d) An item of property, plant and equipment is derecognised upon disposal or when

no future economic benefits are expected from its use or disposal. The difference

between the net disposal proceeds, if any and the net carrying amount is

recognised in the profit or loss.

2.4 Intangible asset Intangible asset is recognised only when the identifiability, control and future

economic benefit probability criteria are met.

Intangible asset is initially measured at cost. After initial recognition, intangible

asset is carried at cost less any accumulated amortisation and any accumulated

impairment losses. The useful life of intangible asset is assessed to be either finite

or indefinite. Intangible asset with finite life is amortised on a straight line basis

over the estimated economic useful life and is assessed for any indication that the

asset could be impaired. If any such indication exists, the entity shall estimate the

recoverable amount of the asset. The amortisation period and the amortisation

method for an intangible asset with a finite useful life are reviewed at least at the

end of each reporting period. The amortisation expense on intangible asset with

finite life is recognised in profit or loss.

Expenditure on an intangible item that is initially recognised as an expense is not

recognised as part of the cost of an intangible asset at a later date.

An intangible asset is derecognised on disposal or when no future economic

benefits are expected from its use. The gain or loss arising from derecognition is

determined as the difference between the net disposal proceeds, if any, and the

carrying amount of the asset is recognised in profit or loss when the asset is

derecognised.

The Group capitalised product development costs, which are amortised on a

straight line basis over a period of three (3) years.



94


2.5 Investments Investment in subsidiary companies is shown at cost less accumulated

impairment, if any. Where an indication of impairment exists, the carrying

amount of the investment is assessed and written down immediately to its

recoverable amount. Refer Note 2.8 on impairment of non-financial assets.

On disposal of such investment, the difference between the net disposal proceeds

and their carrying amount is included in the profit or loss.

2.6 Investment properties Investment properties which consist of long-term leasehold and freehold land are

held to earn rentals and/or for capital appreciation and are measured initially at

cost, including transaction costs. Subsequent to initial recognition, investment

properties are measured at fair value. Gains or losses arising from changes in the

fair value of investment properties are included in profit or loss for the period in

which they arise.

Investment properties are derecognised when either they have been disposed of or

when the investment property is permanently withdrawn from use and no future

economic benefit is expected from its disposal. Any gains or losses on the

retirement or disposal of an investment property are recognised in profit or loss in

the year which they arise.

2.7 Prepaid lease payments on leasehold land

Leases of land where title is not expected to pass to the lessee as of the end of the

lease term are classified as operating lease as land normally has an indefinite

useful life. The upfront payments made on entering into or acquiring a leasehold

land that is an operating lease represents prepaid lease payments which are

amortised on a straight line basis over the lease term of 41 to 60 years.

2.8 Impairment of non-financial assets The carrying amounts of the Group’s assets, other than inventories and deferred

tax assets, are reviewed at each reporting date to determine whether there is any

indication of impairment. If any such indication exists, the asset’s recoverable

amount is estimated to determine the amount of impairment loss.

For the purpose of impairment testing of these assets, recoverable amount is

determined on an individual asset basis unless the asset does not generate cash

flows that are largely independent of those from other assets. If this is the case,

recoverable amount is determined for the cash-generating unit (“CGU”) to which

the asset belongs to.



95


2.8 Impairment of non-financial assets (cont’d) An asset’s recoverable amount is the higher of an asset’s or CGU’s fair value less

costs to sell and its 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. Where the carrying amount of an asset exceeds its

recoverable amount, the asset is considered impaired and is written down to its

recoverable amount.

An impairment loss is recognised in the profit or loss in the period in which it

arises. Impairment loss on goodwill is not reversed in a subsequent period. An

impairment loss for an asset other than goodwill is reversed if, and only if, there

has been a change in the estimates used to determine the asset’s recoverable

amount since the last impairment loss was recognised. The carrying amount of an

asset other than goodwill is increased to its revised recoverable amount, provided

that this amount does not exceed the carrying amount that would have been

determined (net of amortisation or depreciation) had no impairment loss been

recognised for the asset in prior years. A reversal of impairment loss for an asset

other than goodwill is recognised in the profit or loss.

2.9 Inventories Inventories are stated at the lower of cost and net realisable value.

Cost is determined using the first-in, first-out method. The cost of raw material

comprises the original cost of purchase plus the cost of bringing the inventories to

their intended location and condition. The cost of work-in-progress and finished

goods comprises raw materials, direct labour, other direct costs and an

appropriate proportion of production overheads.

Net realisable value is the estimated selling price in the ordinary course of

business, less cost of completion and selling expenses.



96


2.10 Financial instruments

(i) Financial assets

Accounting policies applied from 1 January 2018

Financial assets are recognised in the statements of financial position when,

and only when, the Group and the Company become a party to the

contractual provisions of the instrument.

(i) Recognition and initial measurement Financial assets are classified, at initial recognition, as subsequently

measured at amortised cost, fair value through other comprehensive

income (“OCI”), and fair value through profit or loss.

The classification of financial assets at initial recognition depends on

the financial asset’s contractual cash flow characteristics and the

Group’s and the Company’s business model for managing them.

With the exception of trade receivables that do not contain a significant

financing component or for which the Group and the Company have

applied the practical expedient, the Group and the Company initially

measure a financial asset at its fair value plus, in the case of a financial

asset not at fair value through profit or loss, transaction costs.

Trade receivables that do not contain a significant financing component

or if the period between performance and payment is 1 year or less

under practical expedient of MFRS 15, are measured at the transaction

price determined under MFRS 15.

In order for a financial asset to be classified and measured at amortised

cost or fair value through OCI, it needs to give rise to cash flows that

are solely payments of principal and interest (“SPPI”) on the principal

amount outstanding. This assessment is referred to as the SPPI test and

is performed at an instrument level.



97


2.10 Financial instruments (cont’d)

(i) Financial assets (cont’d)

Accounting policies applied from 1 January 2018 (cont’d)

(i) Recognition and initial measurement (cont’d) The Group’s and the Company’s business model for managing

financial assets refers to how it manages its financial assets in order to

generate cash flows. The business model determines whether cash

flows will result from collecting contractual cash flows, selling the

financial assets or both.

Purchases or sales of financial assets that require delivery of assets

within a time frame established by regulation or convention in the

market place (“regular way trades”) are recognised on the trade date,

that is the date that the Group or the Company commits to purchase or

sell the asset.

(ii) Subsequent measurement For purposes of subsequent measurement, financial assets are classified

in four categories:

(a) Financial assets at amortised cost (debt instruments)

(b) Financial assets at fair value through OCI with recycling of

cumulative gain and losses (debt instruments)

(c) Financial assets designated at fair value through OCI with no

recycling of cumulative gain and losses upon derecognition (equity

instruments)

(d) Financial assets at fair value through profit or loss

The financial assets of the Group and the Company are subsequently

measured under (a) at amortised cost and (d) at fair value through profit

or loss.



98





(ii) Subsequent measurement (cont’d)

Financial assets at amortised cost This category is the most relevant to the Group and the Company. The

Group and the Company measure financial assets at amortised cost if

both of the following conditions are met:

i. The financial asset is held within a business model with the

objective to hold financial assets in order to collect contractual cash

flows; and

ii. The contractual terms of the financial asset give rise on specified

dates to cash flows that are solely payments of principal and

interest on the principal amount outstanding.

Financial assets at amortised cost are subsequently measured using the

effective interest (“EIR”) method and are subject to impairment. Gains

and losses are recognised in profit or loss when the asset is

derecognised, modified or impaired.

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial

assets held for trading, financial assets designated upon initial

recognition at fair value through profit or loss, or financial assets

mandatorily required to be measured at fair value. Financial assets are

classified as held for trading if they are acquired for the purpose of

selling or repurchasing in the near term. Derivatives, including

separated embedded derivatives, are also classified as held for trading

unless they are designated as effective hedging instruments. Financial

assets with cash flows that are not solely payments of principal and

interest are classified and measured at fair value through profit or loss,

irrespective of the business model. Notwithstanding the criteria for

debts instruments to be classified at amortised cost or at fair value

through OCI, debt instruments may be designated at fair value through

profit or loss on initial recognition if doing so eliminates, or

significantly reduces, an accounting mismatch.



99






Financial assets at fair value through profit or loss (cont’d)

Financial assets at fair value through profit or loss are carried in the

statement of financial position at fair value with net changes in fair

value recognised in the statement of profit or loss.

This category includes derivative instruments and listed equity

instruments which the Group had not irrevocably elected to classify at

fair value through OCI. Dividends on listed equity instruments are also

recognised as other income in the statement of profit or loss when the

right of payment has been established.

(iii) Derecognition

A financial asset is derecognised when:

(a) The rights to receive cash flows from the asset have expired, or

(b) The Group and the Company have transferred their rights to

receive cash flows from the asset or have assumed an obligation to

pay the received cash flows in full without material delay to a third

party under a ‘pass-through’ arrangement; and either:

i. The Group and the Company have transferred substantially all

the risks and rewards of the asset; or

ii. The Group and the Company have neither transferred nor

retained substantially all the risks and rewards of the asset, but

have transferred control of the asset.



100





(iii) Derecognition (cont’d)

When the Group and the Company have transferred their rights to

receive cash flows from an asset or have entered into a pass-through

arrangement, they evaluate if, and to what extent, they have retained

the risks and rewards of ownership. When they have neither transferred

nor retained substantially all of the risks and rewards of the asset, nor

transferred control of the asset, the Group and the Company continue to

recognise the transferred asset to the extent of its continuing

involvement. In that case, the Group and the Company also recognise

an associated liability. The transferred asset and the associated liability

are measured on a basis that reflects the rights and obligations that the

Group and the Company have retained.

Continuing involvement that takes the form of a guarantee over the

transferred asset is measured at the lower of the original carrying

amount of the asset and the maximum amount of consideration that the

Group and the Company would require to repay.

Accounting policies applied until 31 December 2017

(i) Initial recognition and measurement

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 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.



101




Accounting policies applied from 31 December 2017 (cont’d)

(ii) Financial instrument categories and subsequent measurement

Effective interest method

The effective interest method is a method of calculating the amortised

cost of a financial asset and of allocating interest income over the

relevant period. The effective interest rate is the rate that exactly

discounts estimated future cash receipts (including all fees and points

paid or received that form an integral part of the effective interest rate,

transaction costs and other premiums or discounts) through the

expected life of the financial asset, or (where appropriate) a shorter

period, to the net carrying amount on initial recognition.

Income is recognised on an effective interest basis for debt instruments

other than those financial assets classified as at fair value through profit

or loss.

[The remainder of this page is intentionally left blank]



102






(cont’d)

Financial assets Financial assets are classified into the following specified categories:

financial assets “at fair value through profit or loss” (“FVTPL”), “held-

to-maturity” investments, “available-for-sale” (“AFS”) financial assets

and “loans and receivables”. The classification depends on the nature

and purpose of the financial assets and is determined at the time of

initial recognition.

A financial asset is any asset that is cash, a contractual right to receive

cash or another financial asset from another enterprise, a contractual

right to exchange financial instruments with another enterprise under

conditions that are potentially favourable, or an equity instrument of

another enterprise. The Group’s and the Company’s principal financial

assets are trade and other receivables, short-term investment, fixed

deposits, cash and bank balances and amount owing by subsidiary

companies.

(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 (including fixed deposits with financial institutions). 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.



103






(cont’d)

(b) Financial assets at FVTPL

Fair value through profit or loss category comprises financial

assets that are held for trading, derivatives or financial assets that

are specifically designated into this category upon initial

recognition.

Derivatives that are linked to and must be settled by delivery of

unquoted equity instruments whose fair values cannot be reliably

measured at cost.

Financial assets categorised as fair value through profit or loss are

subsequently measured at their fair values with the gain or loss

recognised in profit or loss.

All financial assets, except for those measured at fair value through

profit or loss are subject to review for impairment.

(iii) Derecognition

A financial asset or part of it is derecognised when, and only when the

contractual rights to the cash flows from the financial asset expire, or

when it transfers the financial asset ad substantially all the risks and

rewards of ownership of the asset to another entity. On derecognition of

a financial asset, the difference between carrying amount and the sum

of the consideration received (including any new asset obtained less

any new liability assumed) and any cumulative gain or loss that had

been recognised in equity is recognised in profit or loss.



104



(ii) Financial liability

(i) Recognition and initial measurement

Financial liabilities are classified, at initial recognition, as financial

liabilities at fair value through profit or loss, loans and borrowings and

payables as appropriate.

All financial liabilities are recognised initially at fair value and, in the

case of loans and borrowings and payables, net of directly attributable

transaction costs.

The Group’s and the Company’s financial liabilities include trade and

other payables and loans and borrowings.

(ii) Subsequent measurement

The measurement of financial liabilities depends on their classification,

as described below:

Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include financial

liabilities held for trading and financial liabilities designated upon

initial recognition as at fair value through profit or loss.

Financial liabilities are classified as held for trading if they are incurred

for the purpose of repurchasing in the near term. This category also

includes derivative financial instruments entered into by the Group and

the Company that are not designated as hedging instruments in the

hedge relationships as defined by MFRS 9. Separated embedded

derivatives are also classified as held for trading unless they are

designated as effective hedging instruments.



105



(ii) Financial liability (cont’d)


Gains or losses on liabilities held for trading are recognised in the

statement of profit or loss.

Financial liabilities designated upon initial recognition at fair value

through profit or loss are designated at the initial date of recognition,

and only if the criteria in MFRS 9 are satisfied. The Group and the

Company have not designated any financial liability as at fair value

through profit or loss.

Loans and borrowings This is the category most relevant to the Group and the Company. After

initial recognition, interest-bearing loans and borrowings are

subsequently measured at amortised cost using the EIR method. Gains

and losses are recognised in profit or loss when the liabilities are

derecognised as well as through the EIR amortisation process.

Amortised cost is calculated by taking into account any discount or

premium on acquisition and fees or costs that are an integral part of the

EIR. The EIR amortisation is included as finance costs in the statement

of profit or loss.

This category generally applies to interest-bearing loans and

borrowings.



106



(ii) Financial liability (cont’d)

(iii) Derecognition

A financial liability is derecognised when the obligation under the

liability is discharged or cancelled or expires. When an existing

financial liability is replaced by another from the same lender on

substantially different terms, or the terms of an existing liability are

substantially modified, such an exchange or modification is treated as

the derecognition of the original liability and the recognition of a new

liability. The difference in the respective carrying amounts is

recognised in the profit or loss.

(iii) Financial guarantee contracts A financial guarantee contract is a contract that requires the issuer to make

specified payments to reimburse the holder for a loss incurred because a

specified debtor failed to make payment when payment was due.

Financial guarantee contracts are recognised initially as a liability at fair

value. Subsequent to initial recognition, financial guarantee contracts are

recognised as income in profit or loss over the period of the guarantee. If the

debtor fails to make payment relating to financial guarantee contract when it

is due to the Group and the Company, as the issuer is required to reimburse

the holder for the associated loss, the liability is measured at the higher of the

expected credit loss allowance and the amount initially recognised less any

cumulative amount of income/ amortisation recognised.



107



(iv) Equity instruments

Ordinary shares are classified as equity. Dividends on ordinary shares are

recognised in equity in the period in which they are declared.

The transaction costs of an equity transaction are accounted for as a

deduction from equity, net of tax. Equity transaction costs comprise only

those incremental external costs directly attributable to the equity transaction

which would otherwise have been avoided.

(v) Impairment of financial assets

Accounting policies applied from 1 January 2018 The Group and the Company recognise an allowance for expected credit

losses (“ECLs”) for all debt instruments carried at amortised cost and fair

value through OCI. ECLs are based on the difference between the contractual

cash flows due in accordance with the contract and all the cash flows that the

Group and the Company expect to receive, discounted at an approximation of

the original EIR. The expected cash flows will include cash flows from the

sale of collateral held or other credit enhancements that are integral to the

contractual terms.

ECLs are recognised in two stages. For credit exposures for which there has

not been a significant increase in credit risk since initial recognition, ECLs

are provided for credit losses that result from default events that are possible

within the next 12-months (a 12-months ECL). For those credit exposures for

which there has been a significant increase in credit risk since initial

recognition, a loss allowance is required for credit losses expected over the

remaining life of the exposure, irrespective of the timing of the default (a

lifetime ECL).



108



(v) Impairment of financial assets (cont’d)


For trade receivables, the Group and the Company apply a simplified

approach in calculating ECLs. Therefore, the Group and the Company do not

track changes in credit risk, but instead recognise a loss allowance based on

lifetime ECLs at each reporting date. The Group and the Company have

established a provision matrix that is based on its historical credit loss

experience, adjusted for forward-looking factors specific to the debtors and

the economic environment.

The Group and the Company consider a financial asset to be in default when

internal or external information indicates that the Group and the Company

are unlikely to receive the outstanding contractual amounts in full before

taking into account any credit enhancements held by the Group and the

Company. A financial asset is written off when there is no reasonable

expectation of recovering the contractual cash flows.

Accounting policies applied until 31 December 2017 Financial assets, other than those at FVTPL, are assessed for indicators of

impairment as of 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 investment have been affected.

Receivables 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 period, as well as observable

changes in national or local economic conditions that correlate with default

on receivables.



109



(v) Impairment of financial assets (cont’d)

Accounting policies applied until 31 December 2017 (cont’d)

In respect of receivables 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.

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 a provision account. When

a trade receivable is considered uncollectible, it is written off against the

provision account. Subsequent recoveries of amounts previously written off

are credited against the provision account. Changes in the carrying amount of

the provision account are recognised in profit or loss.

(vi) Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is

reported in the consolidated statement of financial position if there is a

currently enforceable legal right to offset the recognised amounts and there is

an intention to settle on a net basis, to realise the assets and settle the

liabilities simultaneously.



110


2.11 Taxation and deferred taxation Income tax on the results for the financial year comprises current and deferred

tax. Current tax is the expected amount of income tax payable in respect of the

taxable profits for the financial year and is measured using the tax rates that have

been enacted at the reporting date.

Deferred tax liabilities and assets are provided using the liability method in

respect of all temporary differences between the carrying amount of an asset or

liability in the statements of financial position and its tax base including unused

tax losses and capital allowances.

Deferred tax liabilities and assets are measured at the tax rates that have been

enacted or substantively enacted by the reporting date and are expected to apply

when the related deferred tax asset is realised or the deferred tax liability is

settled.

A deferred tax asset is recognised only to the extent that it is probable that the

taxable profit will be available against which the deductible temporary

differences can be utilised. The carrying amount of a deferred tax asset is

reviewed at each reporting date. If it is no longer probable that sufficient taxable

profit will be available to allow the benefit of part or that entire deferred tax asset

to be utilised, the carrying amount of the deferred tax asset will be reduced

accordingly. When it becomes probable that sufficient future taxable profit will

be available, such reductions will be reversed.



111


2.12 Foreign currencies transactions In preparing the financial statements of the individual entities, transactions in

currencies other than the entity’s functional currency (foreign currencies) are

recorded in the functional currencies using the exchange rates prevailing at the

dates of the transactions or at the date of payment or receipt of advance

consideration, whichever is earlier. At each reporting date, monetary items

denominated in foreign currencies are retranslated at the rates prevailing on the

reporting date. Non-monetary items carried at fair value that are denominated in

foreign currencies are retranslated at the rates prevailing on 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 arising on the settlement of monetary items, and on the

retranslation of monetary items, are included in the profit or loss for the period.

Exchange differences arising on the retranslation of non-monetary items carried

at fair value are included in the profit or loss for the period except for the

differences arising on the retranslation of non-monetary items in respect of which

gains and losses are recognised directly in other comprehensive income.

Exchange differences arising from such non-monetary items are also recognised

directly in other comprehensive income.

2.13 Leases

As lessee Finance leases, which transfer to the Group substantially all the risks and rewards

incidental to ownership of the leased item, are capitalised at the inception of the

lease at the fair value of the leased asset or, if lower, at the present value of the

minimum lease payments. Any initial direct costs are also added to the amount

capitalised. Lease payments are apportioned between the finance charges and

reduction of the lease liability so as to achieve a constant rate of interest on the

remaining balance of the liability. Finance charges are charged to profit or loss.

Contingent rents, if any, are charged as expenses in the periods in which they are

incurred.



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2.13 Leases (cont’d)

As lessee (cont’d) Leased assets are depreciated over the estimated useful life of the

asset. However, if there is no reasonable certainty that the Group will obtain

ownership by the end of the lease term, the asset is depreciated over the shorter of

the estimated useful life and the lease term.

Operating lease payments are recognised as an expense in profit or loss on a

straight-line basis over the lease term. The aggregate benefit of incentives

provided by the lessor is recognised as a reduction of rental expense over the

lease term on a straight-line basis.

As lessor Leases where the Group retains substantially all the risks and rewards of

ownership of the asset are classified as operating leases. Initial direct costs

incurred in negotiating an operating lease are added to the carrying amount of the

leased asset and recognised over the lease term on the same basis as for rental

income.

2.14 Provisions

A provision is recognised when the Group or the Company has a present

obligation as a result of a past event and it is probable that an outflow of

resources embodying economic benefits will be required to settle the obligation,

and a reliable estimate of the amount can be made. Provisions are reviewed at

each reporting date and adjusted to reflect the current best estimate. Where the

effect of the time value of money is material, provisions are discounted using a

current pre-tax rate that reflects, where appropriate, the risks specific to the

liability. Where discounting is used, the increase in the provision due to the

passage of time is recognised as a finance cost.



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2.15 Revenue recognition

Accounting policies applied from 1 January 2018

The Group recognises revenue from contracts with customers for the sale of

goods based on the five-step model as set out in MFRS 15 Revenue from

Contracts with Customers:

(a) Identify contract(s) with a customer. A contract is defined as an agreement

between two or more parties that creates enforceable rights and obligations

and sets out the criteria that must be met.

(b) Identify performance obligations in the contract. A performance obligation is

a promise in a contract with a customer to transfer a good or service to the

customer.

(c) Determine the transaction price. The transaction price is the amount of

consideration to which the Group expects to be entitled in exchange for

transferring promised goods or services to a customer, excluding amounts

collected on behalf of third parties.

(d) Allocate the transaction price to the performance obligations in the contract.

For a contract that has more than one performance obligation, the Group

allocates the transaction price to each performance obligation in an amount

that depicts the amount of consideration to which the Group expects to be

entitled in exchange for satisfying each performance obligation.

(e) Recognise revenue when (or as) the Group satisfies a performance obligation.

The Group satisfies a performance obligation and recognises revenue over time if

the Group’s performance:

(a) Does not create an asset with an alternative use to the Group and has an

enforceable right to payment for performance completed to-date; or

(b) Creates or enhances an asset that the customer controls as the asset is

created or enhanced; or

(c) Provides benefits that the customer simultaneously receives and consumes

as the Group performs.



114


2.15 Revenue recognition (cont’d)


For performance obligations where any one of the above conditions is not met,

revenue is recognised at the point in time at which the performance obligation is

satisfied.

When the Group satisfies a performance obligation by delivering the promised

goods or services, it creates a contract-based asset on the amount of consideration

earned by the performance. Where the amount of consideration received from a

customer exceeds the amount of revenue recognised, this gives rise to a contract

liability.

Performance obligations are as follows:

(a) Sales of goods Revenue from sales of goods is recognised at the point in time when control

of the goods is transferred to the customers, generally upon delivery of

goods.

(b) Contract balances arising from revenue recognition Contract assets are the Group's right to consideration in exchange for goods

or services that the Company has transferred to customers. If goods or

services are transferred to customers before the customers pay consideration

or before payment is due, the Group shall present the contract as contract

assets, excluding any amounts presented as receivables. Trade receivables

represent the entity's right to an amount of consideration that is

unconditional.

Contract liabilities are the obligation to transfer goods or services to

customers for which the entity has received consideration (or an amount of

consideration is due) from the customers. If the customers pay consideration

before the entity transfer goods or services to the customers, contract

liabilities are recognised when the payment is made or the payment is due

(whichever is earlier).

(c) Other revenues are recognised on the following bases: (i) Interest income is recognised on an accrual basis (taking into account

the effective yield on the assets) unless collectability is in doubt.

(ii) Distribution of investment management fund is recognised when the

right to receive payment has been established.

(iii) Rental income is recognised on an accrual basis in accordance with the

substance of the relevant agreement unless collectability is in doubt.

(iv) Management fee is accrued on a time basis.



115


2.15 Revenue recognition (cont’d)

Accounting policies applied until 31 December 2017

Revenue from sale of goods is measured at the fair value of the consideration

received or receivable and is recognised when goods are delivered and title has

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 transactions can be

measured reliably.

Sales represents amounts receivable for goods delivered in the normal course of

business, net of returns and trade discounts.

Management fee is accrued on a time basis.

Interest income from a financial asset is recognised when it is probable that the

economic benefits will flow to the Group and to the Company and the amount of

income 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.



116


2.16 Employee benefits

Short term employee benefits

Wages, salaries, bonuses and social security contributions are recognised as

expenses in the year in which the associated services are rendered by employees.

Short term accumulating compensated absences such as paid annual leaves are

recognised when services are rendered by employees that increase their

entitlement to future compensated absences, and short term non-accumulating

compensated absences such as sick leaves are recognised when the absences

occur.

Defined contribution plans

As required by law, companies in Malaysia make contributions for local

employees to the state pension scheme, the Employees’ Provident Fund (“EPF”).

Such contributions are recognised as an expense in the profit or loss as incurred.

2.17 Borrowing costs Borrowing costs incurred to finance the construction of property, plant and

equipment are capitalised as part of the cost of the asset during the period of time

that is required to complete and prepare the asset for its intended use. Borrowing

costs incurred to finance property development activities and construction

contracts are accounted for in a similar manner. All other borrowing costs are

expensed.

2.18 Contingent liabilities and contingent assets The Group does not recognise a contingent liability but discloses its existence in

the financial statements. A contingent liability is a possible obligation that arises

from past events whose existence will be confirmed by uncertain future events

beyond the control of the Group or a present obligation that is not recognised

because it is not probable that an outflow of resources will be required to settle

the obligation. A contingent liability also arises in the extremely rare

circumstances where there is a liability that cannot be recognised because it

cannot be measured reliably. However, contingent liabilities do not include

financial guarantee contracts.

A contingent asset is a possible asset that arises from past events whose existence

will be confirmed by uncertain future events beyond the control of the Group.

The Group does not recognise contingent assets but discloses its existence where

inflows of economic benefits are probable, but not virtually certain.



117


2.19 Cash and cash equivalents Cash and cash equivalents comprise cash in hand, bank balances, demand

deposits, bank overdrafts and short term, highly liquid investments that are

readily convertible to known amounts of cash and which are subject to an

insignificant risk of changes in value.

2.20 Fair value measurement Fair value is the price that would be received to sell an asset or paid to transfer a

liability in an orderly transaction between market participants at the measurement

date, regardless of whether that price is directly observable or estimated using a

valuation technique. The measurement assumes that the transaction takes place

either in the principal market or in the absence of a principal market, in the most

advantageous market. For non-financial asset, the fair value measurement takes

into account a market’s participant’s ability to generate economic benefits by

using the asset in its highest and best use or by selling it to another market

participant that would use the asset in its highest and best use. For financial

reporting purposes, the fair value measurements are analysed into level 1 to level

3 as follows:-

Level 1: Inputs are quoted prices (unadjusted) in active markets for identical

assets or liability that the entity can access at the measurement date;

Level 2: Inputs are inputs, other than quoted prices included within level 1, that

are observable for the asset or liability, either directly or indirectly; and

Level 3: Inputs are unobservable inputs for the asset or liability.

