driving excellence for mutual success - techfast.com.my · golden bull award for 4th malaysia 100...

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TECHFAST HOLDINGS BERHAD(Company No. 647820-D)

Dr iv ing Exce l lence fo rMutua l Success

TECHFAST HOLDINGS BERHAD(Company No. 647820-D)

No. 11, Jalan Pasaran 23/5, Seksyen 23, 40300 Shah AlamSelangor Darul Ehsan, Malaysia

Tel: 603-5548 5112 Fax: 603-5548 5113Email: [email protected] Website: www.techfast.com.my

2018ANNUAL REPORT

WHAT’S INSIDE

2 - 4

company prof i le

5

corporate in format ion

6 - 7

f ive-year group f inancia l h igh l ights

8

chairman’s s ta tement

9 - 11

management d iscuss ion & analys is

12 - 14

prof i le of d i rectors

15 - 16

prof i le of key senior

management

17 - 26

corporate governance

overv iew statement

27 - 28

statement of r isk management and in ternal contro l

29 - 31

susta inabi l i ty repor t

32 - 34

audi t commit tee repor t

35

addi t ional compl iance in format ion

36 - 96

f inancia l s ta tements

97

l is t o f proper t ies

98 - 99

analys is of sharehold ings

100 - 105

not ice of annual genera l meet ing

106

statement accompanying not ice of annual genera l meet ing

106

d iv idend pol icy

proxy form

TECHFAST HOLDINGS BERHAD (647820-D)

Company Profile

Techfast Holdings Berhad is a company incorporated in Malaysia and was listed on the ACE Market of Bursa Malaysia on 6 June 2005. Its wholly-owned subsidiaries are Techfast Precision Sdn Bhd, Cape Technology Sdn Bhd and Oriem Technology Sdn Bhd.

TECHFAST PRECISION SDN BHD (“TPSB”)

Company No. 703432-V Incorporated in Malaysia

CAPE TECHNOLOGY SDN BHD (“Cape”)

Company No. 413847-X Incorporated in Malaysia

ORIEM TECHNOLOGY SDN BHD (“Oriem”)

Company No. 597413-T Incorporated in Malaysia

Manufacturing and distribution of specialised fasteners and related precision turning and machining parts for the electronics, telecommunication, computer peripherals and automotive industries

Located in High Tech Industrial Area of Shah Alam, Selangor

Factory with total build up area: 29,419 sqf

75 employees Fully certified with ISO 9001:2015 One of leading companies in the

manufacturing sector for high precision fasteners in the ASEAN region.

Specialises in the electrical & electronic, telecommunications and computer peripherals industries.

Also manufactures precision turned parts for the automotice and medical industries

Manufacturer of mould cleaning rubber sheets and trading of epoxy encapsulant materials for optoelectronics industries

Located in Bayan Lepas, Penang Factory with total build up area:

24,000 sqf 62 employees Fully certified with ISO 9001:2015 Established since 1996 and

known to be the only manufacturer of semi-conductor mould cleaning rubber sheets in South East Asia.

Estimates that 80% of semi-conductor players in Malaysia utilise Cape’s mould cleaning rubber sheets.

Major customers include ASE Electronics (M) Sdn Bhd, SPIL Taiwan, ASE Kaoshiung Taiwan, Carsem (M) Sdn Bhd, Infineon Technologies (Malaysia) Sdn Bhd.

Manufacturing of epoxy encapsulant materials for optoelectronics industries and provision of training, analytical and consultancy services

Shares the same factory premises as Cape in Bayan Lepas, Penang

3 employees Fully certified with ISO 9001:2015 Manufacturer of epoxy

encapsulation material for photonic application in SEA and has been in business for more than 14 years.

Offer clear casting, epoxy -anhydride encapsulation system mainly for application in LED display, smart displays and outdoor display units.

Also produce colour dye and premix epoxy to fulfill customer needs and requirements for manufacture of coloured lighting unit.

Oriem is also able to cater to customers’ formulation to suit specific customer needs.

D r iv ing Excel lence for Mutual Success

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ANNUAL REPORT 2018

Company Profile (cont’d)

TECHFAST PRECISION SDN BHD

Self-cl inching fasteners Electronic Hardware

Self-clinching fasteners, electronic hardware and precision turned parts are used in:

Edupad-LCDs Computer servers / networking products LCD monitors Desktop computers LCD TVs

CAPE TECHNOLOGY SDN BHD Elastowet Rubclean Product Application

General chemical compositions: Rubber Filler Colorant Special additives

ORIEM TECHNOLOGY SDN BHD Product Application – Develop and manufacture tailor made epoxy material for customers of radial and photonic manufacturing industries.

Male female standoffs Spacers Double end standoffs Swage standoffs Hex jack screws Turn parts Captive panel screws Shoulder screws

Lamp

Lamp

Outdoor Display

Digital Display

Smart Display SMD Automotive

MOULDING PROCESS

MOULD CLEANING

MOULD WETTING

DUMMY BUY OFF

Apply RubClean for cleaning semi-conductor

encapsulation mould

Apply Elastowet for wetting semi-conductor

encapsulation mould

Check cleanliness of mould


Company Profile (cont’d)

PAST AWARDS AND ACHIEVEMENTS Some of the past awards won by the Techfast Group of Companies. The following awards won by Techfast Manufacturing Sdn Bhd, a former wholly-owned subsidiary company of Techfast Holding Berhad, which is now deregistered and the operations of which are absorbed into Techfast Precision Sdn Bhd, were as follows: Year 2007 SME Achievers Award organized by SMI Association of Malaysia

Year 2006 Golden Bull Award for 4th Malaysia 100 Outstanding SMEs organized by Nanyang Siang Pau

Year 2005 Golden Bull Award for 3rd Malaysia 100 Outstanding SMEs organized by Nanyang Siang Pau Enterprise 50 Award organized by Small and Medium Industries Development Corporation (“SMIDEC”) and

Deloitte Kassim Chan Gold Medal, Malaysian Emerging Brand Award for Malaysian Export Brand (Products) organized by Brandz

Group & Malaysian International Chamber of Commerce and Industry (MICCI) Selangor Export Excellent Award (Manufacturing) organized by Selangor State Investment Centre, Malaysia

(SSIC) Merit Certificate of Industry Excellence Award (Export) organized by Malaysia External Trade Development

Corporated (MATRADE) Year 2004 Golden Bull Award for 2nd Malaysia 100 Outstanding SMEs organized by Nanyang Siang Pau Enterprise 50 Award organized by Small and Medium Industries Development Corporation and Deloitte

Kassim Chan SMI Recognition Award Series (Best Product Award) organized by SMI Malaysian Association of Malaysia

The following were awards won by Cape Technology Sdn Bhd: Year 2012 Responsible Care Award Community Awareness & ERT organized by Chemical Industries Council of

Malaysia (“CICM”) Year 2010 Responsible Care Award organized by CICM

Year 2007 HR Award organized by Pembangunan Sumber Manusia Berhad (“PSMB”) Ranked 9th for Enterprise 50 Award organized by SMIDEC

Year 2005 Ranked 23rd for Enterprise 50 Award organized by SMIDEC Productivity Award organized by National Productivity Corporation Malaysia SMI Rising Star Award organized by SMI Association

Year 2004 SMI Rising Star Award organized by SMI Association Golden Bull Award for 100 Outstanding SMEs organized by Nanyang Siang Pau

ANNUAL REPORT 2018

Corporate Information

BOARD OF DIRECTORS Executive Chairman Lim Tock Ooi Group Managing Director Yap Yoon Sing Independent Non-Executive Directors Aun Ah Thim Datuk Chan Chong Choon Lai Hui Yeen Khor Joe Ann AUDIT COMMITTEE Chairperson Lai Hui Yeen Members Aun Ah Thim Datuk Chan Chong Choon Khor Joe Ann REMUNERATION COMMITTEE Chairperson Khor Joe Ann Members Lim Tock Ooi Aun Ah Thim Lai Hui Yeen NOMINATION COMMITTEE Chairman Aun Ah Thim Members Datuk Chan Chong Choon Lai Hui Yeen Khor Joe Ann COMPANY SECRETARIES Chin Ooi Wee LS 0006616 Lim Li Shiang MIA 19661 LISTING ACE Market of Bursa Malaysia Securities Berhad Stock Name : TECFAST Stock Code : 0084

CORPORATE OFFICES Techfast Holdings Berhad Techfast Precision Sdn Bhd No. 11, Jalan Pasaran 23/5 Seksyen 23, 40300 Shah Alam Selangor Darul Ehsan Tel : 03-5548 5112 Fax : 03-5548 5113 E-mail : [email protected] Website : www.techfast.com.my Cape Technology Sdn Bhd Oriem Technology Sdn Bhd Plot 25, Bayan Lepas Industrial Estate Non-FTZ, Phase 4 11900 Bayan Lepas, Penang. Tel : 04-642 6363 Fax : 04-642 6366 / 04-642 6369 Email : [email protected] Website : www.cape.com.my REGISTERED OFFICE Suites 7.21 & 7.22, 7th Floor Imbi Plaza, Jalan Imbi 55100 Kuala Lumpur Tel : 03-2142 3584 Fax : 03-2142 0327 AUDITORS Tai, Yapp & Co. (AF 0205) Chartered Accountants No. 3-2 Jalan Indrahana 2 Off Jalan Kuchai Lama 58200 Kuala Lumpur Tel : 03-7983 0277 / 03-7983 6128 Fax : 03-7981 9912 SHARE REGISTRAR Tricor Investor & Issuing House Services Sdn Bhd Unit 32-01, Level 32, Tower A, Vertical Business Suite, Avenue 3, Bangsar South, No. 8, Jalan Kerinchi, 59200 Kuala Lumpur Tel : 03-2783 9299 Fax : 03-2783 9222 PRINCIPAL BANKERS Hong Leong Bank Berhad AmBank Berhad


Five Year Group Financial Highlights

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2014 2015 2016 2017 2018

20,277 19,681 22,466

26,784 30,421

REVENUE (RM'000)

0 500

1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 5,500 6,000

2014 2015 2016 2017 2018

2,778

3,827

4,744 5,079

5,593 PROFIT BEFORE TAXATION (RM'000)

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2014 2015 2016 2017 2018

1,844

2,679

3,530 3,671

3,980

PROFIT AFTER TAXATION (RM'000)

0

500

1000

1500

2000

2500

3000

3500

4000

4500

2014 2015 2016 2017 2018

151

2,358

3,193

3,527

3,980

COMPREHENSIVE INCOME ATTRIBUTABLE TO OWNERS OF THE COMPANY (RM'000)

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2014 2015 2016 2017 2018

25,012 25,489 28,780 29,454 30,982

TOTAL ASSETS (RM'000)

0.00

0.25

0.50

0.75

1.00

1.25

2014 2015 2016 2017 2018

0.50

0.00

0.50

1.00 1.00

DIVIDENDS PER SHARE (SEN)

-

0.50

1.00

1.50

2.00

2014* 2015* 2016* 2017 2018

0.07

1.09

1.42 1.56

1.74

BASIC EPS (SEN)

0

0.05

0.1

0.15

2014* 2015* 2016* 2017* 2018

0.07

0.09 0.10 0.10

0.11

NTA PER SHARE (RM)

*Note: Comparative figures for years 2014-2016 were recalculated retrospectively for the bonus issue of 57,036,677 shares that was completed on 24 October 2017.

ANNUAL REPORT 2018

Five Year Group Financial Highlights (cont’d)

Financial Year Ended 31 December 2014 2015 2016 2017 2018

Key Operating Results:

Revenue (RM ‘000) 20,277 19,681 22,466 26,784 30,421

Profit before Interest and Tax (RM ‘000) 2,804 3,844 4,764 5,116 5,625

Finance Costs (RM ‘000) 25 17 20 38 32

Profit Before Taxation (RM ‘000) 2,778 3,827 4,744 5,079 5,593

Profit After Taxation (RM ‘000) 1,844 2,679 3,530 3,671 3,980

Total Comprehensive Income Attributable to Owners of the Company (RM ‘000) 151 2,358 3,193 3,527 3,980

Other Key Data:

Total Equity (RM ‘000) 16,364 21,675 24,095 24,555 26,254

Total Assets (RM ‘000) 25,012 25,489 28,780 29,454 30,982

Cash and Cash Equivalents* (RM ‘000) 6,631 7,751 11,029 8,924 10,162

No. Of Ordinary Shares in Issue** (‘000) 152,917 168,117 167,619 228,148 228,148

Share Information:

Basic Earnings Per Share^ (Sen) 0.07 1.09 1.42 1.56 1.74

Net Tangible Assets Per Share^^ (RM) 0.07 0.09 0.10 0.10 0.11

Dividends Per Share (sen) 0.50 - 0.50 1.00 1.00

Share Price – High (sen) 25.5 27.0 24.5 87.5 61.5

Share Price – Low (sen) 13.0 16.0 17.5 55.5 26.0

Share Price as at 31 December (sen) 16.5 23.0 19.0 60.0 32.0

Market Capitalisation^^^ (RM ‘000) 25,231 38,667 31,848 136,888 73,008

NOTES: * Cash and Cash Equivalents was the sum of deposits with licensed banks, short term investment, cash and

bank balances after deducting deposits pledged to a licensed bank and deposits with maturity period of more than three months.

** No. of Ordinary Shares in Issue are excluding treasury shares held. ^ The basic Earnings Per Share (EPS) is arrived at by dividing the Group’s total comprehensive income

attributable to owners of the Company by the weighted average number of ordinary shares in issue during the year. The comparative figures years 2014-2016 were recalculated retrospectively for the bonus issue of 57,036,677 shares that was completed on 24 October 2017.

^^ The Net Tangible Assets (NTA) Per Share is arrived at by dividing net tangible assets value attributable to ordinary shares by the number of ordinary shares in issue excluding treasury shares held. Comparative figures for years 2014-2016 were recalculated retrospectively for the bonus issue of 57,036,677 shares that was completed on 24 October 2017.

^^^ Market Capitalisation is arrived at by multiplying the closing share price as at year end by the number of ordinary shares in issue excluding treasury shares held.


