CONTENTS · 2020. 11. 25. · contents 2 corporate information 5 directors’ profile 18 sustainability statement 36 additional compliance information 45 financial statements 3 corporate

CONTENTS2

CORPORATE INFORMATION

5DIRECTORS’

PROFILE

18SUSTAINABILITY

STATEMENT

36ADDITIONAL

COMPLIANCE INFORMATION

45FINANCIAL

STATEMENTS

3CORPORATESTRUCTURE

9KEY SENIOR

MANAGEMENTS’ PROFILE

26CORPORATE

GOVERNANCE OVERVIEW STATEMENT

37STATEMENT ON RISK MANAGEMENT AND

INTERNAL CONTROL

110LIST OF

PROPERTIES

ANNEXURE

PROXY FORM

115NOTICE OF ANNUAL GENERAL MEETING

118

4FINANCIAL

HIGHLIGHTS

11LETTER TO

SHAREHOLDERS

12MANAGEMENT

DISCUSSION AND ANALYSIS

35STATEMENT OF

DIRECTORS’ RESPONSIBILITY IN RELATION TO THE

FINANCIAL STATEMENTS

44REPORT ON AUDIT & RISK MANAGEMENT

COMMITTEE

112ANALYSIS OF

SHAREHOLDINGS

I-STONE GROUP BERHAD 201801011135 (1273151-K)2

i-Stone Annual Report 2019

SHARE REGISTRAR

Tricor Investor & Issuing House Services Sdn. Bhd.Unit 32-01, Level 32, Tower A Vertical Business Suite Avenue 3 Bangsar South No. 8Jalan Kerinchi59200 Kuala LumpurTel: 03-2783 9299Fax: 03-2783 9222

SPONSOR

M&A Securities Sdn. Bhd.Level 11, No.45 & 47The BoulevardMid valley CityLingkaran Syed Putra59200 Kuala Lumpur Tel: 03-2284 2911Fax : 03-2284 2718

STOCK EXCHANGE LISTING

Bursa Malaysia Securities Berhad – Ace MarketStock Code: 0209

Chia Gek Liang Chairman / Independent Non Executive Director

Law Lee Yen Member / Indepedent Non Executive Director

Professor Dr. Ruzairi Bin Hj Abdul Rahim Member / Independent Non Executive Director

Corporate Information

COMPANY SECRETARIES

Ng Heng Hooi (MAICSA 7048492)(PC No. 202008002923)

Wong Mee Kiat (MAICSA 7058813) (PC No. 202008001958)

Wong Mee Ching(LS 9014) (PC No. 202008001420)

CORPORATE WEBSITE

www.i-stone.com.my

CORPORATE OFFICE

12-2Jalan Persiaran TeknologiTaman Teknologi Johor81400 SenaiJohor Darul TakzimTel: 07-595 5545Fax: 07-595 5543

Dato’ Azman bin MahmoodChairman /Independent Non-Executive Director

Tee Sook Sing Managing Director

Chan Kok San Executive Director

Chin Chung Lek Executive Director

Chia Gek Liang Independent Non-Executive Director

Professor Dr. Ruzairi Bin Hj Abdul Rahim Independent Non-Executive Director

Law Lee Yen Independent Non-Executive Director

Law Lee YenChairperson /Independent Non-Executive Director

Chia Gek LiangMember / Independent Non Executive Director

Professor Dr. Ruzairi Bin Hj Abdul RahimMember / Independent Non Executive Director

Chia Gek Liang Chairman / Independent Non Executive Director

Law Lee Yen Member / Independent Non Executive Director

Professor Dr. Ruzairi Bin Hj Abdul Rahim Member / Independent Non Executive Director

BOARD OF DIRECTORS AUDIT & RISK MANAGEMENT COMMITTEE REMUNERATION COMMITTEE

NOMINATION COMMITTEE

REGISTERED OFFICE

Lot 6.08, 6th FloorPlaza First NationwideNo. 161 Jalan Tun H.S. Lee50000 Kuala LumpurTel: 03-2072 8100 Fax: 03-2072 8101

AUDITORS

Ecovis Malaysia PLTChartered AccountantsNo. 54Jalan Kempas Utama 2/2Taman Kempas Utama81200 Johor BahruJohor Darul TakzimTel: 07-562 9000Fax: 07-562 9090

PRINCIPAL BANKERS

OCBC Bank (Malaysia) Berhad47 & 49 Jalan Molek 1/29Taman Molek81100 Johor BahruTel :03-8317 5200 Fax :07-353 5581

I-STONE GROUP BERHAD 201801011135 (1273151-K) 3

i-Stone Annual Report 2019Corporate Structure

Corporation Date / Place of Incorporation

Effective Equity Interest %

Principal Activities

i-Stone Group Berhad 22 March 2018 / Malaysia Public issue

Investment Holding

Subsidiaries/ Associated Company of iStonei-Stone Technology Sdn Bhd

29 January 2007 /Malaysia

100.0 Investment holding company

i-Stone Systems Sdn Bhd

2 December 2015 / Malaysia

100.0 Manufacturing and modification of specialised automation machines, provision of maintenance and technical support services and supply of spare parts

i-Stone Solutions Sdn Bhd

21 May 2013 / Malaysia

100.0 Provision of DMS and engineering design services

i-Stone International Pte Ltd

1 March 2013 / Singapore

100.0 Sales of specialised automation machines

P.A. Metal Technics Sdn Bhd

1 July 1996 / Malaysia

100.0 Design and fabrication of metal panels and frames

i-Stone Engineering Sdn Bhd

23 April 2008 /Malaysia

100.0 Design and fabrication of precision parts

Bizit Systems (M) Sdn Bhd

23 April 2007 /Malaysia

100.0 Distribution of statistical analysis software, wireless communication devices and robotic arms

Bizit Systems and Solution Pte Ltd

30 May 2011 /Singapore

100.0 Distribution of statistical analysis software and wireless communication devices

i-Stone Group Berhad

100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

i-Stone Systems Sdn Bhd

i-Stone Solutions Sdn Bhd

i-Stone International

Pte Ltd

P.A. Metal Technics Sdn Bhd

i-Stone Engineering

Sdn Bhd

Bizit Systems(M)

Sdn Bhd

Bizit Systems And

Solutions Pte Ltd

100.0%

i-Stone Technology Sdn Bhd



FY20151 FY20161 FY20171 FY20181 FY2019RM'000 RM'000 RM'000 RM'000 RM'000

Revenue 44,124 43,127 60,381 67,591 77,731Profit Before Taxation 4,451 5,110 9,390 11,972 10,302Profit After Taxation 4,092 4,708 8,550 11,470 8,536Shareholders' Equity 13,434 15,835 13,348 22,096 65,283Earnings Before Interests, Taxation, Depreciation & Amortisation

5,177 5,999 10,323 13,111 12,187

Earnings per Share (sen) 0.41 0.49 0.84 1.15 1.1Net Assets per Share (sen) 0.01 0.02 0.01 0.02 0.05

Note:(1) The Group was only formed on 2 May 2019. The financial information for FY2018 was presented based

on the historical combined financial statements of the subsidiaries as disclosed in the Prospectus of the Company dated 21 June 2019.

FY2015 FY2016 FY2017 FY2018 FY2019 FY2015 FY2016 FY2017 FY2018 FY2019

FY2015

4,092

FY2016

4,708

FY2017

8,550

11,470

8,536

FY2018 FY2019 FY2015

13,434 15,835 13,34822,096

65,283

11,9729,390

5,1104,451

77,73167,59160,381

43,12744,124 10,302

FY2016 FY2017 FY2018 FY2019

FY2015

0.41

Earnings per Share(sen)

Profit After Taxation(RM’000)

Revenue(RM’000)

Profit Before Taxation(RM’000)

Shareholders’ Equity(RM’000)

Net Assets per Share(sen)

FY2016

0.49

FY2017

0.84

FY2018

1.15

FY2019

1.10

FY2015

0.01

FY2016

0.02

FY2017

0.01

FY2018

0.02

FY2019

0.05

Financial Highlights


i-Stone Annual Report 2019Directors’ Profile

Dato’ Azman Bin Mahmood69 years of age, Male, Malaysian Chairman and Independent Non-Executive Director

He was appointed to the Board on 1 October 2018. He is a Chartered Accountant from the Institute of Chartered Accountants of England and Wales and a member of the Malaysian Institute of Accountants in 1987.

He had served with an audit firm, Lim, Ali & Co., (1975 to 1978) as a Branch Manager in Johor Bahru. From 1979 to 1980 he was an audit senior at RD Neville & Co., an audit firm in Essex, England. He later joined MMC Services Limited in London, a subsidiary of Malaysian Mining Corporation Berhad as an Operations Manager. In 1983, he returned to Malaysia and joined MUI Bank Berhad (now known as Hong Leong Bank Berhad) as a Senior Manager for the Properties Division. In 1984 he then joined Kumpulan Perangsang Selangor Berhad (“KPS”), a Selangor government link company. He was the Group Financial Controller until 1990 when his last post was a Divisional Director of Finance.

In 1991, he led a team form KPS and jointly with a Merchant Bank to successfully undertake and complete a reverse takeover of Worldwide Holdings Berhad (“WHB”), and was appointed as it’s Group Managing Director. After the takeover and relisting the company then was involved in tin mining, hotel operations (Holiday Inn), property development and power generation. He left WHB in June 1980 to set up his own business in property development via Fine Access Sdn. Bhd., and Crystalville Group of Companies.

Currently he is the Chairman of Fine Access Sdn Bhd and all of the companies in the Crystalville Group.

At the same time, he is the Chairman of Cocoaland Holdings Berhad, a confectionary and beverage company. He is also a board member of Jaks Resources Berhad, a civil construction, property development and power generation (Hanoi) company.

Dato’ Azman Bin MahmoodChairman and Independent Non-Executive Director

Ms. Law Lee YenIndependent Non-Executive Director

Professor Dr. Ruzairi Bin Hj Abdul RahimIndependent Non-Executive Director

Ms Tee Sook SingManaging Director

Mr Chia Gek LiangIndependent Non-Executive Director

Mr Chan Kok SanExecutive Director

Mr Chin Chung LekExecutive Director



Chan Kok San43 years of age, Male, MalaysianExecutive Director

He was appointed to the Board on 1 November 2018. He is one of the co-founders of our Group and has been responsible in spearheading the business growth of our Group since its inception in 2007. As our Executive Director, he is primarily responsible for establishing our Group’s internal policies and investor relation. As our Head of Administration, he is responsible for overseeing the overall administrative and finance functions of our Group. As our Head of Distribution, he is responsible for overseeing the overall distribution of manufacturing automation hardware and software business segment.

He graduated with a Bachelor of Engineering (Electrical-Instrumentation and Control) and Master of Engineering (Electrical) in 2001 and 2003, respectively from UTM. In 2017, he obtained the Professional Diploma in Corporate Management from Southern University College, Johor. He has more than 18 years of experience in the E&E industry, specialising in specialised automation machines.