The transfer of fair value between levels is determined as of the date of the event

or change in circumstances that caused the transfer.



118

3. MALAYSIAN FINANCIAL REPORTING STANDARDS (“MFRSs”),

AMENDMENTS TO MFRSs, ISSUES COMMITTEE INTERPRETATIONS (“IC

INTERPRETATIONs”) AND AMENDMENT TO IC INTERPRETATIONs

(a) Adoption of Standards effective for the financial periods beginning on or

after 1 January 2018

As at 1 January 2018, the Group and the Company have adopted the following

pronouncements that are applicable and have been issued by the Malaysian

Accounting Standard Board as listed below:

MFRS 9 Financial Instruments

MFRS 15 Revenue from Contracts with Customers

IC Interpretation 22 Foreign Currency Transactions and Advance

Consideration

Amendment to MFRS 140 Investment Property: Transfers to Investment

Property

The principal changes in accounting policies and their effects are set out below:

(i) MFRS 9 Financial Instruments

The adoption of this Standard resulted in changes in accounting policies and

adjustments to the financial statements.

The accounting policies that relate to the recognition, classification,

measurement and derecognition of financial instruments and impairment of

financial assets are amended to comply with the provisions of this Standard,

while the hedge accounting requirements under this Standard are not relevant

to the Group and the Company.

a. Financial assets

The Group and the Company classify the financial assets into the

following measurement categories depending on the Group’s and the

Company’s business model for managing the financial assets and the

terms of contractual cash flows of the financial assets:

- Those to be measured at amortised cost; and

- Those to be measured subsequently at fair value through profit or

loss.



119

3. MALAYSIAN FINANCIAL REPORTING STANDARDS (“MFRSs”), AMENDMENTS TO MFRSs, ISSUES COMMITTEE

INTERPRETATIONS (“IC INTERPRETATIONs”) AND AMENDMENT TO IC INTERPRETATIONs (cont’d)

(a) Adoption of Standards effective for the financial periods beginning on or after 1 January 2018 (cont’d)

(i) MFRS 9 Financial Instruments (cont’d)

a. Financial assets (cont’d)

The financial impact of the changes in accounting policies are as follows:

Original New Original New

(MFRS 139) (MFRS 9) (MFRS 139) (MFRS 9)

Group RM RM

Financial assets

Trade receivables, other receivables

and deposits Loans and receivables Financial assets at amortised cost 2,342,354 2,342,354

Deposits, cash and bank balances Loans and receivables Financial assets at amortised cost 6,411,249 6,411,249

Investment management funds Fair value through profit or loss Financial assets at fair value

through profit or loss 4,314,002 4,314,002

Carrying amount as

Measurement Category at 1 January 2018



120

3. MALAYSIAN FINANCIAL REPORTING STANDARDS (“MFRSs”), AMENDMENTS TO MFRSs, ISSUES COMMITTEE

INTERPRETATIONS (“IC INTERPRETATIONs”) AND AMENDMENT TO IC INTERPRETATIONs (cont’d)

(a) Adoption of Standards effective for the financial periods beginning on or after 1 January 2018 (cont’d)


a. Financial assets (cont’d)

The financial impact of the changes in accounting policies are as follows: (cont’d)

Original New Original New

(MFRS 139) (MFRS 9) (MFRS 139) (MFRS 9)

Company

Financial assets

Other receivables and deposits Loans and receivables Financial assets at amortised cost 4,814 4,814

Due from subsidiary companies Loans and receivables Financial assets at amortised cost 13,648,641 13,648,641

Cash and bank balances Loans and receivables Financial assets at amortised cost 19,496 19,496

Investment management funds Fair value through profit or loss Financial assets at fair value

through profit or loss 3,228,168 3,228,168

Carrying amount as

Measurement Category at 1 January 2018

The adoption of MFRS 9 does not have financial impact to 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.



121



INTERPRETATIONs”) AND AMENDMENT TO IC INTERPRETATIONs (cont’d)

(a) Adoption of Standards effective for the financial periods beginning on or after

1 January 2018 (cont’d)


b. Financial liabilities There is no impact on the classification and measurement of the Group’s

and the Company’s financial liabilities.

c. Impairment of financial assets

MFRS 9 Financial Instruments requires impairment assessments to be

based on an Expected Credit Loss (“ECL”) model, replacing the incurred

loss model under MFRS 139 Financial Instruments: Recognition and

Measurement.

The key changes in relation to impairment of financial assets are as

follows:

i. Deposit, cash and bank balances The amount of ECL is measured as the probability-weighted present

value of all cash shortfalls over the expected life of the financial

asset discounted at its original effective interest rate. The cash

shortfall is the difference between all contractual cash flows that are

due to the Group and the Company, and all the cash flows that the

Group and the Company expect to receive.

The Group and the Company apply a two-step approach to measure

the ECL on cash and bank balances:

12-months ECL

For a financial asset for which there is no significant increase in

credit risk since initial recognition, the Group and the Company shall

measure the allowance for impairment for that financial asset at an

amount based on the probability of default occurring within the next

12 months considering the loss given default of that financial asset.



122







c. Impairment of financial assets (cont’d)

i. Deposit, cash and bank balances (cont’d)

Lifetime ECL For a financial asset for which there is a significant increase in credit

risk since initial recognition, a lifetime ECL for that financial asset is

recognised as allowance for impairment by the Group and the

Company. If, in a subsequent period the significant increase in credit

risk since initial recognition is no longer evident, the Group and the

Company shall revert the loss allowance measurement from lifetime

ECL to 12-months ECL.

At each financial year end, the Group and the Company assess

whether there is a significant increase in credit risk for cash and

bank balances since initial recognition by comparing the risk of

default on these financial assets as at the financial year end with the

risk of default as at the date of initial recognition. The Group and the

Company consider external credit rating and other supportive

information to assess deterioration in credit quality of these financial

assets.

There is no impact on ECL on deposits, cash and bank balances as

the estimated impairment loss was immaterial.

ii. Trade receivables, other receivables and amount due from

subsidiary companies which are financial assets

The Group and the Company apply the simplified approach

prescribed by MFRS 9 Financial Instruments, which requires a

lifetime ECL to be recognised from initial recognition of the trade

receivables, other receivables and amount due from subsidiary

companies which are financial assets.

There is no impact on ECL on trade receivables, other receivables

and amount due from subsidiary companies as the estimated

impairment loss was immaterial.



123






(ii) MFRS 15 Revenue from Contracts with Customers The Group and the Company have adopted MFRS 15 Revenue from

Contracts with Customers which is applied retrospectively from 1 January

2017. This Standard establishes a five-step model that will apply to

recognition of revenue arising from contracts with customers, and provide a

more structured approach in measuring and recognising revenue. Under this

Standard, revenue will be recognised at an amount that reflects the

consideration to which an entity expects to be entitled in exchange for

transferring goods or services to a customer.

There is no material impact of the adoption MFRS 15 on the profit of the

Group and the Company. Presentation of the financial statement was

affected by the reclassification of affected items from expenses to revenue.

Reconciliation of consolidation statement of profit or loss for the financial

year ended 31 December 2017:

Original New

(MFRS118) MFRS 15 (MFRS15)

RM RM RM

Revenue 28,227,166 (456,790) 27,770,376

Other operating expenses (5,009,107) 456,790 (4,552,317)

Effect of

transition to



124




(b) New and revised MFRSs, Amendments to MFRSs, IC Interpretations and

Amendment to IC Interpretations which have been issued but not yet effective

and relevant to the Group and the Company

Effective dates

MFRS 16 Leases 1 January 2019

Amendments to MFRS 3 Business Combinations 1 January 2020

Amendments to MFRS 9 Prepayment Features with

Negative Compensation

1 January 2019

Amendments to MFRS 101 Presentation of Financial

Statements

1 January 2020

Amendments to MFRS 101

and MFRS 108

Definition of Material 1 January 2020


Accounting Policies, Changes in

Accounting Estimates and Errors

1 January 2020

Amendment to MFRS 112 Income Taxes (Annual

Improvements to MFRS

Standards 2015 – 2017 Cycle)

1 January 2019


Employee Benefits (Plan

Amendment, Curtailment and

Settlement)

1 January 2019

Amendments to MFRS 123 Borrowing Costs (Annual

Improvements to MFRS

Standards 2015-2017 Cycle)

1 January 2019

Amendments to MFRS 137 Provisions, Contingent Liabilities

and Contingent Assets

1 January 2020

IC Interpretation 23 Uncertainty over Income Tax

Treatments

1 January 2019

Amendments to IC

Interpretation 19

Extinguishing Financial Liabilities

with Equity

1 January 2020

Amendments to IC

Interpretation 22

Foreign Currency Transactions and

Advance Consideration

1 January 2020

It is anticipated that the adoption of the abovementioned Standards and

Interpretations will not have significant impact on the financial statements of the

Group and the Company except for MFRS 16 Leases as disclosed below.



125




(b) New and revised MFRSs, Amendments to MFRSs, IC Interpretations and

Amendment to IC Interpretations which have been issued but not yet effective

and relevant to the Group and the Company (cont’d)

Effective for annual periods beginning on or after 1 January 2019

MFRS 16 Leases

MFRS 16 Leases supersedes MFRS 117 Leases and the related interpretations.

Under MFRS 16, a lease is a contract (or part of a contract) that conveys the right

to control the use of an identified asset for a period of time in exchange for

consideration.

MFRS 16 eliminates the classification of leases by the lessee as either finance

leases (on balance sheet) or operating leases (off balance sheet). MFRS 16 requires

a lessee to recognise a “right-of-use” of the underlying assets and lease liability

reflecting future lease payments for most leases.

The right-of-use asset is depreciated in accordance with the principle in MFRS 116

Property, plant and equipment and the lease liability is accreted over time with

interest expense recognised in the profit or loss.

For lessors, MFRS 16 retains most of the requirements in MFRS 117. Lessors

continue to classify all leases as either operating leases or finance leases, and

account for them differently.

A lessee can choose to apply the standard using either a full retrospective or a

modified retrospective transition approach. MFRS 16 is effective for annual periods

beginning on or after 1 January 2019, with early application permitted, but not

before an entity applies MFRS 15.

The Directors are currently assessing the impact on adoption of MFRS 16 on the

amounts reported and disclosures in the financial statements. However, it is not

practicable to provide a reasonable estimate of the effect of MFRS 16 until it

completes a detailed review.



126

4. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS

The preparation of the financial statements involved making certain estimates, judgements,

and assumptions concerning the future. They affect the accounting policies applied,

amount of assets, liabilities, income and expenses reported and disclosures made. They are

assessed on an on-going basis and are based on experience and relevant factors, including

expectations of future events that are believed to be reasonable under the circumstances.

Changes in these estimates and assumptions by management may have an effect on the

balances as reported in the financial statements. Significant accounting estimates and

judgements, where used, have been disclosed in the relevant notes to the financial

statements.

The key assumptions concerning the future and other key sources of estimation uncertainty

at the reporting date that have a significant risk of causing a material adjustment to the

carrying amounts of assets and liabilities within the next financial year are discussed

below:

(i) Depreciation of property, plant and equipment

The cost of property, plant and equipment is depreciated on a straight-line basis

over their estimated useful lives. Management estimates the useful lives of these

property, plant and equipment to be within 3 to 50 years. The carrying amount of

the Group’s property, plant and equipment at 31 December 2018 is disclosed in

Note 5. Changes in the expected level of usage could impact the economic useful

lives and the residual values of these assets, therefore future depreciation charges

could be revised.

(ii) Impairment of property, plant and equipment

The Group assesses whether there are any indicators of impairment of property,

plant and equipment as at the end of each reporting period. Property, plant and

equipment are tested for impairment when there are indicators that the carrying

amounts may not be recoverable. If there are indicators of impairment in property,

plant and equipment, the Group carries 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 are allocated. The estimate of value-in-use is based

on a financial projection, approved by the management covering a period of four

years.

The key assumptions for value-in-use include the management’s expectation of

revenue growth rate and profit margin. Further details are disclosed in Note 6(ii).



127

4. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS (cont’d)

(iii) Allowance for slow-moving inventories

The Group reviews the inventory age listing on a periodic basis. This review

involves the comparison of the carrying value of the aged inventory items with

their respective net realisable values. The purpose is to ascertain whether an

allowance is required to be made in the financial statements for any slow-moving

items. In addition, the Group conducts physical counts on their inventories on a

periodic basis in order to determine whether an allowance for inventory slow-

moving inventories is required. The carrying amount of the Group’s inventories is

disclosed in Note 10.

(iv) Income taxes

Significant judgement is required in determining the capital allowances,

reinvestment allowance and deductibility of certain expenses during the estimation

of the provision for income taxes. There are many transactions and calculations for

which the ultimate tax determination is uncertain during the ordinary course of the

business. The Group recognises liabilities for anticipated tax based on estimates of

whether additional taxes will be due. Where the final tax outcome of these matters

is different from the amounts that were initially recorded, such differences will

impact the income tax and deferred tax provisions in the period in which such

determination is made. Details of income taxes are disclosed in Note 12.

(v) Impairment of investment in subsidiary companies and amount due from

subsidiary companies The Company reviews the investment in subsidiary companies for impairment

when there is an indication of impairment. The recoverable amount of investment

in subsidiary companies is assessed by reference to the higher of its carrying

amount and its value-in-use of the respective investment in subsidiary companies.

The value in use is the net present value of the projected future cash flows derived

from the business operations of the respective subsidiary companies discounted at

an appropriate discount rate. Such a discounted cash flow method involves the use

of estimated future results and a set of assumptions to reflect their income and cash

flows. Judgement was also used to determine the discount rate for their cash flows

and the future growth of the business of the subsidiary companies. The principal

assumptions used are as disclosed in Note 6(ii).



128

5. PROPERTY, PLANT AND EQUIPMENT

Tools,

equipment

and Furniture,

Freehold Plant and Motor electrical fixtures and

Group land Buildings machinery vehicles installation fittings Total

RM RM RM RM RM RM RM

Cost

At 1 January 2017 3,681,482 15,877,278 31,473,027 2,522,510 5,629,715 939,548 60,123,560

Additions - 18,450 107,274 - 82,273 3,700 211,697

Disposals - (377,154) (1,090,226) (131,233) (1,537) - (1,600,150)

At 31 December 2017/ 1 January 2018 3,681,482 15,518,574 30,490,075 2,391,277 5,710,451 943,248 58,735,107

Additions - - 443,781 - 55,748 - 499,529

Written off - - (327,500) - - - (327,500)

At 31 December 2018 3,681,482 15,518,574 30,606,356 2,391,277 5,766,199 943,248 58,907,136



129

5. PROPERTY, PLANT AND EQUIPMENT (cont’d)

Tools,

equipment

and Furniture,

Freehold Plant and Motor electrical fixtures and

Group land Buildings machinery vehicles installation fittings Total

RM RM RM RM RM RM RM

Accumulated depreciation

At 1 January 2017 - 4,272,544 17,784,712 2,055,538 4,681,380 890,387 29,684,561

Charge for the year - 336,768 1,941,831 92,814 198,808 7,859 2,578,080

Disposals - (105,271) (1,071,351) (114,215) (1,500) - (1,292,337)

At 31 December 2017/ 1 January 2018 - 4,504,041 18,655,192 2,034,137 4,878,688 898,246 30,970,304

Charge for the year - 324,609 1,836,614 76,642 183,849 11,213 2,432,927

Written off - - (327,500) - - - (327,500)

At 31 December 2018 - 4,828,650 20,164,306 2,110,779 5,062,537 909,459 33,075,731

Net carrying amounts

At 31 December 2018 3,681,482 10,689,924 10,442,050 280,498 703,662 33,789 25,831,405

At 31 December 2017 3,681,482 11,014,533 11,834,883 357,140 831,763 45,002 27,764,803



130

5. PROPERTY, PLANT AND EQUIPMENT (cont’d)

(i)

2018 2017

RM RM

Net carrying amounts of certain assets are

pledged as securities for bank borrowing and

credit facilities as disclosed in Note 18 and

Note 28 respectively:

- Freehold land (Note 18) 2,309,032 2,309,032

- Building (Note 28) 159,667 165,034

- Plant and machinery (Note 18) 3,633,070 4,128,543

6,101,769 6,602,609

Group

(ii) During the last financial year, the Group disposed off a building together with

leasehold land located at Tanjung Agas, Johor as disclosed in Note 9.

(iii)

2018 2017

RM RM

Purchase of property, plant and equipment:

Aggregate cost of property, plant

and equipment purchased 499,529 211,697

Capitalisation of deposit previously

paid (Note 11(v)) (110,271) -

Amount due to other payable (Note 19(iv)) (122,925) -

Cash payment 266,333 211,697

Group

(iv) The cash generating unit (“CGU”) identified refers to the business of the subsidiary

companies. The key assumptions supporting the recoverable amount of the

property, plant and equipment is as disclosed in Note 6(ii).



131

6. INVESTMENT IN SUBSIDIARY COMPANIES

2018 2017

RM RM

Unquoted shares, at cost 27,013,779 27,013,779

Company

Details of the subsidiary companies, all incorporated in Malaysia, are as follows:

Gross equity interest

2018 2017

Subsidiary companies of the

Company % % Principal activities

T.A. Furniture Industries Sdn. Bhd.* 100 100 Manufacturing and

marketing of furniture

products

T.A. Systems Furniture Industries 100 100 Investment holding

Sdn. Bhd.

Home & Office Furniture Sdn. Bhd. 100 100 General trading,

manufacturing and

exporting of furniture

Subsidiary companies of T.A.

Furniture Industries Sdn. Bhd.

Penquo Resources Sdn. Bhd. 100 100 Investment in properties

T.A. E-Furnishings Sdn. Bhd. 100 100 Trading of furniture

products and provision of

related services

T.A. Furniture Trading (M) - 100 Struck off

Sdn. Bhd.

T.A. Rubber Reforestation (Johor) - 100 Struck off

Sdn. Bhd.



132

6. INVESTMENT IN SUBSIDIARY COMPANIES (cont’d)

Gross equity interest

2018 2017

Subsidiary companies of T.A. Systems

Furniture Industries Sdn. Bhd. % % Principal activities

Gerak Mahir Sdn. Bhd. 100 100 Dormant

* There is a dividend distribution restriction pursuant to the borrowing covenant by

certain banks for credit facilities received, as disclosed in Note 28(iii).

(i) On 4 July 2018, the subsidiary companies of the Company, T.A. Furniture

Trading (M) Sdn. Bhd. and T.A. Rubber Reforestation (Johor) Sdn. Bhd. have

successfully been struck off.

(ii) Key assumptions used in value-in-use calculations The subsidiary companies have made losses during the financial year. The

Company has carried out a review of the recoverable amount of the investment in

the subsidiary companies and amount due from subsidiary companies as disclosed

in Note 11. The recoverable amount of a CGU is determined based on a value-in-

use calculation. The value-in-use is derived based on management’s cash flows

and profit forecast and projections for four (4) financial years from 2019 to 2022

and the key assumptions used in the calculation of value-in-use are as follows:

(a) The forecast annual revenue growth for 2019 is at 153% and over the next

3 years will be approximately 20% per annum; and

(b) The projected gross profit margin for 2019 is at 14.5% and over the next 3

years will be approximately 17.6% per annum.

Sensitivity to changes in assumptions The circumstances where changes in the key assumption will cause and

impairment loss to be recognised include the following:

(a) The forecast annual revenue growth during the financial year ending 2019

decrease to 58% per annum;

(b) The forecast annual revenue growth over the next 3 years commencing

2020 reduce to approximately 10% per annum; and

(c) The projected gross profit margin over the next 4 years is at 10% per

annum.

If all of the above assumptions applied in the calculation of value-in-use, the

potential impairment loss is approximately RM4,000,000.



133

7. INTANGIBLE ASSET

2018 2017

Product development cost RM RM

Expenditure incurred

At 1 January/ 31 December 1,346,024 1,346,024

Accumulated amortisation

At 1 January 930,170 225,552

Amortisation charge 415,854 704,618

At 31 December 1,346,024 930,170

Net carrying amount

At 31 December - 415,854

Group

8. INVESTMENT PROPERTIES

Leasehold Freehold

land land Total

Group RM RM RM

At fair value

At 1 January 2017 2,215,000 2,974,707 5,189,707

Fair value changes - 235,293 235,293

At 31 December 2017/2018 2,215,000 3,210,000 5,425,000

Company

At fair value

At 1 January 2017 - 2,974,707 2,974,707

Fair value changes - 235,293 235,293

At 31 December 2017/2018 - 3,210,000 3,210,000



134

8. INVESTMENT PROPERTIES (cont’d)

(a) The basis of fair value measurement of investment properties is disclosed in Note

31.

(b) Included in investment properties of the Group is a leasehold land of

RM2,215,000 (2017: RM2,215,000) charged to licensed banks for credit facilities

granted to a subsidiary company as disclosed in Note 28.

(c) The operating expenses related to the investment properties are as follow:

2018 2017 2018 2017

RM RM RM RM

Direct operating expenses of

revenue generating investment

properties 23,299 23,299 5,197 5,197

Group Company

9. PREPAID LEASE PAYMENTS

2018 2017

RM RM

Cost

At 1 January 1,153,541 1,449,541

Disposal (Note 5(ii)) - (296,000)

At 31 December 1,153,541 1,153,541

Accumulated amortisation

At 1 January 490,577 498,930

Amortisation charge 30,644 35,119

Disposal (Note 5(ii)) - (43,472)

At 31 December (521,221) (490,577)

Net carrying amounts 632,320 662,964

Group



135

9. PREPAID LEASE PAYMENTS (cont’d)

Prepaid lease payments relate to the lease of four parcels for the Group's factory and

office buildings located in Muar, Johor. The lease will expire in 2046, 2048 and 2056

respectively and the Group does not have an option to purchase the leased land upon the

expiry of these periods.

Included in prepaid lease payments are unamortised prepaid lease payments of

RM197,683 (2017: RM203,607) representing leasehold land that has been charged to

licensed banks for credit facilities granted to a subsidiary company as disclosed in Note

28.

10. INVENTORIES

2018 2017

RM RM

At cost

Raw materials 6,193,234 4,587,399

Work-in-progress 1,425,495 1,400,009

Finished goods 1,724,964 1,970,063

9,343,693 7,957,471

Less: Allowance for slow-moving inventories (166,839) (170,103)

9,176,854 7,787,368

2018 2017

RM RM

Recognised in profit or loss:

- Inventories recognised as expenses 17,824,496 15,537,780

- Allowance for slow-moving inventories 166,839 170,103

- Reversal for slow-moving inventories (170,103) (102,298)

Group

Group



136

11. RECEIVABLES

2018 2017 2018 2017

RM RM RM RM

Trade receivables 2,464,973 1,402,846 - -

Other receivables 1,114,925 619,547 7,857 3,314

Deposits 113,149 319,961 2,010 1,500

Prepayments 561,913 557,299 - -

Due from subsidiary

companies - non-trade - - 13,561,283 13,648,641

4,254,960 2,899,653 13,571,150 13,653,455

Disclosed as:

- Current 4,254,960 2,899,653 9,867 4,814

- Non-current - - 13,561,283 13,648,641

4,254,960 2,899,653 13,571,150 13,653,455

CompanyGroup

(i) The Group’s normal trade receivable credit periods range from letter of credit at

sight to 120 days (2017: letter of credit at sight to 120 days). Other credit terms are

assessed and approved on a case-by-case basis.

(ii) The ageing analysis of the Group’s trade receivables is as follows:

2018 2017

RM RM

Neither past due nor impaired 2,337,465 1,246,006

Past due but not impaired

1 - 30 days 111,933 116,186

More than 30 days 15,575 40,654

2,464,973 1,402,846

Group

None of the Group's trade receivables that are neither past due nor impaired have

been renegotiated during the financial year.



137

11. RECEIVABLES (cont’d)

(ii) Receivable that is past due but not impaired

Included in trade receivables that are past due but not impaired is unsecured in

nature. The Group considers the outstanding amounts are still recoverable and there

has not been a significant change in credit quality.

(iii) As at the reporting date, the Group is exposed to a significant concentration of

credit risk whereby a substantial balance of the total trade receivables is due from

five (5) (2017: four (4)) major customers, representing approximately 63.16%

(2017: 83.56%) of the total trade receivables of the Group.

(iv) The amount due from subsidiary companies is unsecured, interest-free and

repayable upon demand. The related party transactions are disclosed in Note 29.

(v) Included in prepayment are advance payment to suppliers of the Group amounting

to RMNil (2017: RM110,271) for purchase of property, plant and equipment.

(vi) The currency exposure profile of receivables is as follows:

2018 2017 2018 2017

RM RM RM RM

Ringgit Malaysia 1,418,255 2,185,873 13,571,150 13,653,455

US Dollar 2,488,488 352,705 - -

Sterling Pound 326,123 302,709 - -

Others 22,094 58,366 - -

4,254,960 2,899,653 13,571,150 13,653,455

CompanyGroup

(vii) The receivables are not secured by any collateral or other credit enhancement.

(viii) Trade receivables, other receivables and amount due from subsidiary companies

are subject to the impairment requirements of MFRS 9. The estimated impairment

loss was immaterial.



138

12. TAXATION

2018 2017 2018 2017

RM RM RM RM

Tax assets at 1 January 126,806 239,623 27,090 84,230

Taxation charge for the financial year (338) - - -

Payment made during the

financial year 807 - - -

Tax refunded (76,183) (112,817) (27,090) (57,140)

Tax assets at 31 December 51,092 126,806 - 27,090

2018 2017 2018 2017

RM RM RM RM

The taxation expense comprises:

Malaysian taxation

- Under provision in prior year 338 - - -

Group Company

Group Company

Reconciliation of tax expenses with accounting (loss)/profit:

2018 2017 2018 2017

RM RM RM RM

(Loss)/ Profit before taxation (4,613,169) (3,023,641) (10,052) 140,769

Tax at current income tax rate

at 24% (1,107,161) (725,674) (2,412) 33,785

Tax effects in respect of:

- Non-allowable expenses 273,622 269,345 20,715 6,743

- Non-taxable income (47,563) (220,011) (28,303) (24,481)

- Fair value gain on investment

properties - (56,470) - (56,470)

Deferred tax assets not recognised 881,102 732,810 10,000 40,423

Under provision of taxation in prior

year 338 - - -

338 - - -

Group Company



139

13. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

2018 2017 2018 2017

RM RM RM RM

Current

Investment management funds 4,471,594 4,314,002 3,346,094 3,228,168

CompanyGroup

(i) Investment management funds represent fund placed with licensed fund managers.

The portfolio of securities managed by the fund managers comprise of cash

deposits and short-term money market instruments which are not subject to

significant changes in value.

(ii) Interest rate for investment management funds is at 3.89% (2017: 3.22%) per

annum.

(iii) The Group is exposed to a significant concentration risk arising from the

investment management funds whereby 100% (2017: 100%) of the total investment

management fund of the Group is placed in one (1) (2017: one (1)) financial

institution.

14. DEPOSITS, CASH AND BANK BALANCES

2018 2017 2018 2017

RM RM RM RM

Fixed deposits with

licensed banks 2,525,464 2,461,416 - -

Bank balances 935,425 3,938,093 16,528 19,496

Cash in hand 17,535 11,740 - -

3,478,424 6,411,249 16,528 19,496

Group Company

(i) Included in fixed deposits with licensed banks is an amount of RM1,386,182

(2017: RM1,298,982) that has been pledged under a lien to a licensed bank for

credit facilities granted to the Group as disclosed in Note 28.