Chairman’s Statement

On behalf of the Board of Directors, i t gives me great pleasure to present the Annual Report and the Audited Financial Statements of Techfast Holdings Berhad and the Group for the f inancial year ended 31 December 2018. The year 2018 was satisfactory at Techfast. The Group recorded revenue of RM30.42 million, an increase of 13.6% from the revenue of RM26.78 million achieved in 2017. Profit before tax came in at RM5.59 million for 2018 which was higher than the RM5.08 million achieved in 2017. The USD had been relatively stable throughout 2018 which was overall weaker than 2017. A weakened USD will negatively impact our revenue and earnings because majority of our sales are USD denominated. Malaysia’s economy is expected to see lukewarm but stable growth in 2019. Despite the sluggish start for the manufacturing sector in 2019 as a result of some weakness in China, Japan and South Korea, companies seem to be optimistic about higher ouput in line with demand in the next 12 months. For our mould cleaning and epoxy businesses, we tend to look at the semiconductor trends when forecasting because both Cape and Oriem operate as support businesses to the semiconductor industry. The semiconductor industry is expected to be weaker in the year 2019, however, the Company hopes to capture a larger share of the Taiwan and China markets to cushion the impact of any expected slowdown. One thing that will be in the spotlight for 2019 will be the trade war between USA and China. While this trade conflict will have global uncertainties for businesses, there appears to be opportunities for gain, as both economic giants look for alternative sources for their imports. For the fastener business, there are ongoing marketing efforts to expand sales to the US, while Cape and Oriem are working on enlarging its market share in China and Taiwan. Management is aware of the huge market in China and Taiwan, and will continue to invest efforts to build in those markets. We, at Techfast understand that running a business is more than just business. The Management also valued the welfare and development of all employees and takes its responsibility to protect the environment seriously. We have also embraced the ACE Market Listing Requirements to disclose a Sustainability Statement which incorporates and expands on the corporate social responsibility statement.

I am also pleased to report that the Board of Directors is recommending a final single tier dividend of 0.5 sen per share, amounting to approximately RM1,140,740. This will be subject to the approval of shareholders at the forthcoming Annual General Meeting. The final dividend together with the 0.5 sen single tier interim dividend paid on 4 October 2018, would give a total dividend of 1 sen per share. This exceeds the 40% payout target as set out in the dividend policy of the Company. On the Board, Mr. Yap Kok Ching has resigned from the Board as Independent Non-Executive Director. He had served the Board of Directors and the Company for more than 12 years. We are greatly thankful for his contributions and advice during the tenure of directorship. I wish to also welcome on board Ms. Khor Joe Ann and Ms. Lai Hui Yeen, whom we look forward to working with, as the Group moves towards embracing gender diversity on its Board. On behalf of the Board I would also like to express my gratitude to the management and staff for their continued dedication, commitment and loyalty to the Company. Not forgetting, of course, are our shareholders, customers, suppliers, dealers, bankers, business associates and all regulatory authorities, for their understanding, co-operation and assistance to us. Last, but not least, I express my gratitude to my fellow Board members for their invaluable contribution, advice and guidance.

Lim Tock Ooi

Executive Chairman

ANNUAL REPORT 2018

Management Discussion & Analysis

BUSINESS OBJECTIVES AND STRATEGIES Techfast Holdings Berhad and its group of subsidiaries (“Group”) are involved in three distinctly separately businesses operated under its wholly-owned subsidiary companies as follows:

TECHFAST PRESICION SDN BHD (“TPSB”) Manufacturer of high precision fasteners and electronic hardware for use in electronics, telecommunications and computer peripherals. It has invested in the required machines to take on projects from the aerospace industries.

CAPE TECHNOLOGY SDN BHD (“CAPE”) CAPE is the abbreviation for Creative Advanced Polymer Engineering. It has over 20 years of experience in the manufacture of specialised formulation rubber cleaners and conditioning compounds for use as thermosetting transfer mould cleaners in the semi-conductor industry. Rubber sheet cleaners are fast curing materials compared to melamine based cleaners. This means that there is lesser downtime and higher productivity when using rubber sheet cleaners. It also has excellent elastic properties which does not leave any unwanted debris on the moulding stations.

ORIEM TECHNOLOGY SDN BHD (“ORIEM”) ORIEM is abbreviated from OxiRane Innovation Encapsulation Materials and its primary activity is epoxy material engineering with customisation capabilities for optoelectronics industries. It also provides thermal analytical services to tertiary education and research centres. It has the facilities to perform material charaterisation research and development. Oriem also also performs material selection and process optimisation for mix ratio and curing profile.

The resource allocation and assessment of performance are based on these two business segments. For more information, please refer to Note 27 Segmental Reporting, under the notes to the Financial Statements. OPERATIONS REVIEW Financial Results The financial year ended (“FYE”) 31 December 2018 was another year of growth for the Techfast Group. Group turnover continued to increase to RM30.42 million, surpassing RM26.78 million from last year. The net profit after taxation (“NPAT”) of the Group was RM3.98 million, which was an increase from RM3.67 million achieved in 2017.

Liquidity and Capital Resources As at 31 December 2018, the Group has cash and cash equivalents amounting to RM10.16 million, which is up from RM8.92 million from 2017. The Group has no bank borrowings and its liabilities were only comprised of hire purchase leases. Capital expenditure requirements are also minimal at this stage. TPSB had made initial investments into buying machines to expand its capacity to cater for the anticipated aerospace projects. These machineries have since been deployed for fulfillment of other projects due to delay with orders pipeline from the aerospace project. For Cape and Oriem, Management does not foresee any significant capital expenditure requirements to meet increased sales. BUSINESS OPERATIONS REVIEW Fastener Segment The fastener segment contributed about 31% of the Group’s gross profit for the FYE 31 December 2018. This segment maintained its focus on higher margin products such as electronic hardware and precision turned parts which continued to deliver positive results. It was also seeing some return customers for fasteners where these customers have found other suppliers to be more expensive than TPSB. The gross profit margins were marginally about the same at 32.6% compared to 33.6% in the previous year. The fastener segment grew stronger and delivered NPAT of RM1.44 million compared to RM1.15 million in the previous year, achieving three consecutive years of profit since the loss-making years.

Chart 1: Fasteners Sales Distribution by Region

Manufacturing of electronic hardware customised to customers’ specifications based on engineering drawings has been successful and gained traction amongst its customers in the United States (“US”). The Company continue to outsource the production of low margin items so that the Company has more resources to cater for projects with higher profit margins.


Management Discussion & Analysis (cont’d)

The Company now has ample production capacity with the purchase of the CNC machines to meet any increase in demand. For the FYE 2018, export sales to 22 countries accounted for about 46% of its total sales. US remains the top export market for TPSB. Mould Cleaning Rubber Sheets and LED Encapsulant Segment Revenue for Cape was about RM17.00 million for the year under review, which was higher than RM15.95 million for the FYE 31 December 2017. NPAT was marginally higher at RM2.89 million compared to RM2.72 in the previous year. The strengthened Ringgit Malaysia in the FYE 31 December 2018 had affected the bottom line of Cape due to its US Dollar denominated sales. In 2018, Cape had established 4 more working partners in China, which target different sectors of the customer profile there. Cape are selling their product to customers using black epoxy moulding compound as well as clear epoxy moulding compounds. Through its agents, Cape’s products had also been phased in for continuous runs at two large semiconductor companies. This will lead to future expansion of sales for Cape via their customers’ supply chain. There are also continuous business expansion in Taiwan as Cape’s agents seek out new customers. This has resulted in a modest increase in overall sales to China and Taiwan in 2018. Cape is finding interesting market development in Philippines. It had penetrated the market and its sales agents in Philippines had established its mould cleaner rubber sheets with new customers and will be targeting other semiconductor players.

Chart 2: Mould Cleaning Sales Distribution by Region

Oriem recorded higher turnover for the FYE 31 December 2018 of RM2.32 million compared to RM1.99 million in the previous year. Its customers are mainly based in Thailand, China and Taiwan, which include well renowned industry players such as Broadcom, Liteon and Osram group of companies. Oriem recorded NPAT of RM0.33 million, an increase from RM0.28 million from the previous year. Collectively, Cape and Oriem contribute about 68% of the gross profit for the Group for the year under review. The Tecore project for clear epoxy moulding compound is well into its qualifying and reliability

testing stages. Management hopes to see favourable results from this project soon. Testing and confirmation of quality by customers typically take a long time. Favourable outcomes from these projects will contribute to the sales for Cape and Oriem.

Chart 3: LED Encapsulant Sales Distribution by Region RESEARCH AND DEVELOPMENT The key to Cape and Oriem’s competitive edge lies in its research and development (“R&D”) team that work to innovate and improve its products. The management at Cape and Oriem is constantly striving to expand and acquire new technical know how and expertise to improve the technology in the manufacture and use of its products. Customer feedback is always taken constructively and any deficiencies in product satisfaction are always analysed, improvised on and then rectified to meet the specific requirements. As such, Cape and Oriem invest heavily in their R&D human resource and will continue to do so. They also believe in enlarging their human talent pool via extensive collaborations with local universities and local research institutions. This way, they have access to talents that are identified and nurtured from early on. Other talent management initiatives include scholarships that are available to current R&D staff to further their education. RISKS AND CHALLENGES Increasing Costs of Raw Materials Management continues to face increasing costs for raw materials and services used for production. One of the projects that Management will continue its second sourcing project on major raw materials. This includes initiatives like obtaining multiple quotations for similar quality raw materials to get the best pricing as part of its tight price monitoring system. There will also be supply chain database expansion, periodic review of pricing and close controls on material purchasing. Management is looking into enhancing machine capability with new technology for increased productivity.

ANNUAL REPORT 2018

Management Discussion & Analysis (cont’d)

Foreign Exchange Uncertainties Overall, the expectation that the Ringgit Malaysia (“RM”) will strengthen against the US Dollar in 2019 will be unfavourable for the bottom line of the Group, seeing that it has large US Dollar denominated sales. However, Management will monitor the volatility of foreign exchange rates closely with the aim to minimise impact on its financial results. Product Competitiveness The inherent challenge to any business is emergence of competition. There are current direct competitors that are now based in Korea and China which the company is aware of. In addressing this competition, Cape and Oriem are constantly working to keep ahead of the pack by investing its resources in R&D. As such, its products are consistently more superior to that of its competitors in terms of product application and suitability. Key indicators in measuring the functionality of the product include lower downtime, easier application and cost effectiveness. Credit Risk The prevailing operational challenge across both business segments is the risk of non-collection from customers as letters of credit are not commonly used. Management is especially wary and selective of accepting orders from customers in China and has taken action to mitigate this risk. Measures include screening new customers for credit risk and even imposing cash only trade terms for certain high risk customers. Management will be balancing this risk while expanding its sales distribution in China for controlled and sustainable growth. Cyclical Nature of the Semiconductor Industry As Cape and Oriem’s business falls in the semiconductor support industry, its sales and financial performance is largely correlated to the cyclical nature of the semiconductor industry. However, penetration efforts into new markets like expansion of sales to China and Taiwan will mitigate such cyclical impacts. OPPORTUNITIES Increased Cost of Doing Business in China Although the cost of doing business in China is on a steady increase, Malaysian manufacturers are well positioned to deliver products of value. Business development efforts are also targeted at customers who used to buy from us to generate sales orders. This proposition has proven fruitful too as the response from participation in fastener trade shows in the US and Europe has been good. Customers are once again acknowledging the quality of products from our Group and sales have picked up since.

Strategic Partnerships While the shorter term goal for the fastener segment is to manufacture high profit margin products like the electronic hardware and precision turned parts that are customized based on customers’ specifications, there is the long term goal of securing tie-ups with strategic partners. On this note, Management is always on the lookout for suitable candidates to form deep business relationships with. There appears to be new prospective manufacturers based out of India, as seen at the recent trade show held in Stuttgart, Germany. Potential of Taiwan and China Markets Management knows that the largest market for the Cape and Oriem’s products are in Taiwan and China. The potential for growth in these markets is huge with so much more market share to be gained. In this pursuit, Management is working very closely with local agents on the ground to build its presence as being the go-to supplier for its products. Being the first on any customers’ mind and to be known for unparalled product quality will eventually lead to higher market share. OUTLOOK FOR THE YEAR Management is reasonably confident and the staff is motivated and energetic as together, they take on the goals for the coming years. Sales are expected to be brisk with possibly further penetration into the distribution coverage in target markets, especially China. Financial results are expected to be satisfactory for the FYE 2019, barring any unforseen circumstances.


Profile of Directors

Lim Tock Ooi Executive Chairman | Age 71, Male, Malaysian

Date of appointment to the Board

| First appointed to the Board on 31 March 2005. Redesignated as Executive Chairman on 1 March 2011.

Qualification | Holds a Bachelor of Economics degree from the University of New England,Australia. Fellow of the Institute of Chartered Accountants Australia and New Zealand. Member of the Malaysian Institute of Accountants. Member of the Malaysian Institute of Certified Public Accountants. Fellow of the Malaysian Institute of Taxation.

Working experience | Mr. Lim qualified as a Chartered Accountant in 1974 while working for aninternational firm of chartered accountants in Sydney, Australia. He continued hiscareer in chartered accountancy while working for one of the big four accountingfirms upon returning to Malaysia in 1976. In the year 1980, he started hisaccounting practice under the name of Messrs. Michael Lim & Co and is currentlythe advisor and a partner of the firm.

Board committees | Member of the Remuneration Committee.

Other directorships | He holds directorships in each of the subsidiary companies. He also holdsdirectorships in other private limited companies in non-executive capacities.

Yap Yoon Sing Group Managing Director | Age 53, Male, Malaysian


| First appointed to the Board on 31 March 2005 as Chairman-cum-Group ManagingDirector. Redesignated as Group Managing Director on 15 October 2009.

Qualification | Holds a Bachelor of Commerce degree majoring in Business Administration fromNational Chengchi University in Taiwan.

Working experience | Mr. Yap started working as a Management Consultant with the ChineseManagement Association (“CMA”) in Taiwan upon graduation. After gainingexperience in the manufacturing industry, he returned to Malaysia in 1991 and wasinstrumental in setting up a precision turned parts manufacturing company. He thenworked with that company as the Assistant General Manager. Later, he left and co-founded the Techfast Group of Companies. He has a hands-on approach inmanaging the Group’s operations and is recognised by his peers in the self-clinching fastener industry worldwide. As such, Mr. Yap is focused on thedevelopment of formulation of long term business development strategies for theTechfast Group.

Board committees | Nil.

Other directorships | He holds directorships in each of the subsidiary companies. He also holdsdirectorships in other private limited companies in non-executive capacities.

ANNUAL REPORT 2018

Profile of Directors (cont’d)

Aun Ah Thim Independent Non-Executive Director | Age 67, Male, Malaysian


| 17 February 2009

Qualification | First Class Honours Degree in Science from the University of Malaya. Holds an Honours Degree in Law from the University of London and a Certificate inLegal Practice from the Malaysian Qualifying Board. Member of the Malaysian Bar.

Working experience | Following his graduation from University Malaya, he started working in theeducation industry and his service included training school teachers. He also co-authored a book in mathematical recreation that was published by Dewan Bahasa &Pustaka in the 1980s. After obtaining his law qualifications while in the education service, he commencedhis legal practice with Messrs Suhaimi Khor Zulkifli & Chang. He later continued hispractice with Messrs Nga Hock Cheh & Co. and eventually became a partner in thefirm. In 1998, he ventured out on his own under the style and name of Messrs A TAun & Associates in Petaling Jaya. Since then, he has been practising as a soleproprietor. In his years of practice, he has had exposure to varieties of legal works,including conveyancing, corporate matters and litigations.

Board committees | Chairman of the Nomination Committee. Member of the Audit Committee and Remuneration Committee.