He began his career in Flextronics Technology (Malaysia) Sdn Bhd in 2002 as a Test Development Engineer, where he was responsible for the development of test machines. In March 2004, he was promoted to Senior Test Engineer, where he was responsible of overseeing the development and production operations of test and process machines. He left Flextronics Technology (Malaysia) Sdn Bhd in October 2004 and joined Dyson Manufacturing Sdn Bhd in November 2004 as its Senior Electronics Engineer, where he was involved in the D&D of electronic circuits and PCBAs.

In 2006, he left Dyson Manufacturing Sdn Bhd to pursue his own business venture and co-founded Univeztron Technology Pte Ltd in Singapore with Chin Chung Lek and Chan Sai Kong to undertake the provision of electronics design and firmware design business. He was mainly responsible for overseeing the electronics / firmware design of various electrical products and hardware in Univeztron Technology Pte Ltd. In 2007, he co-founded i-Stone Technology together with Chin Chung Lek and Chan Sai Kong to undertake the provision of design and manufacturing of specialised automation machines. He was mainly involved in the marketing, administrative and business expansion activities of i-Stone Technology.

He currently serves as director and is a shareholder for a number of private companies.

Directors’ Profile

Tee Sook Sing40 years of age, Female, Malaysian Managing Director

She was appointed to the Board on 1 November 2018. She joined our Group in January 2008 as one of our pioneer members and has been instrumental to the business growth and development of our Group since then. She is principally responsible for the implementation of our Board’s decisions, strategies and corporate directions, keeping our Board fully informed of all important aspects of our Group’s operations as well as overseeing the day-to-day operations and implementation of the overall strategies and corporate direction of our Group.

She graduated with a Bachelor of Engineering (Electrical-Electronics) and a Master of Business Administration (Strategic Management) in 2003 and 2008, respectively from UTM. She is a Project Management Professional certified by the Project Management Institute. She has more than 17 years of working experience in the E&E industry, specialising in the design and manufacturing of specialised automation machines.

She started her career in Flextronics Technology (Malaysia) Sdn Bhd in 2003 as a Test Development Engineer, where she was responsible for undertaking the development of functional test machines. In 2004, she was promoted as a Senior Test Development Engineer, where she was responsible for managing a team of engineers and monitoring the progress of development projects for functional test machines. She left Flextronics Technology (Malaysia) Sdn Bhd in January 2006 and joined Dyson Manufacturing Sdn Bhd as a Senior Electronics Development Engineer in its R&D department. However, she left Dyson Manufacturing Sdn Bhd in March 2006 and re-joined Flextronics Technology (Malaysia) Sdn Bhd as its Assistant Test Development Manager.

In December 2007, she left Flextronics Technology (Malaysia) Sdn Bhd and joined i-Stone Technology in January 2008 as a Project Manager, where she was responsible for overseeing its manufacturing automation business segment. In 2010, she was re-assigned as the Sales Manager of i-Stone Technology where she was responsible for handling key customer accounts and implementing overall business development plans and strategies. She assumed her current position as our Managing Director in February 2018.

She currently serves as director and is a shareholder for a number of private companies.



Chin Chung Lek52 years of age, Male, Malaysian Executive Director

He was appointed to the Board on 1 November 2018. He is one of the co-founders of our Group and is currently our Executive Director and Head of Procurement, Manufacturing Automation, where he is primarily responsible for the procurement functions of our manufacturing automation segment.

He graduated with a Bachelor of Business Administration from Tamkang University, Taiwan in 1995. He has more than 20 years of working experience in the E&E industry with in-depth knowledge on the procurement functions and business development operations.

In 1996, he started his career with V.S. Industry Berhad as its Sourcing Executive, where he was involved in the purchasing and production planning functions of the company. In April 2000, he left V.S. Industry Berhad and joined Champion Tools (Johor) Sdn Bhd as its Sales Executive, where he was responsible for developing new customer accounts. In February 2001, he left Champion Tools (Johor) Sdn Bhd and joined Farnell Components (M) Sdn Bhd in the same month as its Senior Field Sales Engineer, where he was responsible for developing new customer accounts as well as maintaining existing customer accounts in Johor. In 2005, he left Farnell Components (M) Sdn Bhd and joined 3M Malaysia Sdn Bhd as its Senior Field Sales Executive, where he was responsible for handling and servicing key customer accounts in the southern region of Malaysia as well as undertaking sales and marketing activities. In 2006, while he was still working in 3M Malaysia Sdn Bhd, he co-founded Univeztron Technology Pte Ltd in Singapore with Chan Kok San and Chan Sai Kong to undertake the provision of electronics design and firmware design business. Chin Chung Lek’s role in Univeztron Technology Pte Ltd while he was still under employment in 3M Malaysia Sdn Bhd (and subsequent to leaving the company) was only confined to handling the administrative matters of Univeztron Technology Pte Ltd during his personal time.

In 2007, he left 3M Malaysia Sdn Bhd and co-founded i-Stone Technology together with Chan Kok San and Chan Sai Kong to undertake the provision of design and manufacturing of specialised automation machines. He was mainly involved in the procurement activities of i-Stone Technology.

He currently serves as director and is a shareholder of a number of private companies.

Chia Gek Liang59 years of age, Male, MalaysianIndependent Non-Executive Director

He was appointed to the Board on 1 October 2018. He graduated with a Bachelor of Electrical Engineering and Master of Business Administration from the National University of Singapore in 1985 and 1993, respectively. He also holds a Bachelor of Laws from the University of London, UK which he obtained in 2010 and a Certificate in Legal Practice in 2011. He was admitted as an Advocate & Solicitor of the High Court of Malaya in 2012.

He began his career in 1985 as a Product Engineer with SGS-Thomson Microelectronics Pte Ltd in Singapore, where he was responsible for the product engineering and manufacturing processes of memory products. He left the engineering field in 1991 to pursue his Master of Business Administration. In 1992, he returned to Malaysia and joined the corporate finance division of Commerce International Merchant Bankers Berhad (now known as CIMB Investment Bank Berhad) as an Executive. He was involved in a wide variety of corporate advisory assignments which includes initial public offerings, debt and equity fund raising, mergers and acquisitions, reverse take-overs, corporate and debt restructuring and privatisation exercises. He left the bank in 2001 and joined Intelligent Edge Technologies Berhad as its Chief Financial Officer, where he was responsible for the overall financial management of the company up until his departure in 2002.

From 2002 to 2012, he mainly did freelance consulting work through Siri Mesra Sdn Bhd (a company involved in the investment holding and provision of management consultancy services), such as general management, formulating long term organisation plans and performing projects evaluation in Malaysia, while pursuing his professional qualification as a lawyer. He started practising law as an Associate with Deol & Gill in 2013 where he was involved in providing advisory on legal matters. He left Deol & Gill in October 2014 to undertake various general management consulting works on a freelance basis via Siri Mesra Sdn Bhd up until May 2015. From May 2015 to 2018, he was attached with Mai & Co as an Associate, where he was primarily involved in providing corporate legal services. Since January 2019, he has resumed performing general management consulting works through Siri Mesra Sdn Bhd.

Presently, he is the Independent Non-Executive Director of QES Group Berhad as well as director and is a shareholder for a number of private companies.

He is the Chairman of our Remuneration Committee and Nomination Committee as well as a member of our Audit and Risk Management Committee.




Professor Dr. Ruzairi Bin Hj Abdul Rahim 53 years of age, Male, Malaysian Independent Non-Executive Director

He was appointed to the Board on 1 November 2018. He graduated with a Bachelor Degree in Electronic System & Control Engineering from Sheffield City Polytechnic, UK (now known as Sheffield Hallam University) in 1992. In 1996, he received a Ph.D from Sheffield Hallam University, UK. He has been awarded as Professional Technologist by Malaysia Board of Technologists in 2018. He has over 25 years of experience in the field of R&D management.

He started his career in UTM in 1992 as a Tutor at the Department of Control & Instrumentation Engineering in the Faculty of Electrical Engineering. He was subsequently appointed as the Head of Instrumentation Engineering Laboratory in 1997 to manage and operate lectures, tutorials, practical as well as reviewing examination papers. In June 1998, he was appointed as the Head of Department (Control & Instrumentation Engineering), where he was responsible for overseeing the planning, development programme, distribution of academic workload and staff coordination. He was then made Associate Professor of UTM in 1999.

In 2006, he was promoted as the Professor of UTM and also appointed as the Deputy Dean (Corporate) at the Research Management Centre (“RMC”) of UTM. He was then promoted to the position of Director of RMC in 2009, a position which he held until November 2016. RMC is the research arm of UTM which is responsible for managing and facilitating various R&D activities, intellectual property creation and management, technological development, promotion and exploitation of R&D findings. He has been holding the position of Deputy Vice Chancellor (Research & Innovation) at Universiti Tun Hussein Onn Malaysia from December 2016 to November 2019, where he is mainly responsible for the management of research, innovation and publication. Now he is Professor in School of Electrical Engineering, Faculty of Engineering, Universiti Teknologi Malaysia.

He is a member of our Audit and Risk Management Committee, Remuneration Committee and Nomination Committee.

Law Lee Yen35 years of age, Female, Malaysian Independent Non-Executive Director

She was appointed to the Board on 1 October 2018. She graduated from the University of Melbourne, Australia in 2006 with a Bachelor of Commerce. She is a member of the Malaysian Institute of Accountants and a member of CPA Australia. She is also a member of Chartered Tax Institute of Malaysia. She has more than 13 years of working experiences in the field of audit, corporate advisory and taxation services.

She started her career in 2007 with KPMG LLP Singapore as an Audit Associate. In 2010, she left KPMG LLP Singapore and joined Terry Law & Co, Malaysia (a non-audit firm in which her brother was Partner) as a Manager, responsible for tax advisory services. She was promoted as Partner of the firm in 2011, where she was responsible for providing tax advisory services. In January 2017, she set up her own firm, LY Law & Associates, as a partner after obtaining her audit practice license from the relevant ministry in Malaysia and with that, she was responsible for providing audit and tax advisory services under her new firm. Her tenure in Terry Law & Co. from January to May 2017 was a transitional arrangement to facilitate the transfer of tax clientele from Terry Law & Co. to LY Law & Associates. In May 2017, she resigned as a partner of Terry Law & Co.

Currently, she serves as director and is a shareholder for a number of private companies. She is also the Chairperson of our Audit and Risk Management Committee and a member of our Nomination Committee and Remuneration Committee.

Notes:

1. None of the Directors have any family relationship with any Director and/or major shareholder of the Company.

2. None of the Directors have been convicted of any offence (other than traffic offences) within the past 5 years and have not been imposed any public sanction or penalty by the relevant regulatory bodies during the financial year.

3. None of the Directors have any conflict of interest with the Company.4. Save as disclosed, none of the Directors hold any directorships in other public companies.5. Number of board meetings attended by each Director during the financial year are disclosed in the Corporate

Governance Overview Statement of this Annual Report.



i-Stone Annual Report 2019Key Senior Managements’ Profile

Board of Directors

Tee Sook Sing Managing Director

Lee Yong HoHead of Operation

Tee Mun KeongHead of Engineering

Chin Chung LekExecutive Director/

Head of Procurement

Chan Kok SanExecutive Director/

Head of Administration/Head of Distribution

Teo YelingHead of Finance



Teo Yeling

Teo Yeling, aged 37, female, Malaysian, is the Head of Finance of our Group. She is responsible for our Group’s overall financial and accounting functions, which include treasury, financial review, credit risk, cash flow management and financial planning.