(ii) Interest rates for fixed and short-term deposit range from 2.50% to 3.15% (2017:

2.00% to 2.90%) per annum and the fixed deposits have maturity periods which

range from 92 to 365 days (2017: 92 to 365 days).



140

14. DEPOSITS, CASH AND BANK BALANCES (cont’d)

(iii) The currency exposure profile of the deposits, cash and bank balances are as

follows:

2018 2017 2018 2017

RM RM RM RM

Ringgit Malaysia 3,049,801 4,665,609 16,528 19,496

US Dollar 311,540 1,560,891 - -

Sterling Pound 105,650 173,321 - -

Other currencies 11,433 11,428 - -

3,478,424 6,411,249 16,528 19,496

CompanyGroup

(iv) The Group and the Company are exposed to a significant concentration risk

arising from the deposits, cash and bank balances whereby 93% (2017: 82%) and

98% (2017: 83%) of the total deposits, cash and bank balances of the Group and

of the Company are placed in two (2) (2017: two (2)) and (1) (2017: one (1))

financial institutions respectively.

15. SHARE CAPITAL

2018 2017 2018 2017

Group/ Company No. of shares No. of shares RM RM

Issued and fully paid

Ordinary shares with

no par value

At 1 January 80,000,000 80,000,000 42,809,166 40,000,000

Transition to no par

value regime on 31

January 2017 under the

Companies Act 2016 - - - 2,809,166

At 31 December 80,000,000 80,000,000 42,809,166 42,809,166

Treasury shares

At 31 December 2,540,500 2,540,500 (1,040,934) (1,040,934)



141

15. SHARE CAPITAL (cont’d)

The new Companies Act 2016 which came into operation on 31 January 2017, abolished

the concept of authorised share capital and par value of share capital. Consequently, the

amounts standing to the credit of the share premium account of RM2,809,166 become

part of the Company’s share capital pursuant to the transitional provisions set out in

Section 618(2) of the Companies Act 2016. There is no impact on the numbers of

ordinary shares in issue or the relative entitlement of any of the members as a result of

this transition.

Capital management

The Group manages its capital to ensure it will be able to continue as a going concern

while maximising the return to stakeholders through the optimisation of the liabilities

and equity balance. The Group’s overall strategy remains unchanged from 2017.

The Group monitors capital using a liabilities-to-equity ratio, which is total liabilities

divided by total equity. Total liabilities represent non-current liabilities and current

liabilities of the Group. Equity represents equity attributable to the owners of the

Company.

2018 2017

RM RM

Total liabilities 8,778,470 6,651,013

Equity attributable to the owners of the Company 44,543,179 49,156,686

Total liabilities-to-equity ratio 20% 14%

Group

There are no changes made on the capital management, policies and procedures of the

Group and the Company during the financial year.



142

16. RESERVES

2018 2017 2018 2017

RM RM RM RM

Non-distributable

Retained earnings 925,293 925,293 235,293 235,293

Distributable

Retained earnings 1,849,654 6,463,161 5,039,706 5,049,758

2,774,947 7,388,454 5,274,999 5,285,051

Group Company

Retained earnings

Distributable The Company will be able to distribute dividends out of its entire retained earnings as at

31 December 2018 under the single tier tax system.

Non-distributable The non-distributable retained earnings mainly arise from the surplus on the fair

valuation over cost arising on the investment properties.

17. DEFERRED TAXATION

The deferred tax liabilities represents temporary differences between fair valuation

adjustment on investment properties and net carrying amount of investment properties.

2018 2017 2018 2017

RM RM RM RM

At 1 January/ 31 December 43,530 43,530 - -

Group Company



143

17. DEFERRED TAXATION (cont'd)

The potential deferred tax assets that have not been recognised are as follows:

2018 2017 2018 2017

RM RM RM RM

Temporary differences arising

from

- property, plant and

equipment (9,889,000) (9,732,000) - -

- unused capital allowances 13,837,000 12,770,000 - -

- unused tax losses 12,388,000 9,585,000 175,000 132,000

- others 209,000 252,000 - -

16,545,000 12,875,000 175,000 132,000

Potential deferred tax asset

not recognised calculated

at 24% 3,971,000 3,090,000 42,000 32,000

Group Company

Deferred tax assets of the Group and of the Company are only recognised to the extent

where it is probable that future taxable profit will be available against which deductible

temporary differences can be utilised. The balances of the deferred tax assets have not

been recognised as it is not probable that sufficient future taxable profits will be

available to offset against the unrecognised deferred tax assets.

18. BORROWING

2018 2017

Secured RM RM

Current

Term loan 948,407 830,403

Non-current

Term loan 1,252,382 2,277,274

Total 2,200,789 3,107,677

Group



144

18. BORROWING (cont’d)

(i) The bank loan carried fixed profit rate at 5% (2017: 5%) per annum on yearly rest

and is repayable within 5 years.

(ii) The term loan is secured by way of:

- a first fixed charge on new machinery/ equipment to be financed with a net

carrying amount of RM3,633,070 as at 31 December 2018 (2017:

RM4,128,543) (Note 5(i));

- all open monies legal charge over a freehold land amounted to RM2,309,032

(2017: RM2,309,032) (Note 5(i)); and

- An irrevocable and unconditional corporate guarantee of the Company for the

payment of the selling price, ta’widh, profit rate and all other sums made due,

owing and payable under the security documents in respect of the Bai

Bithaman Ajil facility.

(iii) The outstanding term loan as at the end of the financial year is repayable as

follows:

2018 2017RM RM

Not later than 1 year 948,407 830,403 Between 1 to 2 years 1,062,484 948,407

Between 2 to 5 years 189,898 1,328,867

2,200,789 3,107,677

Group

19. PAYABLES

2018 2017 2018 2017RM RM RM RM

Trade payables 3,453,499 1,233,285 - - Contract liabilities (Note 20) 297,158 799,480 - - Other payables 1,021,474 710,210 84,320 68,705 Accruals 754,121 756,831 Due to a Director 1,007,899 - - - Due to a subsidiary company

- non-trade - - 30,000 30,000

6,534,151 3,499,806 114,320 98,705

CompanyGroup



145

19. PAYABLES (cont’d)

(i) The currency exposure profile of payables is as follows:

2018 2017 2018 2017

RM RM RM RM

Ringgit Malaysia 6,048,347 2,501,797 114,320 98,705

US Dollars 388,595 859,102 - -

Chinese Renminbi 97,209 112,192 - -

Euro - 26,715 - -

6,534,151 3,499,806 114,320 98,705

Group Company

(ii) The normal trade credit periods granted to the Group range from 30 to 120 days

(2017: 30 to 120 days) or such other period as negotiated with the suppliers.

(iii) The amounts due to a Director and a subsidiary company are unsecured, interest-

free and repayable upon demand. The related party transactions are disclosed in

Note 29.

(iv) Included in other payables is an amount of RM122,925 (2017: RMNil) being

amount owing to vendor for purchase of property, plant and equipment.

20. REVENUE

2018 2017 2018 2017

RM RM RM RM

Revenue from contracts

with customers 22,896,941 27,770,376 120,000 120,000

CompanyGroup



146

20. REVENUE (cont’d)

Disaggregation of the Group’s and the Company’s revenue from contracts with

customers:

2018 2017 2018 2017

RM RM RM RM

Sale of furniture products 22,896,941 27,770,376 - -

Management fee from

subsidiary company - - 120,000 120,000

22,896,941 27,770,376 120,000 120,000

CompanyGroup

Revenue from two major customers from the sale of furniture products and other trading

items of the Group amounted to RM5,314,340 (2017: two major customers amounted to

RM12,238,867). For the purposes of this disclosure, a major customer is defined as one

in which revenue from transactions with a single customer amounts to 10% or more of

the Group’s revenue.

2018 2017 2018 2017

RM RM RM RM

Geographical market

Asia 8,307,467 17,952,086 120,000 120,000

Africa 153,451 300,016 - -

Europe 5,401,966 3,559,144 - -

Middle East 1,474,828 3,133,967 - -

United States of America 7,559,229 2,825,163 - -

22,896,941 27,770,376 120,000 120,000

CompanyGroup

2018 2017 2018 2017

RM RM RM RM

Timing of revenue

recognition

At point in time 22,896,941 27,770,376 - -

Over time - - 120,000 120,000

22,896,941 27,770,376 120,000 120,000

CompanyGroup



147

20. REVENUE (cont’d)

The following table provides information about receivables and contract liabilities from

contracts with customers.

2018 2017 2018 2017

RM RM RM RM

Trade receivables 2,464,973 1,402,846 - -

Contract assets - - - -

Contract liabilities

(Note 19) 297,158 799,480 - -

CompanyGroup

The contract assets primarily relate to the Group’s rights to consideration for work

completed but not billed at the reporting date. The contract assets are transferred to

receivables when the rights become unconditional.

The contract liabilities primarily relate to the advance consideration received from

customers, for which revenue is recognised upon satisfaction of performance obligations

by delivery of the goods.

The following table shows how much of the revenue recognised in the current reporting

period relates to carried-forward contract liabilities.

2018 2017

RM RM

Revenue recognised that was included in the

contract liability balance at the beginning of the period

Sales of furniture products 799,480 1,239,005

Group

No information is provided about remaining performance obligations at 31 December

2018 that have an original expected duration of one year of less, as allowed by MFRS 15.



148

21. LOSS FROM OPERATIONS / (LOSS)/ PROFIT BEFORE TAXATION

The following items have been charged/ (credited) in arriving at loss from operations/

(loss)/ profit before taxation:

2018 2017 2018 2017

RM RM RM RM

Auditors' remuneration

- Statutory audit 61,500 78,000 20,000 23,500

- Other services - 2,000 - 2,000

Allowance for slow-moving

inventories (Note 10) 166,839 170,103 - -

Amortisation of intangible asset 415,854 704,618 - -

(Note 7)

Amortisation of prepaid lease

payments (Note 9) 30,644 35,119 - -

Bad debts written off - 42,016 - -

Depreciation of property, plant

and equipment (Note 5) 2,432,927 2,578,080 - -

Directors' remuneration (Note 25) 479,150 420,928 120,000 114,965

Distribution from investment

management funds (157,592) (136,312) (117,926) (102,002)

Fair value gain on investment

properties - (235,293) - (235,293)

Gain on disposal of:

- Investment in an associated

company - (251,428) - -

- Prepaid lease payments - (254,445) - -

- Property, plant and equipment - (291,792) - -

Income on rental of premises (25,200) (25,200) - -

Interest income from:

- Fixed deposits with

licensed banks (66,564) (65,789) - -

- Short-term deposits with

licensed banks (5) (5) (5) (5)

Loss/(gain) on foreign exchange:

- Unrealised 41,946 159,796 - -

- Realised (73,068) 122,328 - -

Reversal for slow-moving

inventories (Note 10) (170,103) (102,298) - -

Rental of premises 144,600 145,800 - -

Group Company



149

21. LOSS FROM OPERATIONS / (LOSS)/PROFIT BEFORE TAXATION (cont’d)

The following items have been charged/ (credited) in arriving at loss from operations /

(loss)/profit before taxation: (cont’d)

2018 2017 2018 2017

RM RM RM RM

Staff costs

- Salaries, wages and allowances 6,414,027 7,306,925 - -

- Employees' Provident Fund 438,790 566,307 - -

- Other employee benefits 177,555 156,003 - -

Group Company

22. FINANCE COST

2018 2017

RM RM

Interests on bank borrowings 159,239 212,102

Group

23. LOSS PER SHARE

(i) Basic Loss Per Share

The loss per share of the Group is calculated based on the loss attributable to

shareholders divided by the weighted average number of ordinary shares in issue

as follows:

2018 2017

Loss attributable to owners of the Company (RM) (4,613,507) (3,023,641)

Number/Weighted average number of ordinary shares

in issue 77,459,500 77,459,500

Basic loss per share (sen) (5.96) (3.90)

Group

(ii) Diluted Earnings Per Share

During the current and previous financial years, there were no shares in issuance

which would have a dilutive effect on the earnings per share of the Group.



150

24. SEGMENT REPORTING

The Group operates in a single industry in the business of manufacturing and marketing

of furniture products. The furniture products of the Group are manufactured in Malaysia.

Information about major customers are disclosed in Note 20.

25. DIRECTORS’ REMUNERATION

2018 2017 2018 2017

RM RM RM RMDirectors of the Company Executive directors:

- Salaries 300,000 254,577 - - - Employees’ Provident

Fund 50,150 44,136 - - - Fees 42,000 35,750 36,000 31,500

Non-executive directors: - Fees 84,000 83,465 84,000 83,465

Director of a subsidiary company:

- Fees 3,000 3,000 - -

479,150 420,928 120,000 114,965

CompanyGroup

The estimated monetary value of benefits-in-kind received and receivable by the

Directors from the Group amounted to RM4,839 (2017: RM4,252) during the financial

year.

This represents remuneration received by the following Directors:

Executive directors:

- Dato’ Saw Eng Guan

- Au Gek Keng

Non-executive directors:

- Siew Chee Choong

- Ratna Rajah Selvaduray

- Lau Kee Sern

Director of a subsidiary company

- Au Gek Ling



151

26. VOLUNTARY STRIKE OFF OF SUBSIDIARY COMPANIES

During the financial year, the wholly owned subsidiary companies, T.A. Furniture

Trading (M) Sdn. Bhd. and T.A. Rubber Reforestation (Johor) Sdn. Bhd. have been

dissolved voluntarily pursuant to Section 550 of the Companies Act 2016.

The fair value of assets and liabilities at the date of dissolution are as follows:

At date of

dissolution

RM

Cash in hand 6

Net assets at the date of striking off 6

Less: Cash and cash equivalents at the date of striking off (6)

Net cash outflows -

27. CASH AND CASH EQUIVALENTS

2018 2017 2018 2017

RM RM RM RM

Represented by:

Fixed deposits with

licensed banks 2,525,464 2,461,416 - -

Cash and bank balances 952,960 3,949,833 16,528 19,496

3,478,424 6,411,249 16,528 19,496

Less: Fixed deposits

pledged to licensed banks

(Note 14) (1,386,182) (1,298,982) - -

2,092,242 5,112,267 16,528 19,496

Group Company



152

28. CREDIT FACILITIES

The Group has bank overdrafts and other credit facilities amounting to RM2,100,000

(2017: RM2,100,000). These credit facilities bear interest at rates ranging from 4.80% to

8.85% (2017: 4.80% to 8.85%) per annum and are secured by:

(i) a fixed charge over certain properties of the Group with carrying values

amounting to RM2,572,350 (2017: RM2,583,641) (comprising property, plant

and equipment, investment properties and prepaid lease payments as disclosed in

Notes 5(i), 8(b) and 9);

(ii) a lien on a subsidiary company’s fixed deposits as disclosed in Note 14(i);

(iii) a dividend restriction covenant on a subsidiary company; and

(iv) a corporate guarantee by the Company.

As at 31 December 2018 and 31 December 2017, the credit facilities were unutilised.

29. RELATED PARTY DISCLOSURES

In addition to related party disclosures mentioned elsewhere in the financial statements,

the other related party relationships and significant transactions are set out as follows:-

(a) Related party relationships

Parties are considered to be related to the Company if the Company has the

ability, directly or indirectly, to control the party or exercise significant influence

over the party in making financial and operating decisions, or vice versa, or

where the Company and the party are subject to common control or common

significant influence.

The Company has related party relationship with the following:-

(i) Subsidiary companies as disclosed in Note 6.

(ii) Macellent (Muar) Sdn. Bhd. (“MMSB”) and Macellent Tax Services (M)

Sdn. Bhd. (“MTSSB”) are companies in which Ms. Saw Bee Tin, sibling

of Dato’ Saw Eng Guan, has substantial financial interest.

(iii) The Group and the Company define its Directors as key management

personnel.



153

29. RELATED PARTY DISCLOSURES (cont’d)

(b) Significant related party transactions

In the normal course of business, the Group and the Company undertake on

agreed terms and prices, the following significant transactions with its related

parties:

2018 2017 2018 2017

RM RM RM RM

Transaction entered into

with subsidiary companies

Management fee - - 120,000 120,000

Repayment from - - 87,358 192,921


with a Director of the

Company

Advances from 1,007,899 - - -


with other related parties

Macellent (Muar) Sdn. Bhd.

-Sale of goods - 1,726 - -

-Secretarial fee 9,982 5,435 1,400 1,400

Macellent Tax Services

(M) Sdn. Bhd.

-Sale of goods - 1,338 - -

Group Company

Information regarding outstanding balances arising from related party

transactions as at 31 December 2018 and 31 December 2017 are disclosed in

Note 11 and Note 19.



154

29. RELATED PARTY DISCLOSURES (cont’d)

(c) Compensation of key management personnel

The key management’s remuneration includes fees, salary, bonus, allowances and

other benefits computed based on the costs incurred by the Group and the

Company. Their compensations are as stated in Note 25.

30. FINANCIAL INSTRUMENTS

(a) Categories of financial instruments

The table below provides an analysis of financial instruments categorised as

follows:

(i) Financial assets at amortised cost (“AC”)

(ii) Financial assets at fair value through profit or loss (“FVTPL”)

(iii) Financial liabilities at amortised cost (“FL”)

Carrying

amount AC/ (FL) FVTPL

RM RM RM

Group

2018

Financial assets

Investment management funds 4,471,594 - 4,471,594

Receivables 3,693,047 3,693,047 -

Deposit, cash and bank balances 3,478,424 3,478,424 -

11,643,065 7,171,471 4,471,594

Financial liabilities

Borrowings (2,200,789) (2,200,789) -

Payables (6,236,993) (6,236,993) -

(8,437,782) (8,437,782) -

2017

Financial assets

Investment management funds 4,314,002 - 4,314,002

Receivables 2,342,354 2,342,354 -

Deposit, cash and bank balances 6,411,249 6,411,249 -

13,067,605 8,753,603 4,314,002



155

30. FINANCIAL INSTRUMENTS (cont’d)

(a) Categories of financial instruments (cont’d)

Carrying

amount AC/ (FL) FVTPL

RM RM RM

Group

2017


Borrowings (3,107,677) (3,107,677) -

Payables (2,700,326) (2,700,326) -

(5,808,003) (5,808,003) -

Company

2018

Financial assets

Investment managemend funds 3,346,094 - 3,346,094

Receivables 13,571,150 13,571,150 -

Cash and bank balances 16,528 16,528 -

16,933,772 13,587,678 3,346,094

Financial liability

Payables (114,320) (114,320) -

2017

Financial assets

Investment managemend funds 3,228,168 - 3,228,168

Receivables 13,653,455 13,653,455 -

Cash and bank balances 19,496 19,496 -

16,901,119 13,672,951 3,228,168

Financial liability

Payables (98,705) (98,705) -



156


(b) Financial risk management

The Group is exposed to a variety of financial risks, including market risk, credit

risk, liquidity risk and cash flow risk. The Group has taken measures to minimise

the Group’s exposure to risk and/or costs associated with the financing, investing

and operating activities of the Group. The Group does not trade in financial

instruments or engage in speculative transactions.

(i) Market risk

Market risk is the risk that changes in market prices, such as interest rates,

foreign exchange rates, and other prices that will affect the Group

financial position or cash flows.

Interest rate risk The Group is exposed to interest rate risk mainly from borrowings,

investment management funds and deposits with licensed banks. The

investments in financial assets are short term in nature and mostly

represented by deposits with financial institutions to yield better returns as

compared to cash at banks. The Group mitigates its exposure to interest

rate fluctuations by borrowing at both fixed and floating rates of interest.

The interest rate risk is monitored on an on-going basis and the Group

endeavours to keep the exposure at an acceptable level. The Group

considers interest rate risk exposure for its deposits as minimal as they are

short term in nature and not held for speculative purposes.



157


(b) Financial risk management (cont’d)

(i) Market risk (cont’d)

Foreign currency risk

The Group is exposed to foreign currency risk on its sales and purchases

that are denominated in currencies other than Ringgit Malaysia. Foreign

currency risk is monitored closely and managed to an acceptable level.

The net carrying amounts of financial assets and financial liabilities stated

at currencies other than the functional currencies are as follows:

2018 2017

RM RM

Financial assets

Receivables 2,836,705 713,780

Deposit, cash and bank balances 428,623 1,745,640

3,265,328 2,459,420


Payables (485,804) (998,009)

Group

A 10% (2017: 10%) weakening of the Malaysian Ringgit (“RM”) against

other currencies at the end of the reporting period would have increased/

(decreased) equity and profit net of tax by the amounts shown below. This

analysis assumes that all other variables, in particular interest rates,

remain constant.



158



(i) Market risk (cont’d)

Foreign currency risk (cont’d)

2018 2017

RM against other currencies, RM RM

weakened by 10% (2017: 10%)

-Increase in profit, net of tax 183,555 164,638

-Increase on equity 183,555 164,638

Group

Conversely, a 10% (2017: 10%) strengthening of RM against the other

currencies at the end of the reporting period would have the equal but

opposite effect on the above currency to the amounts shown above

assuming that all other variables remained constant.

(ii) Credit risk

Credit risk is the risk of financial loss to the Group and the Company if a

customer or counterparty to a financial instrument fails to meet its

contractual obligations. The Group and the Company are exposed to

credit risk mainly from trade receivables, deposits, cash and bank

balances, investment management funds, financial guarantee and amount

due from subsidiary company.

The Group manages its exposure to credit risk by the application of credit

approvals, credit limits and monitoring procedures on an ongoing basis.

For other financial assets (including investment management fund,

deposits, cash and bank balances), the Group minimises credit risk by

dealing exclusively with high credit rating counterparties.

At the end of the reporting period, the maximum exposure to credit risk is

represented by the carrying amounts in the statements of financial

position.

Trade receivables, deposits, cash and bank balances, and amount due from

subsidiary companies are subject to the impairment requirements of

MFRS 9, the estimated impairment loss was immaterial.



159



(ii) Credit risk (cont’d)

Trade receivables

In respect of trade receivables, the Group trades only with recognised and

creditworthy third parties. In addition, receivable balances are monitored

on an ongoing basis and policies and procedures are in place to ensure

that the Group's exposure to bad debts is kept to a minimum.

Information regarding trade receivables that are neither past due nor

impaired and concentration of risk are disclosed in Note 11.

Deposits, cash and bank balances

In respect of deposits, cash and bank balances, the Group's policy is to

place surplus cash with licensed banks in Malaysia. The likelihood of

default by licensed banks is remote based on their high credit ratings.

Information regarding the concentration risk of deposits, cash and bank

balances is disclosed in Note 14.

Investment management funds

Investment management funds represent fund placed with licensed fund

managers. The portfolio of securities managed by the fund managers

comprise of cash deposits and short-term money market instruments

which are not subject to significant changes in value.

Information regarding the concentration risk of investment management

funds is disclosed in Note 13(iii).

Financial guarantee

The Company provides unsecured financial guarantee to banks in respect

of banking facilities granted to subsidiary company. The Company

monitors on an ongoing basis the results of the subsidiary company and

the repayment made by the subsidiary company. As at the reporting date,

there is no indication that the subsidiary company would default on

repayment. The financial guarantees have not been recognised since the

fair value on initial recognition is not material.



160



(ii) Credit risk (cont’d)

Amount due from subsidiary companies

The credit risk arising from amount due from subsidiary companies is

managed on a group basis by the management of the Company to ensure

that risk of losses incurred by the Company due to non-repayment by

related companies are minimal.

(iii) Liquidity risk The Group actively manages its debt maturity profile, operating cash

flows and the availability of sufficient funding and credit facilities so as to

ensure that all operating, investing and financing needs are met. In

liquidity risk management strategy, the Group measures and forecasts its

cash commitments and maintains a level of cash and cash equivalents

deemed adequate to finance the Group’s activities.

The table below summarises the maturity profile of the Group’s and the

Company’s financial liabilities as at the reporting date based on

undiscounted contractual payments:

[The remainder of this page is intentionally left blank]



161



(iii) Liquidity risk (cont’d)

Under 1 year 1-2 years

Group RM RM RM RM RM

2018

Trade payables 3,453,499 - 3,453,499 3,453,499 - -

Other payables and accruals 1,775,595 - 1,775,595 1,775,595 - -

Due to Directors 1,007,899 - 1,007,899 1,007,899 - -

Borrowing 2,200,789 5.00% 2,479,130 1,062,484 1,062,485 354,161

8,437,782 8,716,123 7,299,477 1,062,485 354,161

2017

Trade payables 1,233,285 - 1,233,285 1,233,285 - -

Other payables and accruals 1,467,041 - 1,467,041 1,467,041 - -

Borrowing 3,107,677 5.00% 3,448,815 973,944 1,062,484 1,412,387

5,808,003 6,149,141 3,674,270 1,062,484 1,412,387

Contractual

cash flows

Between 2 to

5 years

Carrying

amount

Contractual

interest rate



162



(iii) Liquidity risk (cont’d)

Under 1 year

Company RM RM RM

2018

Payables 114,320 - 114,320 114,320

Financial guarantee contracts - - 2,479,130 2,479,130

114,320 2,593,450 2,593,450

2017

Payables 98,705 - 98,705 98,705

Financial guarantee contracts - - 3,448,815 3,448,815

98,705 3,547,520 3,547,520

Contractual cash

flowsCarrying amount

Contractual

interest rate

(iv) Cash flow risk

The Group is actively managing its operating cash flow to ensure all commitments and funding needs are met. Prudent liquidity

risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed

credit facilities.



163

31. FAIR VALUE OF ASSETS AND LIABILITIES

Fair value information The carrying amounts of the financial assets and liabilities of the Group and the

Company classified as current assets and current liabilities as at 31 December 2018 and

31 December 2017 approximate their fair values due to the relatively short term maturity

of these financial instruments. The method and assumptions used to determine the fair

value of investment properties, other financial assets and liabilities are as follows:

(i) The fair value of long-term borrowings which are long term financial liabilities

are estimated based on future contractual cash flows discounted at current market

assessments of the time value of money and the risks specific to the liabilities.

(ii) The fair value of investment management funds is the estimated amounts that the

Group would expect to receive by disposal of the investment at the reporting date.

(iii) The fair value of investment properties have been generally derived using the

comparison approach. For comparison method, the principal assumptions

underlying these valuations are those relating to recent transactions and quoted

offers for sale of similar properties in the vicinity. Independent professional

valuations are obtained for these estimates.

(iv) The Company provides corporate guarantees to banks and financial companies

for credit facilities extended to certain subsidiary companies. The fair value of

such corporate guarantees is not expected to be material as the probability of the

subsidiary companies defaulting on the credit lines is minimal.



164

31. FAIR VALUE OF ASSETS AND LIABILITIES (cont’d)

Fair value information (cont’d)

The following table provides the fair value measurement hierarchy of the Group’s assets and liabilities carried at fair value.

Carrying

Level 1 Level 2 Level 3 Total amount

Group RM RM RM RM RM

Financial asset at fair value through profit or loss

- Investment management funds (Note 13) - 4,471,594 - 4,471,594 4,471,594

Investment properties (Note 8) - - 5,425,000 5,425,000 5,425,000




At 31 December 2018

At 31 December 2017



165



The following table provides the fair value measurement hierarchy of the Group’s liabilities not carried at fair value, together with their fair values

and carrying amounts shown in the consolidated statement of financial position.