Other directorships | None.

Datuk Chan Chong Choon Independent Non-Executive Director | Age 63, Male, Malaysian


| 2 December 2010

Qualification | Holds a LL.B (Hons) degree from University of London and a Master of Laws(LL.M (Hons)) degree from the University of Malaya. Also holds a Certificate inLegal Practice from the Malaysian Qualifying Board and a member of the MalaysianBar. He is presently a member of the Disciplinary Committee, Advocates & SolicitorsDisciplinary Board.

Working experience | His early career included him holding positions of Personal Manager / CompanySecretary in a finance society and Legal Advisor / Company Secretary in aninternational oil and gas company. Thereafter, he commenced and continued hislegal practice in two large legal firms and subsequently joined a medium size legalfirm, all at Kuala Lumpur. He started his own legal practice in August 2017 underthe name of BEN CHAN, Advocates & Solicitors, where he is currently the Principalof the firm. He has been empanelled as an Arbitrator, Adjudicator and a Mediator with theAsian International Arbitration Centre. He has co-authored a book titled, Chan &Koh, Malaysian Company Law, Principles and Practice, (Sweet & Maxwell).

Board committees | Member of the Audit Committee and Nomination Committee.

Other directorships |

None


Profile of Directors (cont’d)

Lai Hui Yeen Independent Non-Executive Director | Age 43, Female, Malaysian


| 18 October 2018

Qualification | Holds a Bachelor of Business majoring in Accounting from Monash University,Caulfied campus in Australia. Member of CPA Australia. Member of the Malaysian Institute of Accountants.

Working experience | Ms. Lai started her career as an accounts assistant before moving onto work in theareas of audit and tax with an accounting firm. She later worked as an accountant inmultinational company before moving back into professional practice with PYMSSolutions Sdn Bhd. She is now a Director at PYMS Solutions Sdn Bhd.

Board committees | Chairperson of Audit Committee. Member of the Remuneration Committee and Nomination Committee.

Other directorships | She is a board member of several private limited companies in executive positions.

Khor Joe Ann Independent Non-Executive Director | Age 43, Female, Malaysian


| 18 October 2018

Qualification | Holds a Bachelor of Accounting and Financial Management (with Honours) from theUniversity of Sheffield, United Kingdom. Holds a Masters of International Business from the University of Melbourne,Australia that was obtained with high distinctions.

Working experience | Ms. Khor started her career in audit and since worked in debt capital markets andconsumer and corporate banking. Her work experience was gained from havingworked with Ernst & Young, AmMerchant Bank Berhad, HSBC Bank Australia andSumitomo Mitsui Banking Corporation. After that, she joined Netrove, a regionalventure capital and corporate advisory firm, and was involved in several cross-border deals specialising in the technology sectors. She is now an executive director of Green Growers Ventures Sdn Bhd, a companyinvolved in the marketing and distribution of fresh produce.

Board committees | Chairperson of the Remuneration Committee. Member of the Audit Committee and Nomination Committee.

Other directorships | She is a board member of several private limited companies in executive positions.

ADDITIONAL INFORMATION ON DIRECTORS Confl ict of Interest and Family Relationships with any Director and/or Major Shareholder None of the Directors have any conflict of interest with the Group. None of the directors has family relationships with any other directors. Convict ions for offences (within past 5 years, other than traff ic offences) None of the Directors have any convictions for offences other than traffic offences and have not been imposed any public sanction or penalty by the relevant regulatory bodies during the financial year ended 31 December 2018. Securit ies held in the Company and its subsidiary The details are disclosed in the Directors’ Report on page 38 of this Annual Report.

ANNUAL REPORT 2018

Profile of Key Senior Management

Lu Eng Shean Managing Director, Cape Technology Sdn Bhd and Oriem Technology Sdn Bhd Age 50, Male, Malaysian

Lu Eng Shean holds a Bachelor (Hons) Degree in Polymer Technology from University Science Malaysia. Upon graduation, he started his career with National Semiconductor Sdn Bhd as a Moulding Engineer in the year 1994. In the year 1996, he joined ASE Electronics (M) Sdn Bhd as Lead Engineer and in the same year, he left when he founded Cape Technology Sdn Bhd. He later founded Oriem Technology Sdn Bhd which focuses on research and development and manufacturing of epoxy encapsulant materials for the optoelectronics industry. As an engineer, he specialises in the areas of Mould Development and Polymer Science Development, the key business areas of both companies. He can lay claim to developing the first Malaysian owned formulation for mould cleaning and conditioning rubber sheet. Mr. Lu is also heavily involved in researching rubber compounding technology and its characteristics. He published a technical paper for his research in Polymer Journal. He also served as Chairman of the Malaysia Rubber Board, Northern Region in the years 2003-2004. He had since maintained close working relationships with the Malaysia Rubber Board and the Malaysia Rubber Export Council. He continues to be involved in the product and process improvement of rubber blending with University Science Malaysia.

Teresa Tay Ming Meng Operations Manager, Cape Technology Sdn Bhd and Oriem Technology Sdn Bhd Age 47, Female, Malaysian

Teresa Tay Ming Meng is a member of the Institute of Chartered Secretaries and Administrators. She started her career as an Accounts Assistant with Morrison Express Sdn Bhd, a logistics company, where she was in charge of the accounts payable function in the year 1996. The following year, she joined Cape Technology Sdn Bhd as an administrator where she handled the human resource, finance and logistics functions. She later took on business development work scope as well before being promoted to her current position, where she oversees operations for the Company. She is the sister to Mr. Lu Eng Shean’s wife.

Cheah Chee Wai Business Development Manager, Cape Technology Sdn Bhd and Oriem Technology Sdn Bhd Age 41, Male, Malaysian

Cheah Chee Wai holds a Bachelor Degree in Polymer Technology from University Science Malaysia. After graduation, he joined Cape as a process engineer where he gained valuable experience in applied polymer development. In the year 2004, he moved on to Product Development and was then promoted to Senior Research and Development Engineer in the year 2005. He is currently responsible for product development, sales and technical support for Cape and Oriem.

Lai Nyet Siam Finance-cum-Human Resource Manager, Techfast Precision Sdn Bhd Age 50, Female, Malaysian

Lai Nyet Siam holds a LCCI qualification and has been with the Techfast Group since the year 1999. She is one of the first team of employees and is a long service staff with the Group. She is now in charge of Finance and the Human Resource Department in Techfast Precision Sdn Bhd.


Profile of Key Senior Management (cont’d)

Chan Chun Yi Factory Manager, Techfast Precision Sdn Bhd Age 42, Male, Malaysian

Chan Chun Yi joined the fastener division of the Company in the year 1999 as a technician. His technical skills include good command of the auto lathe machines and the CNC auto lathe machines. He had since been promoted to the position of Factory Manager to oversee the overall production operations in Techfast Precision Sdn Bhd.

Norafidah Binti Oyop Planning-cum-Purchasing Manager, Techfast Precision Sdn Bhd Age 42, Female, Malaysian

Norafidah Binti Oyop graduated from University Putra Malaysia, majoring in Biological and Agricultural Engineering. She joined the fastener division as a Quality Assurance Executive in the year 2002. She was then job rotated to several departments as part of a management trainee development programme. She is now in charge of Production Planning and Purchasing.

Bacho Bin Dahlan Production Manager, Techfast Precision Sdn Bhd Age 47, Male, Malaysian

Bacho bin Dahlan joined the fastener division in the year 1999 as a technician for the CNC and CAM type auto lathe machines. During his tenure with the Techfast Group, he has developed expertise in jigs and fixtures development, spare parts and maintenance, research and development of new products and production control for daily operations.

Saved as disclosed, none of the Key Senior Management personnel have: 1. any directorships in public companies and listed issuers; 2. any family relationship with any Directors and/or major shareholders of the Company; 3. any conflict of interest with the Company; 4. any conviction for offences within the past 5 years other than traffic offences; and 5. any public sanction or penalty imposed by the relevant regulatory bodies during the financial year.

ANNUAL REPORT 2018

Corporate Governance Overview Statement

The Board of Directors (“the Board”) of Techfast Holdings Berhad (“the Company”) undertakes measures to enhance corporate governance framework which are practiced throughout the Company and its subsidiaries (“the Group”) as a fundamental part of discharging its responsibilities to protect, realise and enhance shareholders’ value and the financial performance of the Group. To this end, the Board supports the recommendations of the Malaysian Code on Corporate Governance 2017(“MCCG 2017” or “the Code”), with limited departure from certain practices recommended. The Board is pleased to outline the key principles applied and best practices adopted by the Group to comply with MCCG 2017. PRINCIPLE 1. Establish Clear Roles and Responsibi l i t ies of the Board and Management Duties and Responsibi l i t ies of the Board The Board is responsible for the performance and affairs of the Company and its subsidiaries (collectively “the Group”). It also provides leadership and guidance for setting the strategic direction of the Group. The Board has assigned the day-to-day affairs of the Group’s businesses within the various divisions to the management, comprising the Executive Chairman, the Group Managing Director and the key senior management team of the main operating companies, who are accountable for the conduct and performance in their respective areas. The Group’s Executive Directors are involved in leadership roles overseeing the day-to-day operations and management within their specific work scope and responsibilities. Roles and Responsibi l i t ies of the Board The Board is led by the Executive Chairman and is supported by the Board members with experience in a wide range of expertise and they collectively play an important role in the stewardship of the Group. The Board is primarily responsible for setting the strategic direction and the control systems of the Group. It then delegates the implementation and monitoring of these set directions and controls systems to the Management. The responsibilities of the Board include the following: (a) Formulate, review, evaluate, adopt and approve the strategic plans and policies for the Company and

the Group; (b) Oversee and monitor the conduct of businesses and financial performance and major capital

commitments of the Company and the Group; (c) Review and adopt financial results of the Company and the Group, monitor compliance with applicable

accounting standards and the integrity and adequacy of financial information disclosure; (d) Formulate, review and approve major corporate proposals such as business acquisitions, new business

ventures or joint ventures of the Company and Group; (e) Identify principal risks and assess the appropriate risk management systems to be implemented to

manage these risks; (f) Establish and oversee a succession planning programme for the Company and the Group including the

remuneration and compensation policy thereof; (g) Formulate, review and determine the adequacy and integrity of the internal control systems and

management information of the Company and of the Group; and (h) Develop a code of conduct to address, amongst others, any conflicts of interest relating to directors,

major shareholders and / or management. The role of the Management is to manage and run the general operations and financial businesses of the Company. Management’s responsibilities are limited by their job scope and accepted work culture. The other formal limits to Management’s responsibilities that are in place include customer credit policies and cheque signatories that only the Executive Directors may authorise.


Corporate Governance Overview Statement (cont’d)

PRINCIPLE 1. Establish Clear Roles and Responsibi l i t ies of the Board and Management (cont’d) Succession Planning The duty for reviewing and recommending suitable candidates for key management positions and determining their remuneration packages had been delegated to the Nomination and Remuneration Committees. The Board had approved a succession planning policy that puts in place procedures to reduce the disruption to normal running of business should there be any abrupt departures of key personnel. Succession planning at the Group is further enhanced by the standard operating policies and procedures that had been in place to guide any new incumbents in their roles. Access to Information and Company Secretaries Directors have full and timely access to information regarding the Company and the Group. The Directors are provided with relevant agenda and Board papers in sufficient time to Board meetings to enable them to have an overview of matters to be discussed or reviewed at the meetings and seek further clarifications, if any. The Directors are provided with Notices of Board Meetings and Board papers for each agenda for scheduled meetings. The Board papers include reports on the Group’s Financial Statements, variance analysis of financial performance and relevant corporate developments and proposals prepared by the management team as and when they arise. These are despatched to the Board members in physical hard copies usually at least seven (7) calendar days before the scheduled Board meetings. Soft copies of board papers are also emailed via attachments to Board Members prior to the despatch of the hard copies. Directors have access to the advice and services of the suitably qualified, experienced and competent Company Secretaries who are also members of respective professional bodies. The Company Secretaries play an advisory role to the Board, particularly with regard to the Company’s constitution and Board policies and procedures as well as compliance with relevant rules and regulations. The Company Secretaries will advise the Board on any updates relating to new statutory and relevant regulatory requirements pertaining to the duties and responsibilities of the Directors as and when necessary. Any additional information requested by Directors is readily available, wherever possible. Minutes of all meetings are maintained as a record of proceedings carried out. The Company Secretaries are also responsible for ensuring that board meeting procedures are followed and all statutory records of the Company are properly maintained at the Registered Office of the Company. Directors may also consult with the Executive Chairman, the Group Managing Director and other members of the Senior Management staff in the Group prior to seeking any independent professional advice. Board Charter The Board has formalised and adopted a Board Charter to serve as a source reference and primary induction literature, insights to existing and prospective Board members to assist the Board in the performance of their fiduciary duties as Directors of the Company. The Board Charter would also be good point of reference for any new Board Directors upon appointment. The newly formalised Board Charter merely ratified and documented the practices that had been in place. The Board Charter covered responsibilities of the Board, matters reserved for the Board, composition and independence of the Board of Directors. It also detailed segregation of roles between the executive and non-executive directors and the senior independent non-executive directors. The Directors Code of Ethics was also detailed in the Board Charter and may be accessed on the Company website www.techfast.com.my. Whist le Blowing Policy The Board believed that having a Whistle Blowing Policy in place strengthens, supports good management and at the same time demonstrates accountability, good risk management and sound corporate governance practices. A Whistle-Blowing Policy was adopted by the Board in year 2017. The Whistle Blowing Policy sets out channels and procedures for all employees to raise genuine concerns about possible improprieties in matters of financial reporting, compliance and other malpractices at the earliest opportunity, and in an appropriate way. The policy is set in place to ensure that employees can raise concerns without fear of reprisals and safeguard such person’s confidentiality. This policy not only deals with financial reporting but also covers fraud, corruption, bribery or blackmail, criminal offences, failure to comply with legal or regulatory obligation, miscarriage of justice, endangerment of an individual’s health and safety and concealment of the mentioned.