She graduated with a Bachelor of Business (Accountancy) from the Royal Melbourne Institute of Technology, Australia in 2004. She is a Certified Practising Accountant of CPA Australia and a member of the Malaysian Institute of Accountants. She has accumulated over 15 years of combined working experiences in accounting and finance. She served under an audit firm, KPMG Malaysia from 2005 to 2010. She started as an Audit Assistant and was promoted to Senior Audit Associate in 2007. In July 2008, she was assigned to the Advisory-Transaction Services Division of KPMG Malaysia which involved in pre-deal evaluations and special audits for merger and acquisition exercises. In November 2008, she was seconded to KPMG Indonesia and placed under its Assurance Division where she was involved in various audit assignments for clients involved in the energy, natural resources and automotive industries. Before her returned from KPMG Indonesia in April 2009, she was promoted to Assistant Audit Manager in the Assurance Division of KPMG Malaysia. She was holding the post of an Audit Manager before she left KPMG Malaysia in 2010. She then joined Ok Yau & HowYong PLT as an Audit Manager. She was promoted to Senior Audit Manager in 2013. In 2018 she left to join our Group and assumed her current position.

Tee Mun Keong, aged 36, male, Malaysian, is the Head of Engineering of our Group in charge of automation, mechanical and EE team. He is involved on improving design and development capabilities, improve collaborations between engineering departments, skillsets and talent building, design improvements in terms of cost, quality and manufacturability and others.

He graduated with a Diploma in Mechanical Engineering (Agriculture) from Politeknik Kota Bahru, Kelantan in 2006. He had more than 13 years experience in production planning, engineering support and sales. He began his career with a few entities in Singapore and Malaysia as Sales Coordinator, Production Engineer and Mechanical Engineer before he joined our Group in 2010 as Sales Engineer. In January 2013, he was transferred to the Mechanical Department as a Mechanical Engineer and was involved in product design and sales support before he was promoted to Assistant Project Manager in July 2013, to manage and lead the mechanical team. After 4 years, he was promoted as a Project Manager (Mechanical Engineering), where he was responsible for overseeing the product development and manufacturing, field service & support and quality control activities of our Group. In 2018, he was promoted to Head of of Engineering, a position he still holds to date. He is also the brother of Tee Sook Sing, the Managing Director of our Group.

Tee Mun Keong

Key Senior Managements’ Profile

Notes:

1. None of the Key Senior Management have been convicted of any offence (other than traffic offences) withinthe past 5 years and have not been imposed any public sanction or penalty by the relevant regulatory bodies during the financial year.

2. None of the Key Senior Management have any conflict of interest with the Company.3. None of the Key Senior Management hold any directorships in other public companies.

Lee Yong Ho

Lee Yong Ho, aged 39, male, Malaysian, is the Head of Operations of our Group and overseeing the project management, production capability, capacity and quality.

He graduated with a Bachelor of Engineering (Electrical-Telecommunication) from UTM in 2003. He is a Project Management Professional certified by Project Management Institute. He has over 16 years of working experience specialising in the project management for test and measurement equipment development and manufacturing processes. He began his career with a few private entities as an Electronics Engineer Test Development Engineer and Senior Engineer involved in electronics hardware product design and development before he joined our Group in 2009 as Senior Project Engineer. He was promoted to Project Manager (Electrical Engineering) in 2010 to supervise the overall planning, product development, manufacturing, field service and support as well as quality control activities of our Group. In 2018, he was promoted to Head of Operation, a position he still holds to date.

Profile of the Key Management Personnel



Dear shareholders,

T he year 2019 marked a significant milestone for everyone in i-Stone Group Berhad as we have successfully listed on ACE Market of Bursa Malaysia

Securities Berhad. This will be our first Annual Report as a public listed company. The Group would like to take this opportunity to thank all customers, business partners, advisors, employees and personnel who have made this listing successful. On behalf of the Board of Directors,we are pleased to present the Annual Report and Financial Reports of the Group for the financial year ended 31 Dec 2019.

FINANCIAL PERFORMANCE

The Group achieved a higher revenue of RM77.73 million in FY2019 compared to RM67.59 million in FY2018. The revenue of the Group in FY2019 was derived principally from manufacturing segment contributing approximately 88.0% of the Group’s total revenue. However, the Group recorded a decline of 4.0% in GP margin due to competitive pricing and increase of cost in both direct materials and operations.

The Group recorded a higher other income of RM2.68 million in FY2018 derived mainly from one-off gains on disposal of properties, plant and equipment, assets held for sale and investment properties, disposal of subsidiaries and associate, and gain on re-measurement in cost of investment as a result of additional acquisition of equity in a previously classified associate. In FY2019, other income comprise mainly from gains on foreign exchange of RM0.31 million and interest and dividend income of RM0.26 million from financial institutions.

The distribution, administrative and other expenses decreased slightly by 3.0% from RM12.65 million in FY2018 to RM12.28 million mainly due to decrease in loss on foreign exchange and a one-off expense incurred in relation to incidental costs on acquisition and relocation of our new factory in 2018. Finance costs increased from RM0.28 million in FY2018 to RM0.57 million in FY2019 was mainly attributable to the acquisition of our new factory which was financed through term loan, which was subsequently repaid in full in August 2019. The Group Profit Before Tax decreased by 14.0% from RM11.97 million to RM10.30 million was in line with the decreased of GP margin of 4.0% and other income of RM2.03 million. The Group’s overall tax expense increased from RM0.50 million in FY2018 to RM1.77 million in FY2019 as our effective tax rate rose from 4.2% to 17.1% as a result of the expiry of the pioneer status incentive under Promotion Investment Act 1986 (“PIA”) enjoyed by one of our subsidiaries.

BUSINESS AND OPERATIONS

Since our listing, the Group has performed several changes and improvements to our process and operations, namely:

1. Upgraded our production floor to improve the facilities and layout of the factory;

2. Purchased equipment, hardware and software to enhance our capabilities and capacity;

3. Implemented in-house Manufacturing Execution System and Production Kanban Flow to improve work flow and production efficiency;

4. Developing new standard modules to reduce cost and improve the lead time;

5. Recruited Head of R&D and additional engineers to beef up our R&D capacity as well as capability;

6. Conducted 116 training sessions for employees to enhance their skills and knowledge;

7. Continuous business development through collaboration, partnership and strategic alliances to increase sales from existing and new customers; and

8. Established Emergency Response Team (ERT) consisting of 42 employees, who are trained to respond to emergency situations with different functional tasks in compliance with international safety and environment standards.

MARKET OUTLOOK AND FUTURE PROSPECT

The global economic slowdown is inevitable in Year 2020. Most manufacturing industries including E&E is expected to be hit by the economic slowdown. It is expected that customers will cancel or postpone new product development and launches due to softer consumer demands on E&E and home appliance products. Delay and decline of new product development will have a direct negative impact on the business of the Group. To combat this impact, the Group is looking for new opportunities in new industries such as automation business and medical industry.

Despite facing the challenging environment and uncertainties in 2020, the Group will continue to implement all short and long term strategies to mitigate and reduce the risks and work our best to deliver the best performances for the Group.

ACKNOWLEDGEMENTS

On behalf of the Board of Directors, we would like to express our sincere appreciation to the Group’s management and staff for their dedication, hard work and commitment towards their work and the Group. We also wish to extend our appreciation to our esteemed customers, business partners, advisors, bankers, regulatory authorities and lastly the shareholders for the continuous support and trust in i-Stone Group.

Last but not least, we wish everyone good health and safety in this challenging year.

Dato’ Azman Bin Mahmood Independent Non-Executive Chairman

Rebecca Tee Sook Sing Managing Director

Letter To Shareholder



OVERVIEW OF BUSINESS

I-Stone Group Berhad (“Company” or “the Group”) had achieved a new milestone in the corporate history when it successfully completed its Initial Public Offering (“IPO”) exercise and became a public listed company on the ACE Market of Bursa Malaysia Securities Berhad on the 17 July 2019.

The Group is primarily involved in the manufacturing automation business, with a focus on specialised automation machines and distribution of manufacturing automation hardware and software.

The Group is committed to comply with stringent quality, safety and environment standards and has obtained ISO 9001:2015 Quality Management System and ISO 14001:2015 Environmental Management System.

OPERATING ACTIVITIES

Our Group’s business is divided to 2 segments:

1. Manufacturing Segment

Manufacturing segment is the major contributor to our Group’s revenue. We provide solutions to our customers’ manufacturing and testing needs by developing specialised automation machines which are used to fully or partially automated manufacturing processes including fabrication, assembly, test and inspection, transporting, packaging and storage and they are customised based on our customers’ requirements. Our specialised automation machines comprise specialised test and process machines used in automating manufacturing processes.

We also provide machine modification services to modify our customers’ existing specialised automation machines which are manufactured by our Group, together with maintenance and technical support services which comprise the provision of schedules maintenance and fault rectification. Furthermore, our own developed data management (“DMS”) used for monitoring and controlling of manufacturing processes, such as the efficiency and productivity of the machines and controlling the manufacturing sequence and production data flow of the machines throughout the manufacturing process based on real time basis enhance our commitment in providing value-adds to our customers. We also have in-house capabilities to design and fabricate metal panels, frame and precision parts for our specialised automation machines and on a standalone basis under our manufacturing segment.

Our group has one (1) manufacturing plant located in Senai, Johor.

2. Distribution Segment

Our group also distribute manufacturing automation software and hardware on a standalone basis, namely • Minitab brand of statistical analysis software used for statistical analysis of manufacturing process;• Digi brand of wireless communication devised and related embedded modules; and• Robotics technology equipment (such as robotic arms) manufacturing by Universal Robots.

We also conduct training and technical support for Minitab software. Our group distribution segment has three (3) sales and marketing offices located in Johor Bahru, Kuala Lumpur and Singapore.

I-STONE MISSION AND VISION

Our Vision: Best in Class Manufacturing Test and Automation Company

Our Mission Statement:We are committed to help our manufacturing customers to succeed, by utilising our test and automation solutions and products

Our Core Values:1. Our engineering expertise and know-how, in-house precision and metal fabrication give us competitive

advantages to provide best lead time, cost and quality products to customers.2. We are supportive and committed professionals, practicing effective teamwork to create positive working

environment.3. We continue to improve our processes and operations using best practices in the industry and operating in

safe environment while maximising shareholders’ values.

Management Discussion And Analysis



REVIEW OF FINANCIAL PERFORMANCE

For illustration purpose, we are comparing our Group’s audited consolidated statement of profit or loss and other comprehensive income for the financial year ended 31 December 2019 (“FY2019”) against the historical combined financial statements of the subsidiaries for the financial year ended 31 December 2018 (“FY2018”) as disclosed in the Prospectus of the Company dated 21 June 2019.