Carrying

Group Level 1 Level 2 Level 3 Total amount

RM RM RM RM RM

Liabilities

Term loan (Note 18) - 1,252,382 - 1,252,382 1,252,382

Liabilities

Term loan (Note 18) - 2,277,274 - 2,277,274 2,277,274

2018

2017



166



The following table provides the fair value measurement hierarchy of the Company’s assets carried at fair value.

Carrying

Company Level 1 Level 2 Level 3 Total amount

RM RM RM RM RM

Assets




Assets




2018

2017

There were no transfers between fair value measurements hierarchy during the financial year ended 31 December 2018 and 31 December 2017.



167



(i) Valuation processes applied by the Group and the Company for Level 3 fair value

The fair value was derived from the consideration of the following factors:

(a) Directors’ valuation and assessment based on the valuation reports provided by

registered valuer, Jordan Lee & Jaafar (M’CCA) Sdn. Bhd. and JS Valuers

Property Consultant (Johore) Sdn. Bhd. dated 30 January 2018 and 2 February

2018 respectively;

(b) The application of comparison method valuation technique; and

(c) Transacted prices of properties in vicinity compared.

(ii) Sensitivity to changes in the assumptions applied

With regards to the assessment of the fair value of investment properties, the

management believes that no reasonably possible movements in any of the above key

assumptions would cause the fair value of the investment property to vary significantly

from the fair value disclosed in Note 8.

32. COMPARATIVE FIGURES

Certain comparative figures have been reclassified in order to conform with current year's

presentation.

168

SSTTAATTEEMMEENNTT BBYY DDIIRREECCTTOORRSS

PPuurrssuuaanntt ttoo SSeeccttiioonn 225511((22)) ooff tthhee CCoommppaanniieess AAcctt 22001166

The Directors of TAFI INDUSTRIES BERHAD state that, in the opinion of the Directors,

the financial statements set out on pages 79 to 167 are drawn up in accordance with

Malaysian Financial Reporting Standards, International Financial Reporting Standards and

the requirements of the Companies Act 2016 in Malaysia, so as to give a true and fair view of

the financial position of the Group and of the Company as at 31 December 2018 and of their

financial performance and cash flows of the Group and of the Company for the financial year

ended on that date.

Signed on behalf of the Board

in accordance with a resolution of the Directors

……………………………….


Director

……………………………….

SIEW CHEE CHOONG

Director

Muar, Johor Darul Takzim

Date:

169

SSTTAATTUUTTOORRYY DDEECCLLAARRAATTIIOONN

PPuurrssuuaanntt ttoo SSeeccttiioonn 225511((11))((bb)) ooff tthhee CCoommppaanniieess AAcctt 22001166

I, DATO’ SAW ENG GUAN (MIA No. CA 3910), being the Director primarily responsible

for the financial management of TAFI INDUSTRIES BERHAD, do solemnly and sincerely

declare that, to the best of my knowledge and belief, the financial statements set out on pages

79 to 167 are 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 DATO’ SAW ENG GUAN )

at MUAR in the State of JOHOR DARUL )

TAKZIM on ) …………………………………

) DATO’ SAW ENG GUAN

Before me

……………………………….

Commissioner for Oaths

170

AANNAALLYYSSIISS OOFF SSHHAARREEHHOOLLDDIINNGGSS AASS AATT 2299 MMAARRCCHH 22001199

Class of Shares : Ordinary shares

No. of Shareholders : 1,147

Voting Rights : Every member of the Company present in person or by proxy

shall have one (1) vote on a show of hand and in the case of a

poll, shall have one (1) vote for every ordinary share held. A

proxy need not be a member.

DISTRIBUTIONS OF SHAREHOLDINGS

No. of No. of

Holdings Holders % Shares %

1 – 99 3 0.261 64 0.000

100 – 1,000 684 59.633 661,736 0.854

1,001 – 10,000 277 24.149 1,323,600 1.708

10,001 – 100,000 140 12.205 4,717,600 6.090

100, 001 – 3,872,974* 39 3.400 37,028,400 47.803

3,872,975 and above** 4 0.348 33,728,100 43.542

Total: 1,147 100.00 77,459,500*** 100.000

Remark : * - Less than 5% of issued shares

: ** - 5% and above of issued shares

*** - Excludes 2,540,500 TAFI shares bought back and retained as treasury

shares.

SUBSTANTIAL SHAREHOLDERS

Shareholders Direct No. of

Shares Held %

(1)

Indirect No. of

Shares Held %

(1)

(2)Estate of Saw Han Lim 15,978,100 20.627

(3)669,800

0.864

Tan Kim Hui 7,500,000 9.682 - -

Arcadia Venture Sdn. Bhd. 6,000,000 7.745 - -

Maybank Securities Nominees

(Tempatan) Sdn. Bhd.

Pledged Securities Account For

Simfoni Semangat Sdn. Bhd.

4,250,000 5.486 - -

Note:

(1) Excludes 2,540,500 TAFI shares bought back and retained as treasury shares.

(2) Dato’ Saw Eng Guan, the Group MD of the Company, is the son of the late Mr. Saw Han Lim.

(3) Deemed interested by virtue of interest held through Macellent (Muar) Sdn. Bhd.

171

AANNAALLYYSSIISS OOFF SSHHAARREEHHOOLLDDIINNGGSS AASS AATT 2299 MMAARRCCHH 22001199 ((ccoonntt’’dd))

LIST OF TOP 30 SHAREHOLDERS

No. Name Shareholdings %

1. Estate of Saw Han Lim 15,978,100 20.627

2. Tan Kim Hui 7,500,000 9.682

3. Arcadia Venture Sdn. Bhd. 6,000,000 7.745

4. Maybank Securities Nominees (Tempatan) Sdn. Bhd.

Pledged Securities Account for Simfoni Semangat

Sdn. Bhd.

4,250,000 5.486

5. Lim Pei Tiam @ Liam Ahat Kiat 3,850,000 4.970

6. Maybank Securities Nominees (Tempatan) Sdn. Bhd.

Pledged Securities Account for Terk Yew Tee 3,750,000 4.841

7. Tan Hong See 3,480,000 4.492

8. Saw Eng Guan 3,112,500 4.018

9. Saw Eng Guan 3,000,000 3.872

10. Soo Eng Choon 3,000,000 3.872

11. Chua Lee Seng 2,287,000 2.952

12. Au Gek Keng 1,921,000 2.480

13. Chua Yong Kuang 1,216,700 1.570

14. Chua Gek Tiow 1,128,400 1.456

15. Saw Bee Tin 1,012,700 1.307

16. Alliancegroup Nominees (Tempatan) Sdn. Bhd.

Pledged Securities Account for Kuek Choon Heng

(8089876)

1,000,000 1.290

17. Tok Heng Hwa 872,700 1.126

18. Chua Yong Chai 730,000 0.942

19. Macellent (Muar) Sdn. Bhd. 669,800 0.864

20. Lau Wee Seng 644,000 0.831

21. Au Gek Ling 500,000 0.645

22. Lee You Long 500,000 0.645

23. Lim Ah Waa 452,700 0.584

24. Malacca Equity Nominees (Tempatan) Sdn. Bhd.

Pledged Securities Account for Ho Kok Kiang 443,900 0.573

25. Yeo Eck Liong 379,400 0.489

172

AANNAALLYYSSIISS OOFF SSHHAARREEHHOOLLDDIINNGGSS AASS AATT 2299 MMAARRCCHH 22001199 ((ccoonntt’’dd))

LIST OF TOP 30 SHAREHOLDERS (con’t)

No. Name Shareholdings %

26. Susan Tan Phek Choo 319,900 0.412

27. Saw Bee Lay 311,600 0.402

28. Mr. Serm Juthamongkhon 283,700 0.366

29. Yee Pek Seong 215,000 0.277

30. Yeo Eck Liong 198,000 0.255

Total 69,007,100 89.087

SHAREHOLDINGS OF DIRECTORS AS AT 29 MARCH 2019

Names

Direct No. of

Shares Held %

(1)

Indirect No. of

Shares Held %

(1)

1. (2)

Dato’ Saw Eng Guan 6,112,500 7.891 18,002,200 23.241

2. Siew Chee Choong - - - -

3. Au Gek Keng 1,921,000 2.480 - -

4. Ratna Rajah Selvaduray - - - -

5. Lau Kee Sern - - - -

Note: (1) Excludes 2,540,500 TAFI shares bought back and retained as treasury shares.

(2) Dato’ Saw Eng Guan, the Group MD of the Company, is the son of the late Mr. Saw Han Lim, a

substantial shareholder of the Company

173

LLIISSTT OOFF PPRROOPPEERRTTIIEESS

Location & Description

Age of building (years)

Tenure/Date of Expiry of

Lease

Description/ Existing Usage

Land/(Built up) area (sq. ft.)

Audited Net Book Value/

Prepaid Operating

Lease as at 31-12-2018

(RM)

Year of Acquisition

/ Date of revaluation

GM163, Lot 267 Mukim Sg. Terap 84300 Bukit Pasir Muar Johor

13

Freehold

A single-storey factory building with a 2 storey office annexure/factory, warehouse and office

223,245

(138,600)

7,730,174

2005 /

5 August 2015

PLO 3, Kawasan Perindustrian Bukit Pasir, Mukim Sg. Raya, 84300 Bukit Pasir, Muar Johor

22

Leasehold for 60 years/

(5 September 2056)

A single-storey factory building with a 3-storey office annexure and other ancillary buildings/ factory, warehouse and office

124,450.92 / (94,814)

2,691,887 1995 / 30

November 1998

Batu 6¼, Mukim Sg. Raya, Jalan Bukit Pasir, 84000 Muar Johor

14

Freehold Industrial land/ a single-storey warehouse

97,456.788 / (60,530)

3,475,660

2003 / 2

November 2003

No. H.S. (D) 6270, 6271, 6272, 6273 No. PT 385, 386, 387, 388 Mukim Semujok, Daerah Jasin, Melaka

n.a. Leasehold for 99 years/

(23 February 2100)

Industrial land / Vacant

276,647 / (n.a)

2,215,000

2000 / 30 January

2018

K35-K38, Kawasan Perindustrian Tanjung Agas, Jalan Kesang, 84000 Muar, Johor

26


(19 September

2048)

4 contiguous units of single-storey semi-detached factory buildings/factory, warehouse and office

29,620 / (8,400)

639,350

1993 / 23 January

2018

174

LLIISSTT OOFF PPRROOPPEERRTTIIEESS ((ccoonn’’tt))

Location & Description

Age of building (years)

Tenure/Date of Expiry of

Lease

Description/ Existing Usage

Land/(Built up) area (sq. ft.)

Audited Net Book Value/

Prepaid Operating

Lease as at 31-12-2018

(RM)

Year of Acquisition

/ Date of revaluation

K-57, Kawasan Perindustrian Tanjung Agas, Jalan Kesang, 84000 Muar, Johor

29


(26 September

2046)

A single-storey factory building with an office annexure/ factory, warehouse and office

21,780 / (8,004)

281,223

1986 / 23 January

2018

15-0-01, Block B Desa Petaling Business Centre Jalan 1/125E Taman Desa Petaling 57100 Kuala Lumpur

22

Strata title not issued yet

An office lot located on the first floor of a 5½ storey building/office

n.a. / (1,229.2)

185,432

2000 / No

valuation

Lot 3862 Mukim Paloh. Daerah Kluang, Johor

n.a Freehold Commercial land / Vacant

50,181 / (n.a.)

2,258,000 2013 / 2 February

2018

Lot 3863 Mukim Paloh, Daerah Kluang Johor

n.a Freehold Commercial land / Vacant

21,162 / (n.a.)

952,000 2013 / 2 February

2018

175

NNOOTTIICCEE OOFF AANNNNUUAALL GGEENNEERRAALL MMEEEETTIINNGG

NOTICE IS HEREBY GIVEN that the Fifteenth Annual General Meeting of the Company will

be held at the Meeting Room, TAFI Industries Berhad, PLO 3 Kawasan Perindustrian Bukit

Pasir, Mukim Sg. Raya, 84300 Bukit Pasir, Muar, Johor, Malaysia on Friday, 24 May 2019,

at 2:00 p.m., for the following purposes:

AGENDA

AS ORDINARY BUSINESS

1. To receive the Directors’ Report, Audited Financial Statements and

Auditors’ Report for the financial year ended 31 December 2018.

(Please refer to

Note 2)

2. To approve the payment of Directors’ fees for an amount not

exceeding RM200,000 for the financial year ending 31 December

2019 as recommended by the Directors.

(Resolution 1)

3.

To approve the payment of Directors’ benefits for an amount not

exceeding RM10,000 for the financial year ending 31 December

2019.

(Resolution 2)

4. To re-elect the following Directors who retire in accordance with

Article 84 of the Company’s Articles of Association, and being eligible,

have offered themselves for re-election:-

(i) Dato’ Saw Eng Guan (Resolution 3)

(ii) Au Gek Keng (Resolution 4)

5. To re-appoint Messrs. Peter Chong & Co. as Auditors of the

Company for the financial year ending 31 December 2019 and to

authorise the Board of Directors to fix their remuneration.

(Resolution 5)

176

NNOOTTIICCEE OOFF AANNNNUUAALL GGEENNEERRAALL MMEEEETTIINNGG ((ccoonn’’tt))

AS SPECIAL BUSINESS

To consider and if thought fit, to pass the following Special Resolution, with or without

modifications:-

6. As Special Resolution

Proposed Alteration of the Existing Memorandum and Articles of Association by

Replacing with a New Constitution (“Proposed Alteration”)

“THAT the existing Memorandum and Articles of Association of the Company be hereby

altered by replacing with a new Constitution as set out in the Annexure A attached to the

Annual Report 2018 with effect from the date of passing this special resolution.

AND THAT the Directors of the Company be hereby authorised to do all such acts and

things and to take all such steps as they deem fit, necessary, expedient and/or

appropriate in order to complete and give full effect to the Proposed Alteration with full

powers to assent to any condition, modification, variation and/or amendment as may be

required or imposed by the relevant authorities.”

(Special Resolution 1)

7. To transact any other business of which due notice shall have been given in accordance

with the Companies Act, 2016.

By Order of the Board

TAFI INDUSTRIES BERHAD

NG BEE LIAN (MAICSA 7041392)

Company Secretary

Melaka

26 April 2019

177


NOTES: 1. APPOINTMENT OF PROXY

(i) A proxy may but need not be a member of the Company, an advocate, an approved

company auditor or a person approved by the Registrar of the Companies. (ii) In the case of a corporate member, the instrument appointing a proxy shall be (a) under its

Common Seal or (b) under the hand of a duly authorised officer or attorney and in the case of (b), be supported by a certified true copy of the resolution appointing such officer or certified true copy of the power attorney.

(iii) A member shall not, subject to Paragraphs (iv) and (v) below, be entitled to appoint more

than two (2) proxies to attend and vote at the same meeting. Where a member appoints more than one (1) proxy to attend and vote at the same meeting, each proxy appointed shall represent a minimum of 100 shares and such appointment shall be invalid unless the member specifies the proportion of his shareholding to be represented by each proxy.

(iv) Where a member is an authorised nominees, as defined under the Securities Industry

(Central Depositories) Act 1991, it may appoint at least one (1) proxy but not more than two (2) proxies in respect of each securities account it holds which is credited with the ordinary shares of the Company. The appointment of two (2) proxies in respect of any particular securities account shall be invalid unless the authorised nominee specifies the proportion of its shareholding to be represented by each proxy.

(v) Where a member is an exempt authorised nominee (“EAN”) as defined under the Securities

Industry (Central Depositories) Act 1991 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 EAN may appoint in respect of each omnibus account it holds.

(vi) Any alteration to the instrument appointing a proxy must be initialed. The instrument

appointing a proxy must be deposited at the registered office of the Company at PLO 3 Kawasan Perindustrian Bukit Pasir, Mukim Sg. Raya, 84300 Bukit Pasir, Muar, Johor, Malaysia, not less than 48 hours before the time appointed for holding the meeting.

(vii) Pursuant to Paragraph 8.29A of the Main Market Listing Requirements (“MMLR”) of Bursa

Malaysia Securities Berhad (“Bursa Securities”), all resolutions set out in the Notice of 15th AGM will be put to vote on a poll.

2. AUDITED FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER

2018

The audited financial statements are laid in accordance with Section 340(1)(a) of the Companies Act 2016 (“CA2016”) for discussion only under Agenda 1. They do not require shareholders’ approval and hence, will not be put for voting.

3. RESOLUTIONS 1 TO 2 : PAYMENT OF DIRECTORS’ FEES AND BENEFITS

Section 230(1) of the CA2016 provides that the fees of the Directors and any benefits payable to the Directors of a listed company and its subsidiaries shall be approved at a general meeting. Pursuant thereto, shareholders’ approval will be sought at this AGM on the Directors’ fees and Directors’ benefits for the financial year ending 31 December 2019.

178


4. RESOLUTIONS 3 AND 4 : RE-ELECTION OF DIRECTORS Article 84 of the Articles of Association that one-third of the Directors of the Company for the time being shall retire by rotation at an AGM of the Company. The Directors standing for re-election pursuant to the Company’s Articles of Association are:- (i) Dato’ Saw Eng Guan (ii) Au Gek Keng The Board has through the Nominating Committee, considered the assessment of the Directors and agreed that they met the criteria as prescribed by Paragraph 2.20A of the MMLR of Bursa Securities on character, experience, integrity, competence and time to effectively discharge their roles as Directors.

5. RESOLUTION 5 : RE-APPOINTMENT OF AUDITORS The Audit Committee had at its meeting held on 12 April 2019 assessed the suitability and independence of the External Auditors and recommended the re-appointment of Messrs. Peter Chong & Co. as External Auditors of the Company for the financial year ending 31 December 2019. The Board has in turn reviewed the recommendation of the Audit Committee and recommended the same be tabled to the shareholders for approval for the forthcoming AGM of the Company.

6. SPECIAL RESOLUTION 1 : PROPOSED ALTERATION The Proposed Special Resolution 1, if passed, will enable the Company to alter its existing Memorandum and Articles of Association by replacing with a new Constitution which is drafted in accordance with the relevant provisions of the Companies Act 2016, relevant amendments of Chapter 7 and other Chapters of the MMLR of Bursa Securities and other provisions of laws and regulations that are applicable to the Company. For further information on the Proposed Alteration, please refer to the Annexure A attached to the Annual Report 2018 of the Company.

179

SSTTAATTEEMMEENNTT AACCCCOOMMPPAANNYYIINNGG NNOOTTIICCEE OOFF AANNNNUUAALL GGEENNEERRAALL MMEEEETTIINNGG

A. Directors Standing for Re-election Pursuant to the Articles of Association of the

Company are:-

(i) Dato’ Saw Eng Guan (Article 84)

(ii) Au Gek Keng (Article 84)

Details of the above Directors who are standing for re-election at the Fifteenth Annual

General Meeting of the Company are set out in the Directors’ profile appearing on pages

5 to 9 of this Annual Report while their securities holdings are listed in the Analysis of

Shareholdings – Directors’ Shareholdings on page 172 of this Annual Report.

B. Details of Attendance of Directors at Board Meetings

Details of the attendance of Directors at Board meetings are set out in the Corporate

Governance Statement appearing on page 28 of this Annual Report.

C. Date, Time and Place of the Annual General Meeting

Date : Friday, 24 May 2019

Time : 2:00 p.m.

Place : Meeting Room, TAFI Industries Berhad

PLO 3 Kawasan Perindustrian Bukit Pasir, Mukim Sg. Raya

84300 Bukit Pasir, Muar, Johor, Malaysia

D. Details of Securities Holdings in the Company and Subsidiaries

Details of the Directors’ securities holdings in the Company are set out in the

Shareholdings of Directors appearing on page 172 of this Annual Report.

180

ANNEXURE A Proposed Alteration of the Existing Memorandum and Articles of Association by Replacing with a New Constitution

COMPANIES ACT 2016 MALAYSIA

PUBLIC COMPANY LIMITED BY SHARES

CONSTITUTION

OF


Incorporated in Malaysia

Company No. 640935-P – Constitution

1

Companies Act 2016

Public Company Limited by Shares

Constitution of


Name of Company

1. The name of the Company is TAFI INDUSTRIES BERHAD. Company name

Registered Office

2. The registered office of the Company is situated in Malaysia. Registered office

DEFINITIONS AND INTERPRETATION

Definitions

3. In this Constitution: Definitions

“Act” Means the Companies Act 2016, as amended,

substituted or re-enacted from time to time.

“Annual General

Meeting”

Means a meeting of the Company required to be

held pursuant to Section 340 of the Act.

“Auditors” Means the auditors of the Company.

“Board” or “Board of

Directors”

Means the board of directors for the time being

of the Company.

“Board Meeting” Means a meeting of the Directors of the

Company.

“Bursa Securities” Means Bursa Malaysia Securities Berhad.


2

"Central Depositories

Act"

Means the Securities Industry (Central

Depositories) Act 1991 and regulations made

thereunder, as amended or re-enacted from time

to time.

“Company” Means TAFI INDUSTRIES BERHAD.

“Company’s

Documents” Including, but not limited to any of the following

documents that may be issued by the Company

from time to time:

(a) In respect of a Member and person

entitled to a Security in consequence

of an Event of Transmission:

(i) Notices relating to General

Meetings, instrument

appointing a proxy

(including electronic proxy

appointment and voting

manner), annual reports,

audited financial statements,

circular to shareholders,

notices to holders of

Securities, prospectus,

information memorandum,

notice of resolution,

statement and other

documents relating thereto;

(ii) All other documents as

required under the Act, the

Listing Requirements,

applicable laws, guidelines,

practice directives etc;

(iii) Other publication concerning

the Company; and/or

(iv) All written communications.

(b) In respect of a Director:

(i) Notices relating to meetings

of Board and Board

committees and other



3

(ii) Notices relating to General

Meetings, annual reports,


circular to shareholders, and

other documents relating

thereto;

(iii) All other documents as


Listing Requirements, applicable laws, guidelines,

practice directives etc;

(iv) Other publication concerning

the Company; and/or

(v) All written communications.

(c) In respect of the Auditors:

(i) Notices relating to General

Meetings, audited financial

statements, and other




Listing Requirements,

applicable laws, guidelines,

practice directives etc; and/or

(iii) All written communications.

(d) In respect of a holder of Debt

Securities:

(i) Notices relating to meeting

of Debt Securities holders,


notices to Debt Securities

holders and other documents

relating thereto;


4


required under the trust deed

governing an issue of Debt

Securities, Act, the Listing

Requirements, applicable

laws, guidelines, practice

directives etc; and/or

(iii) All written communications.

“Constitution” The constitution of the Company as constituted

by this document, or as altered from time to time

by a special resolution.

“Debt Securities” Means debentures, loan stocks or other similar

instruments representing or evidencing

indebtedness, whether secured or unsecured, and

whether convertible or not.

"Deposited Security" Means a security standing to the credit of a

Securities Account and includes a security in a

Securities Account that is in suspense.

“Depositor” Means a holder of a Securities Account.

"Depository" Means Bursa Malaysia Depository Sdn Bhd.

“Directors” Means the directors for the time being of the Company (inclusive of alternate or nominee

directors).

“Event of

Transmission” Means the death, bankruptcy or insolvency of a

Member or debenture holder which would result

in the Member or debenture holder being unable

to remain as the registered holder of a share or debenture or such other transmission by

operation of law.

“General Meeting” Means a meeting of Members of the Company.

“Joint Holder” In respect of a Security (other than Deposited

Security), means two (2) or more persons are

jointly entitled to any Security in the Company.


5

“Jumbo Certificate” In relation to a Deposited Security, means a

certificate comprising not less than fifty

thousand (50,000) units of Securities of the

Company or such denominations as may be

directed by the Depository which is registered in

the name of the Depository or its nominee

company, as nominee for Depositors.

“Listed Deposited

Security” Means a Deposited Security quoted on the

official list of Bursa Securities.

“Listing

Requirements” Means Main Market Listing Requirements of

Bursa Securities, including any amendment that

may be made from time to time.

“Member” Means:

(a) a person whose name is entered in the Register of Members as the holder for

the time being of one or more shares in

the Company; and/or

(b) a Depositor whose name appears in the

Record of Depositors as the holder for

the time being of one or more shares in

the Company.

Shares include ordinary shares, preference

shares or other type of shares that may be issued and allotted by the Company from time to time.

“Office” Means the registered office of the Company.

“Officer” Means any Director, Secretary or employee of

the Company.

“Record of

Depositors”

Means a record provided by the Depository to

the Company under Chapter 24.0 of the Rules.

“Register of

Members”

Means the record of members of the Company

kept and maintained pursuant to Section 50 of

the Act.

“Registrar” Means the Registrar of Companies designated

under Section 20A(1) of the Companies

Commission of Malaysia Act 2001.


6

“Representative of

Member”

Includes any of the following persons:

(a) Representative appointed by a corporation which is a Member; or

(b) Attorney appointed by the Member by

a power of attorney.

“Rules” Means the Rules of Depository, including any

amendment that may be made from time to time.

“Seal” Means the common seal of the Company.

“Secretary” Means a secretary of the Company appointed under Section 236 of the Act.

“Security” or

“Securities”

Has the meaning given in Section 2(1) of the

Capital Markets and Services Act 2007.

"Securities Account" Means an account established by the Depository

for a Depositor for the recording of deposit of

Securities and for dealing in such Securities by

the Depositor.

“Shareholder” Means a holder of one or more share(s) in the

Company.

“Unlisted Deposited

Security”

Means a Deposited Security other than Listed

Deposited Security.

Interpretation

4. (1) Expressions referring to writing include, unless the contrary

intention appear, references to printing, lithography,

photography and other modes of representing or reproducing

words in a visible form.

Interpretation

(2) Words importing the singular number only shall include the

plural number, and vice versa.

(3) Words importing the masculine gender only shall include the

feminine gender.

(4) Words importing persons shall include corporations.

(5) Unless the context requires otherwise, other words and

expressions contained in this Constitution shall bear the same

meaning as in the Act when this Constitution becomes effective

and binding on the Company.


7

TYPE AND PURPOSE OF COMPANY

Type of Company

5. (1) The Company is a public company limited by shares. Public company

(2) The liability of the Members is limited to the amount, if any,

unpaid on shares held by the Members.

Members’

liability

Purpose of Company

6. (1) The principal objects for which the Company is established are: Objects

(a) To carry on business as an investment company and

for that purpose to acquire and hold either in the name

of the Company or in that of any nominee shares,

stocks, debentures, debenture stock, bonds, notes,

obligations and securities issued or guaranteed by any

Company wherever incorporated or carrying out

business of debentures, debenture stock, bonds, notes, obligations and securities issued or guaranteed by any

government, sovereign ruler, commissioners, public

body or authority, supreme, dependent, municipal,

local or otherwise in any part of the world.