ANNUAL REPORT 2018


PRINCIPLE 2. Strengthen Composit ion of the Board Composit ion and Balance of the Board The Board consists of six (6) members, comprising one (1) Executive Chairman, one (1) Group Managing Director and four (4) Independent Non-Executive Directors. Collectively, the Board consists of qualified individuals with knowledge, skills, industry specific experience and expertise in the areas of financial management, strategic planning, legal and regulatory compliance, manufacturing and marketing development. The Board complies with paragraph 15.02 of Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) for the ACE Market which states that at least two (2) directors or one-third (1/3) of the board of directors of a listed company must be independent directors. In addition, the composition of the Board also meets the requirements of Practice 4.1 of the MCCG where at least half of the board comprises independent directors. A brief profile of each Director is set out on pages 12 to 14 of this Annual Report. The presence of Independent Non-Executive Directors, Aun Ah Thim, Datuk Chan Chong Choon, Lai Hui Yeen and Khor Joe Ann, all of whom are of sufficient caliber and experience, bring objectivity, balance and independent judgment to decision making process of the Board. Yap Kok Ching, who was the designated Senior Independent Non-Executive Director, served as the contact person to whom any concerns may be raised with until his resignation on 26 November 2018. Lai Hui Yeen was appointed as Senior Independent Non-Executive Director to replace Yap Kok Ching on 2 April 2019. Nomination Committee The Nomination Committee was established on 21 July 2005. The members of the Committee are as follows: Aun Ah Thim (Chairman, Independent Non-Executive Director) Datuk Chan Chong Choon (Independent Non-Executive Director) Lai Hui Yeen* (Independent Non-Executive Director) Khor Joe Ann* (Independent Non-Executive Director) * Appointed wef 18 October 2018 The objectives of the Nomination Committee include assisting the Board of Directors (“the Board”) in assessing existing directors, identifying, nominating and orienting new directors to enhance corporate governance of the Group. The Committee also assists the Board in reviewing desired mix of skills, experience and qualifications, in addition to examining and reviewing the overall composition of the Board for optimal size and balance between Executive Directors, Non-Executive Directors and Independent Directors. The terms of reference of the Nomination Committee are published on the Company website: www.techfast.com.my. The Nomination Committee conducted two (2) meetings on 27 February 2018 and 28 September 2018 for the financial year ended 31 December 2018 with the attendance record as follows:

Directors Nomination Committee Meetings

Held Attended % of

Attendance Aun Ah Thim 2 2 100% Datuk Chan Chong Choon 2 1 50% Lai Hui Yeen+ - - - Khor Joe Ann+ - - - Yap Kok Ching* 2 2 100%

+Appointed wef 18 October 2018 *Resigned wef 26 November 2018



PRINCIPLE 2. Strengthen Composit ion of the Board (cont’d) Appointment and Induction The Board delegates to the Nomination Committee the responsibility of recommending the appointment of any new Director. The Nomination Committee is responsible to ensure that the procedures for appointing new Directors are transparent and rigorous and appointments are made on merit. At a Nomination Committee meeting held on 28 September 2018, the Committee members considered two female candidates, Khor Joe Ann and Lai Hui Yeen, for appointment to the Board. Their curriculum vitae were perused and discussed before the Committee recommended for their appointment to the Board. They were then appointed as Independent Non-Executive Directors on 18 October 2018. The Board nomination and election process is summarised as follows: (a) The candidate is identified based on recommendations from existing Directors, senior management staff,

shareholders and / or other consultants;

(b) In evaluating the suitability of candidates to the Board, the Nomination Committee considers, inter-alia, the independence, the competency, work and industry experience, commitment, contribution and integrity of candidates. In the case of candidates proposed to be appointed as Independent Non-Executive Directors, the Nomination Committee will consider the candidate’s independence;

(c) Following that assessment, the Nomination Committee would make the recommendation to the Board. This also includes recommendation for appointment as member of various Board committees, where necessary; and

(d) Final decision on the proposed new appointment would be made by the Board, including appointment to various Board committees.

Annual Assessment The Nomination Committee conducted an evaluation of the effectiveness of the Board and Board Committees as well as the performance of individual directors. The evaluation involves the individual Directors and Committee members completing separate questionnaires regarding the processes of the Board and its Committees, their effectiveness and where improvements could be considered. The evaluation process also involved a peer and self-review assessment, where Directors will assess their own performance and that of their fellow Directors. These assessments and comments by all Directors were then discussed at the Nomination Committee meeting, which were then reported to the Board at the Board Meeting held thereafter. All assessments and evaluations carried out by the Nomination Committee in the discharge of its duties were properly documented. The Nomination Committee carried out the following activities during their meeting held on 28 March 2019: reviewed the term of office and the performance of the Audit Committee and of its members for the

financial year ended 31 December 2018; assessed the training needs of the Directors; reviewed and assessed the mix of skills, expertise, composition, size and experience of the Board; and reviewed and assessed the performance of each individual Directors, the independence of the

Independent Directors, the effectiveness of the Board and the Board Committees. The Nomination Committee also assessed the performances of the Directors, namely Yap Yoon Sing, Lai Hui Yeen and Khor Joe Ann, whom are due for re-election. The Nomination Committee then made recommendation to the Board for their re-election to be tabled for shareholders’ approval at the forthcoming AGM. The evaluations were facilitated by the Company Secretary making references to the corporate governance guides that are available and the good corporate governance practices by other listed companies. The suggested areas for improvement were in respect of succession planning for the senior management team and reviewing the Group’s overall strategic planning. The results and comments from the Directors, concerning the Board as a whole and the general performance of the Directors, were also presented to the Board upon review by the Nomination Committee.

ANNUAL REPORT 2018


PRINCIPLE 2. Strengthen Composit ion of the Board (cont’d) Boardroom Diversity The Board acknowledges the importance of boardroom diversity in terms of age, gender, nationality, ethnicity and socio-economic background and recognises the benefits of this diversity. The Board is of the view that while promoting boardroom diversity is essential, the normal selection criteria based on an effective blend of competencies, skills, extensive experience and knowledge to strengthen the Board should remain a priority. On the 18 October 2018, the Board appointed two women Independent Non-Executive Directors, namely, Lai Hui Yeen and Khor Joe Ann. Their appointment came at a time when there were vacancies in the Boardroom and having suitable candidates for the positions. While this fulfills the corporate governance practice of having 30% women directors on the Board, the priority is still on having an effective blend of competencies, skills, and experience to steer the Company. The Board looks forward to working with this new dynamic mix in its boardroom. Re-election and re-appointment of Directors In accordance with the Company’s Constitution, one-third (1/3) of the Directors for the time being or if the number is not three (3) or a multiple of three (3) then the nearest one-third (1/3) shall retire from office at each Annual General Meeting (“AGM”). All Directors shall retire from office once at least every three (3) years but shall be eligible for re-election. Directors who are appointed by the Board during the financial year are subject to re-election by the shareholders at the next AGM following their appointments. At the forthcoming AGM, Yap Yoon Sing, the Managing Director of the Company will be retiring by rotation and shall be standing for re-election pursuant to Article 74 of the Company’s Constitution. Pursuant to Article 81 of the Company’s Constitution, both Lai Hui Yeen and Khor Joe Ann will retire and shall also be standing for re-election at the forthcoming AGM. The Nomination Committee had assessed the performance of the Directors standing for re-election and has made a recommendation to the Board for their re-election to be tabled for shareholders’ approval at the forthcoming AGM. To assist the shareholders in their decision, sufficient information including their personal profile, attendance at meetings and the shareholdings of the Directors standing for re-election have been disclosed in this Annual Report. Remuneration Committee The Remuneration Committee was established on 21 July 2005. The members of the Committee are as follows:- Khor Joe Ann* (Chairperson, Independent Non-Executive Director) Lai Hui Yeen* (Independent Non-Executive Director) Aun Ah Thim (Independent Non-Executive Director) Lim Tock Ooi (Executive Director) *Appointed wef 18 October 2018 The objectives of the Remuneration Committee are to assist the Board of Directors in ensuring that the Executive Directors and key senior managerial staff of the Techfast Group (“the Group”) are fairly compensated for their individual contributions to the Group’s overall performance and that the levels of remuneration package are sufficient to attract, retain and motivate the Executive Directors and key senior management staff needed to manage the business of the Group successfully. The terms of reference of the Remuneration Committee is available on the Company website www.techfast.com.my. One (1) meeting was held on 12 February 2018 during the financial year ended 31 December 2018 with full attendance from all the Committee members. The Remuneration Committee is responsible for recommending to the Board the remuneration packages for Executive Directors and senior management. The Company’s remuneration scheme for Executive Directors and senior management is linked to their performance, service seniority, experience and scope of responsibilities. This aims to attract, motivate and retain Executive Directors with the relevant experience and expertise required to manage the business of the Group effectively and successfully. Executive Directors are abstained from deliberations and voting on the decision in respect of their own remuneration package. The determination of remuneration package of Non-Executive Directors is a matter to be decided by the Board as a whole with the Director concerned abstaining from deliberations and voting on decision in respect of his individual remuneration package. The Board recommends the Directors’ fees payable to Non-Executive Directors on a yearly basis to the shareholders for approval at the AGM.



PRINCIPLE 2. Strengthen Composit ion of the Board (cont’d) Directors’ Remuneration Details of Directors’ remuneration paid or payable to all Directors of the Company are disclosed in the table below. Other emoluments include their statutory contributions and allowances received.

Remuneration Received from the Company

Remuneration Received from

Subsidiary Companies

Salary Fees Bonus

Other Emolu-ments

Company Total Fees

Other Emolu-ments

Group Total

RM RM RM RM RM RM RM RM

Yap Yoon Sing 519,516 - 173,172 132,555 825,243 80,000 24,550 929,793

Lim Tock Ooi 363,600 - 121,202 92,724 577,526 80,000 31,150 688,676

Aun Ah Thim - 40,000 - 5,100 45,100 - - 45,100

Datuk Chan Chong Choon - 40,000 - 4,200 44,200 - - 44,200

Yap Kok Ching* - 40,000 - 5,100 45,100 45,100

Lai Hui Yeen+ - 9,000 - 600 9,600 - - 9,600

Khor Joe Ann+ - 9,000 - 600 9,600 - - 9,600

883,116 138,000 294,374 240,879 1,556,769 160,000 55,700 1,772,469

* Resigned wef 26 November 2018 + Appointed wef 18 October 2018 The Company departs from Practices 7.2 and 7.3 of the MCCG and did not disclose the remuneration breakdown by named basis for its top senior management. The subsidiary companies are engaged in different industries where their salary packages commensurate with the skills and experience required. As such, disclosing remuneration packages may lead to comparisons that are not meaningful and may create unnecessary unhappiness amongst the staff in the Group. PRINCIPLE 3. Reinforce Independence of the Board Annual Assessment of Independence The Board recognises the importance of independence and objectivity in its decision making process. The presence of the Independent Non-Executive Directors is essential in providing unbiased and impartial opinion, advice and judgment to ensure the interests of the Group, shareholders, employees, customers and other stakeholders in which the Group conducts its businesses are well represented and taken into account. The Board, through the Nomination Committee, has assessed the independence of its Independent Non-Executive Directors based on criteria set out in the Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”). The current Independent Directors of the Company namely, Aun Ah Thim, Datuk Chan Chong Choon, Khor Joe Ann and Lai Hui Yeen have fulfilled the criteria of “independence” as prescribed under Chapter 1 of the ACE Market Listing Requirements of Bursa Securities. The Company also fulfils the requirement to have at least one-third (1/3) of its Board members being Independent Non-Executive Directors. Tenure of Independent Directors The MCCG 2017 recommends that the tenure of an Independent Director should not exceed a cumulative term of nine (9) years. The MCCG 2017 gives guidance on procedures to retain Independent Directors as independent if they have completed their service tenure of nine (9) years with the Board. Following the recommendation of the MCCG 2017, the Board Charter has been amended in the year 2018 to limit the tenure of Independent Directors to a maximum of nine (9) years.

ANNUAL REPORT 2018


PRINCIPLE 3. Reinforce Independence of the Board (cont’d) Separation of Posit ions of the Chairman and CEO The roles of the Chairman and Managing Director in the Board of Directors are divided. Lim Tock Ooi, who is the Executive Chairman, is responsible for the Board’s effectiveness and conduct as well as spearheading the strategic direction of the Group. The Executive Chairman will ensure that procedural rules are followed in the conduct of meetings and that decisions made are formally recorded and adopted. Having a professional background in finance and accounting, he is also in charge of strategic financial resource planning and oversees the areas of financial reporting and compliance. Despite the Chairman not being an Independent Non-Executive Director, he is one of the founding members of the Group and has deep knowledge and experience to navigate the strategic plan for the Group. The presence of the four (4) Independent Directors, who form the majority of the Board members, provide the necessary checks and balances on the decision making process at the Board. The significant contributions of the independent directors in the decision making process is evidenced in their participation as members of the various Board committees. Yap Yoon Sing, who is the Group Managing Director and plays the role of the Chief Executive Officer, is primarily responsible for the overall management of day-to-day business operations and implementation of key business decisions at the Group. He also brings relevant business developmental plans to the Board, motivates employees and drives the change and innovation for organic growth within the Group. PRINCIPLE 4. Foster Commitment of Directors Time Commitment The Board meets regularly on a quarterly basis and additional meetings are convened as and when necessary. The Directors have an expectation of when these quarterly meetings will be held and meeting dates are set one meeting in advance in order to accommodate the busy schedules of all Directors. Any additional meetings will be called with sufficient notice given to Directors and the meeting date is usually decided on when all Directors are able to confirm their attendance. As such, 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 Board members 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. Similarly, the Chairman of the Board shall also do likewise before taking up any additional appointment of directorships. The Board met for a total of six (6) times during the financial year ended 31 December 2018. The number of meetings attended by the Board members was as follows:

Directors Board Meetings

Held Attended % of

Attendance Lim Tock Ooi 6 6 100% Yap Yoon Sing 6 6 100% Aun Ah Thim 6 6 100% Datuk Chan Chong Choon 6 5 83.3% Lai Hui Yeen+ 1 1 100% Khor Joe Ann+ 1 1 100%

+Appointed wef 18 October 2018 Directors’ Training All Directors have successfully completed the Mandatory Accreditation Programme as required by Bursa Malaysia Securities Berhad, including the two newly-appointed Independent Non-Executive Directors, Lai Hui Yeen and Khor Joe Ann. Directors are encouraged to evaluate their own training needs on a continuous basis and to determine the relevant programmes, seminars, briefings or dialogue available that would best enable them to enhance their knowledge and contributions to the Board. Areas of concern include those related to corporate governance, as well as changes in laws and regulations affecting the business community. Throughout the year, directors also received updates and briefings, particularly on regulatory, industry and legal developments that may have implications on the business of the Group.