Our Group’s financial performance for FY2019 and FY2018 is illustrated as follows:FY2019 FY2018 (1) VarianceRM’000 RM’000 RM’000 %

Revenue 77,731 67,591 10,140 15.0Gross profit (“GP”) 22,501 22,227 274 1.2Other income 646 2,678 (2,032) (75.9)Distribution, administrative and other expenses (12,276) (12,650) (374) (3.0)Finance costs (569) (283) 286 101.1Profit before taxation (“PBT”) 10,302 11,972 (1,670) (13.9)Profit after taxation (“PAT”) 8,536 11,470 (2,934) (25.6)GP margin (%) 28.9 32.9 (4) (12.2)PBT margin (%) 13.3 17.7 (4) (22.6)PAT margin (%) 11.0 17.0 (6) (35.3)



Revenue

FY2019 FY2018 (1) VarianceRM’000 RM’000 RM’000 %

Manufacturing 68,382 59,216 9,166 15.5 Malaysia 45,126 48,566 Philippines 17,835 4,595 Singapore 4,312 5,109 Others 1,109 946Distribution 9,349 8,375 974 11.6 Malaysia 5,539 4,280 Singapore 2,973 3,318 Indonesia 837 777

77,731 67,591



Our Group achieved a higher revenue of RM77.73 million in FY2019 compared to RM67.59 million in FY2018. The revenue of the Group in FY2019 was derived principally from manufacturing segment where manufacturing segment contributed approximately 88.0% of the Group’s total revenue. The manufacturing segment recorded an increase in revenue by RM9.17 million from RM59.22 million in FY2018 to RM68.38 million in FY2019 mainly due to expansion into automation business in FY2019.



i-Stone Annual Report 2019 Management Discussion And Analysis

Revenue Cont’d

Revenue from our distribution segment increased from RM8.38 million in FY2018 to RM9.35 million in FY2019. The increase in revenue from distribution segment was mainly attributable to the sale of robotics arms which has increased our overall revenue in this segment from RM0.55 million in FY2018 to RM1.55 million in FY2019.

By geographical location, Malaysia remains our Group’s largest revenue contributor in FY2019 which represent 65.2% of our total revenue, followed by Philippines of 22.9% and Singapore of 9.4%.

Gross Profit

Manufacturing Distribution Total2019 2018(1) Variance 2019 2018(1) Variance 2019 2018(1) Variance

RM’000 RM’000 % RM’000 RM’000 % RM’000 RM’000 %Revenue 68,382 59,216 15.5 9,349 8,375 11.6 77,731 67,591 15.0Cost of sales 48,730 39,988 21.9 6,500 5,376 20.9 55,230 45,364 21.7Gross profit (“GP”) 19,652 19,228 2.2 2,849 2,999 -5.0 22,501 22,227 1.2GP margin (%) 28.7 32.5 -3.8 30.5 35.8 -5.3 28.9 32.9 -4.0

1) The Group was only formed on 2 May 2019. The financial information for FY2018 was presented based on the historical combined financial statements of the subsidiaries as disclosed in the Prospectus of the Company dated 21 June 2019.

Gross profit increased by 1.2% from RM22.23 million in FY2018 to RM22.50 million in FY2019. However GP margin has declined from 32.9% in FY2018 to 28.9% in FY2019 mainly resulted by our competitive pricing, increase in staff cost, additional process and product development activities and higher depreciation charges on new factory acquired and in used towards the end of FY2018 for manufacturing segment. Distribution segment also contributed to the declined in GP margin where the decrease was mainly due to the change in product mix where lower number of statistical software were sold in FY2019 which commanded higher GP margin and was offset by the increase in sale of robotic arms which has a lower margin.

Other Income

Higher other income of RM2.68 million was recorded in FY2018 was mainly attributable to one-off gain on disposal of properties, plant and equipment, assets held for sale and investment properties of RM1.54 million; disposal of subsidiaries and associates due to restructuring for RM0.36 million and gain on remeasurement in associate stake as a result of additional acquisition in equity of an associate of RM0.53 million. In FY2019, other income mainly comprise of gain on foreign exchange of RM0.31 million and interest and dividend income of RM0.29 million from financial institutions.

Operating Expenses

Distribution, administrative and other expenses decreased slightly by 3% from RM12.65 in FY2018 to RM12.28 million was mainly due to decrease in loss on foreign exchange from RM0.77 million in FY2018 to RM0.39 million in FY2019 as a result of weakening of RM against USD and SGD, thus resulting in the increase in revenue recognised from our USD and SGD denominated sales. In addition, the decrease was also contributed by one-off expenses incurred in FY2018 of RM0.22 million in relation to securing banking facilities for the purchase of new factory and working capital; and higher property, plant and expenses written off in FY2018 due to the move to our new factory in 2018 of RM0.17 million, offset by the increased in carriage outwards and travelling cost of RM0.30 million and higher expenses to maintain the new factory.

Finance cost increased from RM0.28 million in FY2018 to RM0.57 million in FY2019 was mainly attributable to the acquisition of our new factory in Senai which was financed through term loan from Maybank Islamic Berhad. However, the term loan was settled in August 2019.


i-Stone Annual Report 2019Management Discussion And Analysis

Profit and Tax

Our PBT decreased by 14.0% from RM11.97 million to RM10.30 million was in line with the decrease of GP margin of 4% and other income of RM2.03 million.


Income tax:- current year 1,269 324 945 291.7- prior year 127 (359) 486 135.4Foreign withholding tax 196 82 114 139.0

1,592 47Deferred tax 174 455 (281) (61.8)

1,766 502 1,264 251.8

1) The Group was only formed on 2 May 2019. The financial information for FY2018 was presented based on the historical combined financial statements of the subsidiaries as disclosed in the Prospectus of the Company dated 21 June 2019.

The Group’s overall tax expense has increased from RM0.50 million in FY2018 to RM1.77 million in FY2019 with effective tax rate rose from 4.2% to 17.1% as a result of the expiry of the pioneer status incentive under Promotion Investment Act 1986 (“PIA”) for one of the subsidiary, i-Stone Solutions Sdn Bhd, which grants a tax exemption of up to 100.0% of the statutory income for a period of 5 years (i.e. from 5 December 2013 to 4 December 2018). In FY2019, the overall effective tax rate was lower than statutory tax rate due to pioneer status incentive obtained by another subsidiary, i-Stone Systems Sdn Bhd, which grant a tax exemption of up to 70.0% of the statutory income for a period of 5 years (i.e. from 1 January 2017 to 31 December 2021).

Financial Position Review

For illustration purpose, we are comparing our Group’s audited consolidated statement of financial position as at 31 December 2019 against the historical combined financial statements of the subsidiaries for the financial year ended 31 December 2018 as disclosed in the Prospectus of the Company dated 21 June 2019.


AssetsNon-current assets 24,410 24,234 176 0.7Current assets 54,648 25,856 28,792 111.4Total assets 79,058 50,090

LiabilitiesNon-current liabilities 1,907 12,140 (10,233) (84.3)Current liabilities 11,868 14,570 (2,702) (18.5)Total liabilities 13,775 26,710

Equity 65,283 23,380 41,903 179.2





Non-Current Asset

Our non-current assets mainly comprised of property, plant and equipment of RM23.09 million and goodwill of RM0.86 million in relation to the acquisition of subsidiaries. Slight increase in non-current assets was mainly attributable to the recognition of Right-of-Use assets of RM0.18 million as a result of adoption of MFRS 16 Leases in 2019.

Current Asset

Current assets increased by 195.3% from RM25.86 million in FY2018 to RM54.65 million in FY2019. The increase was mainly due to the higher trade receivables balances from RM12.22 million in FY2018 to RM24.44 million in FY2019 arising from billing on the sales from manufacturing segment in last quarter of FY2019 which was also noted through the increase in trade receivables turnover period from 76 days in FY2018 to 115 days in FY2019 and higher cash and cash equivalents of RM24.14 million (FY2018 : RM3.80 million) arising from net proceeds raised pursuant to the IPO exercise during the year.

Current and Non-Current Liability

Non-current liabilities decreased mainly due to full settlement of term loans of RM11.39 million in FY2018 in the current financial year and offset by the additional hire purchase payables of RM0.88 million. Current liabilities decreased by RM2.70 million from RM14.57 million in FY2018 to RM11.87 million in FY2019 mainly due to decrease in trade payables by RM1.82 million arising from settlement with merchants and full settlement of term loans of RM0.98 million. This has resulted in the improvement in our gearing ratio from 0.55 times in FY2018 to 0.02 times in FY2019.

Liquidity and Capital Reserves

The net cash inflow of the Group for FY2019 was RM20.41 million. This was attributable by:a) Cash outflow of RM0.64 million from operating activities;b) Cash outflow of RM3.75 million from investing activities; andc) Cash inflow of RM24.80 million from financing activities.

Cash outflow of RM0.64 million from operating activities was mainly due to the Group achieving lower PBT, higher trade receivables in FY2019 and prompt repayments of payables which was noted through the decrease in trade payables turnover period from 53 days in FY2018 to 35 days in FY2019.

Cash outflow from investing activities was mainly due to the acquisition of subsidiaries in relation to IPO exercise and purchase of property, plant and equipment for our new factory.

Cash inflow from financing activities of RM24.80 million was mainly attributable to the net proceeds from issuance of ordinary shares pursuant to IPO exercise of RM37.90 million and offset by the repayment of term loans and hire purchase of RM12.75 million.

As at 31 December 2019, our cash and cash equivalents stood at RM23.14 million.

OPERATIONAL AND FINANCIAL RISKS

Risk of Dependence on Our Major Customer

Our major customer contributed 59.8% (FY2018 : 65.5%) to our overall Group’s revenue. Our Group presently does not have any long-term contract with our major customer. Hence, any adverse changes in the consumer preference and taste may affect the development of various products manufactured or introduced by our major customer, which in turn may affect the demand for our range of specialised automation machines as our customer may scale back on their overall production and investment plan.

The Group will continue to expand its customer base by penetrating new market segments and regularly participate in local and overseas exhibitions.




Foreign Currency Risk

The Group is exposed to fluctuation in foreign exchange rate as a proportion of our sales and purchases are transacted in foreign currencies, namely in United States Dollar (“USD”) and Singapore Dollar (“SGD”). Any adverse movement in the foreign exchange markets may have adverse impact on our business performance, financial position and operating results.

Our Group’s foreign currency sales and purchases provide a natural hedge against fluctuations in foreign currencies and the Group continues to monitor our exposure to foreign currency movements on a regular basis. Should our exposure be substantial, the Group would consider financial instruments to hedge our exposure.

Market Risk

The Group remains cautious on the Covid-19 pandemic that could potentially pose some headwinds to the manufacturing industry. The Covid-19 outbreak is expected to slow down global economic growth, with the sentiment that lower consumer spending appetite is likely to discourage our customers to launch new product in the market, which may result in our customers delaying or cancelling new product launching and may directly reduce the need of our new test and automation machines. The Group will continue to explore new opportunity in modernising automation solutions and continue to improve our profit margin via research and development activities as set out in our IPO plan.

DIVIDEND POLICY

Our Group presently does not have any formal dividend policy. It is our intention to pay dividends to shareholders in the future while retaining adequate reserves for our future growth.