(b) To promote or assist in the promotion of any Company

for purposes of acquiring the undertaking or all or any

of the property and assets for any of the liability of this

Company, or undertaking any business or operation

which may seem directly or indirectly likely to assist

or benefit this Company or to enhance the value of any

property or business of this Company, or for any other

purpose which may seem directly or indirectly

calculated to benefit this Company and to place or

guarantee the placing of, underwrite, subscribe for, or

otherwise acquire all or any part of the shares,

debentures, debenture stocks, or securities of any such

company and to subscribe or otherwise assist any such

company; and

(c) To carry on the business of management services,

business advisers and advisers on problems relating to the administration, computer system matters, financial

matters and organization of industry trade, applications

of licences and permits, patents copyrights and the

training of personnel for industrial trade and personnel

consultants and to advise upon the means and methods

for all systems or processes relating to the production,

storage, distribution, marketing and sale of goods

and/or relating to the rendering of services, the

business of general merchants, traders, suppliers,

importers, exporters, storers, storekeepers, removers,

packers, brokers, distributors, manufacturers,


8

manufacturers’ representatives, commissions,

insurance, managing, financial and general agents,

under-writers, investors, franchisors, carriers,

shipowners, and or in any other capacity, dealers in,

and to buy, prepare, manufacture, render marketable,

sell, barter, exchange, pledge, charge, make advances

on otherwise deal in or with or turn to account by

wholesale or retail goods, general merchandise and

other commodities of all kinds and description.

(2) Without derogating from the generality of this Clause, the

Company shall have the full capacity to carry on or undertake

any business or activity that is in the best interest of the

Company with full rights, powers and privileges for such

purpose in accordance with Section 21 of the Act, subject

always to the requirements of any applicable laws and

regulations.

Legal capacity

and powers of the

Company

SECURITIES

Classes of Shares

7. (1) The capital of the Company shall consist of ordinary shares. Ordinary shares

(2) A holder of ordinary share(s) shall have the following voting

rights:

Rights of ordinary

shares

(a) Right to vote on a show of hands to one (1) vote on

any resolution of the Company; and

(b) Right to vote on a poll to one (1) vote for every share

held on any resolution of the Company.

Variation of Rights

8. (1) If at any time the share capital is divided into different classes of shares, the rights attached to each class of shares (unless

otherwise provided by the terms of issue of the shares of that

class) may only, whether or not the Company is being wound

up, be varied:

Variation of

rights

(a) with the consent in writing of the holders holding not

less than seventy-five percent (75%) of the total voting rights of the holders of that class of shares; or

(b) by a special resolution passed by a separate meeting of

the holders of that class of shares sanctioning the

variation.


9

(2) The provisions of this Constitution relating to General Meetings

apply with the necessary modifications to every separate

meeting of the holders of the shares of the class referred to in

Clause 8(1), except that:

Quorum for Class

Meeting

(a) for a meeting other than an adjourned meeting, a

quorum is constituted by two (2) persons present

holding at least one-third (1/3) of the number of issued

shares of such class, excluding any shares of that class

held as treasury shares;

Class Meeting

(b) if that class of shares only has one holder, a quorum is

constituted by one (1) person present holding shares of

such class; and

(c) for an adjourned meeting, a quorum is constituted by

one (1) person present holding share(s) of such class.

Adjourned Class

Meeting

(3) The rights attached to an existing class of preference shares shall

be deemed to be varied by the issue of new preference shares

that rank equally with the existing class of preference shares

unless such issuance was authorised by:

Variation of

rights of existing

preference shares

(a) the terms of the issue of the existing preference shares;

or

(b) this Constitution of the Company as in force at the

time when the existing preference shares were issued.

Records of Members

9. (1) The records of Members of the Company comprise the

following:

Records of

Members

(a) Record of Depositors; and/or

(b) Register of Members.

(2) In relation to Deposited Securities, a Depositor whose name

appears in the Record of Depositors maintained by the

Depository in accordance with Section 34 of the Central

Depositories Act in respect of the Securities of the Company

which have been deposited with the Depository shall be deemed

to be a shareholder, debenture holder or option holder of the Company, as the case may be, and shall, subject to the

provisions of the Central Depositories Act and any regulations

made under that Act, be entitled to the number of securities

stated in the Record of Depositors.

Record of

Depositors


10

(3) In relation to non-Deposited Securities, the Company shall: Register of

Members

(a) maintain a Register of Members at its Office or such

other place as may be determined by the Directors

from time to time; and

(b) record the particulars of the Members as prescribed

under Section 50 of the Act in the Register of

Members.

(4) The Company shall use the address of a Member in the Record

of Depositors or Register of Members (as applicable) for the

purpose of delivering Company’s Documents and such address

may be any one or more of the following:

Address

(a) a residential address;

(b) a postal address;

(c) a registered office (if the Member is a corporation);

(d) a business address;

(e) an email address;

(f) a facsimile number; and/or

(g) contact details as provided by the Depositor to the

Depository.

(5) (a) In relation to Deposited Securities, a Depositor must

notify the Depository from time to time of any change

of his particulars or such information as required under

the Rules.

Notification of

change of

particulars of

Record of

Depositors

(b) In relation to non-Deposited Securities, each Member

must notify the Company as soon as practicable (in any

event no later than fourteen (14) days) of any change

of his particulars to enable the Company to record such

change in the Register of Members and notify the

Registrar within the aforesaid timeline as stipulated in

the Act.

Notification of

change of

particulars of

Register of

Members


11

Certificates of Shares or Debentures

10. (1) The Company may, as required by the Depository, issue a

Jumbo Certificate in the name of the Depository or its nominee

company, as nominee for Depositors, for the Deposited

Securities issued by the Company from time to time.

Issuance of

Jumbo Certificate

(2) In relation to non-Deposited Securities:

(a) every person whose name is entered as member in the

Register of Members or holder in the register of

debenture holders shall be entitled without payment to

receive a certificate in respect of the shares or

debentures issued under the Seal in accordance with

the Act.

Issuance of share

/ debenture

certificate

(b) in respect of shares or debentures held jointly by

several persons, the Company is not bound to issue

more than one (1) certificate for such shares or

debentures, and delivery of a certificate for shares or

debentures to one (1) of several Joint Holders is

sufficient delivery to all such holders.

Issuance of share

/ debenture

certificate to Joint

Holders

(c) if a certificate of shares or debentures is worn out,

defaced, lost or destroyed, it may be re-issued on

payment of a fee not exceeding RM50.00 on the

application by the Shareholder or debenture holder.

The Directors may, at its absolute discretion and as

they think fit, impose such terms and requirements (if

any) as to evidence and indemnity and payment of out-

of-pocket expenses of the Company incidental to the

investigation, and in the case of defacement or wearing

out, on delivery of the old certificate.

Loss or

destruction of

share / debenture

certificate

Beneficial Ownership of Shares

11. (1) Except as required by law, the Central Depositories Act, the

Rules or pursuant to any order of the Court, no person is to be

recognised by the Company as holding any share upon any trust.

Trust

(2) Except as required by law, this Constitution, the Central

Depositories Act, the Rules or pursuant to any order of the

Court, the Company is not bound by or compelled in any way to

recognise or enter into the Register of Members or Record of

Depositors:

Not compelled to

recognise trust


12

(a) any equitable, contingent, future or partial interest in

any share or unit of a share; or

(b) any other rights in respect of any share or unit of share,

other than the registered holder’s rights to the entirety of the

share or unit of share.

(3) Clause 11(2) applies even when the Company has notice of any

interest or right (including notice of any trust expressed, implied

or constructive in this regard) referred to in Clauses 11(2)(a) or

(b).

Notice of interest

or right

DEALING IN SECURITIES

Issue of Securities

12. (1) Without prejudice to any special rights previously conferred on

the holders of any existing shares or class of shares but subject

always to the Act, the Listing Requirements and this

Constitution, the Directors have the right to:

Allotment of

shares or grant of

rights

(a) issue and allot shares in the Company; and

(b) grant rights to subscribe for shares or options over

unissued shares in the Company.

(2) Subject to the Act, the Listing Requirements, this Constitution

and the relevant Shareholders’ approval being obtained, the

Directors may issue any shares (including rights or options over

subscription of such shares):

Pre-emptive

rights shall not

apply

(a) with such preferred, deferred, or other special rights or

such restrictions, whether with regard to dividend,

voting, return of capital, or otherwise, as the Directors

may determine;

(b) to any person, whether a Member or not, in such

numbers or proportions as the Directors may

determine; and

(c) for such consideration as the Directors may determine.

(3) (a) Subject to the Act, the Listing Requirements and any

direction to the contrary that may be given by the

Company in General Meeting, all new shares or other

convertible securities shall, before issue, be offered to

Issue of new

shares or

securities to

Members


13

such persons as at the date of the offer are entitled to

receive notices from the Company of General

Meetings in proportion as nearly as the circumstances

admit, to the amount of the existing shares or securities

to which they are entitled.

(b) The offer shall be made by notice specifying the

number of shares or securities offered, and limiting a

time within which the offer, if not accepted, will be

deemed to be declined, and, after the expiration of that

time, or on the receipt of an intimation from the person

to whom the offer is made that he declines to accept

the shares or securities offered, the Directors may

dispose of those shares or securities in such manner as

they think most beneficial to the Company.

(c) The Directors may likewise also dispose of any new share or security which (by reason of the ratio which

the new shares or securities bear to shares or securities

held by persons entitled to an offer of new shares or

securities) cannot, in the opinion of the Directors, be

conveniently offered under this Constitution.

(4) Subject to Paragraph 6.06 of the Listing Requirements and notwithstanding the existence of a resolution pursuant to

Sections 75(1) and 76(1) of the Act, the Company must not issue

any shares or convertible securities if the total number of those

shares or convertible securities, when aggregated with the total

number of any such shares or convertible securities issued

during the preceding twelve (12) months, exceeds ten percent

(10%) of the total number of issued shares (excluding treasury

shares) of the Company except where the shares or convertible

securities are issued with the prior shareholder approval in a

General Meeting of the precise terms and conditions of the issue.

General mandate

for issue of

securities

(5) (a) The Company may pay commission (including

brokerage) subject to the following:

Permitted

commission

(i) the commission shall not exceed the rate of ten percent (10%) of the price at which the

shares in respect whereof the same is paid are

issued; or

(ii) the commission shall not exceed an amount

equal to ten percent (10%) of that price,

whichever is lesser;

(b) The rate of commission shall be disclosed in the

manner prescribed in the Act; and


14

(c) The said commission may be satisfied by payment in

cash or shares (fully or partly paid shares) or partly in

one way and partly in the other. For the purpose of

Clause 12(5), commission includes brokerage and the

rates referred to in Clause 12(5)(a) shall not apply to

brokerage.

(6) Subject to Section 130 of the Act, where any shares of the

Company are issued for the purpose of raising money to defray

the expenses of the construction of any works or buildings or the provision of any plant which cannot be made profitable for a

long period, the Company may pay interest or returns on the

amount of such share capital as is for the time being paid up and

charge the interest or returns paid to share capital as part of the

cost of construction of the works, buildings or the provision of

any plant.

Power of

Company to pay

interest out of

capital in certain

cases

Transfer and Transmission of Securities under the Central Depository System

13. Clauses 14 and 15 shall apply to Deposited Securities. Application

Transfer of Securities

14. The transfer of any Deposited Security or class of Deposited Security of

the Company, shall be by way of book entry by the Depository in

accordance with the Rules and, notwithstanding Sections 105, 106 or 110 of the Act, but subject to Section 148(2) of the Act and any exemption that

may be made from compliance with Section 148(1) of the Act, the

Company shall be precluded from registering and effecting any transfer of the Deposited Securities.

Transfer of

securities

Transmission of Securities

15. Where: Transmission of

securities

(a) the Securities of the Company are listed on another stock exchange; and

(b) the Company is exempted from compliance with Section 14 of

the Central Depositories Act or Section 29 of the Securities

Industry (Central Depositories) (Amendment) Act 1998, as the

case may be, under the Rules in respect of such Securities,

the Company shall, upon request of a Securities holder, permit a

transmission of Securities held by such Securities holder from the register

of holders maintained by the registrar of the Company in the jurisdiction

of the other stock exchange, to the register of holders maintained by the

registrar of the Company in Malaysia and vice versa provided that there shall be no change in the ownership of such Securities.


15

Transfer and Transmission of Shares or Debentures

16. Clauses 17 to 23 shall apply to non-Deposited Securities. Application

Transfer of Shares or Debentures

17. (1) Subject to this Constitution and other written laws, any

Shareholder or debenture holder may transfer all or any of his

shares or debentures by instrument of transfer as prescribed under the Act.

Instrument of

transfer

(2) The instrument of transfer must be executed by or on behalf of

the transferor and the transferee.

Execution of

instrument of

transfer

(3) The transferor shall remain as the holder of such shares or

debentures until the transfer is registered and the name of the

transferee is entered in the Register of Members or register of debenture holders in respect of the shares or debentures

respectively.

Effect the transfer

of shares or

debentures

18. (1) To enable the Company to register the name of the transferee,

the following items in relation to the transfer of shares or

debentures must be delivered by the transferor to the Office of

the Company:

Items for transfer

of shares or

debentures

(a) the instrument of transfer duly executed and stamped;

(b) the certificate of the shares or debentures which the

instrument of transfer relates; and

(c) any other evidence as the Directors may reasonably

require showing the right of the transferor to make the

transfer.

(2) Upon receipt of the items referred to in Clause 18(1), the

Company shall, upon the approval of the Board and unless

otherwise resolved, register the name of the transferee in the

Register of Members or register of debenture holders (as

applicable).

Approval of

registration

19. (1) The Directors may decline or delay to register the transfer of

shares within thirty (30) days from the receipt of the instrument

of transfer if:

Refusal of

registration

(a) the shares are not fully paid shares;

(b) the Directors passed a resolution with full justification

to refuse or delay the registration of transfer;


16

(c) the Company has a lien on the shares; and/or

(d) the Shareholder fails to pay the Company an amount

due in respect of those shares, whether by way of

consideration for the issue of the shares or in respect of

the sums payable by the Shareholder in accordance

with this Constitution.

(2) Where applicable, the Company shall send a notice of the

resolution referred to in Clause 19(1)(b) to the transferor and

transferee, within seven (7) days of the resolution being passed

by the Directors.

Notification to

transferor and

transferee

20. On giving at least fourteen (14) days’ notice to the Registrar to close the

Register of Members or register of debenture holders, the Company may

close the Register of Members or register for any class of members or

register of debenture holders (collectively, the “Registers”) for the purpose

of updating the Registers. The registration of transfer may be suspended at

such time and for such period as the Directors may from time to time

determine, provided that no part of the relevant Register(s) be closed for

more than thirty (30) days in aggregate in any calendar year.

Closing the

Register of

Members or

Register of

Debenture

Holders

Transmission on Death

21. In case of the death of a Member or debenture holder, the only persons

recognised by the Company as having any title to the interest of the

deceased Member or debenture holder in the shares or debentures

respectively shall be:

Transmission on

death

(1) the survivor(s), where the deceased Member or debenture holder was a Joint Holder; and

(2) the legal personal representatives of the deceased Member or

debenture holder, where the deceased Member or debenture

holder was a sole holder,

but nothing herein contained shall release the estate of a deceased Joint

Holder from any liability in respect of any share which had been jointly

held by him with other persons.

Transmission by Operation of Law

22. (1) Any person becoming entitled to a share or debenture in

consequence of an Event of Transmission may, upon such

evidence being produced as is properly required by the

Directors, and subject as hereinafter provided, elect either to

register himself as the holder of the share or debenture or to have some other person nominated by him registered as the transferee

of the shares or debentures.

Registration of

transmission


17

(2) If the entitled person elects to register himself, he shall deliver or

send to the Company a notice in writing signed by him stating

that he so elects.

Elects to register

himself as holder

(3) If he elects to have another person registered, he shall execute an

instrument of transfer of the share or debenture in favour of that

person.

Elects to register

other person as

the holder

(4) All limitations, restrictions and clauses of this Constitution

relating to the right to transfer and the registration of transfers of shares or debentures shall be applicable to any such notice or

transfer as if the Event of Transmission had not occurred and the

notice or transfer were a transfer signed by that Shareholder or

debenture holder.

Limitations,

restrictions and

clauses relating to

transfer of shares

or debentures

shall apply to

transmission

23. (1) Upon an Event of Transmission and the receipt by the Company

of the relevant notification as required under the Act together with such documentary evidence as required by the Directors

from the person who is entitled to the title to the relevant shares

or debentures, the Company shall register the person as a

shareholder or debenture holder of the Company within sixty

(60) days from its receipt of the notification (together with the

required documentary evidence).

Entitled to the

same rights as the

registered holder

(2) The registration of transmission of shares or debentures under

Clause 23(1) shall entitle the registered holder to the same

dividends and other advantages, and to the same rights (whether

in relation to meetings of the Company, or to voting or

otherwise), as the registered holder would have been entitled to

if the registered holder had not suffered an Event of

Transmission.

(3) Where two (2) or more persons are jointly entitled to any shares

or debentures in consequence of the death of the registered

holder, they shall, for the purpose of this Constitution, be

deemed to be Joint Holders of the shares or debentures.

Joint Holder

Lien on Shares

24. (1) The Company has a first and paramount lien on every share for: Lien on shares

(a) any amount due or unpaid in respect of the share which

has been called or is payable at a fixed date and/or

time;

(b) all amounts that the Company may be called on by law

to pay in respect of the share; and/or


18

(c) any reasonable interest in respect of the unpaid

amounts on the share and reasonable expenses incurred

by the Company in respect of receiving unpaid

amounts on the share.

(2) The Company’s lien, if any, on a share extends to all dividends

payable in respect of the share which may be retained and

applied towards the satisfaction of any or all amounts due to the

Company in respect of which the lien exists.

Dividends

payable may be

used for

satisfaction of the

amount due

(3) The Company’s lien on shares and dividends from time to time

declared in respect of such shares, shall be restricted to:

Company’s lien

on shares and

dividends

(a) unpaid calls and instalments upon the specific shares in

respect of which such moneys are due and unpaid,

(b) if the shares were acquired under an employee share

option scheme, amounts which are owed to the Company for acquiring them; and

(c) such amounts as the Company may be called upon by

law to pay, and has paid, in respect of the shares of the

Member or deceased Member.

In each case, the lien extends to reasonable interest and expenses

incurred because the amount is not paid.

(4) The Directors may at any time declare a share to be wholly or

partly exempt from Clauses 24(1) or (2), or both.

Exemption

25. No person is entitled to exercise any rights or privileges as a Member until

the Member has paid all calls, instalments of calls and other moneys

(including interest and expenses) for the time being payable in respect of

which the lien exists.

Rights or

privileges of a

Member

26. The registration of a transfer of a share approved by the Directors shall

operate as a waiver of the Company’s lien over the share.

Registration of

transfer

27. (1) Subject to Clause 27(2), the Company may sell, in any manner

as the Directors think fit and appropriate, any shares over which

the Company has a lien.

Sale of shares

under lien

(2) A share on which the Company has a lien shall not be sold

unless:

Enforcing sale of

shares under lien

(a) a sum in respect of which the lien exists is presently

payable; and


19

(b) the Company has, not less than fourteen (14) days

before the date of the sale, given to the registered

holder for the time being of the share or the person

entitled to the share by reason of the death or

bankruptcy of the registered holder of the share, a

notice in writing stating and demanding payment of

such part of the amount in respect of which the

privilege or lien exists and is presently payable.

28. (1) To give effect to any sale of shares under Clause 27, the Directors may authorise a person to transfer the shares sold to

the purchaser of the shares.

Give effect to any

sale of shares

(2) The Company shall register the purchaser as the holder of the

shares comprised in any such transfer and the Directors shall not

be bound to see to the application of the purchase money.

Register the

purchaser as the

holder

(3) The title of the purchaser to the shares shall not be affected by

any irregularity or invalidity in the proceedings relating to the

sale of the shares.

Title of the

purchaser

29. The proceeds of a sale of shares under Clause 27 shall be received and

applied by the Company in payment first of the expenses of the sale, then

of such part of the amount in respect of which the lien exists as is

presently payable and the residue (if any) shall (subject to any similar lien

for sums not presently payable that exists over the shares before the sale)

be paid to the person entitled to the shares as at the date of the sale.

Proceeds of sale

of shares

Calls on shares

30. (1) The Directors may from time to time make calls upon the

Shareholders in respect of any money unpaid on the shares of

the Shareholders and not by the conditions of the allotment of

the shares made payable at fixed date, provided that:

Directors to make

calls

(a) no call shall exceed one-fourth (¼) of the issue price of

the share or be payable at less than thirty (30) days

from the date fixed for the payment of the last

preceding call; and

(b) each Shareholder shall, upon receiving at least fourteen (14) days’ notice specifying the date, time and place of

payment, pay to the Company (at the time or times and

place specified in the notice) amount called on the

Shareholder’s shares.

(2) The Joint Holders of a share shall be jointly and severally liable

to pay all calls in respect of their shares.

Joint Holder

(3) A call shall be deemed to have been made at the time when the

resolution of the Board authorising the call was passed and may

be required to be paid by instalments.

Board’s

resolution

authorising the

call


20

(4) A call may be revoked or postponed as the Directors may

determine.

Directors may

revoke or

postpone call

31. (1) If a sum called in respect of a share is not paid before or on the

day appointed for payment of the sum, the person from whom

the sum is due shall pay interest on that sum from the appointed

day for payment to the time of actual payment at a rate not

exceeding eight percent (8%) per annum as the Board may

determine.

Interest on late

payment

(2) The Board may waive payment of any such interest in whole or in part.

Waiver of interest

32. (1) Any sum which, by the terms of issue of a share, becomes

payable on allotment or at any fixed date shall be deemed to be a

call duly made and payable on the date on which by the terms of

issue such sum becomes payable.

Sum becomes due

and payable

(2) In the case of non-payment of such sum, all the relevant

provisions of this Constitution as to payment of interest and

expenses, forfeiture or otherwise shall apply as if such sum had

become payable by virtue of a call duly made and notified.

Non-payment of

such sum

33. (1) The Company may accept from any Shareholder the whole or a

part of the amount unpaid on a share although no part of that

amount has been called up.

Advance from

shareholder

(2) The Company may make arrangements on the issue of shares for

varying the amounts and times of payment of calls as between

Shareholders.

Arrangement to

vary the amount

and payment

(3) Upon all or any part of the money advanced by Shareholder (for all or any part of the money uncalled or unpaid upon the shares

held by such Shareholder) received by the Directors from the

Shareholder become payable, the Directors may authorise the

Company to pay interest or return at a rate not exceeding eight

percent (8%) per annum as may be agreed upon between the

Directors and the Shareholder paying the sum in advance (unless

the Company in a General Meeting otherwise directs).

Interest on

advance

(4) However, the Company may not pay dividends in proportion to

the amount paid up on each share where a larger amount is paid

up on some shares than on others.

Forfeiture of Shares

34. (1) If a Shareholder fails to pay any call or instalment of a call on or

before the day appointed for the payment of the call or

instalment, the Directors may serve a notice on the Shareholder

requiring payment of the amount unpaid, together with interest at such rate not exceeding eight percent (8%) per annum as the

Directors shall determine.

Notice of

forfeiture of

shares


21

(2) The notice shall specify a date (not earlier than the expiration of

fourteen (14) days from the date of service of the notice) on or

before which the payment is required to be made and the notice

shall state that, in the event of non-payment on or before the

specified date, the shares in respect of which the call was made

will be liable to be forfeited.

Contents of notice

35. (1) If the requirements set out in the notice served under Clause 34

are not complied with, the shares in respect of which such notice

has been given shall be forfeited by a resolution of the Directors to that effect, unless the required payment is made before such

resolution.

Passing of

Directors’

resolution to

forfeit the shares

(2) A forfeiture of shares as referred to in Clause 35(1) above shall

include all dividends declared in respect of the forfeited shares

and not actually paid before the forfeiture.

Forfeiture

including all

dividends

declared

36. A forfeited share may be sold or otherwise disposed of on such terms and

in such manner as the Directors think fit and, at any time before a sale or

disposition of the forfeited shares, the forfeiture may be cancelled on such

terms as the Directors think fit.

Forfeited share

may be sold,

reissued or

otherwise

37. If any share is forfeited and sold, any residue after the satisfaction of the

unpaid calls and accrued interest and expenses, shall be paid to the person whose shares have been forfeited, or his executors, administrators or

assignees or as he directs.

Sale of shares

forfeited

38. A person whose shares have been forfeited shall cease to be a Member in

respect of the forfeited shares. Notwithstanding that, such person shall

remain liable to pay to the Company all money that, at the date of

forfeiture, was payable by the person to the Company in respect of the

shares (together with interest or compensation at the rate of eight percent (8%) per annum from the date of forfeiture on the money for the time

being unpaid if the Directors think fit to enforce payment of the interest or

compensation). Liability of the person shall cease if and when the

Company receives payment in full of all the money (including interest or

compensation) so payable in respect of the shares.

Cessation of

Member in

respect of

forfeited shares

39. A statutory declaration in writing by a Director or Secretary that a share in the Company has been duly forfeited on the date stated in the declaration

shall be conclusive evidence of the facts stated in the declaration against

all persons claiming to be entitled to the share.

Statutory

declaration

40. (1) The Company may receive the consideration (if any) given for a

forfeited share on any sale or disposition of the shares and may

execute a transfer of the share in favour of the person to whom

the share is sold or disposed of.

Consideration of

the forfeited

shares


22

(2) Upon the execution of the transfer of the share, the transferee

shall be registered as the holder of the share and the Company

shall not be bound to see to the application of the purchase

money (if any).

Transfer of

forfeited shares

(3) The title of the transferee to the share is not affected by any

irregularity or invalidity in the proceedings in connection with

the forfeiture, sale or disposal of the share.

Title of the

transferee

41. The provision of this Constitution as to forfeiture of shares shall apply in the case of non-payment of any sum that, by the terms of issue of a share,

become payable to the Company at a fixed date as if that sum of the shares

had been payable by virtue of a call duly made and notified.

Provision of

forfeited shares

Conversion of shares into stock

42. The Company may by ordinary resolution passed at a General Meeting

convert any paid-up shares into stock and reconvert any stock into paid-up

shares in accordance with Sections 84(1)(b) and 86 of the Act.

Conversion of

shares into stock

and vice versa

43. (1) The stockholders may transfer their stock or any part thereof in

the same manner as the transfer of shares from which the stock

arose may, before the conversion, have been transferred or be

transferred in the closest manner as the circumstances allow.

Stock is

transferable

(2) The Directors may from time to time fix the minimum amount

of stock transferable and restrict or forbid the transfer of

fractions of that minimum.

Directors’ powers

44. (1) The stockholders shall, according to the amount of the stock

held by them, have the same rights, privileges and advantages as

regards dividends, voting at meetings of the Company and other

matters as if they held the shares from which the stock arose.

Rights of

stockholders

(2) However, no such privilege or advantage (except participation in the dividends and profits of the Company and in the assets on

winding up) shall be conferred by any such part of stock which

would not, if existing shares have conferred that privilege or

advantage.

Participation in

dividends and

profits

45. For the purpose of Clauses 42 to 44, any reference in this Constitution as

are applicable to paid-up shares shall apply to stock, and the words

"share" and "shareholder" therein shall include "stock" and "stockholder"

respectively.

Reference

Alteration of Capital

46. (1) The Company may from time to time by ordinary resolution and

subject to other applicable laws or requirements:


23

(a) consolidate and divide all or any of its share capital,

the proportion between the amount paid and the

amount, if any, unpaid on each subdivided share shall

be the same as it was in the case of the share from

which the subdivided share is derived; or

Consolidation of

shares

(b) subdivide its shares or any of them into shares,

whichever is in the subdivision; the proportion

between the amount paid and the amount, if any,

unpaid on each subdivided share shall be the same as it was in the case of the share from which the subdivided

share is derived.