PRINCIPLE 4. Foster Commitment of Directors (cont’d) Directors’ Training (cont’d) Descriptions of the types of training and/or seminars attended by the Directors for financial year ended 31 December 2018 were as follows: Director Training Mode of

Training No. of hours/day(s)

spent

Lim Tock Ooi Audit Quality Enhancement Programme for SMP’s in 2018

Malaysian Institute of Accountants 2 days

Advocacy Programme on CG Assessment Using The Revised

ASEAN CG Scorecard Methodology

Minority Shareholders Watch Group

day

Corporate Governance Briefing Session Bursa Malaysia day

Yap Yoon Sing Advocacy Programme On CG Assessment Using The Revised

ASEAN CG Scorecard Methodology

Minority Shareholders Watch Group

day

Lai Hui Yeen (Appointed wef. 18.10.2018)

Mandatory Accreditation Programme for Directors of Public Listed

Companies

Training Programme 2 days

Khor Joe Ann Appointed wef. 18.10.2018)

Mandatory Accreditation Programme for Directors of Public Listed

Companies

Training Programme 2 days

Aun Ah Thim and Datuk Chan Chong Choon did not attend any trainings during the financial year ended 31 December 2018 due to their busy schedules during the year. PRINCIPLE 5. Uphold Integrity in Financial Report ing by the Company Financial Report ing The Directors are aware of their responsibilities to present a balanced and understandable assessment of the Group’s financial performance and prospects. In this respect, the Audit Committee assists the Board in overseeing the Group’s financial reporting processes and the quality of its financial reporting. Relationship with the External Auditors The external audit functions acts as an independent review for the Financial Statements to form an opinion as to the true and fair view of the Financial Statements prepared by the Company. Under the existing practice, the external auditors are invited to attend two of the Audit Committee meetings held during the year. The external auditors would present their audit plan for the financial year end audit and subsequently present their findings following the completion of the audit of the statutory Financial Statements. There is a transparent and professional relationship with the external auditors when seeking professional advice to ensure compliance with the adoption of Financial Reporting Standards in the Group. The responsibility of the external auditors includes highlighting to the Audit Committee and the Board any matters that require their attention. The management also held a session with the external auditors to understand and discuss the implications of MFRS 9: Financial Instruments. On 2 April 2019, the Audit Committee members held a private session with the external auditors without the presence of any executive personnel, other than one joint Company Secretary, who recorded the proceedings of the meeting. The Audit Committee members discussed with the external auditor their feedback on topics such as the general assistance from the Management, accounting knowledge and experience of the finance personnel within the subsidiary companies of the Group. The Company undertakes an annual assessment of the quality of the audit which encompasses the performance and quality of the external auditors in terms of their independence, objectivity and professionalism. The responsibility for carrying out this policy was delegated to the Audit Committee and the areas of assessment include the caliber, quality, processes, audit team, audit scope, audit communication, audit governance and independence.

ANNUAL REPORT 2018


PRINCIPLE 5. Uphold Integrity in Financial Report ing by the Company (cont’d) Relationship with the External Auditors (cont’d) To support the Audit Committee’s assessment of their independence, the external auditors will provide the Audit Committee with a written assurance confirming 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 also ensures that the External Auditors are independent of the activities they audit and reviews the provision of non-audit services and the fee thereof by the External Auditors. The recurring non-audit services were in respect of reviewing the Group account’s consolidation and the annual review of the Statement of Risk Management and Internal Control. The role of the Audit Committee in relation to the external auditors is further set out on pages 32 to 34 of this Annual Report. PRINCIPLE 6. Recognise and Manage Risks Risk Management The Board of Directors is responsible for maintaining a sound system of internal control to provide reasonable assurance regarding the achievement of the Group’s objectives in ensuring effectiveness and efficiency of operation, reliability and transparency of financial information and compliance with laws and regulations. The Board recognises that reviewing the Group’s system of internal control is a continuing process, designed to manage rather that eliminate the risk of failure to achieve business objectives. Accordingly, the systems, processes and procedures being put in place are aimed at minimizing those risks and to provide reasonable but not absolute assurance against material misstatement, fraud and loss. The Audit Committee had also incorporated the discussion of potential business risks in its meeting agendas. The Statement of Risk Management and Internal Control as set out on pages 27 to 28 of this Annual Report provides an overview of the state of internal controls within the Group. Internal Audit Function The internal audit function within the Group has been outsourced to an independent professional firm. A summary of the work performed for the financial year ended 31 December 2018 is included in the Audit Committee Report on pages 32 to 34. PRINCIPLE 7. Ensure Timely and High Quality Disclosure Corporate Disclosure Policy The Company is committed to ensuring that all information that should be made publicly available such as financial results, corporate announcements, notices and circulars to shareholders are disseminated on a timely and accurate manner. The Company’s quarterly unaudited interim and full year audited financial results are released within the mandatory period as required by the Listing Requirements. The Board reviews and approves all quarterly financial results and other important announcements before they are released to the public. Such announcements of information including financial results, corporate developments, corporate changes and others are disseminated to the public using the BURSA LINK channel that is linked to the Bursa Malaysia Securities Berhad (“Bursa Malaysia”) website. The quarterly unaudited results are made available on the Company website as soon as it is announced on Bursa Malaysia. Use of Information Technology The Group maintains a website which serves as a forum for the general public to access general information on the Group, its products and any latest developments. The annual reports, quarterly financial results and annual audited accounts are also found on the website at www.techfast.com.my.



PRINCIPLE 8. Strengthen Relationship Between Company and Shareholders Shareholders and Investor Relations The Group values dialogue with investors as a means of effective communication that enables the Board to convey information about the Group’s performance, corporate strategy and other matters affecting shareholders’ interests. Such information is communicated through the Annual Report and the various disclosures and announcements to Bursa Malaysia Securities Berhad including quarterly and annual results. Care is taken to ensure that no market sensitive information such as corporate proposals, financial results and other material information is disseminated to any party without first making an official announcement through Bursa Malaysia Securities Berhad. Annual General Meeting (“AGM”) The AGM provides a vital and principal forum for dialogue with shareholders. At the AGM, shareholders are encouraged to participate in the question-and-answer session on the resolutions being proposed or to share viewpoints and acquire information on issues relevant to the business operation and deeper understanding of the financial performance of the Group in general. Copies of the Annual Report and Notice of the AGM are sent to all shareholders at least twenty-eight (28) days before the meeting. The Notice of the AGM is also published in widely circulated newspapers. Each item of special business included in the Notice of the meeting will be accompanied by an explanatory statement for the effects of a proposed resolution to facilitate full understanding and evaluation of issues involved. The results of all resolutions proposed at the AGM is then submitted to Bursa Malaysia Securities Berhad after the meeting day. Poll Voting At the last AGM of the Company, other than the resolutions pertaining to re-appointment and re-election of Directors, payment of dividends, payment of Directors’ fees, the re-appointment of external auditors, retention of Independent Director, authority to allot and issue shares and the renewal of share buy-back authority, there were no other resolutions that were put forth for shareholders’ approval. All resolutions were voted on by poll voting pursuant to Paragraph 8.31A of the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad, since the last AGM held in the year 2018. STATEMENT OF COMPLIANCE WITH BEST PRACTICES The Board has deliberated, reviewed and approved this Corporate Governance Overview Statement. The Board considers that this statement provides the information necessary to enable shareholders to evaluate how the MCCG 2017 was applied. The Board considers and is satisfied that the Company has fulfilled its obligation under the MCCG 2017, the ACE Market Listing Requirements and all applicable laws and regulations throughout the financial year ended 31 December 2018. This Statement is made in accordance with a resolution of the Board of Directors dated 2 April 2019. STATEMENT OF DIRECTORS’ RESPONSIBILITY IN RESPECT OF THE PREPARATION OF THE AUDITED FINANCIAL STATEMENTS The Directors are required to prepare audited Financial Statements that give a true and fair view of the state of affairs, including the cash flow and results, of the Company and the Group as at the end of each financial year. In preparing these Financial Statements, the Directors have considered the following: the Company and the Group have adopted appropriate accounting policies, and that these were

consistently applied; that reasonable and prudent judgments and estimates were made; that the approved accounting standards in Malaysia have been applied; and that the Financial Statements were prepared on a going concern basis.

The Directors are responsible for ensuring that the Company maintains proper accounting records which disclose with reasonable accuracy the financial position of the Company and the Group, and which enable them to ensure that the Financial Statements comply with the Companies Act, 2016. The Directors have the general responsibility for taking such steps that are reasonably available to them to safeguard the assets of the Company and the Group, and to prevent and detect fraud and other irregularities.

ANNUAL REPORT 2018

Statement of Risk Management and Internal Control

The Board of Directors is pleased to present the Statement of Risk Management and Internal Control of the Techfast Group of companies which outl ines the key elements of i ts r isk management framework for the year ended 31 December 2018. RESPONSIBILITY OF THE BOARD The Board of Directors acknowledges its responsibility for the Group’s system of internal control to cover the financial, compliance and operational controls of the Group. The Board also recognises its responsibility for reviewing the adequacy and integrity of the system of internal control to safeguard shareholders’ investments and the Group’s assets. The Board believes that its commitment to uphold the spirit of the internal control as compared to the mere compliance with the ACE Market Listing Requirements will cultivate the positive culture within the Group to prevent total corporate failure. However, it should be noted that there are limitations that inherently exist in any system of internal control as it is designed to manage rather than to eliminate the risk of failure to achieve business objectives. As such, it can only provide reasonable and not absolute assurance against material misstatement or loss regarding: (a) the safeguarding of assets against unauthorised use or disposition; and (b) the maintenance of proper accounting records and the reliability of financial information used within the

business or for publication. The Board has established an on-going process for identifying, evaluating and managing the significant risks faced by the Group and this process includes enhancing the system of internal controls when there are changes to the business environment of regulatory guidelines. Management assists the Board in implementation of the Board’s policies and procedures on risk and control by identifying and assessing the risks faced, and in the design, operation and monitoring of suitable internal controls to mitigate and control these risks. The Board is of the view that the system of internal controls in place for the financial year under review and up to the date of issuance of the Financial Statements is sound and sufficient to safeguard the shareholders’ investment, the interests of customers, regulators and employees and the Group’s assets. RISK MANAGEMENT FRAMEWORK The Executive Directors with the assistance of the senior management are continuously identifying, evaluating and managing significant business risks that affect the day-to-day operations of the Group. Management will conduct monthly meetings to identify and discuss issues that arise. The Audit Committee, on behalf of the Board, considers the effectiveness of the operation of the internal control procedures in the Group during the financial year. The Audit Committee reviews internal control issues identified by the outsourced internal auditors, external auditors and management. The Audit Committee then evaluates the adequacy and effectiveness of the Group’s risk management and internal control system. The principles that form the basis for the framework include the following: to safeguard people, asset, property and the environment; uphold our image and reputation; enhance effectiveness, efficiency and continuity of our business management;. encourage proactive rather than reactive management; provide a basis for strategic planning; ensure compliance with mandatory requirements and standards; provide assurance to stakeholders that risk identification and management of risks play a key role in the

delivery of our business objectives; ensure that there is adequate financial provision in the event of loss by having a structured risk financing

process. KEY ELEMENTS The Board is fully committed to ensuring that a proper and conducive control environment is maintained within the Group to govern the manner in which the Group and its employees conduct themselves. The key elements of the Group’s internal control system include the following: There is a clear organisational structure with well-defined lines of responsibility and delegation of authority

to ensure proper identification of accountabilities and segregation of duties which are communicated to all levels of the organization.

Policy guidelines, procedures and authority limits that have been established are continuously refined to cater for operational changes in order for Executive Directors and management within the Group to run the day to day operations.


Statement of Risk Management and Internal Control (cont’d) KEY ELEMENTS (CONT’D) There are standard operating policies and procedures which are set out and communicated to all levels of

the organisation. The Group Managing Director regularly updates the Board on industry trend, key customers and

performance of the Group. The Executive Directors maintain a “close-to-operations” attitude with managerial staff, which provides an

ideal platform for assessment and management of those identified risks in the business operations. For monitoring of financial performance, monthly management reporting and variance analysis identifies

any anomalies that required further investigation. Management meetings that are focused on financial performance, goals and strategies enforce accountability amongst staff.

Through delegation of job responsibilities to and constant communication with key management personnel who are responsible for the daily operations, the Executive Directors are able to make reasonable assessment about the operations of the Group.

The Company has a framework for recruitment activities to maintain a capable workforce. Ongoing training is conducted to enhance the skill and knowledge of the workforce, which aids in maintaining a risk conscious culture within the organisation.

Identification and Evaluation of Risks The internal audit function of the Group is outsourced to an external professional firm (“internal auditor”) whom reports directly to the Audit Committee. The internal auditor conducts its work independently of Management to assess the risk management quality of the Group’s operations. The internal auditor goes through a process of identifying the major auditable business processes in the day-to-day operations and then performing a corresponding identification and assessment of controls in those functions. The internal controls that are in place are assessed for adequacy and integrity. The process of evaluating the risks are done by walking through review of the major business processes, discussions with top management and key personnel as well as the review of various related records and documents supplemented with observations of current practices. Managing Identified Risks On a quarterly basis, the internal auditor would report to the Audit Committee its internal audit findings and recommendations to Management on the identified risk areas, where mitigating internal controls may require further improvements. The Audit Committee members are then able to keep tabs on any internal control issues that had been flagged for improvements and those that are in progress. The Audit Committee members monitor these identified risks and areas in the internal controls that need to be strengthened through the internal audit progress reports. CONCLUSION The Board is satisfied that for the financial year under review, there were no material losses, deficiencies or errors arising from any inadequacy or failure of the Group’s system of internal control that would require disclosure in the Annual Report of the Company. The Board and Management have sought regular assurance on the effectiveness and soundness of the internal control system through reviews conducted by the internal auditor. ASSURANCE PROVIDED BY THE EXECUTIVE CHAIRMAN AND GROUP MANAGING DIRECTOR The process for identifying, evaluating and managing risks as outlined in this Statement has been in place for the year under review and up to the date of approval of this statement. During the financial year ended 31 December 2018, a number of improvements to internal controls were put in place and implemented by Management. There have been no significant material internal control failures, which have resulted in material losses or contingencies. The Board has also received assurances from the Executive Chairman and Group Managing Director that the Group’s risk management and internal control system is operating adequately and effectively, in all material aspects, based on the risk management and internal control system of the Group. REVIEW OF THE STATEMENT BY EXTERNAL AUDITORS The external auditors have reviewed this Statement of Risk Management and Internal Control for inclusion in the Annual Report 2018. Based on their review, the external auditors have reported to the Board that nothing has come to their attention that had led them to believe that this Statement of Risk Management and Internal Control is inconsistent with their understanding of the process that the Board has adopted in the review of the adequacy and integrity of internal controls in the Group. The external auditors are satisfied that the Statement of Risk Management and Internal Controls appropriately reflects the processes that the Directors have adopted in ensuring the adequacy and integrity of the system of internal controls for the Group.

ANNUAL REPORT 2018

Sustainability Statement

ABOUT THE SUSTAINABILITY REPORT The subsidiary companies of Techfast are involved in the manufacturing sector and had identified four (4) elements which form its core sustainability efforts. They encompass community investment, environmental protection, growing the business and occupational health and safety.