In respect of FY2019, an interim single-tier dividend of 0.15 sen per ordinary share amounting to RM1,832,216 was paid.

FORWARD LOOKING STATEMENT

A global economic slowdown is forecasted in 2020, pre-dominantly due to the economic fallout arising from the Covid-19 pandemic. Overall we expect the slowdown in E&E and home appliances industries resulting in possible decline in new orders as customers may cancel or postpone the launching of new products during this period. In anticipation of the potential drop of sales, we will focus on improving our profit margins through cost reduction, mainly through improvements in supply chain efficiency as well as design and manufacturing processes.

Although the Group has achieved its target sales in 2019, our overall profit has dropped. This was due to discounts given to customers to gain more sales, stiffer competitions from local and overseas competitors as well as higher cost to expansion into new process automation segments. The Group will continue to improve our costing, quality, product offerings and internal competencies to increase our competitiveness in the market.

Even though our dependency on major customers has dropped slightly in 2019, we are committed to further reduce the dependency in the future by enlarging our sales network, further enhance new business development through strategic alliances and collaborations with business partners to increase our market reach, especially in the automation business segment. Our long-term business strategy is not to be overly dependent on certain customer, product and industry. We intend to maintain a more balanced and diversified customers in the manufacturing segment, as well as getting equal contributions from both the tester and automation segments.

The Group is planning to restructure our Singapore operations in order to enlarge our customer base in Singapore where we intend to target more high value functional tester and automation business riding on the growth of medical and automotive industries there.

Lastly, the Group will continue to focus on R&D activities to develop standard modules and new technology solutions especially on IoT related solutions to be used in our testers and machines to improve our margin, efficiency and offerings. Continuous R&D on new features, products and solutions will strengthen our foundation, improve our competitiveness as well as to ensure the long-term growth and sustainability of our Group.

In summary, the Group would remain cautious for the financial year 2020.



i-Stone Annual Report 2019 Sustainability Statement

INTRODUCTION

The Group carries out its sustainability practices based on the Sustainability Reporting Guide (“Guide”) issued by Bursa Malaysia Securities Berhad. The Group strives to enhance long term sustainability to balance the needs of its stakeholders in generating long term benefits and business continuity by embedding the core areas of economic, environment and social measures in the Group’s business operations. The Group also believes that practicing sustainability will bring benefits for the Group by improving its reputation, image and strategic position in the market. The Group is committed to maintain sound corporate governance, continuously practise good ethics in all facets of its businesses, compliance with applicable laws and regulations where it operates.

SUSTAINABILITY GOVERNANCE

Our sustainability governance approach is directed by Board of Directors, supported by Managing Director and Senior Management in providing direction and guidance to ensure sustainable business strategy and risk management within the Group.

Board of Directors

Oversee sustainable business strategy and risk management

Managing Director, Executive Directors and Senior Management

Provide overall guidance and direction towards achieving sustainability objectives

Quality Environment and Management System CommitteeSafety and Health Committee

Responsible for matters relating to product quality, environment, workplace safety and human capital development


i-Stone Annual Report 2019Sustainability Statement

STAKEHOLDER ENGAGEMENT

A stakeholder is an individual or entity that has interests in a company who can either affect or be affected by the business. i-Stone Group acknowledges the importance of stakeholders’ engagement in identifying and understanding their needs and expectations for continuous growth. i-Stone Group’s key stakeholders include customers, employees, shareholders, suppliers and government agencies.

Stakeholder Group

Sustainability Concern i-Stone’s Response Type of Engagement

Customers • Quality product with competitive price

• On time delivery• Customer service• Manufacturing capability

and capacity, technology and innovation

• Comply to customer CSR requirement

• Establish manufacturing quality system

• Good project management practice

• Continuous learning and improvement

• Full compliance with customer CSR expectations

• Face-to-face meeting with customers

• Customer audit• On-site visits• Customer satisfaction

survey

Employees • Respect human rights • Occupational safety and

health• Career and talent

development• Competitive remuneration

and employee benefit• Work-life balance

• Encourage employee feedbacks

• Individual and department Objectives and Key Results (OKR) measurements

• Integrated training Reward and appreciation

• Company organised events

• Formal meetings and discussions

• Direct communication channel

• Performance appraisal• Training and development• Social events with

employees

Shareholders • Long term business growth plan

• Financial performance• Return of investment• Corporate sustainability• Interim results

• Enable investor relationship function

• Transparency of operational performance

• Establish risk management function

• Management competencies

• Quarterly analyst briefings• Quarterly financial results • Annual & Extraordinary

General Meetings• Announcements• Annual report • Ad-hoc meetings and

correspondence • Corporate website

Suppliers • Product quality• Competitive pricing• Business continuity• Long-term business

relationship

• Assessment on supply deliverables

• Supplier qualification plan

• Suppliers performance evaluation

• Regular feedback on performance

• Supplier auditGovernment and Regulatory Authorities

• Regulatory compliances • Adhere to all regulatory requirements

• Continuous monitoring of compliances

• Participating in social programme and exhibition

• Attend seminar related to new standards, Acts and regulations

• Announcement and Report submission to regulators.



MATERIAL ASSESSMENT

The Group has identified the following matters as key to its sustainability journey:

ECONOMIC

Ethics and Conducts

The Group is committed to conduct its business in compliance with applicable laws, rules and regulations in accordance with high ethical principles and standards to protect i-Stone’s reputation. Code of conduct is applied to all levels and grades in the organisation including board members, managers and employees to strengthen company-wide ethical standards and to sustain a work environment that fosters integrity, caring, respect and professionalism. The Group prohibits discriminatory conduct, sexual harassment, child labour and zero tolerance of any practices that seeks to obtain business through improper means.

All i-Stone’s new employees are required to attend one day’s induction training to understand the Group’s current polices and guidelines including Code of Conduct, Whistleblowing, Work, Health and Safety, Grievance Procedure and Insider Trading. An employee handbook will be provided to the employees on the expectations and compliance requirements of i-Stone. The Group expects employees to abide by the Code of Conduct and that employees shall be subjected to disciplinary actions for violation of the Code.

The Group encourages employees to raise concerns and discuss suspected violations of our business conduct without fear of reprisal with their respective Reporting Managers or directly to the Managing Director or Executive Directors of the Group. The Group’s Whistleblowing Policy enables employees and stakeholders to report or disclose through established channels verbally or in writing on genuine concerns about unethical behaviours, malpractices, illegal acts or failure to comply with regulatory requirements. Employees may also utilise the i-Stone’s Grievance Procedure to raise their work grievances.

To maintain a competitive advantage, the Group signs unilateral privacy agreement with employees, contractors, customers, suppliers and others in the course of business activities. The Group also collects, uses and stores personal information and is therefore bound to respect the privacy rights of all these individuals.

Economics Social

Environmental

• Ethics and Conducts• Commitment towards

Quality

• Environmental Compliance

• Energy Saving • Employee• Health and Safety• Emergency Response• Talent Training and

Development Programme• Employee Welfare and

Social Activities• Corporate Social

Responsibilities (CSR)

Sustainability Statement



Commitment towards Quality

i-Stone’s Quality Policy is to develop and produce quality products and services that consistently conform to customers requirements and satisfactions. Our subsidiary, i-Stone Systems Sdn Bhd has successfully renewed its ISO 9001:2015 certification under UKAS and DSM accreditation bodies in 2019. To further strengthen the effectiveness of our quality management system, two more of our subsidiary companies ie, i-Stone Engineering Sdn Bhd and P. A. Metal Technics Sdn Bhd, were certified with ISO 9001:2015 in 2019. We also integrated our ISO 9001:2015 certifications with environment requirement standard, ISO 14001:2015.

ENVIRONMENTAL

i-Stone is mindful of the environmental impact in our business process and is totally committed to ensure that we conduct our business in the best environmental practices as evident by our ISO 14001:2015 certification and through the following actions during 2019.

Environmental Compliance

Compliance with Environment Quality (Schedule Waste) Regulation 2005

The Group has undertaken comprehensive steps to train competent staff to manage schedule waste and built schedule waste storage since July 2019. All inventories in e-Swis are updated by our competent schedule waste officer. The Group has appointed licensed schedule waste facility / transporter registered and approved by the Department of Environment to dispose all schedule wastes in compliance with the Environment Quality Act 1974 under Environment Quality (Schedule Waste) Regulation 2005.

The table below shows the Group’s generation of schedule wastes in 2019.

No. Types of schedule waste (code) Total Generation Weight (kg)1 SW 110 (electric/electronic waste) 900 - 9502 SW 422 (copper) 300 - 3503 SW 422 (chip waste) 5,450 - 5,5004 SW 410 (contaminated rags/glove/filter/paper) 150 - 2005 SW 307 (spent coolant) 550 - 6006 SW 417 (waste powder coat) 1,350 - 1,4007 SW 409 (discarded chemical container) 100 - 1508 SW 322 (spent thinner) 750 - 8009 SW 418 (off spec paint) 50 - 100

Compliance with Fire Service Act (1988)

The Group is committed to provide a sustainable safety environment in life safety, fire prevention, fire protection and firefighting facilities in its building. As such, compliances to Fire Service Act 1988 are ensured.

The Group had installed an Automatic Fire Alarm Monitoring Control System (SPKA) linked directly to the Fire Rescue Station. The system is renewed on a yearly basis yearly with BOMBA authorised agent. The fire fighting facilities and equipment at the Group’s factory are inspected, checked and tested quarterly by our contracted registered competent fire protection service provider registered with BOMBA.

Energy Saving

Striving for sustainable environment and financial benefits through reduction in energy consumption will be a continuous effort of the Group. Our Group operates in hot weather conditions throughout the year, and air conditioners are used to improve thermal comfort. Sustainable approach is being taken to counter air conditioning effects such as global warming effects. The Group have set thermostats at controlled optimal levels in different parts of our building at different times so that our staff can work in comfort while saving energy. At the same time, only energy efficient LED lights are used. The Group’s business process is not water intensive. Nevertheless, we strive to save water for general maintenance and cleaning of the factory by using uncontaminated wastewater together with water collected from our monthly fire fighting equipment test such as fire hose and hydrant.




SOCIAL

Employees

The Group is a socially responsible employer and recognises its employees as a strength in the organisation’s growth. The Group encourages a healthy work-life balance for employees through sports activities to improve employee’s productivity and well-being. Employees are encouraged to put forward proposals and suggestions to improve factory facilities / workplace / compensations or benefits. The Group is diversified in its workplace without discrimination in gender equality, age and ethnicity at all levels of the organisation. The Group’s remuneration policy provides equal opportunities to potential candidates to be part of the organisation based on skill, knowledge, qualification, experience and commitment. This is supplemented with performance appraisal carried out by employees and supervisors to avoid biasness. The Group has zero tolerance towards sexual harassment threats or acts of violence and physical intimidation.

The table below shows the total number of employees of i-Stone Group.