Subdivision of

shares

(2) The Company may from time to time by special resolution and

subject to other applicable requirements:

(a) cancel shares which, at the date of the passing of the

resolution in that regard, have not been taken or agreed to be taken by any person or which have been forfeited

and diminish the amount of its share capital by the

amount of the shares so cancelled or in such other

manner allowed by law; or

Cancellation of

shares

(b) reduce its share capital in such manner permitted by

law, and (where applicable) subject to the relevant

required approvals being obtained.

Reduction of

share capital

(3) The Company shall have the power, subject to and in accordance

with the provisions of the Act, the Listing Requirements and any

rules, regulations and guidelines in respect thereof for the time

being in force, to purchase its own shares and thereafter to deal

with the shares purchased in accordance with the provisions of

the Act, the Listing Requirements and any rules, regulations and

guidelines thereunder or issued by Bursa Securities and any

other relevant authorities in respect thereof.

Purchase of own

shares

PASSING OF RESOLUTIONS OF MEMBERS

Passing of Resolutions of Members

47. The Company may pass a resolution of the Members or of a class of Members at a meeting of the Members.

Passing a

Members’

Resolution


24

MEETINGS OF MEMBERS

Convening General Meetings

48. (1) The Company shall hold an Annual General Meeting in every

calendar year pursuant to Section 340 of the Act to transact the

following ordinary business:

Annual general

meeting

(a) The laying of audited financial statements and the

reports of the Directors and Auditors;

Ordinary business

(b) The declaration of dividend (if any);

(c) The election or re-election and the fixing of the fees

and benefits of the Directors;

(d) The appointment and the fixing of the fees and benefits

of the Directors; and

(e) The appointment or re-appointment and the fixing of

the remuneration of the Auditors.

(2) All businesses (except for those set out under Clause 48(1)) shall

be special that is transacted at an Annual General Meeting and

also that is transacted at other General Meeting.

Special business

49. Subject to Clause 48, all meetings of Members shall be called General

Meetings.

General Meetings

50. The Board: Board to convene

General Meeting

(1) may, whenever it thinks fit, convene a meeting of the Members;

and

(2) shall convene a General Meeting on the request of the Members

pursuant to Section 311 of the Act.

51. A General Meeting may be requisitioned by: Members to

requisite a

General Meeting

(a) any Member(s) holding at least ten percent (10%) of the issued

and paid up share capital of the Company pursuant to Sections

310(b) and 311(3)(a) of the Act; or

(b) any of the Members representing more than one half of the total

voting rights of all of the Members who requisitioned the

General Meeting pursuant to Section 313(1) of the Act.


25

Notice of General Meetings

52. (1) A notice of a General Meeting must specify the following: Contents of

Notice of General

Meeting

(a) the place, date and time of the General Meeting;

(b) the general nature of the business of the General

Meeting; and

(c) the text of any proposed resolution and other

information as the Directors think fit.

(2) If the General Meeting is to be held in two (2) or more places, the notice of the General Meeting shall specify the technology or

method that will be used to facilitate the General Meeting.

General Meeting

held at two (2) or

more venues

(3) The main venue of the General Meeting shall be in Malaysia and

the chairperson shall be present at that main venue of the

General Meeting.

Main venue

53. (1) The notices convening General Meetings shall specify the place, day and hour of the General Meeting, and shall be given to all

Shareholders at least fourteen (14) days before the General

Meeting or at least twenty-one (21) days before the General

Meeting where any special resolution is to be proposed or where

it is an Annual General Meeting. Any notice of a General

Meeting called to consider special business shall be

accompanied by a statement regarding the effect of any proposed

resolution in respect of such special business. At least fourteen

(14) days’ notice or twenty-one (21) days’ notice in the case

where any special resolution is proposed or where it is the

Annual General Meeting, of every such meeting must be given

by advertisement in at least one (1) nationally circulated Bahasa

Malaysia or English daily newspaper and in writing to each stock exchange upon which the Company is listed.

Notice of General

Meetings

(2) The notice of General Meeting shall exclude the date of issuing

the notice and the date of the General Meeting.

(3) An Annual General Meeting may be called by a notice shorter

than the period referred to in Clause 53(1) if so agreed by all the

Members entitled to attend and vote at the General Meeting.

(4) The technology to be used for the purpose of this Clause must

allow the Members who participate in the physical and/or virtual

General Meeting to communicate simultaneously with the

chairperson, Directors, other Members and advisers (if any)

taking part in the main venue of the General Meeting and such

technology may include telephone, television, video

conferencing, or any other telecommunication or digital methods

which permits instantaneous communication.

Technology to be

used for physical

and/or virtual

General Meeting


26

(5) Subject to the Act, the Listing Requirements and other

applicable laws and regulations, the physical and/or virtual

General Meeting shall be deemed to constitute a General

Meeting and all provisions of this Constitution relating to

General Meetings shall apply to any physical and/or virtual

General Meeting provided the following conditions are met:

Conditions for

physical and/or

virtual General

Meeting

(a) All the Members for the time being entitled to receive

notice of the General Meeting shall be entitled to

receive notice of the physical and/or virtual General Meeting. Notice of any such meeting shall be given by

an appropriate form of technology (or in such other

manner) as determined by the Board of Directors and

permitted by this Constitution; and

(b) The Members who attend the General Meeting

remotely may participate, speak and vote at the physical and/or virtual General Meeting provided that

the remote locations should leverage on technology to

facilitate voting, including voting in absentia and

remote shareholders’ participation at the physical

and/or virtual General Meeting.

(6) A General Meeting, other than an Annual General Meeting and a

General Meeting for passing of a special resolution, may be

called by a notice shorter than the period referred to in Clause

53(1) if so agreed by a majority in the number of the Members

who collectively hold not less than ninety-five percent (95%) of

the total number of shares giving the rights to attend and vote at

the General Meeting, excluding any shares in the Company held

as treasury shares.

Shorter notice

54. Notice of every General Meeting shall be given in the manner authorised

by Clause 128 to:

Persons entitled

to receive notice

of General

Meeting

(1) every Member (including any person who is entitled to a share

in consequence of the death or bankruptcy of a Member who,

but for his death or bankruptcy, would be entitled to receive

notice of the meeting and the Company has been notified of the person’s entitlement in writing);

(2) every Director; and

(3) the Auditors.

55. (1) In relation to Deposited Securities, the Company shall request

the Depository in accordance with the Rules, to issue a Record

of Depositors to whom notices of General Meetings shall be

given by the Company.

Record of

Depositors


27

(2) The Company shall also request the Depository in accordance

with the Rules, to issue a Record of Depositors, as at the latest

date which is reasonably practicable which shall in any event be

not less than three (3) market days before the General Meeting

(“General Meeting Record of Depositors”).

(3) Subject to the Securities Industry (Central Depositories)

(Foreign Ownership) Regulations 1996 (where applicable), a

Depositor shall not be regarded as a Member entitled to attend

any General Meeting and to speak and vote thereat unless his name appears in the General Meeting Record of Depositors.

Quorum for General Meetings

56. (1) No business is to be transacted at any General Meeting unless a

quorum of Members is present at the time when the meeting

proceeds to business.

Quorum

(2) Two (2) Members personally present at a meeting or by proxy or

by Representative of Member shall constitute a quorum.

More than one (1)

Member

(3) For the purpose of constituting a quorum:

(a) one (1) or more representatives appointed by a

corporation shall be counted as one (1) Member;

Corporate

representative

(b) one (1) or more proxies appointed by a person shall be

counted as one (1) Member; or

Proxy

(c) the presence of one (1) or more Joint Holders shall be

counted as one (1) Member.

Joint Holders

No Quorum

57. If a quorum is not present within half an hour after the time appointed for

a General Meeting:

Quorum is not

present

(1) where the General Meeting was convened upon the requisition

of Members, the meeting shall be dissolved; or

Requisition of

Member

(2) in any other case: Other case

(a) if no determination is made by the Directors, the

General Meeting shall stand adjourned to the same day

in the next week at the same time and place or if that

day falls on a public holiday then to the next business day following that public holiday; or

Adjournment of

General Meeting


28

(b) the General Meeting shall stand adjourned to another

day and at another time and place as the Directors may

determine; and

if at the adjourned General Meeting, a quorum is not present

within half an hour from the time appointed for the meeting,

then any Member present shall form a quorum.

Adjourned

General Meeting

Chairperson of General Meetings

58. The chairperson of a General Meeting is:

(1) where the Board has appointed a chairperson or deputy

chairperson amongst the Directors, the Chairperson of the

Board; or

Chairperson of

the Board

(2) where: Members to

appoint

Chairperson of

General Meeting

(a) the Chairperson of the Board is unable or unwilling to

act as the chairperson of the General Meeting;

(b) the Chairperson is not present within fifteen (15)

minutes after the time appointed for the holding of the

General Meeting; or

(c) the Board has not appointed a chairperson amongst the

Directors,

the Members present shall elect one of their Members present to be the chairperson of the General Meeting.

(3) For avoidance of doubt, a proxy or Representative of Member

may be elected as the chairperson of the General Meeting by a

resolution passed at the meeting.

Adjournment of General Meetings

59. (1) The chairperson shall adjourn a General Meeting, at which a quorum is present, from time to time and from place to place if

the Members present with a majority of votes that may be cast at

that meeting agree or direct the chairperson to do so.

Members’ consent

is required

(2) No business shall be transacted at any adjourned General

Meeting other than the business left unfinished at the General

Meeting from which the adjournment took place (referred to as

the “Original General Meeting”).

Only transact the

business left

unfinished at the

General Meeting


29

(3) There is no need to give any notice of an adjourned General

Meeting or of the business to be transacted at an adjourned

General Meeting unless the adjourned General Meeting is to be

held thirty (30) days or more after the date of the Original

General Meeting or otherwise as the chairperson directs.

Notice of

adjourned

General Meeting

Voting by Show of Hands

60. (1) Subject to any express requirement of the Listing Requirements,

at a General Meeting, a resolution put to the vote of the General Meeting shall be decided on a show of hands unless a poll is

demanded before or on the declaration of the result of the show

of hands.

By show of hands

(2) On a vote on a resolution at a General Meeting on a show of

hands, a declaration by the chairperson that a resolution has been

passed unanimously, or with a particular majority, or is lost, and

an entry to that effect in the minutes of the proceeding shall be conclusive evidence of that fact without proof of the number or

proportion of the votes recorded in favour of or against the

resolution.

Declaration by

the chairperson

Voting by Poll

61. Any resolution set out in the notice of any general meeting, or in any

notice of resolution which may properly be moved and is intended to be

moved at any general meeting shall be voted on by poll.

Resolutions in

notice of general

meeting to be

voted on by poll

62. (1) A poll may be demanded: Demand a poll

(a) by the chairperson;

(b) by at least three (3) Members present in person or by

proxy;

(c) by any Member or Members present in person or by

proxy and representing not less than ten percent (10%)

of the total voting rights of all the Members having the

right to vote at the General Meeting; or

(d) by a Member or Members holding shares in the

Company conferring a right to vote at the General Meeting being shares on which an aggregate sum has

been paid up equal to not less than ten percent (10%)

of the total paid up shares conferring that right.

For purposes of this Clause, references to “Member” shall

include Representative of Member.


30

(2) The demand for a poll may be subsequently withdrawn. Withdrawal of a

demand for poll

(3) Subject to Clause 62(4), if a poll is duly demanded, it shall be

taken in such manner and either at once or after an interval or

adjournment or otherwise as the chairperson directs.

When a poll is to

be held

(4) No poll shall be demanded on the election of a chairperson of a

General Meeting or on a question of adjournment of a General

Meeting.

No poll on

election of

chairperson or

adjournment

(5) When a poll is properly demanded, the earlier vote by a show of

hands shall be superseded by the result of the poll and the result

of the poll shall be the resolution of the General Meeting at

which the poll was demanded.

Result of the poll

Casting Vote

63. In the case of an equality of votes, whether on a show of hands or on a

poll, the chairperson of the General Meeting at which the show of hands

takes place or at which the poll is carried out is entitled to a second or

casting vote.

Chairperson shall

have a casting

vote

Voting Entitlement

64. Subject to any rights or restrictions for the time being attached to any class or classes of shares:

(1) at meetings or class meetings of Members, each Member entitled

to vote may vote in person or by a proxy or by Representative of

Member;

Voting by

Member

(2) on a vote by way of show of hands, every Member who is

present in person or by proxy or Representative of Member has

one (1) vote;

Voting by a show

of hands

(3) on a vote by way of poll, every Member who is present in person

or by proxy or by Representative of Member shall have one (1)

vote for each share or stock the Member holds; and

Voting by poll

(4) in the case of Joint Holders, the joint holders shall be considered

as one (1) Member.

Voting by Joint

Holders

65. For the purposes of Clause 64(2): Votes by proxy

(1) where a Member entitled to vote on a resolution has appointed a

proxy, the proxy shall be entitled to vote on a show of hands,

provided that he is the only proxy appointed by the Member;

May vote by show

of hands if one

proxy is

appointed


31

(2) where a Member entitled to vote on a resolution has appointed

more than one (1) proxy,

May only vote on

a poll if more

than one (1)

proxy appointed

(a) the proxies shall only be entitled to vote on a poll; and

(b) the appointment shall not be valid unless he specifies

the proportions of his holdings to be represented by

each proxy; and

(3) in respect of Clause 65(1), where the shares of the Company are

quoted on a stock exchange and if a Member entitled to vote on a resolution has appointed more than one (1) proxy, the

entitlement of those proxies to vote on a show of hands shall be

in accordance with the listing requirements of the stock

exchange.

Exception

66. For the purposes of Clause 64(4), if the Joint Holders purport to exercise

the power to vote in the same way, the power is treated as exercised in that

way. If the Joint Holders do not purport to exercise the power in the same

way, the power is treated as not exercised.

Votes of Joint

Holders of shares

67. For the purposes of Clause 64, when a corporate Member appoints more

than one (1) representative, if its representatives purport to exercise the

power to vote in the same way, the power is treated as exercised in that

way. If the representatives do not purport to exercise the power in the

same way, the power is treated as not exercised.

Votes of

corporate

representative of

shares

Voting Restrictions

68. If a Member is of unsound mind or is a person whose person or estate is

liable to be dealt with in any way under the law relating to mental health,

the relevant committee or trustee or such other person as properly

appointed under the applicable law to manage his estate may exercise any

rights of the Member in relation to a meeting of the Company’s Members as if the committee, trustee or other person were the Member.

Member is of

unsound mind

69. No member is entitled to attend and vote at any General Meeting unless

all calls or other sums presently payable by the Member in respect of

shares in the Company have been paid.

Calls unpaid

Objection to Votes

70. (1) An objection may be raised to the qualification of a voter only at the General Meeting or adjourned General Meeting at which the

vote objected to is given or tendered.

Objection to

qualification of a

voter

(2) Any such objection made in due time shall be referred to the

chairperson of the General Meeting, whose decision is final and

conclusive.

Any objection

shall be referred

to the chairperson


32

(3) A vote not disallowed pursuant to an objection at the General

Meeting is valid for all purposes.

Vote not

disallowed

PROXIES / REPRESENTATIVES OF MEMBERS

General

71. (1) A Member of the Company may appoint a proxy and/or

Representative of Member to exercise his rights to attend,

participate, speak and vote for the Member at a General

Meeting. A proxy may but need not be a Member of the

Company.

Proxy /

Representative of

Member

(2) Subject to the Act and this Constitution, a proxy or

Representative of Member is only entitled to vote:

Entitlement to

vote

(a) if the Member is entitled to vote;

(b) if the Member is not personally present at the General Meeting;

(c) if the Member has complied with the requirements set

out in this Constitution to properly appoint a proxy or

Representative of Member and to give notice of such

appointment to the Company;

(d) if the Member has conferred a right to vote on the

proxy or Representative of Member; and

(e) the appointment of proxy or Representative of Member

was not revoked by the Member by a notice of

revocation forty-eight (48) hours before the time of

holding of the General Meeting or adjourned General

Meeting or such other time that may be determined by

the Directors and the said revocation must be deposited

at the Office or such other place in Malaysia as is

specified in the notice convening the General Meeting.

(3) A proxy or Representative of Member may vote, whether on a

show of hands or on a poll, on any question at any General

Meeting and to the extent permitted under the instrument of

proxy or certificate of appointment of corporate representative or

power of attorney.

May vote by a

show of hands or

on a poll


33

Proxies

72. (1) An instrument appointing a proxy: Manner of

execution of

instrument

appointing a

proxy

(a) must be in writing and executed by or on behalf of the

appointing Member in substantially the form and in the

manner as specified in “Appendix A” annexed hereto

or in such other permitted form (including the

electronic proxy appointment and voting manner) as

the Board of Directors may determine from time to time;

(b) will not be invalid merely because it omits any

particulars of the proxy and the appointing Member;

and

(c) will be deemed to have appointed the Chairperson of

the General Meeting as the proxy of the appointing

Member where no other person has been named to act

as proxy.

(2) An instrument appointing a proxy may: Form of

instrument of

proxy

(a) specify the manner in which the proxy is to vote in

respect of a particular resolution and, where an

instrument of proxy so provides, the proxy is not

entitled to vote in the resolution except as specified in

the instrument;

(b) specify the proportion or number of votes that the

proxy may exercise; and/or

(c) be a specific appointment for a particular meeting.

(3) An instrument appointing a proxy and the power of attorney or

other authority (if any) under which it is signed or a notarially certified copy of that power or authority :

(a) shall be deemed to confer authority to demand or join

in demanding a poll;

Confer authority

to demand a poll

(b) shall be deposited at the Office or at such other place

in Malaysia as is specified in the notice convening the

General Meeting or adjourned General Meeting, at which the person named in the instrument proposes to

vote:

Time limit to

deposit

instrument

appointing a

proxy

(i) not less than forty-eight (48) hours before the

time for holding the General Meeting or

adjourned General Meeting; or


34

(ii) in the case of a poll, not less than twenty-four (24) hours before the time appointed for the

taking of the poll; and

(c) may be accepted if it is: Execution by

electronic or

digital signature

or authentication

of an appointment

by electronic

means

(i) transmitted to the Company by any

technology purporting to include a signature

and/or an electronic or digital signature by

the Member; or

(ii) authenticated in any document given to the

Company by electronic means which shows

the validity of the appointment of a proxy.

(4) In Clause 72(3), documents relating to proxies include: Documents

relating to proxies

(a) the appointment of a proxy in relation to a General

Meeting;

(b) any document necessary to show the validity of, or

otherwise relating to, the appointment of a proxy; and

(c) notice of the revocation of the authority of a proxy.

(5) For the purposes of Clause 72(3), delivery may be effected by: Manner of

delivery

(a) physical delivery of the document;

(b) delivery by facsimile transmission;

(c) delivery by email transmission; or

(d) lodging electronic document,

to the place, facsimile number, electronic address or the

designated website link or address (where applicable) as specified in the notice of General Meeting.

(6) The proceedings at a General Meeting shall not be invalidated

where an appointment of proxy in respect of that General

Meeting is sent in electronic form, but cannot be read by the

Company due to technical problems or other reasons.


35

(7) If a Member is entitled to cast two (2) or more votes at a General

Meeting, the Member:

Member with two

(2) or more votes

(a) may appoint up to two (2) proxies; and

(b) must specify the proportion or number of the

Member’s votes each proxy may execute.

(8) (a) 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.

Appointment of

multiple proxies

(b) An exempt authorised nominee refers to an authorised

nominee defined under the Central Depositories Act

which is exempted from compliance with the

provisions of Section 25A(1) of the Central

Depositories Act.

(9) Where a member of the Company is an authorised nominee as

defined in the Central Depositories Act, it may appoint not more

than two (2) proxies in respect of each securities account it holds

in ordinary shares of the Company standing to the credit of the

said securities account.

Appointment of

proxy by

authorised

nominee

(10) When two (2) or more valid but differing appointments of a

proxy are received by the Company in respect of the same share

for use at the same General Meeting, the one which is last

received (regardless of its date or of the date of its execution or

submission) shall be treated as replacing and revoking the other

as regards that share. If the Company is unable to determine which appointment was last received, none of them shall be treated as valid in respect of that share.

Differing

Appointment of

Proxy

(11) For the avoidance of doubt, the appointment of a proxy shall not

preclude a Member from attending and voting in person at a

General Meeting.

73. (1) Subject to Clause 73(2), a vote given in accordance with the

terms of an instrument of proxy is valid despite:

Validity of a vote

(a) the previous death or unsound mind of the appointing

Member;

(b) the revocation of the instrument or of the authority

under which the instrument was executed; or


36

(c) the transfer of the share in respect of which the

instrument or power is given.

(2) Clause 73(1) does not apply if an instrument in writing of such:

(a) death, unsound mind or transfer has been received by

the Company before the commencement of the General

Meeting or adjourned General Meeting at which the

instrument is used; or

(b) revocation by the Member was not received by the Company forty-eight (48) hours before the time of

holding of the General Meeting or adjourned General

Meeting or such other time that may be determined by

the Directors, and

the said notification must be deposited at the Office or such

other place in Malaysia as is specified in the notice convening

the General Meeting.

Attorneys

74. (1) A person purporting to be the attorney of a Member shall be

required to produce the original Power of Attorney to the

Company.

Power of attorney

(2) A copy of the power of attorney may be accepted provided that

it is certified notarially and/or in accordance with the applicable

legal requirements in the relevant jurisdictions in which it is

executed.

Corporate Representatives

75. (1) A corporate Member may appoint an individual as its corporate

representative to exercise all or any of the powers the corporate

Member may exercise.

Appointment of

corporate

representative

(2) The appointment may be a standing appointment until notice of

revocation is received by the Company.

(3) The instrument of appointment may set out restrictions on the

powers of the corporate representative.

(4) A corporate Member may appoint more than one (1) corporate

representative. However, it shall observe the voting entitlement set out in Clause 67.


37

DIRECTORS

Number of Directors

76. (1) The Company may from time to time by an ordinary resolution

passed at a General Meeting fix the number of Directors

(excluding Alternate Director) but the number so fixed shall not

be less than two (2) nor more than ten (10).

May fix the

number of

Directors

(2) The shareholding qualification for Directors may be fixed by the

Company in general meeting and until so fixed no shareholding

qualification for Director shall be required.

Shareholding

qualification for

Directors

Retirement of Directors

77. (1) An election of Directors shall take place each year. Election

(2) At the Annual General Meeting in every subsequent year, one-

third (1/3) of the Directors for the time being, or, if their number

is not three (3) or a multiple of three (3), then the number nearest

to one-third (1/3), shall retire from office at the conclusion of the

Annual General Meeting in every year provided always that all

Directors shall retire from office once at least in each three (3)

years, but shall be eligible for re-election.

Retirement at

Annual General

Meeting in every

subsequent year

(3) The Directors to retire in every year shall be the Directors who

have been longest in office since the Directors’ last election, but

as between persons who became Directors on the same day, the

Directors to retire shall be determined by lot, unless they

otherwise agreed among themselves.

Directors to retire

(4) A retiring Director shall be eligible for re-election at the Annual

General Meeting.

Eligible for

re-election

(5) The Company may appoint any person who is not disqualified

under the Act to fill in vacancy at the Annual General Meeting at

which a Director so retires, and if no appointment was made to

fill the vacancy, the retiring Director shall, if he offers himself

for re-election, be deemed to have been re-elected, unless:

Fill in vacancy at

the Annual

General Meeting

(a) at that meeting, the Company expressly resolved not to

fill the vacated office; or

(b) a resolution for the re-election of the Directors is put to

the meeting and lost.


38

Appointment of Directors

78. The Directors shall have power from time to time to appoint any person: Appointment by

Directors

(1) to be a Director to fill a casual vacancy; and

(2) to be an addition to the existing Directors,

subject to the total number of Directors shall not exceed the maximum

number fixed in Clause 76(1).

79. Any Director so appointed under Clause 78 shall hold office only until the

next Annual General Meeting, and shall then be eligible for re-election.

Hold office until

next Annual

General Meeting

80. The Members may, at any time and from time to time by an ordinary

resolution, appoint any person:

Appointment by

Members

(1) to be a Director to fill a casual vacancy; and

(2) to be an addition to the existing Directors,

subject to the total number of Directors shall not exceed the maximum

number fixed in Clause 76(1).

81. Subject to Clause 76(1), no person, not being a retiring Director, shall be

eligible for election to the office of Director at any General Meeting

unless a Member intending to propose him for election has, at least eleven

(11) clear days before the meeting, left at the Office of the Company a

notice in writing duly signed by the nominee, giving his consent to the

nomination and signifying his candidature for the office, or the intention

of such member to propose him for election, provided that in the case of a

person recommended by the Directors for election, nine (9) clear days’

notice only shall be necessary, and notice of each and every candidature

for election to the Board shall be served on the Members at least seven (7)

days before the meeting at which the election is to take place.

Notice of

intention to

appoint Director

Proceedings in case of Vacancies

82. The remaining Director may continue to act notwithstanding any vacancy

in their body, but if and so long as their number is reduced below the

minimum number fixed by or pursuant to this Constitution, the remaining

Director may, except in an emergency, act only for the purpose of

increasing the number of Directors to such minimum number, or to

summon a General Meeting.

Proceedings in

case of vacancies


39

Defects in Appointment of Directors

83. The acts of a Director shall be valid notwithstanding any defect that is discovered after his appointment or in his qualifications.

Validity of acts of

Directors

Appointment of Managing and Executive Directors

84. (1) The Board of Directors may from time to time appoint one (1) or

more of its body to the office of Managing Director (which term

shall be deemed to include the chief executive or other such

designation of the Company’s chief executive officer) for such

period and on such terms as they think fit and, subject to the

terms of any agreement entered into in any particular case, may revoke any such appointment.

Managing and

Executive

Directors

(2) A Director (other than a Managing Director) holding any such

other office or employment is herein referred to as an “Executive Director”.

Executive

Director

(3) Any such appointment of a Managing Director automatically terminates if the appointee ceases from cause to be a Director.

Cessation of

office of

Managing

Director

85. A Managing Director or an Executive Director shall, subject to the terms

of any agreement entered into in any particular case, receive such

remuneration (whether by way of salary, bonus, commission, or

participation in profits, or partly in one way and partly in another and other benefits) as the Board of Directors may determine.

Remuneration

86. (1) The Board of Directors may, upon such terms and conditions

and with such restrictions as it may think fit, entrust to and

confer upon a Managing Director or an Executive Director any

of the powers exercisable by them. A Managing Director or an

Executive Director shall be subject to the control of the Board of Directors.

Directors may

confer powers to

Managing

Director or

Executive

Director

(2) Any powers so conferred may be collateral with, or be to the

exclusion of, the powers of the Board of Directors.

(3) The Board of Directors may at any time, and from time to time,

revoke, withdraw, alter or vary all or any of the powers so conferred on a Managing Director or an Executive Director.

Appointment of Alternate Director

87. (1) Any Director (called in this Clause the “Appointer”) may, with

the approval of a majority of the other members of the Board of

Directors, appoint one (1) or more persons to be his Alternate

Director in the Appointer’s place for any period as the Appointer

Appointment of

Alternate

Director


40

thinks fit provided that:

(a) such person is not a Director of the Company; and

(b) such person does not act as an Alternate Director for more than one (1) Director of the Company.

(2) An appointment or removal of an Alternate Director must be in

writing under the Appointer’s hand. The original notification of

appointment or removal must be provided by the Appointer to

the Board.

Appointment or

removal must be

in writing

(3) An Alternate Director may resign from office by notice in

writing to the Appointer and the Board.