1. COMMUNITY INVESTMENT The operations at Cape Technology Sdn Bhd (“Cape”) and Oriem Technology Sdn Bhd (“Oriem”) are founded by Mr. Lu Eng Shean, whose education background is in the areas of polymers. With that in mind, Mr. Lu Eng Shean, the Managing Director of both Cape and Oriem, believes in cultivating development in the field of polymers and expanding the career options for those who are pursuing polymer engineering as a field of study. In this regard, Cape and Oriem have hosted students from Universiti Sains Malaysia (USM), Universiti Malaysia Perlis (UniMAP), Universiti Malaysia Sabah (UMS) and Tunku Abdul Rahman University College to intern at their offices. Besides that, the companies have established an education foundation. Rewards will be given to employees’ children who get academic achievement in school and government examinations. Cape and Oriem also give subsidy for employees’ children who study in primary and secondary school to buy books and stationeries before school opening. Cape and Oriem also contribute regularly towards the community by providing monetary donations to such events like I Love BM Run; Elaine Kang Charity Concert for building Tzu Chi International School; and Ukulele Charity Show for helping orphans or abandoned children. We love our nature too. Cape and Oriem have sponsored for World Oceans Day; as well as sponsored for coral bud planting project at Pulau Payar Marine Park to improve the ecology of the marine park and create awareness to the public on the importance of preserving the coral reefs. We hope to have a healthier nature for our next generations. Techfast Precision Sdn Bhd (“TPSB”) also makes various donations to none profit and charitable organisations to give back to the community. 2. ENVIRONMENTAL PROTECTION The subsidiaries have put in place certain environmental practices that are aimed at minimising any adverse impact to the environment. Environmental practices are guided by legal requirements as mandated by the regulatory bodies and these practices are incorporated into the operational level processes. All of our standard operating procedures are designed to complement and comply with the guidelines and regulations set out by the Department of Environment. At TPSB, there are two committees set up to implement and execute the enviromental policy of the Company. There is the Environmental Regulatory Compliance Monitoring Committee (“ERCMC”) and the Environmental Performance Monitoring Committee (“EPMC”). Through these working committees, there are five (5) types of registered waste that have been identified and registered with the Department of Environment. The following table depicts the type of scheduled waste and the activities where they are generated:


Sustainability Statement (cont’d)

2. ENVIRONMENTAL PROTECTION (CONT’D)

SCHEDULED WASTE SOURCE OF WASTE GENERATED FROM

Waste oil Machine maintenance Oily residue Cleaning activities Contaminated dust Dust from cleaning activities Contaminated container Machine maintenance and cleaning activities Contaminated rags and gloves Machine maintenance and cleaning activities

TPSB has a in place a scheduled waste management infrastructure that enables their operations to reduce environmental impacts. Emphasis is placed on managing and segregating scheduled waste in contained areas. Similarly, Cape and Oriem also monitor and report on the quantity of registered scheduled waste. As scheduled waste is comprised of scrap from the production process, Management monitors the level of scrap for its environmental impact and to reduce cost to the Company. In this case, levels of waste is measured against the total raw materials input used for production. Total waste levels has always fell below the target as set by Management. Typical waste that is a by-product of the production process are comprised of rubber waste, solvent and epoxy waste, used machine oil, empty chemical drums and contaminated clothes and gloves. 3. GROWING THE BUSINESS We believe in a customer satisfaction led business that guides us to deliver positive economic impact to our customers in our product and service offerings. We believe that being customer focused will ultimately support the company’s mission in pursuing profit and business growth. Management embraces this fully and incorporates detailed discussions of problems and brainstorms resolutions to customer issues during our quarterly management review meetings. Customer complaints are logged and discussed for any value added insights that may be used as improvements to the way our business is conducted. On the same note, in order to achieve customer satisfaction, the subsidiary companies places importance on managing a tight supply chain. This means that it has a secure database of suppliers who can supply raw materials that are of similar quality to what is currently in the production process. We have second sourcing initiatives that aim to lock in suitable suppliers 4. OCCUPATIONAL HEALTH AND SAFETY The Group takes pride in providing a safe and healthy working environment for our employees, as well as our customers, suppliers and contractors. We believe that a safe and healthy working environment will contribute significantly towards a more productive workforce. With a health and safety measures and policies in place, the Group aims to instil a sense of confidence in the work environment at Techfast. The Managements aims to have employees who are confident in carrying out their tasks and responsibilities. At TPSB, there are emergency response plans that include steps to respond to fire emergencies, activate emergency evacuation and first aid. At Cape and Oriem, occupational health and safety is a key component in their operations because the manufacturing process involve the use of chemicals ingredients. Overall, the operations are set up in accordance with the regulations and requirements of the Department of Safety and Health (“DOHS”). Cape and Oriem had always complied with all requirements. There is an Employee Safety Committee that is managed by a Safety Officer. The committee is comprised of members from the management team and staff. The Committee’s activities include the monitoring and discussion on the following but is not the exhaustive list of activities: Monitoring of personal chemical exposure in the production area. These include the monitoring of inhaleable

particulate at different areas of the production space. Every 2 years, DOHS will check on the level of inhaleable particulate and then provide recommendations on suitable personal protective equipment.

Monitoring of chemical exposure via Chemical Health Risk Assessments which is done every 5 years or upon

the addition of a new compound in the production process.

ANNUAL REPORT 2018

Sustainability Statement (cont’d)

4. OCCUPATIONAL HEALTH AND SAFETY (CONT’D) Ensure that all chemical containers are properly classified, packaged and label in accordance with DOSH

requirement. For example, some chemicals are labeled irritants, some are corrosive and maybe some are oxidisers. DOSH specifies that these are to be accurately labeled for occupational safety.

Cape and Oriem also monitor particulate and levels of ammonia that are emitted into the air. Clean air regulation states that for particulate matters, 150mg/m3 is the limit, where else at Cape and Oriem, particulate emission is less than 0.1520mg/ m3. For ammonia emission, clean air regulation has a limit of 30mg/m3 and it is less than 0.7598mg/m3 at Cape and Oriem.

At Cape and Oriem, the personal noise exposure and air compressor pressure is also monitored to ensure

the safety of its employees. Other than that, the Safety Committee also keeps track on fire drill activities and ensuring that first aiders are

up to date with training. So far, Cape and Oriem have a zero occupational health and safety related accidents on record and its products are RoHS-compliant. RoHS stands for Restriction of Hazardous Substances and it impacts the entire electronics industry and many electrical products as well. RoHS specifies maximum levels of hazardous substances that are allowed, which include heavy metals like cadmium, plumbum, mercury and chromium, all of which Cape and Oriem have complied with. Additionally, Cape and Oriem also abides by the requirements of REACH which stands for Registration, Evaluation, Authorisation and Restriction of Chemicals and established under the European Chemicals Agency. REACH aims to improve the protection of human health and the environment through the better and earlier identification of the intrinsic properties of chemical substances. It also calls for the progressive substitution of the most dangerous chemicals (referred to as “chemicals of very high concern”) when suitable alternatives have been identified. In this regard, Cape and Oriem’s products are compliant with REACH requirements.


Audit Committee Report

The Audit Committee was established on 31 March 2005. The Board of Directors is pleased to present the report of the Audit Committee for the f inancial year ended 31 December 2018. 1. MEMBERS

The Audit Committee comprises the following members:- Lai Hui Yeen* (Chairperson, Independent Non-Executive Director) Datuk Chan Chong Choon (Independent Non-Executive Director) Aun Ah Thim (Independent Non-Executive Director) Khor Joe Ann+ (Independent Non-Executive Director) *Appointed as member wef 18 October 2018, re-designated as Chairperson on 26 November 2018) + Appointed wef 18 October 2018 Lai Hui Yeen is a member of the Malaysian Institute of Accountants.

2. NUMBER OF MEETINGS AND DETAILS OF ATTENDANCE During the financial year ended 31 December 2018, five (5) Audit Committee meetings were held. The number of meetings attended by the Committee members is as follows:

Members Audit Committee Meetings

Held Attended % of

Attendance Aun Ah Thim 5 5 100% Datuk Chan Chong Choon 5 4 80% Lai Hui Yeen+ 1 1 100% Khor Joe Ann+ 1 1 100%

+ Appointed wef 18 October 2018 The meetings were appropriately structured through the use of agendas, which were distributed to members with sufficient notice period. The Company Secretary was in attendance as secretary of the Committee in all meetings. The Senior Accounts Executive also attended meetings upon invitation, where appropriate.

3. SUMMARY OF ACTIVITIES AND WORK OF THE AUDIT COMMITTEE The Terms of Reference of the Audit Committee which laid down its duties and responsibilities is accessible via the Company’s website at www.techfast.com.my.

During the financial year ended 31 December 2018, the activities and work of the Audit Committee included the following: Financial Report ing The Audit Committee reviews quarterly Financial Statements and any draft announcements pertaining thereto and makes recommendations to the Board for approval of the same. The following quarterly and full year Financial Statements were reviewed by the Committee during the Audit Committee meetings held during the financial year ended 31 December 2018: Date of Meetings Review of Quarterly and Full Year Financial Statements 27 February 2018 Review financial results for the fourth quarter ended 31 December 2017 5 April 2018 Review of audited financial results for the financial year ended 31 December 2018 25 May 2018 Review of financial results for the first quarter ended 31 March 2018 28 August 2018 Review of financial results for the second quarter ended 30 June 2018 26 November 2018 Review of financial results for the third quarter ended 30 September 2018

ANNUAL REPORT 2018

Audit Committee Report (cont’d)

3. SUMMARY OF ACTIVITIES AND WORK OF THE AUDIT COMMITTEE (CONT’D) Financial Report ing (cont’d) The Committee reviewed the quarterly reports of the Group and accompanying notes to make recommendation to the Board for approval and release of the Group’s result to Bursa Malaysia Securities Berhad. The Audit Committee reviews the quarterly Financial Statements and disclosures to ensure that they present a true and fair view of the Group’s financial position and performance and for compliance with the Malaysian Financial Reporting Standard (“MFRS”) 134 – Interim Financial Reporting Standards in Malaysia and International Accounting Standards (“IAS”) 34 – Interim Financial Reporting as well as applicable disclosure provisions of the Listing Requirements of Bursa Malaysia Securities Berhad. In reviewing the financial performance, the Committee is presented with a variance analysis of the financial performance of the Group for the quarter and for the year-to-date period. This variance analysis is prepared for each subsidiary company and the review is undertaken with the main executive personnel in-charge of the Finance function during the Audit Committee meeting. Commentary on material variances for each major line item in the statement of financial performance and statement of financial position are reviewed by the Audit Committee members. During the year, the Audit Committee also reviewed the expected credit loss matrix that was prepared by Management in accordance with MFRS 9 – Financial Instruments. The Committee reviewed and made recommendations to the Board in respect of the audited Financial Statements of the Company and of the Group for the financial year ended 31 December 2018 at its meeting held on 2 April 2019. At the same meeting, the Committee members were also briefed on the audit findings from the final year end audit for the financial year ended 31 December 2018. External Audit Prior to the commencement of the audit, the Audit Committee discussed with the external auditors the nature and scope of the audit, including the evaluation of the system of internal controls and audit reports. The Audit Committee also deliberated on the external auditors’ reports and recommendations regarding any key audit matters and issues following the year-end statutory audit. Any recommendations for improvements to significant risk areas, internal controls and financial matters based on their observations were duly noted. During the Audit Committee meeting held on 2 April 2019, the Audit Committee members evaluated the performance of the external auditors and assessed their independence. The Audit Committee then, being satisfied with the suitability and independence of Messrs. Tai Yapp & Co as external auditors, recommended the external auditors for re-appointment and their remuneration to be determined by the Board. Internal Audit During the financial year ended 31 December 2018, the Audit Committee reviewed and approved the annual Internal Audit Plan for the financial year ended 31 December 2018 proposed by the internal auditor to ensure the adequacy of scope and coverage of works. Included in their scope of works was the assessment of any risk management issues and internal controls. The Audit Committee reviewed the internal audit programme and results of the internal audits on a quarterly basis. The internal auditor would present the findings and recommendations for improvements to the Audit Committee members, and the Audit Committee would take note of responses from Management with regards to the recommendations. The internal audit would also follow up on outstanding issues in the Internal Audit Progress Report that is presented to the Audit Committee members. In line with the corporate governance best practices, the Audit Committee assessed and reviewed the performance of the Internal Audit function and reviewed the effectiveness of the audit process.


Audit Committee Report (cont’d)

4. SUMMARY OF WORK OF THE INTERNAL AUDIT FUNCTION The internal audit function within the Group has been outsourced to an independent professional firm, namely Kloo Point Risk Management Services Sdn Bhd (“Kloo Point”), for the financial year ended 31 December 2018. In order to maintain their independence from Management, the independent professional firm reports directly to the Audit Committee. The professional firm is an independent third party firm, that is free from any relationships or conflicts of interest which could impair their objectivity and independence in the conduct of their work. Typically, each Internal Audit (“IA”) assignment is led by a senior staff in charge of the engagement, who reports to the Executive Director from Kloo Point. The internal audit review is staffed by 3 internal audit personnel, including the one senior staff as mentioned. The main client representative, who is an Executive Director of Kloo Point, posseses the following qualifications: Fellow member of the Association of the Chartered Certified Accountants, United Kingdom (FCCA); Chartered Accountant, Malaysian Institute of Accountants (CA); Certified Internal Auditor, United States of America (CIA); and Chartered Member of the Institute of Internal Auditors Malaysia (CMIIA).

The Executive Director from Kloo Point attends the Audit Committee meetings on a quarterly basis to report the internal audit work performed and internal audit findings. In doing so, the professional firm assists the Board in monitoring the risks through their review of the internal controls within the operations of the Group to ensure that a sound system of internal control is established and continues to function effectively and satisfactorily, while taking into consideration the practicality of such control mechanisms being in place. The internal auditors has adopted the International Professional Practices Framework set by the Institute of Internal Auditors (“IIA”). Kloo Point ensures that their staff are professional guided and trained to develop appropriate competencies to perform their duties during the internal audit review. The audit approach involved the identification of existing controls and assessment of the controls against “best practice” to determine the adequacy and effectiveness of the controls. It involved walkthrough reviews of its major operations, discussions held with top management and key personnel as well as a review of the various related records and documents supplemented with an observation of its current practices. The following activities were carried out by the Kloo Point during the year: Identification of risk areas in relation to the process area; Assessment of existing controls in place; Identification of control weaknesses, if any; Identification of related risks left uncontrolled; and Highlighting the need for improvements.

In the course of conducting the internal audit work during the financial year ended 31 December 2018, the independent professional firm covered the following auditable activities: Production and quality control; Inventory receiving and storage procedures; Sales order processing and billing procedures; and Product costing.

The total cost incurred for the internal audit function of the Group for 2018 is RM40,000 (2017: RM40,000).

ANNUAL REPORT 2018

Additional Compliance Information

In compliance with the Bursa Malaysia Securit ies Berhad List ing Requirements, the fol lowing addit ional compliance information is provided: 1. NON-AUDIT FEES

During the financial year, the amount of 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: Group Company

2018 2017 2018 2017 RM RM RM RM Audit Fees 69,000 65,000 17,000 13,000Non-Audit Fees 26,000 29,000 26,000 29,000

95,000 94,000 43,000 42,000

2. MATERIAL CONTRACT INVOLVING DIRECTORS AND SUBSTANTIAL SHAREHOLDERS

The Company and its subsidiary companies did not enter into any material contracts outside the ordinary course of business in the last two years preceding the date of this Annual Report.