Headcount %By GenderFemale 61 24.2Male 191 75.8By Age<30 152 60.330 - 39 78 31.040 - 49 15 5.9>50 7 2.8Total 252 100.0

The Group promotes the Japanese philosophy of 5S towards our employees and it was well implemented during the year. 5S stands for Sort, Set in order, Shine, Standardise and Sustain. The objective of implementing this 5S Policy is to create an organised, clean, healthy and safe working environment for employees while at the same time improving work efficiency by eliminating waste of motion in search of tools, materials or information. The Group has a 5S committee to monitor, organise, conduct training sessions and holds competitions for employees to encourage the good practice of 5S culture. The 5S committee does monthly audit of each department to ensure sustainability of the policy.

Health and Safety

It has always been the Group’s priority to cultivate a safe, healthy and productive work environment for the employees. The Group adheres strictly to the Occupational Health & Safety (OHS) management principles to safeguard employees and prevent the occurrence of occupational accidents. Hazard Identification, Risk Assessment and Risk Control (HIRARC) are conducted throughout all work areas periodically to prevent accidents, injuries and illnesses.

The Safety, Health and Environment Committee comprises of a representative from each department in our organisation assigned to supervise and to ensure that their departmental workstation is safe and free from hazards and injuries. Regular premise inspections are conducted to ensure safety policies are abided, to identify and record hazards for Management’ s review for corrective actions.




Emergency Response

The Group has set up an Emergency Response Team (ERT) in compliance with international safety and environment standards. The ERT consist of 42 employees, divided into several functional groups responsible for evacuation, incident and safety control. In order to ensure every functional group fully understands their roles and responsibilities, the members are required to be well equipped with emergency-related trainings. A guideline for emergency response plan and preparedness has also been established for each group members duties and actions in preparedness for any emergency, prevent or curb incident from happening and taking into consideration of any unforeseen risk problems. Our ERT has completed a two days Essential Fire Fighting and Emergency Respond Plan & Preparedness training awareness on fire safety and emergency procedures; First Aid Team trained for two days on first-aid treatment knowledge; and Fire Fighter Team undergone training on fire and emergency evacuation procedures from threats or hazards and handling of firefighting equipment in 2019. On 30 April 2019, the Group successfully organised an emergency evacuation exercise and fire drill training together with BOMBA to acquaint our employees with emergency procedures and preparedness in the event of emergency.

Talent Training and Development Programme

The Group acknowledged the strong desires of employees to improve their knowledge, technical skills and soft skills along with corporate growth plans. The Group organises internal and external trainings for employees to acquire knowledge and new skillset required for their job. Through these training programmes, the Group keeps our employees in the forefront position with industry developments. The Group hopes to achieve a minimum of 4 hours training for at least 80% of the employees in their related field of work. In 2019, the Group had offered 116 training sessions covering 5,963.5 training hours for employees from the respective departments.

The Group also organise several ‘Coffee Talk” sessions to give our employees the opportunity to relax and engage with the seniors to share knowledge, work, resolve potential problems which can develop strong relationships and loyalty.

The Group understands the importance of continuing education towards talent development and has a scholarship programme for eligible employees to pursue higher education including undergraduate and postgraduate programmes in local universities. In 2019, 10 employees were sponsored for higher education learning programmes. The Group also collaborates with local universities to provide internship programme for various engineering disciplines. A total of 21 undergraduate students completed their internship with the Group in 2019. The Group also organises industrial day tour for the local university students to increase their exposure and passion in this field.

33% 6% 17% 26% 7% 6% 3% 4%

35

7 7 531

20 8 3

Product & ServicesTraining

Health & SafetyTraining

Human ResourceManagement

Finance andAccounting

Others

ISOTraining

OrganistaionSkills

Supply Chain & Purchasing

Total Conducted Training: 116



i-Stone Annual Report 2019 Sustainability Statement

Employee Welfare and Social Activities

In appreciation of the contributions and support from our employees, social activities such as weekly recreation sports events, jamuan berbuka puasa, movie nights, festivals and monthly birthday celebrations for employees were organised. These activities not only foster employer-employee relationship but promote a healthy work-life balance. An Annual Dinner was also organised to gather employees together to celebrate a successful 2019 capturing precious moments and memories with awesome Hawaii costume theme.


i-Stone Annual Report 2019Sustainability Statement

Corporate Social Responsibilities (CSR)

Hosting a young group of future engineers from My-Robot Taman Universiti – Robotics & Coding Academy for an industrial visit at our company.

Supporting the Johor Impact Challenge organised by the Collaborative Research in Engineering, Science and Technology (CREST) and Universiti Teknologi Malaysia (UTM) by conducting a tour to our factory and sharing sessions with the students as well as judging the competition.

Providing donation to Persatuan Kebajikan i-Kasih Johor Bahru in aid of the poor.


i-Stone Annual Report 2019 Corporate Governance Overview Statement

This Corporate Governance Overview Statement is presented pursuant to Paragraph 15.25(1) of the Ace Market Listing Requirements (“ACE LR”) of Bursa Malaysia Securities Berhad (“Bursa Securities”).

The objective of this Statement is to provide an overview of the application of the corporate governance practices of the Group during the financial year ended 31 December 2019 (“FY 2019”) and to ensure good corporate governance is practiced throughout the Group as a fundamental part of discharging its fiduciary responsibilities to safeguard and enhance shareholders’ value and the financial performance of the Group in accordance with the Malaysian Code on Corporate Governance (“MCCG”).

PRINCIPLE A : BOARD LEADERSHIP AND EFFECTIVENESS

The Board’s main roles are to create value for shareholders and provide leadership to the Group. It is primarily responsible for the Group’s overall strategic plans and directions, overseeing the conduct of the businesses, risk management, succession planning of Senior Management, implementing investor relations programmes and ensuring the system of internal controls and management information system are adequate and effective.

The Board provides overall strategic guidance, effective oversight on the governance and management of the business affairs of the Group. Responsibilities of the Board include:

(a) at all times act honestly, fairly, ethically and diligently in all aspects in accordance with the laws, rules and regulations applicable to the Company;

(b) ensure stakeholders are kept informed of the Company’s performance and major developments affecting its state of affairs;

(c) identify and manage principal risks affecting the Company;

(d) maintain a robust and sound framework for internal control and risk management to identify, analyse, evaluate, manage and monitor significant financial and non-financial risks;

(e) be responsible for the overall corporate governance of the Group, including environmental and social impact and the Group’s strategic direction, establishing goals for Management and monitoring the achievement of these goals;

(f) input into and approve Management development of corporate strategies, including setting performance objectives;

(g) monitor corporate performance and implementation of strategies and policies;

(h) monitor and review Management processes aimed at ensuring the integrity of financial and other reporting with the guidance of the Audit and Risk Management Committee (“ARMC”);

(i) ensure that succession planning of the Board and Senior Management is in place;

(j) monitor the Board composition, processes and performance with the guidance of the Nomination Committee; and

(k) review and approve remuneration of Directors under the guidance of the Remuneration Committee.

In discharging its duties, the Board is assisted by the Board Committees namely ARMC, Remuneration Committee and Nomination Committee. Each Committee operates within its respective defined Terms of Reference (“TOR”) which have been approved by the Board. The TOR of the respective Board Committees are periodically reviewed and assessed to ensure that the TOR remain relevant and adequate in governing the functions and responsibilities of the Committee concerned and reflect the latest developments in the ACE LR of Bursa Securities and the MCCG.


i-Stone Annual Report 2019Corporate Governance Overview Statement

A. Audit and Risk Management Committee (“ARMC”)

For details of its composition and activities during the FY 2019, please refer to the ARMC Report on pages 44 of this Annual Report.

B. Remuneration Committee (“RC”)

The RC is appointed by the Board and consists entirely of Independent Non-Executive Directors as follows:-

Members DesignationChia Gek Liang Chairman - Independent Non-Executive DirectorLaw Lee Yen Member - Independent Non-Executive DirectorProfessor Dr. Ruzairi Bin Hj Abdul Rahim Member - Independent Non-Executive Director

The RC reviews and reports to the Board on remuneration and personnel policies, compensation and benefits programmes with the aim to attract, retain and motivate individuals of the highest quality. The remuneration should be aligned with the business strategy and long-term objectives of the Group, and to reflect the Board’s responsibilities, expertise and complexity of the Group’s activities. The RC shall be appointed by the Board and shall comprise exclusively Non-Executive Directors with a majority of Independent Directors.

The remuneration package of each Executive Director is structured to reflect his or her experience, performance and scope of responsibilities. The remuneration of Non-Executive Directors is in the form of annual fees which are approved by the shareholders at the annual general meeting (“AGM”). Where applicable, the Board also takes into consideration any relevant information from survey data.

In carrying out its duties and responsibilities, the RC has full, free and unrestricted access to the Group’s records, properties and personnel. During the FY 2019, the RC convened one meeting and full attendance of the members were recorded at the meeting. The meeting was held to review the remuneration packages of the Directors. The TOR of the RC is available for reference at www.i-stone.com.my

The details of the aggregate remuneration of the Directors of the Company (comprising remuneration received and/or receivable from the Company and its subsidiaries) during the FY 2019 are categorised as follows:

Company

Fee

Salaries, emoluments and

statutory contribution(i) Bonuses

Benefits in-kind(ii) Total

RM RM RM RM RM

Independent Non-Executive Directors:

Dato’ Azman Bin Mahmood 60,000 - - 1,600 61,600

Chia Gek Liang 60,000 - - 1,600 61,600

Professor Dr. Ruzairi Bin Hj Abdul Rahim 48,000 - - 1,000 49,000

Law Lee Yen 48,000 - - 1,000 49,000

Executive Directors:

Tee Sook Sing - - - - -

Chan Kok San - - - - -

Chin Chung Lek - - - - -

Total 216,000 - - 5,200 221,200



B. Remuneration Committee (“RC”) Cont’d

The details of the aggregate remuneration of the Directors of the Company (comprising remuneration received and/or receivable from the Company and its subsidiaries) during the FY 2019 are categorised as follows:

Group

Fee

Salaries, emoluments and

statutory contribution(i) Bonuses

Benefits in-kind(ii) Total

RM RM RM RM RM

Independent Non-Executive Directors:

Dato’ Azman Bin Mahmood 60,000 - - 1,600 61,600

Chia Gek Liang 60,000 - - 1,600 61,600

Professor Dr. Ruzairi Bin Hj Abdul Rahim 48,000 - - 1,000 49,000

Law Lee Yen 48,000 - - 1,000 49,000

Executive Directors:

Tee Sook Sing - 445,372 39,163 11,100 495,635

Chan Kok San - 429,389 30,925 9,900 470,214

Chin Chung Lek - 229,167 16,891 11,100 257,158

Total 216,000 1,103,928 86,979 37,300 1,444,207

Notes:(i.) Statutory contributions comprised EPF.(ii.) Benefits-in-kind comprised meeting allowance and provision of company motor vehicle, petrol allowance,

insurance and phone bill.

C. Nomination Committee (“NC”)

The NC is delegated with the responsibility to ensure a formal and transparent procedure for the appointment of new Directors to the Board. The NC will review and assess the proposed appointment of new Directors, and there upon make the appropriate recommendations to the Board for approval. In addition, the NC is also responsible for reviewing candidates for appointment to the Board Committees and making appropriate recommendations to the Board for approval. It is also tasked with assessing the competencies and effectiveness of the Board, the Board Committees and the performance of individual directors in ensuring that the required mix of skills and experience are present on the Board.