Resignation

(4) An Alternate Director must vacate office if the Appointer

vacates office as a Director or removes the appointee from

office.

Vacate office

88. An Alternate Director is entitled to receive notice of Board Meetings and, if the Appointer is not present at such a meeting, is entitled to attend and

vote in his stead.

Entitled to receive

notice of Board

Meetings

89. (1) An Alternate Director may exercise any powers that the

Appointer may exercise and the exercise of any such power by

the Alternate Director shall be deemed to be the exercise of the

power by the Appointer.

Exercise of power

(2) The exercise of any power by an Alternate Director shall be an

agent of the Company and not as an agent of the Appointer.

90. An Alternate Director:

(1) has no entitlement to receive remuneration from the Company

and any fee paid by the Company to the Alternate Director shall

be deducted from the Appointer’s remuneration; and

Not entitled to

receive

remuneration

(2) is entitled to be reimbursed for all the travelling and other

expenses properly incurred by him in attending the Board

Meetings on behalf of the Appointer from the Company.

May be paid

travelling and

other expenses

Appointment of Associate Director

91. (1) The Board may from time to time appoint any person to be an

associate director and may from time to time revoke any such appointment.

Appointment or

revocation

(2) The Board may fix, determine and vary the powers, duties and

remuneration of any person appointed as an associate director.

Board to fix the

terms


41

(3) A person appointed as an associate director does not have any

right to attend or vote at any Board Meetings except by the

invitation and with the consent of the Board.

May attend Board

Meetings by

invitation

Removal of Director

92. Subject to the Act, the Company may by an ordinary resolution remove

any Director and may by an ordinary resolution appoint another person in

place of the removed Director provided that the total number of Directors

should not at any time fall below the minimum or exceed the maximum set out in Clause 76(1) of this Constitution.

May remove and

appoint a

Director by

ordinary

resolution

Vacation of Office of Director

93. The office of Director shall become vacant if the Director: Vacation of office

(a) resigns from his office by giving a written notice to the

Company at its Office;

(b) is removed from office in accordance with Clause 92 of this

Constitution;

(c) becomes disqualified from being a Director under Section 198 or

Section 199 of the Act;

(d) becomes of unsound mind or a person whose person or estate is

liable to be dealt with in any way under the Mental Health Act

2001;

(e) dies or has passed away;

(f) has been convicted by a court of law of an offence under the

securities laws; or

(g) otherwise vacates his office in accordance with this Constitution.

Remuneration of Directors

94. (1) The Company may from time to time by an ordinary resolution

passed at a General Meeting, approve the remuneration of the

Directors, who hold non-executive office with the Company, for

their services as non-executive Directors.

Non-executive

Directors’

remuneration

(2) Subject to Clause 85, the fees of the Directors and any benefits

payable to the Directors shall be subject to annual shareholders’

approval at a General Meeting.

Fee


42

(3) If the fee of each such non-executive Director is not specifically

fixed by the Members, then the quantum of fees to be paid to

each non-executive Director within the overall limits fixed by

the Members, shall be decided by resolution of the Board. In

default of any decision being made in this respect by the Board,

the fees payable to the non-executive Directors shall be divided

equally amongst themselves and such a Director holding office

for only part of a year shall be entitled to a proportionate part of

a full year’s fees. The non-executive Directors shall be paid by a fixed sum and not by a commission on or percentage of profits

or turnover.

(4) The following expenses shall be determined by the Directors: Expenses

(a) Traveling, hotel and other expenses properly incurred

by the Directors in attending and returning from

meetings of the Directors or any committee of the

Directors or General Meetings of the Company or in

connection with the business of the Company; and

(b) Other expenses properly incurred by the Directors

arising from the requirements imposed by the

authorities to enable the Directors to effectively

discharge their duties.

(5) Executive Directors of the Company shall be remunerated in the

manner referred to in Clause 85 but such remuneration shall not

include a commission on or percentage of turnover.

Executive

Directors’

remuneration

Powers of Directors

95. (1) The business and affairs of the Company shall be managed by or

under the direction and supervision of the Directors who may

pay all expenses incurred in promoting and registering the

Company.

Directors shall

manage the

business and

affairs of the

Company

(2) The Directors may exercise all the powers necessary for

managing and for directing and supervising the management of

the business and affairs of the Company except any power that

the Act or by this Constitution requires the Company to exercise

in General Meeting, but no regulation made by the Company in

General Meeting shall invalidate any prior act of the Directors

which would have been valid if that regulation had not been

made.

Validity of acts of

Directors

(3) Where an oral contract is made by a Director acting under

authority, express or implied, the contract is to be reduced to

writing within fourteen (14) days and may be subject to

ratification by the Board (if required). If there is any non-

compliance with the above requirement of reduction to writing

and proper ratification by the Board, the Director entering into

such oral contract shall assume personal responsibility for the

same and shall indemnify the Company fully in all respects in

relation to such contract.

Oral contract

shall be reduced

to writing and

Board’s

ratification


43

(4) (a) The Directors may procure the establishment and

maintenance of any non-contributory or contributory

pension or superannuation fund or life assurance

scheme for the benefit of, and pay, provide for or

procure the grant of donations, gratuities, pensions,

allowances, benefits or emoluments to any persons

who are or shall have been at any time in the

employment or service of the Company or any

subsidiary company or to any persons who are or have been a Director or other officer of and holds or has

held salaried employment in the Company or any

subsidiary company, or the wives, widows, families or

dependents of any such persons.

Establishment

and maintenance

of fund

(b) The Directors may also procure the establishment and

subsidy of or subscription and support to any

institutions, association, clubs, funds or trusts calculated to be for the benefit of any such persons as

aforesaid or of its members and payment for or

towards the insurance of any such persons as aforesaid,

and subscriptions or guarantees of money for

charitable or benevolent objects or for any exhibitions

or for any public, general or useful object.

96. Without limiting the generality of Clause 95(1) and (2), the Directors may, subject to the Act and the Listing Requirements, exercise all the powers of

the Company to do all or any of the following for any debt, liability, or

obligation of the Company or of any third party:

(1) borrow money; Borrowing

(2) mortgage or charge its undertaking, property, and uncalled

capital, or any part of the undertaking, property and uncalled

capital;

Mortgage

(3) issue debentures and other Securities whether outright or as

security; and/or

Issue debentures

(4) (a) lend and advance money or give credit to any person

or company;

Lend or advance

money

(b) guarantee and give guarantees or indemnities for the

payment of money or the performance of contracts or

obligations by any person or company;

(c) secure or undertake in any way the repayment of

moneys lent or advanced to or the liabilities incurred

by any person or company;

and otherwise to assist any person or company.


44

97. All cheques, promissory notes, drafts, bills of exchange, and other

negotiable instruments, and all receipts for money paid to the Company,

must be signed, drawn, accepted, endorsed, or otherwise executed, as the

case may be, by any two (2) Directors or in such other manner as the

Directors may from time to time determine.

Operation of

cheques,

promissory notes

etc.

98. (1) The Directors may from time to time by power of attorney

appoint any corporation, firm, or person or body of persons,

whether nominated directly or indirectly by the Directors, to be

the attorney or attorneys of the Company for the purposes and with the powers, authorities, and discretions (not exceeding

those vested in or exercisable by the Directors under this

Constitution) and for a period and subject to any conditions as

the Directors may think fit.

Power of attorney

(2) Any powers of attorney granted under Clause 98(1) may contain

provisions for the protection and convenience of persons dealing

with the attorney as the Directors think fit and may also

authorise the attorney to delegate all or any of the powers, authorities, and discretions vested in the attorney.

99. Subject always to the Act and the Listing Requirements, a Director may

hold any other office or place of profit under the Company (other than the

office of auditor) in conjunction with his office of Director for such period

and on such terms (as to remuneration and otherwise) as the Board of

Directors may determine and no Director or intending Director shall be

disqualified by his office from contracting with the Company either with regard to his tenure of any such other office or place of profit or as vendor,

purchaser or otherwise nor shall any such contract, or any contract or

arrangement entered into by or on behalf of the Company in which any

Director is in any way interested, be liable to be avoided, nor shall any

Director so contracting or being so interested be liable to account to the

Company for any profit realised by any such contract or arrangement by

reason of such Director holding that office or of the fiduciary relationship

thereby established.

Director may hold

other office

Delegation of Powers

100. Subject to the applicable laws and/or the Listing Requirements:

(1) the Directors may delegate any of their powers to a committee or

committees consisting of such their number as they think fit;

Directors may

delegate powers

to committee

(2) any committee formed under Clause 100(1) shall exercise the

powers delegated in accordance with any directions of the

Directors and a power so exercised shall be deemed to have been

exercised by the Directors; and

Committee shall

exercise powers

as per Board’s

direction

.

(3) the Board shall, subject to the Listing Requirements and upon

the committee’s recommendation (where applicable), appoint a

chairperson of the committee and determine the period for which

he is to hold office.

Chairperson of

committee


45

101. The Company may pass a resolution of the committee either by way of a

written resolution or at a meeting of the committee.

Passing a

Committee’s

Resolution

102. (1) The Company may pass a resolution of the committee by way of

a written resolution by the committee’s members recording the

resolution and signing the record.

Passing of

resolution by

committee’s

members

(2) The record of decisions made by the committee is valid and effective as if it were a resolution duly passed at a meeting of the

committee.

Record of

decision

(3) Any such resolution may consist of several documents in like

form, each signed by one or more of the committee’s members,

and shall be as valid and effectual as if it were a resolution duly

passed at a meeting of the committee.

Resolution may

consist of several

documents

(4) Any such document may be accepted as sufficiently signed by a

member of the committee if transmitted to the Company by any

technology purporting to include a signature and/or an electronic

or digital signature by the said member.

Agreement to

written resolution

by electronic

means

103. (1) A committee may, whenever it thinks fit, convene a meeting of

the committee, and may adjourn the meeting as it thinks proper.

Convening of

meeting of the

committee

(2) The committee may hold a committee meeting at two (2) or

more venues within or outside Malaysia using any technology

that gives the committee members as a whole a reasonable

opportunity to participate.

Committee

meeting may hold

at two or more

venues

(3) The virtual meeting of the Directors set out in Clause 121 shall

apply to the meeting of the committee.

Virtual meeting of

committee

(4) Where a meeting of committee is held and: Chairperson of

meeting

(a) a chairperson has not been appointed as provided by

Clause 100(3);

(b) the person so appointed is not present within fifteen

(15) minutes after the time appointed for holding the

meeting; or

(c) the person so appointed is unable or unwilling to act as

the chairperson of the meeting,

the members present may, subject to the Listing Requirements,

choose one of their number to be chairperson of the meeting.


46

(5) No business is to be transacted at any meeting unless a quorum

of members is present at the time when the meeting proceeds to

business.

Quorum

(6) Subject to the Listing Requirements, two (2) members

personally present at a meeting shall constitute a quorum.

Quorum

(7) Questions arising at any meeting of the committee must be

determined by a majority of votes of the members present, and

in the case of an equality of votes, the chairperson has a second or casting vote, except where two (2) members form a quorum,

the chairperson of a meeting at which only such a quorum is

present, or at which only two (2) members are competent to vote

on the question at issue shall not have a casting vote.

Votes

Duties of Directors

104. A Director shall at all times exercise his powers in accordance with the Act, for a proper purpose and in good faith in the best interest of the

Company.

Duties

105. Where a Director acts by virtue of his position as an employee of the

Company, or who was appointed by or as a board representative of

Member, employer or debenture holder, that Director shall be taken to

have acted in the best interest of the Company, and in the event of any

conflict between his duty to act in the best interest of the Company and his

duty to his nominator, he shall not subordinate his duty to act in the best

interest of the Company to his nominator.

Duties of nominee

Director

Directors’ Interest in Contracts

106. (a) A Director shall not vote in regard to any contract or proposed

contract or arrangement in which he has, directly or indirectly,

an interest.

Directors’

interest in

contracts

(b) Every Director shall observe the provisions of Sections 221 and

222 of the Act relating to the disclosure of the interest of the

Directors in contracts or proposed contracts with the Company

or of any office or property held by the Directors which might

create duties or interest in conflict with their duties or interest as

Directors and participation in discussion and voting. Such

disclosure of material personal interest by the Directors shall be in the form of a notice. Such notice shall be in the form and

manner prescribed under Section 221 of the Act.


47

PASSING OF RESOLUTIONS OF DIRECTORS

Passing of Resolutions of Directors

107. The Company may pass a resolution of the Directors either by way of a

written resolution or at a meeting of the Directors.

Passing a

Directors’

Resolution

DIRECTORS’ WRITTEN RESOLUTION

Passing of resolution by the Directors

108. (1) The Directors may pass a resolution without a Board Meeting, if

a majority of the Directors entitled to vote and sign on the

resolution signed the resolution, signifying their agreement to the

resolution set out in the document.

Passing of

resolution by

more than one

Director

(2) Any such resolution may consist of several documents in like

form, each signed by one (1) or more of the Directors, and shall

be as valid and effectual as if it were a resolution duly passed at

a Board Meeting.

Resolution may

consist of several

documents

Agreement to written resolution by electronic means

109. (1) Any such document may be accepted as sufficiently signed by a

Director if transmitted to the Company by any technology

purporting to include a signature and/or an electronic or digital

signature by the Director.

Agreement to

written resolution

by electronic

means

(2) For the purposes of Clause 109(1), delivery may be effected by: Manner of

delivery

(a) physical delivery of the document;

(b) delivery by facsimile transmission; or

(c) delivery by email transmission,

to the place, facsimile number or electronic address as specified by the Director or Secretary of the Company.


48

MEETINGS OF DIRECTORS

Frequency of Board Meetings

110. The Board may meet together for the despatch of business, adjourn and

otherwise regulate its meetings as it thinks fit.

Frequency of

Board Meetings

Convening Board Meetings

111. A Director may at any time, and the Secretary shall on the requisition of a

Director to do so, convene a Board Meeting by giving notice in

accordance with Clause 112.

Secretary or

Director may

convene a Board

Meeting

Notice of Board Meetings

112. (1) A notice of a Board Meeting must specify the following: Contents of

Notice of Board

Meeting

(a) the place, date and time of the Board Meeting;

(b) the general nature of the business (including matters to

be discussed) of the Board Meeting; and

(c) where the Directors think fit, the text of any proposed

resolution and other information.

(2) If the Board Meeting is to be held in two (2) or more places, the

notice of the Board Meeting shall specify the technology that

will be used to facilitate the Board Meeting.

Board Meeting

held at two (2) or

more venues

(3) The main venue of the Board Meeting shall be the place where the chairperson is present at the Board Meeting.

Main venue

113. Reasonable notice in the circumstances must be given of all Board

Meetings.

Notice period

114. Notice of every Board Meeting shall be given to all Directors in

accordance with the manner specified in Clause 128.

Directors entitled

to receive notice

Quorum for Board Meetings

115. (1) No business is to be transacted at any Board Meeting unless a

quorum of Directors is present at the time when the meeting

proceeds to business.

Quorum

(2) Two (2) Directors personally present at a meeting shall

constitute a quorum.

More than one

Director


49

(3) In this clause, “Director” includes Alternate Director. Meaning of

Director

No Quorum

116. If a quorum is not present within half an hour after the time appointed for

a Board Meeting:

Quorum is not

present

(1) the Board Meeting shall stand adjourned to another day and at

another time and place as the Directors may determine; or

Adjournment of

Board Meeting

(2) if no determination is made by the Directors, the Board Meeting

shall stand adjourned to the same day in the next week at the

same time and place or if that day falls on a public holiday then

to the next business day following that public holiday; and

(3) if at the adjourned Board Meeting, a quorum is not present

within half an hour from the time appointed for the meeting,

then any Director present shall form a quorum.

Adjourned Board

Meeting

Chairperson of Board Meetings

117. (1) The Directors shall appoint one of their number as Chairperson

and may also appoint another of their number as Deputy

Chairperson of the Company.

Chairperson and

Deputy Chairman

(2) The Directors shall determine the period for which such

Chairperson or Deputy Chairperson is to hold office.

Office period

(3) The Chairperson or Deputy Chairperson (in the absence of the Chairperson) shall be the Chairperson of the Board Meeting.

Chairperson of

Board Meetings

(4) Where a Board Meeting is held and: Chairperson of

Board Meetings

(a) a Chairperson or Deputy Chairperson has not been

appointed as provided by Clause 117(1); or

(b) the person so appointed is not present within fifteen

(15) minutes after the time appointed for the holding of

the Board Meeting or is unable to act for all or part of

the meeting;

the Directors present shall elect one of their number to be the

chairperson of the Board Meeting.

(5) For avoidance of doubt, an Alternate Director shall not be

elected as the chairperson of the Board Meeting.


50

Adjournment of Board Meetings

118. (1) The chairperson shall adjourn a Board Meeting, at which a

quorum is present, from time to time and from place to place if

the Directors present with a majority of votes that may be cast at

that meeting agree or direct the chairperson to do so.

Directors’

consent is

required

(2) No business is to be transacted at any adjourned Board Meeting

other than the business left unfinished at the Board Meeting

from which the adjournment took place (referred to as the “Original Board Meeting”).

Only transact the

business left

unfinished at the

Board Meeting

(3) There is no need to give any notice of an adjourned Board

Meeting or of the business to be transacted at an adjourned

Board Meeting unless the adjourned Board Meeting is to be held

more than thirty (30) days after the date of the Original Board

Meeting.

Notice of

adjourned Board

Meeting

Voting at Board Meetings

119. (1) Subject to this Constitution, questions arising at a Board

Meeting shall be decided by a majority of votes of Directors

present and voting and any such decision shall for all purposes

be deemed a decision of the Directors.

Directors’

decision

(2) Each Director is entitled to cast one (1) vote on each matter for

determination.

Casting of vote

Casting Vote

120. In the case of an equality of votes, the chairperson of the Board Meeting is

entitled to a second or casting vote, except where two (2) Directors form a

quorum, the chairperson of a meeting at which only such a quorum is

present, or at which only two (2) Directors are competent to vote on the

question at issue shall not have a casting vote.

Chairperson shall

have a casting

vote

Virtual Meetings of Directors

121. (1) The Directors may hold a Board Meeting at two (2) or more

venues within or outside Malaysia using any technology that

gives the Directors as a whole a reasonable opportunity to

participate.

Board Meeting

may hold at two

(2) or more

venues

(2) The technology to be used for the purpose of this Clause must be such that each Director taking part in the meeting must be able to

communicate simultaneously with each of the other Directors

taking part in the meeting and may include telephone, television,

video conferencing, or any other audio and/or visual device

which permits instantaneous communication.

Technology to be

used for virtual

meeting


51

(3) A virtual meeting shall be deemed to constitute a Board Meeting

and all the provisions of this Constitution as to Board Meetings

shall apply to any virtual meeting provided the following

conditions are met:

Conditions for

virtual meeting

(a) All the Directors for the time being entitled to receive

notice of the Board Meeting (including any Alternate

Director) shall be entitled to receive notice of a virtual

meeting. Notice of any such meeting shall be given by

an appropriate form of technology (or in such other manner) as permitted by this Constitution; and

(b) A Director may not leave a virtual meeting by

disconnecting from the technology used unless he has

previously expressly notified the chairperson of the

meeting of his intention to leave the meeting and a

Director shall be conclusively presumed to have been present and to have formed part of the quorum at all

times during such a meeting until such notified time of

his leaving the meeting.

(4) A minute of the proceedings of meetings including virtual

meetings shall be sufficient evidence of such proceeding and of

the observance of all necessary formalities if certified as a

correct minute by the chairperson of the meeting or the next

succeeding meeting.

Minutes

SECRETARY

Appointment of Secretary

122. The Secretary shall in accordance with the Act be appointed by the Board

for such terms, at such remuneration, and upon such terms and conditions

as the Board may think fit.

Appointment

Casual Vacancy of Secretary

123. (1) Any Secretary so appointed under Clause 122 may be removed

by the Directors, in accordance with the terms and conditions of

its appointment.

Removal

(2) The office of a Secretary may or will become vacant if the Secretary:

Vacation of office

(a) resigns from office by notice in writing to the Board, the

Secretary shall cease to act as Secretary upon the expiry

of thirty (30) days from the date of the notice to the

Board or from the effective date as specified in his notice

or the terms of appointment; or


52

(b) is unable to communicate with the Directors at the last

known residential address, the Secretary may, notify the

Registrar of that fact and of his intention to resign from

the office, and he shall cease to act as the Secretary on

the expiry of thirty (30) days from the date of the notice

to the Registrar.

(3) The Board shall fill the vacancy of the Secretary within thirty

(30) days after the occurrence of any event under Clause 123(1)

or (2).

Fill the casual

vacancy of

Secretary

INSURANCE AND INDEMNITY OF APPLICABLE PERSONS

Applicable Persons

124. The provisions of Clauses 125 to 127 shall apply to the following persons

(“Applicable Persons”):

Applicable

persons

(1) every person who is or has been an Officer;

(2) Auditors; and

(3) any other officers as defined in the Act.

Indemnity

125. The Company does not exempt an Applicable Person from a liability

which by law would otherwise attach to him in respect of any negligence,

default, breach of duty or breach of trust, of which he may be guilty in

relation to the Company incurred in his capacity as an Applicable Person.

No indemnity

126. (1) The Company may indemnify an Applicable Person out of the

Company’s assets for any costs incurred by him or the Company

in respect of any proceedings:

Indemnity may be

allowed

(a) that relates to his liability for any act or omission in his

capacity as an Applicable Person; and

(b) in which judgment is given in favour of the Applicable

Person or in which the Applicable Person is acquitted

or in which the Applicable Person is granted relief

under the Act, or where proceedings are discontinued

or not pursued.

(2) The Company may also indemnify an Applicable Person in respect of an application for relief under the Act.


53

(3) The Company may indemnify an Applicable Person in respect

of:

Exception

(a) any liability to any person, other than the Company,

for any act or omission in his capacity as an Officer or

Auditors; and

(b) costs incurred by that Applicable Person in defending

or settling any claim or proceedings relating to any

such liability except:

(i) any liability of the Director to pay:

(aa) a fine imposed in criminal

proceedings; or

(bb) a sum payable to a regulatory

authority by way of a penalty in

respect of non-compliance with any

requirement of a regulatory nature,

however arising; or

(ii) any liability incurred by the Director:

(aa) in defending criminal proceedings

in which he is convicted; or

(bb) in defending civil proceedings brought by the Company, or an

associated company, in which

judgment is given against him.

(4) Where the costs and expenses incurred by an Applicable Person

under Clause 126(1) and (2) are recovered by the Company

under an insurance policy taken out or paid for by the Company

pursuant to Clause 127, the extent of the indemnification of an Applicable Person shall be reduced accordingly.

Insurance

127. (1) The Company may, with the prior approval of the Board,

purchase and maintain insurance, at the expense of the

Company, for an Applicable Person, against:

Insurance

(a) civil liability, for any act or omission in his capacity as

a Director or Officer or Auditors; and

(b) costs incurred by that Officer or Auditors in defending

or settling any claim or proceeding relating to any such liability; or


54

(c) costs incurred by that Officer or Auditors in defending

any proceedings that have been brought against that

person in relation to any act or omission in that

person’s capacity as an Officer or Auditors:

(i) in which that person is acquitted;

(ii) in which that person is granted relief under

the Act; or

(iii) where proceedings are discontinued or not pursued.

(2) In the case of a Director, Clauses 126(2) and (3) and 127(1)(a)

and (b) shall not apply to any civil and criminal liability in

respect of a breach of the duties of the Directors as specified in

Section 213 of the Act.

ADMINISTRATION

Notices, Documents and Other Publication

128. Any Company’s Documents may be given by the Company to the persons

mentioned below in the following manner:

Notice

(1) In respect of a Member and person entitled to a Security in

consequence of an Event of Transmission (“Persons”):

Members

(a) The Company’s Documents shall be in writing and

shall be given to the aforesaid Persons either:

(i) in hard copy, which shall be sent to the

Persons either personally or by post to his

last known address;

Hard copy

(ii) in electronic form, which shall be either: Electronic form

(aa) transmitted to the last known

electronic address provided by the

Persons to the Company;

(bb) transmitted to the last known

contact details as recorded in the

Register of Members or Record of

Depositors provided by the Persons to the Company or Depository

respectively;


55

(cc) by publishing on a website;

(dd) transmitted by the Company to the

Persons using any appropriate

electronic communication platform

established by the Company or

third parties, or

(iii) partly in hard copy and partly in electronic

form.

Both of the above

(b) If a notice of General Meeting is published on the

website, the Company must notify the Persons in

writing in hard copy or electronic form stating the

following:

Website

(i) it concerns a General Meeting;

(ii) the place, date and time of the General

Meeting; and

(iii) the designated website link or address where

a copy of the notice may be downloaded,

and the notice must be published on the Company’s

website throughout the period starting from the date of

notification until the conclusion of the General

Meeting.

Period of

publication on

website

(c) If the Company publishes its documents (other than a

notice of General Meeting) (“Company’s Publication”)

on its Company’s website or any other appropriate

electronic communication platform, the Company must

notify the Persons in writing in hard copy or electronic

form stating the following:

Publication on

Website

(i) brief description of the Company’s

Publication; and

(ii) the designated website link or address where

a copy of the Company’s Publication may be

downloaded.

(d) In the event of a delivery failure, the Company must immediately send the Company’s Documents to the

affected Members by other appropriate means as

permitted under Clause 128(1)(a).

Delivery failure

(e) The Persons may request for a hard copy of the

Company’s Documents from the Company if they are

sent by electronic means.

Request for hard

copy


56

(2) In respect of a Director, the Company’s Documents shall be in

writing and shall be given to the Director either:

Directors

(a) in the manner(s) set out in Clause 128(1) (except for

publishing on a website); or

(b) to the Director’s last known service address.

(3) In respect of the Auditors, the Company’s Documents shall be in

writing and shall be given to the Auditors either:

Auditors

(a) in the manner(s) set out in Clause 128(1) (except for publishing on a website); or

(b) to the Auditors’ last known address.

(4) In respect of a holder of Debt Securities, the Company’s

Documents shall be in writing and shall be given to the holder of

Debt Securities:

(a) in the manner(s) set out in Clause 128(1); or.

(b) to the holder of Debt Securities’ last known address

provided by the said holder to the Company or

Depository.

(5) For the purpose of Clause 128(1), the Board of Directors may, at

their discretion, determine the appropriate mode of

communication with the persons mentioned above.

Directors’

discretion

129. Where the Company’s Documents are: Service of notice

(1) served by post, service of the notice shall be deemed to be

effective by properly addressing, prepaying and posting a letter

containing the notice, and to have been effected, in the case of a

notice of the Persons, on the day after the date of its posting;

Post

(2) sent by facsimile transmission, service of the notice shall be deemed to be effected at the time when the notice is transmitted,

unless the Company receives notification that the transmission

was not successful;

Facsimile

transmission

(3) sent by electronic transmission, service of the notice shall be

deemed to be effected at the time when the notice is transmitted

electronically, unless the Company receives notification that the

transmission was not successful;

Electronic

transmission


57

(4) published on the Company’s website or any appropriate

electronic communication platform, service of the notice shall be

deemed to be effected on the day on which the notice first

appears on the Company’s website to which the relevant person

may have access or the day on which the notice of publication is

deemed to have been served or delivered to such person under

Clause 128, whichever is later; or

Website

(5) served or delivered in person, service of the notice shall be

deemed effected at the time the relevant Company’s Documents are delivered, received or left at the address of such person.