3. RECURRENT RELATED PARTY TRANSACTIONS (“RRPT”) OF REVENUE NATURE

There was no shareholders’ mandate obtained in respect of RRPT of a revenue or trading nature that was entered into by the Group during the financial year ended 31 December 2018.

4. UTILISATION OF PROCEEDS

There were no proceeds were raised by the Company from any corporate proposal during the financial year ended 31 December 2018.


FINANCIAL STATEMENTS

37 - 40

d i rectors ’ repor t

41

consol idated s tatement of f inancia l pos i t ion

42

statement of f inancia l pos i t ion

43

consol idated s tatement of prof i t or loss and

other comprehensive income

44

s tatement of prof i t or loss and

other comprehensive income

45

consol idated s tatement of

changes in equi ty

46

s tatement of changes in equi ty

47 - 48

consol idated s tatement of cash f lows

49

s tatement of cash f lows

50 - 91

notes to f inancia l

s ta tements

92

s tatement by d i rectors

92

s tatutory dec larat ion

93 - 96

independent audi tors ’ repor t

ANNUAL REPORT 2018

Directors’ Report for the financial year ended 31 December 2018

The Directors present their report and the audited Financial Statements of the Group and of the Company for the financial year ended 31 December 2018. PRINCIPAL ACTIVITIES The principal activities of the Company are that of investment holding and provision of management services. The principal activities of the subsidiary companies are disclosed in Note 7 to the Financial Statements. There have been no significant changes in the nature of these principal activities during the financial year. FINANCIAL RESULTS Group Company RM RM

Profit for the year 3,979,888 3,072,123 The results of the operations of the Group and of the Company for the financial year were not, in the opinion of the Directors, substantially affected by any item, transaction or event of a material and unusual nature. DIVIDENDS Since the end of the previous financial year, the Company paid the following dividends: (i) Final single tier dividend of 0.5 sen per share amounting to RM1,140,740 in respect of the financial year

ended 31 December 2017 and subsequently paid on 18 June 2018.

(ii) Interim single tier dividend of 0.5 sen per share amounting to RM1,140,740 in respect of the financial year ended 31 December 2018 and paid on 27 September 2018.

The Directors proposed a final single tier dividend of 0.5 sen per share amounting to RM1,140,740 in respect of the financial year ended 31 December 2018, to be approved at the forthcoming Annual General Meeting RESERVES AND PROVISIONS There were no material transfers to or from reserves or provisions during the financial year other than as disclosed in the Financial Statements. ISSUE OF SHARES AND DEBENTURES During the year, no issue of shares was made by the Company. SHARE OPTION No option was granted to any person to take up unissued shares of the Company during the financial year. INDEMNIFYING DIRECTORS, OFFICERS OR AUDITORS No indemnities have been given or insurance premium paid, during or since the end of the financial year for any person who is or has been the directors, officers or auditors of the Group and of the Company.


Directors’ Report for the financial year ended 31 December 2018 (cont’d)

DIRECTORS The Directors who served during the financial year until the date of the this report are: Directors of the Company Lim Tock Ooi Yap Yoon Sing Aun Ah Thim Datuk Chan Chong Choon Khor Joe Ann - Appointed on : 18.10.2018 Lai Hui Yeen - Appointed on : 18.10.2018 Yap Kok Ching - Resigned on : 26.11.2018 Directors of the subsidiaries Lu Eng Shean Lim Tock Ooi Yap Yoon Sing In accordance with Article 74 of the Company’s Constitution, Yap Yoon Sing retires by rotation and, being eligible, offers himself for re-election at the forthcoming Annual General Meeting of the Company. Khor Joe Ann and Lai Hui Yeen retire in accordance with Article 81 of the Company’s Constitution and, being eligible, offer themselves for re-election at the forthcoming Annual General Meeting of the Company. DIRECTORS’ INTEREST The shareholdings in the Company of those who were Directors as at the end of the financial year, as recorded in the Register of Directors' Shareholdings kept by the Company are as follows:

Number of Ordinary Shares

Direct interest As at

1.1.2018 Bought (Sold) As at

31.12.2018 Aun Ah Thim 66,666 - - 66,666Datuk Chan Chong Choon 8,800 - - 8,800 Number of Ordinary Shares Indirect interest in shares of the holding company

As at 1.1.2018 Bought (Sold)

As at31.12.2018

Yap Yoon Sing 37,565,309 - - 37,565,309Lim Tock Ooi 31,185,184 - - 31,185,184 DIRECTORS’ BENEFITS Since the end of the previous financial year, no Director has received or become entitled to receive any benefit (other than those fees and other benefits included in the aggregate amount of remuneration received or due and receivable by the Directors as shown in the Financial Statements or the fixed salary of a full-time employee of the Company) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which he is a member, or with a company in which the Director has a substantial financial interest other than any benefits which may be deemed to have arisen from the transactions entered into in the ordinary course of business with a firm and a company in which the Directors have substantial interest as disclosed in Note 22 and Note 26 to the Financial Statements. During and at the end of the financial year, no arrangements subsisted to which the Company is a party whose object is to enable the Directors to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

ANNUAL REPORT 2018


OTHER STATUTORY INFORMATION (a) Before the statements of profit or loss and other comprehensive income and statements of financial

position of the Group and of the Company were made out, the Directors took reasonable steps:

(i) to ascertain that proper action has been taken in relation to the writing off of bad debts and the making of allowance for impairment of receivables and satisfied themselves that all known bad debts had been written off and that adequate allowance had been made for doubtful debts;

(ii) to ensure that any current assets which were unlikely to realise their value as shown in the accounting records in the ordinary course of business have been written down to an amount which they might be expected so to realise.

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

(i) the amount written off for bad debts or the amount of the allowance for impairment of receivables in the Group and the Company inadequate to any substantial extent;

(ii) the values attributed to current assets in the Financial Statements of the Group and of the Company misleading.

(c) At the date of this report, the Directors are not aware of any circumstances 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.

(d) At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this

report or Financial Statements of the Group and of the Company which would render any amount stated in the Financial Statements misleading.

(e) As at the date of this report there does not exist:

(i) any charge on the assets of the Group or of the Company which has arisen since the end of the financial year which secures the liabilities of any other person; or

(ii) any contingent liability in respect of the Group or of the Company which has arisen since the end of the financial year.

(f) In the opinion of the Directors:

(i) no contingent liability or other liabilities has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which will or may affect the ability of the Group or of the Company to meet their obligations when they fall due; and

(ii) no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of the operations of the Group or of the Company for the financial year in which this report is made.

SUBSIDIARY COMPANIES Details of the Company’s subsidiaries are disclosed in Note 7 to the Financial Statements. DIRECTORS’ REMUNERATION Details of directors’ remuneration are set out in Note 22 to the Financial Statements. AUDITORS’ REMUNERATION Details of auditors’ remuneration are set out in Note 22 to the Financial Statements.



AUDITORS The auditors, Tai, Yapp & Co., have expressed their willingness to continue in office. Signed on behalf of the Board in accordance with a resolution of the Directors. YAP YOON SING LIM TOCK OOI Kuala Lumpur Dated: 2 April 2019

ANNUAL REPORT 2018

Consolidated Statement of Financial Position as at 31 December 2018

2018 2017 Note RM RM

ASSETS

Non-current assets

Property, plant and equipment 5 8,141,872 8,316,852

Goodwill on consolidation 6 1,109,776 1,109,776

Other investment 8 62,000 62,000

9,313,648 9,488,628

Current assets

Inventories 9 3,602,620 3,445,603

Trade receivables 10 6,893,295 6,288,716

Other receivables, deposits and prepayments 11 404,316 525,064

Tax recoverable - 58,910

Deposits with licensed banks 12 4,165,882 3,032,826

Short term investment 13 3,752,059 4,071,805

Cash and bank balances 14 2,850,140 2,542,798

21,668,312 19,965,722

TOTAL ASSETS 30,981,960 29,454,350

EQUITY AND LIABILITIES

Equity

Share capital 15 29,945,837 29,945,837

Reserves 16 (3,692,089) (5,390,497)

Total equity 26,253,748 24,555,340

Non-current l iabi l i t ies

Finance lease liabilities 17 419,731 621,336

Deferred taxation 18 501,897 456,800

921,628 1,078,136

Current l iabi l i t ies

Trade payables 19 1,125,952 1,397,023

Other payables and accruals 20 2,430,049 2,161,091

Finance lease liabilities 17 201,605 192,403

Current tax payable 48,978 70,357

3,806,584 3,820,874

Total l iabi l i t ies 4,728,212 4,899,010

TOTAL EQUITY AND LIABILITIES 30,981,960 29,454,350

The accompanying Notes form an integral part of the Financial Statements.


Statement of Financial Position as at 31 December 2018


ASSETS

Non-current assets

Property, plant and equipment 5 2,836 3,625

Investment in subsidiary companies 7 32,463,377 32,463,377

Other investment 8 62,000 62,000

32,528,213 32,529,002

Current assets

Other receivables 11 3,000 3,000

Short term investment 13 3,752,059 3,742,696

Cash and bank balances 14 991,019 89,541

4,746,078 3,835,237

TOTAL ASSETS 37,274,291 36,364,239

EQUITY AND LIABILITIES

Equity

Share capital 15 29,945,837 29,945,837

Reserves 16 6,734,080 5,943,437

Total equity 36,679,917 35,889,274

Current l iabi l i ty

Other payables and accruals 20 594,374 474,965

TOTAL EQUITY AND LIABILITIES 37,274,291 36,364,239


ANNUAL REPORT 2018

Consolidated Statement of Profit or Loss and Other Comprehensive Income for the financial year ended 31 December 2018


Revenue 21 30,421,458 26,783,529

Cost of sales (16,588,831) (13,985,577)

Gross profit 13,832,627 12,797,952

Other income 410,744 639,078

Selling and distribution expenses (1,666,234) (1,425,894)

Administrative expenses (4,766,440) (4,389,027)

Other expenses (2,185,907) (2,505,772)

Profit from operations 5,624,790 5,116,337

Finance costs (31,997) (37,640)

Profi t before taxation 22 5,592,793 5,078,697

Taxation 23 (1,612,905) (1,407,529)

Profi t for the year 3,979,888 3,671,168

Other comprehensive income - -

Total comprehensive income for the year 3,979,888 3,671,168

Profi t for the year attr ibutable to:

Owners of the Company 3,979,888 3,526,507

Non-controlling interest - 144,661


Total comprehensive income for the year attr ibutable to:

Owners of the Company 3,979,888 3,526,507

Non-controlling interest - 144,661


Earnings per ordinary share (sen) - Basic 24 1.74 1.56

Dividend per ordinary share (sen) 25 1.00 1.00



Statement of Profit or Loss and Other Comprehensive Income for the financial year ended 31 December 2018


Revenue 21 5,260,996 5,487,754

Administrative expenses (1,830,163) (1,681,304)

Other expenses (358,710) (351,300)

Profi t before taxation 22 3,072,123 3,455,150

Taxation 23 - -


Other comprehensive income - -


Dividend per ordinary share (sen) 25 1.00 1.00


ANNUAL REPORT 2018

Consolidated Statement of Changes in Equity for the financial year ended 31 December 2018

Attr ibutable to owners of the Company

Non-Distr i-

butable

Distr i-

butable

Share

Capital Treasury

SharesShare

PremiumOther

Reserve

Accumu-lated

Losses Total

Non- Control l ing

Interest Total

Equity

Note RM RM RM RM RM RM RM RM

Balance at 1 January 2017

17,111,180 (506,525) 11,269,920 - (4,881,431) 22,993,144 1,102,328 24,095,472

Dividend paid to non-controlling interest

- - - - - - (370,010) (370,010)

Dilution from transaction with non-controlling interest

- - - - (2,334,418) (2,334,418) (876,979) (3,211,397)

Profit for the year - - - - 3,526,507 3,526,507 144,661 3,671,168

Total comprehensive income for the year

- - - - 3,526,507 3,526,507 144,661 3,671,168

Bonus issue 15 5,703,668 - (3,970,538) (1,733,130) - - - -

Expenses related to bonus issue

- - (168,393) - - (168,393) - (168,393)

Resale of treasury shares

- 506,525 - 1,733,130 - 2,239,655 - 2,239,655

Dividend paid to owners of the Company

25 - - - - (1,701,155) (1,701,155) - (1,701,155)

Total transactions with owners

5,703,668 506,525 (4,138,931) - (1,701,155) 370,107 - 370,107

Effect of implementation of Companies Act 2016

16 7,130,989 - (7,130,989) - - - - -

Balance at 31 December 2017

29,945,837 - - - (5,390,497) 24,555,340 - 24,555,340

Profit for the year - - - - 3,979,888 3,979,888 - 3,979,888


- - - - 3,979,888 3,979,888 - 3,979,888

Dividend paid to owners of the Company

25 - - - - (2,281,480) (2,281,480) - (2,281,480)

Total transactions with owners

- - - - (2,281,480) (2,281,480) - (2,281,480)


29,945,837 - - - (3,692,089) 26,253,748 - 26,253,748



Statement of Changes in Equity for the financial year ended 31 December 2018

Attr ibutable to Owners of the Company

Non-Distr ibu-

table

Distr ibu-

table

Share Capital

Treasury Shares

Share Premium

Other Reserve

Retained Profi ts

Total Equity

Note RM RM RM RM RM RM

Balance at 1 January 2017

17,111,180 (506,525) 11,269,920 - 4,189,442 32,064,017

Profit for the year - - - - 3,455,150 3,455,150


- - - - 3,455,150 3,455,150

Bonus issue 15 5,703,668 - (3,970,538) (1,733,130) - -

Expenses related to bonus issue - - (168,393) - - (168,393)

Resale of treasury shares - 506,525 - 1,733,130 - 2,239,655

Dividend paid to owners of the Company 25 - - - - (1,701,155) (1,701,155)

Total transactions with owners 5,703,668 506,525 (4,138,931) - (1,701,155) 370,107

Effect of implementation of Companies Act 2016 16 7,130,989 - (7,130,989) - - -


29,945,837 - - - 5,943,437 35,889,274

Profit for the year - - - - 3,072,123 3,072,123


- - - - 3,072,123 3,072,123

Dividend paid to owners of the Company 25 - - - - (2,281,480) (2,281,480)

Total transactions with owners - - - - (2,281,480) (2,281,480)


29,945,837 - - - 6,734,080 36,679,917


ANNUAL REPORT 2018

Consolidated Statement of Cash Flows for the financial year ended 31 December 2018


CASH FLOWS FROM OPERATING ACTIVITIES

Profit before taxation 5,592,793 5,078,697

Adjustments for:

Allowance for impairment of receivables written back - (28,013)

Allowance for impairment of receivables - 7,020

Depreciation of property, plant and equipment 812,323 686,976

Interest expense 31,997 37,640

Unrealised loss on foreign exchange 26,997 51,621

Property, plant and equipment written off 3,413 18

Gain on disposal of property, plant and equipment (15,578) (149)