The NC is appointed by the Board and consists entirely of Independent Non-Executive Directors as follows:-

Members DesignationChia Gek Liang Chairman - Independent Non-Executive DirectorLaw Lee Yen Member - Independent Non-Executive DirectorProfessor Dr. Ruzairi Bin Hj Abdul Rahim Member - Independent Non-Executive Director

Corporate Governance Overview Statement



C. Nomination Committee (“NC”) Cont’d

In carrying out its duties and responsibilities, the NC has full, free and unrestricted access to the Group’s records, properties and personnel. The NC was instituted on 1 November 2018. Accordingly, the NC has yet to discharge its responsibilities fully under the TOR empowered by the Board. During the FY 2019, the NC convened one meeting and full attendance of the members were recorded at the meeting. The meeting was held to review the assessment on independence of Independent Non-Executive Directors. The NC also reviewed and recommended the re-election of Members of the Board who are retiring at the AGM for shareholders’ approval, pursuant to the Constitution of the Company. The TOR of the NC is available for reference at www.i-stone.com.my

Roles of the Chairman and Managing Director

There is a clear segregation of responsibilities between the Chairman and Managing Director to ensure there is an appropriate balance of power, authority and accountability at the Board level.

The Chairman of the Board plays a critical role on the Board, leading the Board in its responsibilities for the business and affairs of the Group and oversight of Management while the Managing Director is responsible to the Board for the overall management and profit performance of the Group, including all day-to-day operations and administration within the framework of Group policies, reserved powers and routine reporting requirements. The Managing Director may delegate aspects of her authority and power but remains accountable to the Board for the Group’s performance.

Role of the Company Secretaries

The Company Secretaries are responsible for ensuring that the Board procedures are followed, that the applicable rules and regulations for the conduct of the affairs of the Board are complied with and for all matters associated with the maintenance of the Board or otherwise required for its efficient operation. The Company Secretaries will also advise the Board on any new statutory requirements, guidelines and listing rulings relating to corporate governance as and when it arises. All Board members have direct access to the advice and services of the Company Secretaries for the purpose of the Board’s affairs and the business.

Access to Information and Advice

Prior to the Board meetings, every Director is given an agenda and a comprehensive set of Board papers consisting reports on the Group’s financial performance, the quarterly or annual financial results, the minutes of preceding meetings of the Board and the Board Committees, and relevant proposal papers (if any) to allow them sufficient time to review, consider and deliberate knowledgeably on the matters to be tabled.

Senior key management as well as advisers and professionals appointed to act for the Company on corporate proposals to be undertaken by the Company are invited to attend the meetings to furnish the Board with their views and explanations on relevant agenda items tabled to the Board and to provide clarification on issues that may be raised by any Director.

In between Board meetings, approvals on matters requiring the sanction of the Board are sought by way of circular resolutions enclosing all the relevant information to enable the Board to make informed decisions. All circular resolutions approved by the Board are tabled for notation at the subsequent Board meeting.

The Board also perused the decisions deliberated by the Board Committees through minutes of these Committees. The Chairman of the Board Committees is responsible for informing the Board at the Directors’ Meetings of any salient matters noted by the Committees and which may require the Board’s direction.

The Board members have access to the advice and services of the Company Secretaries and senior key management. The Board, whether as a full board or in their individual capacity, in the furtherance of their duties, may seek independent professional advice in discharge of their duties and obligations at the Company’s expense.




Board Charter

The Board Charter sets out the principles governing the Board and adopts the principles and practices of good corporate governance in the management of the Group.

The Board Charter shall be reviewed by the Board as and when required to ensure its relevance in assisting the Board to discharge its duties with the changes in the corporate laws and regulations that may arise from time to time and to remain consistent with the Board’s objectives and responsibilities.

The Board Charter is published on the Company’s website at www.i-stone.com.my

Code of Conduct

The Group’s Codes of Conduct (“the Code”) reflects the objective of management to reinforce Group-wide ethical standards and to sustain a work environment that fosters integrity, caring, respect and professionalism. It is to serve the long-term interest of the Group by following the policy strictly to be lawful, highly principled and socially responsible in all business activities. The Code is published on the Company’s website at www.i-stone.com.my

Whistleblowing Policy

The Group has set out various channels for employees or stakeholders to report or disclose any genuine concerns about unethical behaviour, malpractices, illegal acts or failure to comply with regulatory requirements (“reportable misconduct”). The whistleblowing policy also provides protection for the party who reported allegations of such malpractice / misconduct / wrongdoings. The policy is published on the Company’s website at www.i-stone.com.my

Board Composition and Independence

The Board currently has 7 members, comprising 4 Independent Non-Executive Directors and 3 Executive Directors. The Chairman of the Board is an Independent Non-Executive Director. The current composition of the Board is in compliance with Paragraph 15.02 of the ACE Market Listing Requirements of Bursa Securities. The profile of each Director is presented under Directors’ Profile on pages 5 to 8 of the Annual Report.

Appointments and Re-elections to the Board

Candidates for appointment to the Board as Independent Directors are selected after taking into consideration the mix of skills, experience and strength that would be relevant for the effective discharge of the Board’s responsibilities. Potential candidates are first evaluated by the NC and, if recommended by the NC, subsequently, by the Board based on their respective profiles as well as their character, integrity, professionalism, independence and their ability to commit sufficient time and energy to the Group’s matters.

Article 131 of the Constitution of the Company provides that one third (1/3) of the Directors for the time being shall retire from office and an election of Directors shall take place at the forthcoming AGM of the Company provided always that each Director shall retire at least once in every three (3) years but shall be eligible for re-election.

The following Directors are up for retirement at the forthcoming AGM of the Company and have offered themselvesfor re-election at the said AGM:

(i.) Dato’ Azman Bin Mahmood(ii.) Mr. Chia Gek Liang

Gender Diversity Policy

The Board recognizes the importance of gender diversity and is committed to the extent practicable, to address the recommendation of the MCCG relating to the establishment of a policy formalizing its approach to boardroom and workplace diversity.

The current Board composition consists of two women Directors, one of whom is our Managing Director whilst the other is the Chairperson of our ARMC.




Annual Assessment

The NC annually reviews the size and composition of the Board and the Board Committees in order to ensure the Board and the Board Committees have the requisite competencies and capacity to effectively oversee the overall business and carry out their respective responsibilities. The NC uses the Board and Board Committee Evaluation Form comprising questionnaires for the assessment. The effectiveness of the Board is assessed in the Board’s responsibilities and composition, administration and conduct of meetings, communication and interaction with Management and stakeholders and Board engagement. A Board Skills Matrix Form is also used as a general assessment of the composition, knowledge, skills and experience of the current Board.

The annual evaluation of the individual Director/Board Committee member is performed by the NC via the Directors’ Evaluation Form comprising questionnaires pertaining to the Director’s knowledge and skills, participation, contribution and performance, calibre and personality.

To assess the independence of the Independent Directors, each of the Independent Directors annually provides the NC with their Self-Assessment Independence Checklist.

Meetings and Time Commitment

The Board usually meets at least 4 times a year at quarterly intervals with additional meetings convened when necessary. During the FY 2019, the Board met on four occasions; where it deliberated on matters such as the Group’s financial results, strategic decisions, business plan, and strategic direction of the Group among others. Board meetings for each year are scheduled in advance before the end of the preceding year in order for Directors to plan their schedules. The Board is satisfied with the level of time commitment of the Directors from their attendance at the Meetings. The record of the Directors’ attendance at Board Meeting for the FY 2019 is contained in the table below:-

Board Members AttendanceDato’ Azman Bin Mahmood 4/4 Tee Sook Sing 4/4 Chan Kok San 4/4Chin Chung Lek 4/4 Chia Gek Liang 4/4 Professor Dr. Ruzairi Bin Hj Abdul Rahim 4/4 Law Lee Yen 4/4

The Board was satisfied with the level of time commitment given by the Directors towards fulfilling their roles and responsibilities as Directors of the Company during the FY 2019. All the Directors do not hold directorships more than that prescribed under the Listing Requirements of Bursa Securities.




Directors’ Training

The Directors also made time to attend appropriate external training programs to equip themselves further with the knowledge to discharge their duties more effectively and to keep abreast of developments on a continuous basis in compliance with Paragraph 15.08 of the Listing Requirements of Bursa Securities, the details of which are set out below:

Name Programmes/ Seminar Attended Dated Attended DurationDato Azman Bin Mahmood

Fighting Corruption / Corporate Governance and MACC / Introduction to Blue Ocean Shift / Emerging AL trends that shape future strategies

12 September 2019 1 Day

Tee Sook Sing Introduction to ISO 9001:2015 Quality Management System

19 February 2019 1 Day

Introduction to ISO 14001:2015 Environmental Management System


ISO9001: 2015 Risk Management 22 February 2019 1 DayIdentification and Assessment of EnvironmentalAspects Impacts, Risk and Opportunities

20 March 2019 1 Day

Hiring Effectively Using Behavioural Interview & DISC Profiling

3 & 4 April 2019 2 Days

Mandatory Accreditation Programme 11 & 12 April 2019 2 DaysUnderstanding Malaysia Environmental Law 16 April 2019 1 DayLEAD Program for Managers 19 & 20 April 2019 2 Days

Chan Kok San Mandatory Accreditation Programme 11 & 12 April 2019 2 DaysShape Analysts’ Expectations! The fundamentals of how to win over equity analysts every company must know

28 November 2019 1 Day

Chin Chung Lek Introduction to ISO 9001:2015 Quality Management System


Introduction to ISO 14001:2015 Environmental Management System


ISO9001: 2015 Risk Management 22 February 2019 1 DaySMI – Master Class Supervisory Leadership, Supervisory Motivation and Supervisory Creativity

12 March 2019 1 Day

Identification and Assessment of EnvironmentalAspects Impacts, Risk and Opportunities

20 March 2019 1 Day

Hiring Effectively Using Behavioural Interview & DISC Profiling

3 & 4 April 2019 2 Days

Mandatory Accreditation Programme 11 & 12 April 2019 2 DaysUnderstanding Malaysia Environmental Law 16 April 2019 1 DayLEAD Program for Managers 19 & 20 April 2019 2 DaysTax Deductible Workshop 24 May 2019 1 DayConducting an Effective Internal QEMS Auditing 6 & 7 August 2019 2 Days

Chia Gek Liang Wills, Probate, Letters of Administration and Small Estate Distribution Act

24 January 2019 Half Day

Malaysian Financial Reporting Standards Made Simple for Director and Senior Management

22 March 2019 1 Day

Common Offences & Pitfalls to avoid under theCompanies Act 2016

18 April 2019 Half Day

Volatility Based Technical Analysis 17 August 2019 1 DaySession on Corporate Governance & Anti-Corruption 31 October 2019 Half DayAudit Oversight Board conversation with Audit Committees

22 November 2019 Half Day




Directors’ Training Cont’d

The Directors also made time to attend appropriate external training programs to equip themselves further with the knowledge to discharge their duties more effectively and to keep abreast of developments on a continuous basis in compliance with Paragraph 15.08 of the Listing Requirements of Bursa Securities, the details of which are set out below: Cont’d

Name Programmes/ Seminar Attended Dated Attended DurationProfessor Dr. Ruzairi Bin Hj Abdul Rahim

Mandatory Accreditation Programme 11 & 12 April 2019 2 Days

Law Lee Yen Mandatory Accreditation Programme 11 & 12 April 2019 2 DaysNational Tax Conference 2019 5 & 6 August 2019 2 DaysMFRS impact to construction contracts and property development activities

16 October 2019 1 Day

Budget Seminar 2019 18 November 2019 1 Day

PRINCIPLE B: EFFECTIVE AUDIT AND RISK MANAGEMENT

Suitability and Independence of External Auditors

The External Auditors report to the ARMC in respect of their audit on each year’s statutory financial statements on matters that require the attention of the ARMC. At least once a year, the ARMC will have a separate session with the External Auditors without the presence of the Executive Directors and Management.