Personal delivery

130. The Company’s Documents may be given by the Company to Joint

Holders by giving the notice to the Joint Holder first named in the

Register of Members.

Joint Holder

131. Any Company’s Documents delivered or sent to any Member in such

manner as provided in Clause 128(1) shall, if such Member be then deceased, and whether or not the Company has notice of his death, be

deemed to have been duly served on his legal personal representative or

survivor.

Written Resolutions and Minutes

132. The Directors must cause: Written

resolutions and

minutes

(1) all Directors’ and committees’ written resolutions;

(2) all proceedings and resolutions of Board Meetings and

committee meetings; and

(3) all proceedings and resolutions of General Meetings,

to be duly entered into the books kept for that purposes in accordance with

the Act.

133. The records of resolutions passed by way of Directors’ and committees’

written resolutions or at the Board Meetings, committee meetings and

General Meetings and signed in accordance with the Act and this

Constitution are evidence of the proceedings, resolutions or declaration to

which they relate, unless the contrary is proved.

Execution of Documents

134. (1) The Company shall adopt a Seal, known as the common seal, on

which its name and registration number and the words

“Common Seal” are engraved in legible romanised characters.

Seal


58

(2) The Directors shall provide for the safe custody of the Seal. Custody

(3) The Seal shall only be used by the authority of the Board of Directors or of a committee of the Board of Directors authorised

by the Directors on their behalf.

Authority of the

Directors

(4) The Company may execute a document by affixing the Seal to

the document where the affixing of the Seal is witnessed by:

Affixing the Seal

(a) two (2) Directors;

(b) one (1) Director and one (1) Secretary; or

(c) one (1) Director and another person appointed by the

Directors for that purpose.

(5) (a) Any Director or the Secretary or any person so

appointed by the Directors shall have power to

authenticate any documents affecting this Constitution

and any resolutions passed by the Company or the

Directors or any committee, and any books, records,

documents and accounts relating to the business of the

Company, and to certify copies thereof or extracts

therefrom as true copies or extracts; and where any

books, records, documents or accounts are elsewhere

than at the Office the local manager or other officer of

the Company having the custody thereof shall be

deemed to be a person appointed by the Directors as

aforesaid.

Authentication of

documents

(b) A document purporting to be a copy of a resolution, or

an extract from the minutes of a meeting of the

Company or the written resolutions or minutes of a

meeting of the Directors or any committee which is certified as aforesaid shall be conclusive evidence in

favour of all persons dealing with the Company upon

the faith thereof that such resolution has been duly

passed or, as the case may be, that any minute or

written resolution so extracted is a true and accurate

record of the resolutions or proceedings at a duly

constituted meeting to which it relates.

135. (1) The Company may have an official Seal, on which its name and

registration number and the words “Common Seal” and the

place where it is to be used are engraved in legible romanised

characters.

Official seal for

use abroad

(2) The Directors shall provide for the safe custody of the official

Seal.

Custody


59

(3) The Directors may exercise all the powers of the Company in

relation to any official Seal for use outside Malaysia and in

relation to branch registers of debenture holders kept in any

place outside Malaysia.

Authority of the

Directors

(4) The Company may execute a document by affixing the official

Seal to the document where the affixing of the official Seal is

witnessed by:

Affixing the

official Seal

(a) two (2) Directors;

(b) one (1) Director and one (1) Secretary;

(c) one (1) Director and another person appointed by the

Directors for that purpose; or

(d) two (2) persons appointed by the Directors for that

purpose, and

the person affixing official Seal shall certify in writing on the deed or document to which the official Seal is affixed the date

and place it is affixed.

(5) The Company may have an official Seal to seal: Official seal for

Securities

(a) Securities issued by the Company; or

(b) documents creating or evidencing Securities so issued,

on which its name and registration number and the words

“Securities” are engraved in legible romanised characters.

(6) The official Seal for Securities shall be executed in the manner

provided in Clause 134(4).

FINANCIAL MATTERS

Financial Statements

136. (1) The Directors must cause proper accounting and other records to

be kept in accordance with Section 245 of the Act and such

records must be true and complete accounts of the affairs and

transactions of the Company and give a true and fair view of the

state of the Company’s affairs and explain its transactions.

Accounting and

other records


60

(2) The Directors shall from time to time, in accordance with the

provisions of the Act and the Listing Requirements, cause to be

prepared and approved, and to be circulated to the Members,

Directors and Auditors and laid before the Company in Annual

General Meeting such financial statements and consolidated

financial statements (if any) and reports of Directors and

Auditors.

Circulation and

laying of financial

statements

(3) No Member (who is not a Director) shall have any right of

inspecting any accounting or other records of the Company except where such right is conferred by law.

Right of

inspection

Audit

137. (1) (a) The Board shall appoint the first Auditors of the

Company at any time before the first Annual General

Meeting, at such remuneration as the Board thinks fit.

First Auditors

(b) The Auditors appointed under Clause 137(1)(a) shall

hold office until the conclusion of the first Annual

General Meeting.

(2) (a) For subsequent years, the Board may, subject to the

Act, appoint the Auditors to fill casual vacancy in the

office of the Auditors, at such remuneration as the

Board thinks fit.

Appointment of

Auditors by Board

(b) The Auditors appointed under Clause 137(2)(a) shall

hold office until the conclusion of the next Annual

General Meeting.

(3) For subsequent years, the Members may by an ordinary

resolution:

Change of

Auditors by

Members

(a) re-appoint the existing Auditors;

(b) appoint another person as the Company’s Auditors;

(c) remove the Auditors; and/or

(d) if there is a vacancy in the office of the Auditors,

appoint Auditors to fill the vacancy.

The remuneration of the Auditors appointed under Clause 137(3)

shall be fixed by the Members by ordinary resolution or in such manner as the Members may determine.


61

(4) The Auditors shall hold office in accordance with the terms of

their appointment, provided that:

Term of office of

Auditors

(a) they do not take office until the previous auditors have

ceased to hold office unless they are the first Auditors;

and

(b) they ceased to hold office at the conclusion of the

Annual General Meeting next following their

appointment, unless they are re-appointed.

(5) The powers and duties of the Auditors are as regulated under

Sections 266 and 287 of the Act.

Powers and duties

(6) The Auditors shall attend every Annual General Meeting where

the financial statements and consolidated financial statements

(where applicable) of the Company for a financial year

(“Financial Statements”) are to be laid, so as to respond

according to their knowledge and ability to any question relevant

to the audit of the Financial Statements.

Attendance of

Auditors

(7) The Auditors may cease to act as Auditors of the Company by:

(a) giving a notice of resignation in writing to the

Company at the Office and their term of office shall

end after twenty-one (21) days from the date of the

notice to the Company or from the effective date as

specified in their notice; or

Resignation of

Auditors

(b) giving a notice in writing to the Company at the Office

indicating that they do not wish to seek re-appointment

at the forthcoming Annual General Meeting.

Retirement of

Auditors

Dividends

138. (1) A dividend may be declared by: Declaration of

dividend

(a) the Directors; or

(b) the Members on the recommendation of the Board of

Directors as it thinks appropriate.

(2) The payment of a dividend is to those holders of such class of

shares as the Directors have determined in accordance with and

subject to any conditions upon which the shares have been

issued.

Payment of

dividend

(3) A dividend shall not exceed the amount recommended by the Directors.

Directors to

recommend

amount


62

139. The Directors may authorise a distribution of dividends in accordance

with Section 132 of the Act, and any dividend so authorised must be out

of profits of the Company available for distribution and provided the

Company is solvent. The Directors may authorise a distribution at any

time and for such amounts as the Directors shall consider appropriate so

long as the Directors are satisfied that the Company will be solvent for a

period of twelve (12) months after the distribution is made.

Distribution only

if Company is

solvent

140. (1) A dividend may be classified as:

(a) an interim dividend if it is declared and distributed by

the Company to its Members prior to the determination

of final profit position of the Company for the financial

year;

Interim dividend

(b) a final dividend if it is the last dividend distributed by

the Company to its Members after the financial

statements for the financial year have been prepared

and approved by the Board; and

Final dividend

(c) a special dividend if it is a non-recurring distribution of

the Company’s assets, where the amount is larger

compared to normal dividend paid out by the Company

or other circumstances that the Directors think fit.

Special dividend

(2) The Directors may, at its discretion, declare dividend pursuant to

either Clause 138(1)(a) or (1)(b).

At Directors’

discretion

141. No dividend is to bear interest against the Company. No interest

bearing

142. (1) The Directors may, before recommending any dividend: Before

recommending

dividend

(a) set aside out of the profits of the Company such sums

as they think proper as reserves; or

(b) carry forward any profits which they may think

prudent not to divide, without placing the profits to

reserve.

(2) The reserves set aside under Clause 142(1)(a): Reserves that set

aside

(a) are, at the discretion of the Directors, to be applied for

any purpose to which the profits of the Company may

be properly applied; and

(b) may, pending any application under Clause 142(2)(a)

and at the discretion of the Directors, be employed in

the business of the Company or be invested in any

investments (other than shares in the Company) as the

Directors may from time to time think fit.


63

143. (1) Subject to the rights of persons (if any) entitled to shares with

special rights or conditions as to dividend entitlement or to any

provisions in this Constitution, all dividends must be declared

and paid according to the amounts paid or credited as paid on the

shares in respect of which the dividend is paid.

Dividends must be

declared and paid

according to the

amounts paid

(2) An amount paid or credited as paid on a share in advance of a

call shall not be taken for the purposes of this Clause to be paid

or credited as paid on the share and shall not, whilst carrying

interest, confer a right to participate in profits.

Amount paid on a

share in advance

of a call

(3) All dividends must be apportioned and paid proportionately to the amounts paid or credited as paid on the shares during any

portion or portions of the period in respect of which the dividend

is paid.

Dividend must be

paid

proportionately

(4) If any share is issued on terms providing that it ranks for

dividend as from a particular date that share ranks for dividend

accordingly.

Share ranks for

dividend

144. The Directors may deduct from any dividend payable to a Member all

sums of money (if any) presently payable by him to the Company on

account of calls or otherwise in relation to the shares of the Company.

Deduct dividend

from calls

145. (1) When declaring a dividend, the Directors or Members on the

recommendation of the Directors may by ordinary resolution,

direct payment of the dividend wholly or partly by the

distribution of specific assets, including:

Distribution of

specific assets

(a) paid-up shares of the Company or any other

corporation;

(b) debentures or debenture stock of the Company or any other corporation;

(c) assets of the Company which the Directors think

appropriate; or

(d) any combination of any specific assets, and

the Directors may do all acts and things considered necessary or

expedient to give effect to such a resolution.

(2) Where a difficulty arises with regard to such a distribution

directed under Clause 145(1), the Directors may, subject to the

Act and the Listing Requirements, do all or any of the following:

(a) settle the distribution as they think expedient;

(b) fix the value for distribution of the specific assets or

any part of the specific assets;


64

(c) determine that cash payments be made to any Member

on the basis of the value so fixed by the Directors in

order to adjust the rights of all parties; and/or

(d) vest any specific assets in trustees as the Directors

think expedient.

146. (1) Any dividend, interest or other money payable in cash in respect

of shares may be paid in such manner as may be determined by

the Directors from time to time including:

Payment

(a) in respect of Listed Deposited Security, direct crediting

the payment into the bank account of the Member as

provided by the Member to the Depository from time

to time; or

(b) in respect of Security other than Listed Deposited

Security:

(i) by direct crediting the payment into the bank

account of the Member as provided by the

Member to the Company or Depository from

time to time; or

(ii) by cheque sent through the post directed to :

(aa) the address of the Member as

shown in the Register of Members,

or in the case of Joint Holders, to

the address shown in the Register

of Members as the address of the

Joint Holder first named in the

Register of Members; or

(bb) such other address as the holder or

Joint Holders in writing directs or

direct.

(2) Every direct transfer or cheque made under Clause 146(1) must

be made payable to the order of the person to whom it is sent.

(3) Any one (1) of two (2) or more Joint Holders may give effectual

receipts for any dividends, interest or other money payable in

respect of the shares held by them as Joint Holders.

Capitalisation of Profits

147. (1) The Directors may, before declaring or recommending any

dividend, set aside out of the profits of the Company such sums

as they think proper as reserves, to be applied, at the discretion

of the Directors, for any purpose for which the profits of the

Company may be properly applied.

Application of

profits


65

(2) Pending any such application, the reserves may, at the discretion

of the Directors, be used in the business of the Company or be

invested in such investments as the Directors think fit.

Utilisation of

reserves

(3) The Directors may carry forward such amount of the profits

remaining as they consider ought not to be distributed as

dividends without transferring those profits to reserves.

Dividends

148. (1) Subject to Clause 148(2), the Company may, upon a

recommendation of the Directors and in General Meeting,

resolve that it is desirable to capitalise any sum, being the whole

or a part of the amount for the time being standing to the credit

of any of the Company’s reserve accounts or to the credit of the

profit and loss account or otherwise available for distribution to

Members, and that such sum be applied, in any of the manners

mentioned in Clause 148(3), for the benefit of the Members in

the proportions to which those Members would have been

entitled in a distribution of that sum by way of dividend.

Members’

approval

(2) The Directors may, subject to the Act and the Listing Requirements, capitalise any sum, being the whole or a part of

the amount for the time being standing to the credit of any of the

Company’s reserve accounts or to the credit of the profit and

loss account or otherwise available for distribution to the

Members.

Exemption

(3) The amount capitalised under Clause 148(1) is set free for

distribution amongst the Members who would have been entitled to the amount had it been distributed by way of dividend and in

the same proportions subject to the following conditions:

Capitalised

amount

(a) the capitalised amount must not be paid in cash;

(b) the capitalised amount must be applied in or towards

either or both of the following:

(i) paying up any amounts for the time being

unpaid on any shares held by the Members;

(ii) paying up in full unissued shares or

debentures of the Company to be allotted, distributed and credited as fully paid up to

and amongst such Members in the same

proportions.

149. The Directors shall do all things necessary to give effect to the resolution

and, in particular, to the extent necessary to adjust the rights of the

Members among themselves, may:

To give effect to

the resolution

(1) issue fractional certificates or make cash payments in cases

where shares or debentures becoming distributable in fractions;

and


66

(2) authorise any person to enter, on behalf of all the Members

entitled to the distribution into an agreement with the Company,

providing:

(a) for the allotment to the Members respectively, credited

as fully paid up, of any further shares or debentures to

which they may be entitled upon the capitalisation; or

(b) for the payment up by the Company on the Members’

behalf of the amounts or any part of the amounts remaining unpaid on their existing shares by the

application of their respective proportions of the profits

resolved to be capitalised, and

any agreement made under such authority referred to in Clause

148(3)(b) is effective and binding on all the Members entitled to

the distribution.

DISSOLUTION

Winding Up

150. Subject to the Act, the Company may be dissolved by a special resolution

in a General Meeting. If such a resolution is passed, the Members shall

also be required to appoint a liquidator or liquidators for the purpose of

winding up the affairs and distributing the property of the Company.

Passing of special

resolution

151. (1) If the Company is wound up, the liquidator may, with the

sanction of a special resolution of the Company:

Power of

liquidator

(a) divide amongst the Members in kind the whole or any

part of the property, if any, of the Company, whether

they consist of property of the same kind or not;

(b) set a value as the liquidator considers fair upon the property, if any referred to in Clause 151(1)(a);

(c) determine how the division of property, if any is to be

carried out as between the Members or different

classes of Members; and

(d) vest the whole or any part of the property, if any, of the

Company in trustees upon such trusts for the benefit of the contributories as the liquidator thinks fit.

(2) No Member is compelled to accept any shares or other Securities

on which there is any liability.


67

SECRECY

152. Save as may be expressly provided by the Act, no Member shall be

entitled to enter into or upon or inspect any premises or property of the

Company nor to require discovery of any information in respect of any

detail of the Company's business or any matter which is or may be in the

nature of a trade secret, mystery of trade or secret process which may

relate to the business and/or conduct of the business of the Company and

which, in the opinion of the Directors, it would be inexpedient in the

interests of the Member of the Company to communicate to the public.

EFFECTS OF THE LISTING REQUIREMENTS

Effects of the Listing Requirements

153. (1) Notwithstanding anything contained in this Constitution, if the

Listing Requirements prohibit an act being done, the act shall

not be done.

Effects of the

Listing

Requirements

(2) Nothing contained in this Constitution prevents an act being

done that the Listing Requirements require to be done.

(3) If the Listing Requirements require an act to be done or not to be

done, authority is given for that act to be done or not to be done

(as the case may be).

(4) If the Listing Requirements require this Constitution to contain a provision and it does not contain such a provision, this

Constitution is deemed to contain that provision.

(5) If the Listing Requirements require this Constitution not to

contain a provision and it contains such a provision, this

Constitution is deemed not to contain that provision.

(6) If any provision of this Constitution is or becomes inconsistent with the Listing Requirements, this Constitution is deemed not

to contain that provision to the extent of the inconsistency.

COMPLIANCE

Compliance

154. Notwithstanding these Rules, the Company shall comply with the Act, the

Central Depositories Act and the Rules of the Central Depository in

respect of all matters where applicable


68

155. If any of the Rules in this Constitution is inconsistent with or in breach of

any of the provisions of the Act other than any replaceable Rule which has

been modified, replaced or excluded by the provisions in this Constitution,

then –

(1) that Rule shall be read down to the extent necessary to comply

with the provisions of the Act; and

(2) that Rule or those portions thereof which are inconsistent with or

in breach of any provision of the Act shall be struck out and deemed not to form part of this Constitution.

“APPENDIX A”

TAFI INDUSTRIES BERHAD (640935-P) (Incorporated in Malaysia)

PROXY FORM CDS Account No.

No. of shares held

I/We Tel:

[Full name in block, NRIC/Passport/Company No.]

of

being member(s) of TAFI INDUSTRIES BERHAD, hereby appoint:

Full Name (in Block) NRIC/Passport No. Proportion of Shareholdings

No. of Shares %

Address

and / or* (*delete as appropriate)

Full Name (in Block) NRIC/Passport No. Proportion of Shareholdings

No. of Shares %

Address

or failing him, the Chairperson of the Meeting, as my/our proxy to vote for me/us and on my/our

behalf at the General Meeting of the Company to be held at (Venue) on (Date), (Day) at (Time) or

any adjournment thereof, and to vote as indicated below:

Description of Resolution Resolution For Against

Please indicate with an “X” in the space provided whether you wish your votes to be cast for or

against the resolutions. In the absence of specific direction, your proxy will vote or abstain as he

thinks fit.

Signed this day of

Signature*

Member

* Manner of execution:

(a) If you are an individual member, please sign where indicated.

(b) If you are a corporate member which has a common seal, this proxy form should be executed

under seal in accordance with the constitution of your corporation.

(c) If you are a corporate member which does not have a common seal, this proxy form should be

affixed with the rubber stamp of your company (if any) and executed by:

(i) at least two (2) authorised officers, of whom one shall be a director; or

(ii) any director and/or authorised officers in accordance with the laws of the country under

which your corporation is incorporated.

Notes:

1. For the purpose of determining who shall be entitled to attend this General Meeting, the

Company shall be requesting Bursa Malaysia Depository Sdn Bhd to make available to the

Company, a Record of Depositors as at (date). Only a member whose name appears on this

Record of Depositors shall be entitled to attend this General Meeting or appoint a proxy to

attend, speak and vote on his/her/its behalf.

2. A member entitled to attend and vote at this General Meeting is entitled to appoint a proxy or

attorney or in the case of a corporation, to appoint a duly authorised representative to attend,

participate, speak and vote in his place. A proxy may but need not be a member of the

Company.

3. A member of the Company who is entitled to attend and vote at a General Meeting of the

Company may appoint not more than two (2) proxies to attend, participate, speak and vote

instead of the member at the General Meeting.

4. If two (2) proxies are appointed, the entitlement of those proxies to vote on a show of hands

shall be in accordance with the listing requirements of the stock exchange.

5. Where a member of the Company is an authorised nominee as defined in the Central

Depositories Act, it may appoint not more than two (2) proxies in respect of each securities

account it holds in ordinary shares of the Company standing to the credit of the said securities

account.

6. Where a member of the Company is an exempt authorised nominee which holds ordinary

shares in the Company for multiple beneficial owners in one securities account (“omnibus

account”), there is no limit to the number of proxies which the exempt authorised nominee may

appoint in respect of each omnibus account it holds. An exempt authorised nominee refers to an

authorised nominee defined under the Securities Industry (Central Depositories) Act 1991

(“Central Depositories Act”) which is exempted from compliance with the provisions of Section

25A(1) of the Central Depositories Act.

7. Where a member appoints more than one (1) proxy, the proportion of shareholdings to be

represented by each proxy must be specified in the instrument appointing the proxies.

8. The appointment of a proxy may be made in a hard copy form or by electronic means in the

following manner and must be received by the Company not less than forty-eight (48) hours

before the time appointed for holding the General Meeting or adjourned General Meeting at

which the person named in the appointment proposes to vote:

(i) In hard copy form

In the case of an appointment made in hard copy form, this proxy form must be deposited

at the registered office of the Company situated at PLO 3 Kawasan Perindustrian Bukit

Pasir, Mukim Sg. Raya, 84300 Bukit Pasir, Muar, Johor.

(ii) By electronic means via facsimile

In the case of an appointment made by facsimile transmission, this proxy form must be

received via facsimile at (facsimile no.).

(iii) By electronic means via email

In the case of an appointment made via email transmission, this proxy form must be

received via email at (email address).

For options (ii) and (iii), the Company may request any member to deposit original executed

proxy form to its registered office before or on the day of meeting for verification purpose.

(iv) Online

In the case of an appointment made via online lodgement facility, please login to the link

website using the holding details as shown below:

(Holding details)

(v) By mobile device

In the case of an appointment made by mobile device, please follow the instruction provided

below:

(Details) 9. Any authority pursuant to which such an appointment is made by a power of attorney must be deposited

at the registered office of the Company situated at (address) not less than forty-eight (48) hours before

the time appointed for holding the General Meeting or adjourned General Meeting at which the person

named in the appointment proposes to vote. A copy of the power of attorney may be accepted provided

that it is certified notarially and/or in accordance with the applicable legal requirements in the relevant

jurisdiction in which it is executed.

10. Please ensure ALL the particulars as required in this proxy form are completed, signed and dated

accordingly.

11. Last date and time for lodging this proxy form is (time), (date) and (day).

12. Please bring an ORIGINAL of the following identification papers (where applicable) and present it to

the registration staff for verification:

a. Identity card (NRIC) (Malaysian), or

b. Police report (for loss of NRIC) / Temporary NRIC (Malaysian), or

c. Passport (Foreigner).

13. For a corporate member who has appointed a representative instead of a proxy to attend this meeting,

please bring the ORIGINAL certificate of appointment executed in the manner as stated in this proxy form

if this has not been lodged at the Company’s registered office earlier.

PPRROOXXYY FFOORRMM

TAFI INDUSTRIES BERHAD (640935-P) (Incorporated in Malaysia)

CDS Number

Number of shares held

I/We .................................................................................... (NRIC No: ….......................……)

of……………..…………………………………………………………………………………………...

being a member/members of TAFI INDUSTRIES BERHAD (640935-P), hereby appoint

……....……...........……….............................................. (NRIC No: .................................……)

of.............................................................................………........................................................

or failing whom, …………………………………………………… (NRIC No: .....................……)

of ……………………………..…………………………………………………………………………

as my/our proxy to vote for me/us and on my/our behalf at the Fifteenth Annual General

Meeting of the Company held at the Meeting Room, TAFI Industries Berhad, PLO 3 Kawasan

Perindustrian Bukit Pasir, Mukim Sg. Raya, 84300 Bukit Pasir, Muar, Johor, Malaysia on

Friday, 24 May 2019, at 2:00 p.m. and at every adjournment thereof.

The proportion of my/our holding to be represented by my/our proxies is as follows:

Mark either box below with “X” if you wish to direct the proxy how to vote. If no mark is made, the proxy may vote on the resolution or abstain from voting as the proxy thinks fit. If you appoint two (2) proxies and wish them to vote differently, this should be specified.

My/our proxy/proxies is/are to vote as indicated below:

ITEM AGENDA

1. To receive the Directors’ Report, Audited Financial Statements and the Auditors’ Report for the financial year ended 31 December 2018.

RESOLUTION FOR AGAINST

2. To approve the payment of Directors’ fees for financial year ending 31 December 2019.

1

3. To approve the payment of Directors’ benefits for financial year ending 31 December 2019.

2

4. To re-elect Dato’ Saw Eng Guan (Article 84) 3 5. To re-elect Au Gek Keng (Article 84) 4 6.

To re-appoint Messrs. Peter Chong & Co. as auditors of the Company for the financial year ending 31 December 2019 and to authorise the Directors to fix their remuneration.

5

7. To approve the Proposed Alteration 6

Proxy A % Proxy B % Total 100%

PPRROOXXYY FFOORRMM (cont’d)

Signed this ………….day of ……………………. 2019

Signature Seal Notes:- i. Applicable to shares held through a nominee account. ii. A proxy may but need not be a member of the Company, an advocate, an approved company

auditor or a person approved by the Registrar of the Companies. iii. In the case of a corporate member, the instrument appointing a proxy shall be (a) under its

Common Seal or (b) under the hand of a duly authorised officer or attorney and in the case of (b), be supported by a certified true copy of the resolution appointing such officer or certified true copy of the power attorney.

iv. A member shall not, subject to Paragraphs (v) and (vi) below, be entitled to appoint more than two (2) proxies to attend and vote at the same meeting. Where a member appoints more than one (1) proxy to attend and vote at the same meeting, each proxy appointed shall represent a minimum of 100 shares and such appointment shall be invalid unless the member specifies the proportion of his shareholding to be represented by each proxy.

v. Where a member is an authorised nominees, as defined under the Securities Industry (Central Depositories) Act 1991, it may appoint at least one (1) proxy but not more than two (2) proxies in respect of each securities account it holds which is credited with the ordinary shares of the Company. The appointment of two (2) proxies in respect of any particular securities account shall be invalid unless the authorised nominee specifies the proportion of its shareholding to be represented by each proxy.

vi. Where a member is an exempt authorised nominee (“EAN”) as defined under the Securities Industry (Central Depositories) Act 1991 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 EAN may appoint in respect of each omnibus account it holds.

vii. Any alteration to the instrument appointing a proxy must be initialed. The instrument appointing a proxy must be deposited at the registered office of the Company at PLO 3 Kawasan Perindustrian Bukit Pasir, Mukim Sg. Raya, 84300 Bukit Pasir, Muar, Johor Malaysia, not less than 48 hours before the time appointed for holding the meeting.

viii. For the purpose of determining a member who shall be entitled to attend this 15th AGM, the Company shall be requesting Bursa Malaysia Depository Sdn. Bhd. in accordance with Article 79 of the Company’s Constitution and Section 34(1) of the Securities Industry (Central Depositories) Act 1991, to issue a General Meeting Record of Depositors as at 17 May 2019. Only a depositor whose name appears on the Record of Depositors as at 17 May 2019 shall be entitled to attend the said meeting or appoint proxies to attend and/or vote on his/her behalf.

Fold along this line (1)

Stamp

To:

The Company Secretary TAFI Industries Berhad PLO 3 Kawasan Perindustrian Bukit Pasir Mukim Sg. Raya 84300 Bukit Pasir Muar, Johor Malaysia

Fold along this line (2)