Income from short term investment (1,200) (36,199)

Interest income (110,475) (101,360)

Operating profit before working capital changes 6,340,270 5,696,251

Increase in inventories (157,017) (855,262)

Increase in trade and other receivables (554,557) (635,555)

Increase in trade and other payables 1,866 81,513

Cash generated from operations 5,630,562 4,286,947

Tax refunded 8,660 43,005

Tax paid (1,538,937) (1,492,008)

Net cash provided by operating activities 4,100,285 2,837,944

CASH FLOWS FROM INVESTING ACTIVITIES

Interest received 110,475 101,360

Short term investment income received 1,200 36,199

Proceeds from disposal of property, plant and equipment 15,578 150

Purchase of property, plant and equipment (b) (640,756) (993,209)

Acquisition of non-controlling interest - (3,211,397)

Purchase of club membership - (62,000)

Upliftment of fixed deposits 660,000 -

Placement of fixed deposits (541,981) (661,921)

Net cash used in investing activities (395,484) (4,790,818)



Consolidated Statement of Cash Flows for the financial year ended 31 December 2018 (cont’d)

2018 2017 RM RM

CASH FLOWS FROM FINANCING ACTIVITIES

Payment of finance lease interests (31,997) (37,640)

Proceeds from resale of treasury shares - 2,239,655

Repayment of finance lease liabilities (192,403) (201,418)

Bonus issue expenses - (168,393)

Dividend paid (2,281,480) (1,701,155)

Dividend paid to non-controlling interest - (370,010)

Net cash used in financing activities (2,505,880) (238,961)

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS

1,198,921 (2,191,835)

EFFECTS OF FOREIGN EXCHANGE RATE CHANGES 39,750 86,570

CASH AND CASH EQUIVALENTS BROUGHT FORWARD 8,923,528 11,028,793

CASH AND CASH EQUIVALENTS CARRIED FORWARD

10,162,199 8,923,528

Note:

(a) Cash and cash equivalents:

Deposits with licensed banks (Note 12) 4,165,882 3,032,826

Short term investment (Note 13) 3,752,059 4,071,805

Cash and bank balances (Note 14) 2,850,140 2,542,798

10,768,081 9,647,429

Deposits pledged to a licensed bank (Note 12) (65,882) (63,901)

Deposits with maturity period of more than three months (540,000) (660,000)

10,162,199 8,923,528

(b) Purchase of property, plant and equipment

During the financial year, the Group acquired property, plant and equipment with an aggregate cost of RM640,756 (2017: RM1,368,209) of which Nil (2017: RM375,000) was acquired by means of finance lease. Cash payment of RM640,756 (2017: RM993,209) were made to purchase property, plant and equipment.


ANNUAL REPORT 2018

Statement of Cash Flows for the financial year ended 31 December 2018

2018 2017 RM RM

CASH FLOWS FROM OPERATING ACTIVITES

Profit before taxation 3,072,123 3,455,150

Adjustment for:

Depreciation of property, plant and equipment 789 1,101

Operating profit before working capital changes 3,072,912 3,456,251

Increase in receivables - (2,000)

Increase/(Decrease) in payables 119,409 (3,475)

Net cash provided by operating activities 3,192,321 3,450,776

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of additional shares in subsidiary companies - (3,211,397)

Purchase of property, plant and equipment - (3,215)

Purchase of club membership - (62,000)

Net cash used in investing activities - (3,276,612)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from resale of treasury shares - 2,239,655

Bonus issue expenses - (168,393)

Dividends paid (2,281,480) (1,701,155)

Net cash (used in)/provided by financing activities (2,281,480) 370,107

NET INCREASE IN CASH AND CASH EQUIVALENTS

910,841 544,271

CASH AND CASH EQUIVALENTS BROUGHT FORWARD

3,832,237 3,287,966

CASH AND CASH EQUIVALENTS CARRIED FORWARD

4,743,078 3,832,237

Note:

Cash and cash equivalents:

Short term investment (Note 13) 3,752,059 3,742,696

Cash and bank balances (Note 14) 991,019 89,541

4,743,078 3,832,237



1. GENERAL INFORMATION

The Company is a public limited liability company incorporated and domiciled in Malaysia. It is listed on the ACE Market of Bursa Malaysia Securities Berhad. The Company’s registered office is at Suites 7.21 & 7.22, 7th Floor, Imbi Plaza, Jalan Imbi, 55100 Kuala Lumpur. The Company’s principal place of business is at No. 11, Jalan Pasaran 23/5, Seksyen 23, 40300 Shah Alam, Selangor Darul Ehsan. The Financial Statements were authorised for issue by the Board of Directors on 2 April 2019.

2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS 2.1 Statement of Compliance

The Financial Statements of the Group and of the Company have been prepared in accordance with Malaysian Financial Reporting Standards (MFRS), International Financial Reporting Standards (IFRS) and the requirements of the Companies Act 2016 in Malaysia. The Group and the Company had adopted the following amendments/improvements to MFRS mandatory for the current financial year: Descript ion Effective for annual

periods beginning on or after

MFRS 9 Financial Instruments (IFRS 9 issued by IASB in July 2014) 1 January 2018 MFRS 15 Revenue from Contracts with Customers 1 January 2018 Annual Improvements to MFRS Standards 2014 – 2016 Cycle 1 January 2018 Amendments to MFRS 2 – Classification and Measurement 1 January 2018 of Share – based Payment Transactions Amendments to MFRS 15 – Clarifications to MFRS 15 1 January 2018 Amendments to MFRS 140 – Transfers of Investment Property 1 January 2018 Amendments to MFRS 4 – Applying MFRS 9 Financial 1 January 2018 Instruments with MFRS 4 Insurance Contracts IC Interpretation 22 – Foreign Currency Transactions and 1 January 2018 Advance Consideration (a) MFRS 9 Financial Instruments

For the purpose of subsequent measurement, the Group classifies financial assets into three measurement categories, namely : (i) financial assets at amortised cost; (ii) financial assets at fair value through other comprehensive income and (iii) financial assets at fair value through profit or loss. The classification is based on the Group’s business model objective for managing the financial assets and the contractual cash flow characteristics of the financial instruments. After initial recognition, the Group measures financial assets, as follows: (i) Financial Assets at Amortised Cost (AC) – A financial asset is measured at amortised

cost if: (a) it is held within the Group’s business objective to hold the asset only to collect contractual cash flows, and (b) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest in principal outstanding.

(ii) Financial Assets at Fair Value through Other Comprehensive Income (FVOCI) – A

financial asset is measured at FVOCI if: (a) it is held within the Group’s business objective to hold the asset both to collect contractual cash flows and selling the financial asset, and (b) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest in principal outstanding.

31 December 2018

Notes to the Financial Statements

ANNUAL REPORT 2018

Notes to the Financial Statements 31 December 2018 (cont’d)

2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONT’D) 2.1 Statement of Compliance (cont’d) (a) MFRS 9 Financial Instruments (cont’d)

(iii) Financial Assets at Fair Value through Profit or Loss (FVPL) – A financial asset is measured at FVPL if it is an equity investment, held for trading (including derivative assets) or if it does not meet any of the condition specified for the AC or FVOCI model.

MFRS 9 also introduces a new impairment methodology for financial assets, lease receivables and contract assets subject to impairment requirements and a new hedge accounting model. It uses a single forward-looking expected credit loss (ECL) model that requires a 12 month ECL be provided on initial recognition of a financial instrument, and if, and only if, there has been a significant deterioration in the credit risk after initial recognition, a lifetime ECL shall be recognised. For trade receivables, the Group has availed the exception to the 12 months ECL requirement to recognise only lifetime ECL. Also, the new hedge accounting model has been aligned to an entity’s business model for managing financial risks, with eligible qualifying hedged items being extended to cover hedges of non-financial items. The date of initial application of MFRS 9 is 1 January 2018. The effects of the adoption are discussed below: Changes in Measurement Categories The following tables below shown the initial measurement under MFRS 139 and the new measurement categories under MFRS 9 for each class of the Group’s and the Company’s financial assets and financial liabilities as at 1 January 2018 based on the assessment of business model. Group

Financial assets

Classif ication under MFRS 139

New classif ication under MFRS 9

Carrying amount

under MFRS 139

Carrying amount

under MFRS 9

RM RM

Trade and other receivables

Loans and receivables

Amortised cost 6,696,846 6,696,846

Deposits with licensed bank


Amortised cost 3,032,826 3,032,826

Short term investment


Amortised cost 4,071,805 4,071,805

Cash and bank balances


Amortised cost 2,542,798 2,542,798

16,344,275 16,344,275

Financial l iabi l i t ies



Carrying amount

under MFRS 139

Carrying amount

under MFRS 9

RM RM

Trade and other payables

Financial liabilities measured at amortised cost

Financial liabilities at amortised cost

(3,558,114) (3,558,114)

Finance lease liabilities



(813,739) (813,739)

(4,371,853) (4,371,853)



2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONT’D) 2.1 Statement of Compliance (cont’d) (a) MFRS 9 Financial Instruments (cont’d)

Company

Financial assets



Carrying amount

under MFRS 139

Carrying amount

under MFRS 9

RM RM

Trade and other receivables


Amortised cost 3,000 3,000

Short term investment


Amortised cost 3,742,696 3,742,696

Cash and bank balances


Amortised cost 89,541 89,541

3,835,237 3,835,237

Financial l iabi l i t ies



Carrying amount

under MFRS 139

Carrying amount

under MFRS 9

RM RM

Trade and other payables



(474,965) (474,965)

(474,965) (474,965) The classification of loans and receivables under MFRS 139 have been changed to financial assets measured at amortised cost model because MFRS 9 no longer has the former measurement categories. The measurement basis for such instruments at amortised cost effective interest method is retained because the Group’s business model objective for such financial assets is to collect contractual cash flows of interest and principal and the instruments have these contractual cash flow characteristics. For financial liabilities, the Group and the Company did not change the measurement categories because the requirement in MFRS 9 are substantially similar to those in the former MFRS 139.

(b) MFRS 15 Revenue from Contracts with Customers MFRS 15 establishes a new five-step model that will apply to revenue arising from contracts with customers. MFRS 15 will supersede the current revenue recognition guidance including MFRS 118 Revenue, MFRS 111 Construction Contracts and the related interpretations when it becomes effective. The core principle of MFRS 15 is that an entity should recognise revenue which depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchanged for those goods or services. Under MFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e when “control” of the goods or services underlying the particular performance obligation is transferred to the customer.

ANNUAL REPORT 2018


2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONT’D) 2.1 Statement of Compliance (cont’d) (b) MFRS 15 Revenue from Contracts with Customers (cont’d)

The Amendments to MFRS 15 are to clarify certain aspects of MFRS 15 to make them easier for reporting entities to apply the requirements of the new Revenue Standard. In assessing whether an entity’s promises to transfer goods or services to the customer are separately identifiable, the objective is to determine whether the nature of the promise, within the context of the contract, is to transfer each of those goods or services individually or, instead, to transfer a combined item or items to which the promised goods or services are inputs. The adoption of MFRS 15 Revenue from Contracts with Customers and the Amendments to MFRS 15 did not have significant impact on the Financial Statements of the Group and of the Company.

The accounting standards and interpretations that are issued but not yet effective up to the date of issuance of the Group’s and of the Company’s Financial Statements are disclosed below. The Group and the Company intend to adopt these standards, if applicable, when they become effective. Descript ion Effective for annual

periods beginning on or after

MFRS 16 Leases 1 January 2019 Annual Improvements to MFRS Standards 2015 – 2017 Cycle 1 January 2019 Amendments to MFRS 9 – Prepayment Features with 1 January 2019 Negative Compensation Amendments to MFRS 128 – Long Term Interest in 1 January 2019 Associates and Joint Ventures Amendments to MFRS 119, Employee Benefit 1 January 2019 - Plan Amendments, Curtailment and Settlement IC Interpretation 23 – Uncertainty Over Income Tax Treatment 1 January 2019 Amendments to MFRS 3, Business Combinations 1 January 2020 -Definition of a Business Amendments to MFRS 101, Presentation of Financial Statements 1 January 2020 and MFRS 108, Accounting Policies, Changes in Accounting Estimates and Errors – Definition of Material MFRS 17 – Insurance Contracts 1 January 2021 Amendments to MFRS 10 and MFRS 128: Sale or Contribution Deferred of Assets Between an Investor and its Associate or Joint Venture The directors expect that the adoption of the above standards and interpretations will have no material impact on the Financial Statements in the year of initial application except as described below: MFRS 16 Leases MFRS 16 requires lessees to account for all leases under a single on-balance sheet model in a similar way to finance leases under MFRS 117. The standard includes two recognition exemptions for leases – leases of “low-value” assets (e.g., personal computers) and short-term leases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee will recognise a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset). Lessees will be required to separately recognise the interest expense on the lease liability and the depreciation expense on the right-of-use asset. Lessees will be required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognise the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset.



2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONT’D) 2.1 Statement of Compliance (cont’d) MFRS 16 Leases (cont’d)

Either a full or modified retrospective transition approach is required for annual periods beginning on or after 1 January 2019. The standard’s transition provisions permit certain reliefs. Early application is permitted, but not before an entity applies MFRS 15. Based on the assessment the Group do not expect the application of MFRS 16 to have a significant impact on the Financial Statements.

2.2 Basis of Measurement The Financial Statements of the Group and of the Company have been prepared under the historical cost convention and other measurement basis otherwise indicated in the respective accounting policies as set out below.

2.3 Functional and Presentation Currency The Financial Statements of the Group and of the Company are presented in Ringgit Malaysia (RM), which is the Group’s and the Company’s functional currency.

2.4 Use of Estimates and Judgments The preparation of Financial Statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expense. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. In particular, information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amount recognised in the Financial Statements are described in the respective notes. 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: (a) Loss Allowances of Financial Assets

The Group recognises impairment losses for loans and receivables using the expected credit loss model. Individually significant loans and receivables are tested for impairment separately by estimating the cash flows expected to be recoverable. All others are grouped into credit risk classes and tested for impairment collectively, using the Group’s past experience of loss statistics, ageing of past due amounts and current economic trends. The actual eventual losses may be different from the allowance made and this may affect the Group’s financial position and results.

(b) Useful Lives of Property, Plant and Equipment The Group estimates the useful lives of property, plant and equipment based on the period over which the assets are expected to be available for use. The estimated useful lives of property, plant and equipment are reviewed periodically and are updated if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence and legal or other limits on the use of the relevant assets. In additional the estimation of the useful lives of property, plant and equipment are based on internal evaluation and experience with similar assets. It is possible that future results of operations could be materially affected by changes in the estimates brought about by changes in factors mentioned above. The amounts and timing of recorded expenses for any period would be affected by changes in these factors and circumstances. A reduction in the estimated useful lives of the property, plant and equipment would increase the recorded expenses and decrease the non-current assets.

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