The External Auditors are required to declare their independence annually to the ARMC as specified by the by- laws issued by the Malaysian Institute of Accountants. The External Auditors had provided the declaration in their annual audit plan presented to the ARMC.

The ARMC undertakes annual assessment of the suitability and independence of the External Auditors. The factors considered by the ARMC in its assessment include, adequacy of professionalism and experience of the staff, the resources, the fees and the independence of and the level of non-audit services rendered to the Group.

Sound Risk Management Framework

The Board recognises the importance of a sound risk management framework and internal control system in order to safeguard the Group’s assets and therefore, shareholders’ investments in the Group.

The Board affirms its overall responsibility for the Group’s system of internal controls. This includes reviewing the adequacy and integrity of financial, operational and compliance controls and risk management procedures within an acceptable risk profile. Since certain risks and threats are externally driven, unforeseen and beyond the Group’s control, the system can only provide reasonable assurance against misstatement or loss.

The Board had put in place an ongoing process for identifying, evaluating and managing significant risks faced by the Group.

Internal Audit Function

The Group has outsourced the internal audit function to Needsbridge Advisory Sdn Bhd, an internal audit consulting firm. The engagement was done during the FY 2019 where the ARMC and Board approved the proposed internal audit plan for FY 2020 and 2021 and Risk Management Framework and Key Risk Report.




PRINCIPLE C: INTEGRITY IN CORPORATE REPORTING AND MEANINGFUL RELATIONSHIP WITH STAKEHOLDERS

Compliance with Applicable Financial Reporting Standards

The Board is assisted by the ARMC to oversee the Group’s financial reporting processes and the quality of its financial reporting and to ensure that the financial statements of the Group and the Company comply with applicable financial reporting standards in Malaysia. Such financial statements comprise the quarterly financial report announced to Bursa Securities and the annual audited financial statements.

A Statement by the Board of its responsibilities in respect of the preparation of the annual audited financial statements is set out on page 50 of this Annual Report.

Investors Relations and Shareholders Communication

The Group identifies the importance of effective and timely communication with shareholders and investors to keep them informed of the Group’s latest financial performance and material business/corporate matters affecting the Group. The information about the Group’s business and corporate developments is circulated via the Company’s annual reports, various disclosures to Bursa Securities including quarterly financial results and various announcements made from time to time.

The AGM provides the main platform for dialogue and interactions with the shareholders. At the meeting, the Chairman sets out the performance of the Group for the financial year then ended. Question and Answer session will then be convened wherein the Directors, Company Secretaries and the External Auditors will be available to answer to the queries raised by the shareholders.

Voting at the forthcoming AGM will be conducted by poll as poll voting reflects shareholders’ views more accurately and fairly as every vote is properly counted in accordance with the one share, one vote principle. The Company will continue to explore the deployment of technology to enhance the quality of engagement with shareholders and further facilitate greater participation by shareholders at general meetings of the Company.

Shareholders and the public can also access information on the Group’s background, products and financial performance through the Company’s website www.i-stone.com.my




The Directors are responsible for preparing the Annual Report and the Group and Company financial statements in accordance with applicable law and regulations, such as Malaysian Financial Reporting Standards, International Financial Reporting Standards, the requirements of the Companies Act 2016 (“the Act”) and pursuant to Paragraph 15.26(a) of the Ace Market Listing Requirements of Bursa Malaysia Securities Berhad to ensure that the financial statements give a true and fair view of the state of affairs, the results and the cash flows of the Group and of the Company for the financial year.

In preparing each of the Group and Company financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;• make judgements and estimates that are reasonable and prudent; and• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the

Group and the Company will continue in business.

The Directors are also responsible to ensure that proper accounting and other records are kept to ensure that financial statements comply with the Act as well as taking reasonably available steps to safeguard the assets of the Group and the Company, and to prevent and detect fraud and other irregularities.

This statement is made in accordance with a resolution of the Board dated 28 May 2020.

Statement On Directors’ Responsibility In Relation To The Financial Statements


i-Stone Annual Report 2019 Additional Compliance Information

1. Utilisation of Proceeds

In conjunction with its listing on the ACE Market of Bursa Malaysia Securities Berhad, the gross proceeds arising from the Public issue amounting to RM39.09 million is intended to be utilised based on the IPO Price in the following manners:-

Details of utilisationProposed Utilisation

Actual Utilisation

Unutilised Amount

Estimated timeframe for

utilisation upon listing

RM’000 RM’000 RM’000

Process and product development 4,200 517 3,683 Within 24 monthsRepayment of borrowings 13,482 13,482 - Within 12 monthsConstruction of new D&D centre 6,800 - 6,800 Within 48 monthsCapital expenditures 5,200 508 4,692 Within 24 monthsWorking capital requirements 5,905 365 5,540 Within 36 monthsEstimated listing expenses 3,500 3,500 - Within 1 months

39,087 18,372 20,715

The utilisation of proceeds as disclosed above should be read in conjunction with the Prospectus of the Company dated 21 June 2019.

2. Audit and Non-Audit Fees The total amount of audit fees paid or payable to the external auditors by the Company and Group during the financial year ended 31 December 2019 were RM17,000 and RM90,881 respectively.

The non-audit fees paid or payable to the external auditors, or a firm or corporation affiliated to the auditors’ firm by the Company during the financial year ended 31 December 2019 were RM200,000. The non-audit fees were mainly for the service rendered for Reporting Accountant for listing exercise.

3. Material Contracts

There were no material contracts entered into by the Company and / or its subsidiaries involving the interests of Directors and major shareholders, which subsisted at the end of the financial year or, if not then subsisting, entered into since the end of the previous financial year.

4. Recurrent Related Party Transactions

The Company and its subsidiaries did not have any recurrent related party transactions which requires shareholder’s mandate during FYE 2019.


i-Stone Annual Report 2019Statement On Risk Management And Internal Control

INTRODUCTION

Pursuant to paragraph 15.26(b) and Guidance Note 11 of the Bursa Malaysia Securities Berhad’s ACE Market Listing Requirements (“Listing Requirements”) in relation to requirement to prepare statement about the state of internal control of the listed issuer as a group, and as guided by the Statement on Risk Management and Internal Control: Guidelines for Directors of Listed Issuers (“the Guidelines”) and the Malaysian Code on Corporate Governance, the Board of Directors (“the Board”) of i-Stone Group Berhad (“i-Stone” or “the Company”) (collectively with its subsidiaries, “the Group”) is pleased to present the statement on the state of the internal controls of the Group for the financial year ended 31 December 2019. The scope of this Statement includes the Company and its operating subsidiaries.

BOARD RESPONSIBILITIES

The Board affirms its overall responsibility for maintaining a sound governance, risk management and internal control systems and for reviewing their adequacy and effectiveness so as to provide assurance on the achievement of the Group’s corporate objectives and strategies and to safeguard all its stakeholders’ interests and protecting the Group’s assets as well as to establish risk appetite of the Group based on the mission, vision, core value, strategies, business objectives, external environment, business nature and corporate lifecycle. The Board is committed to the establishment and maintenance of an appropriate control environment and governance framework that is embedded into the corporate culture, strategies and processes of the Group as well as to articulate and implement risk management and internal control system. The Board has delegated its oversight role to Audit and Risk Management Committee (“ARMC”) on the implementation and establishment of risk management framework and internal control systems of the Group and to provide assurance to the Board on the adequacy and effectiveness of the same. Through the ARMC, the Board is kept informed on all significant risks, control issues and provided with reasonable assurance that any impact arising from foreseeable future events or situations is properly managed and/or mitigated.

The system of internal control covers, inter-alia, risk management as well as financial, operational, sustainability and compliance controls. However, in view of the limitations that are inherent in any system of internal control, the system of internal control is designed to manage, rather than to eliminate, the risk of failure to achieve the Group’s business objectives. Accordingly, the system of internal control can only provide reasonable and not absolute assurance against material misstatement of losses and fraud.

RISK MANAGEMENT

The Board recognises risk management as an integral part of system of internal control and good management practice in pursuit of its mission, vision, core value, strategies and business objectives. The Board maintains an on-going commitment for identifying, evaluating and managing significant risks and opportunities faced by the Group systematically during the financial year under review. The Board had put in place a formal Risk Management Framework, as the governance structure and processes for the risk management on enterprise wide, in order to embed the risk management practice into all level of the Group and to manage key business risks faced by the Group as well as to optimize key business opportunities available to the Group adequately and effectively as second-line-of-defense. The duties for the identification, evaluation and management of the key business risks and opportunities are delegated to the Risk and Sustainability Management Working Group (“RSMWG”) which consist of Managing Director, Executive Directors, Key Sustainability & Risk Officer and Heads of Departments. The principles, practices and process of Risk Management Policy established by the Board are, in material aspects, guided by the ISO 31000:2018 – Risk Management Guidelines.



RISK MANAGEMENT Cont’d

The Risk Management Framework established lays down the risk management’s objectives and processes established by the Board with formalised governance structure of the risk management activities of the Group established as follows:

Clear roles and responsibilities of the Board, the ARMC, RSMWG, Risk Owners and Internal Audit Function are defined in the Risk Management Framework. In particular, the roles and responsibilities of RSMWG in relation to the risk management are as follow:-

(a) implement the Group Risk Management Framework approved by the Board;(b) implement the risk management process which includes the identification of key risks and devising

appropriate action plan(s) in cases where existing controls are ineffective, inadequate or non-existence and communicate methodology to the risk owners;

(c) ensure that risk strategies adopted are aligned with the Group’s organisational strategies. (e.g. vision/mission, corporate strategies/goals, etc.), Group Risk Management Framework (including policies and processes), tolerance, risk appetite;

(d) continuous review and update of the Key Risk Registers (including incorporation new or emerging risks or integration of business risks from implementation and integration of new strategies and business objectives into new key risk registers for monitoring) and compilation of Key Risk Profile and Key Risk Report of the Group due to changes in internal and external business context, business processes, business strategies or external environment and determination of Management action plan, if required;

(e) update the Board, through the ARMC, on changes to the Key Risk Profile on periodical basis (at least on annual basis) or when appropriate (due to significant change to the internal and external business context) and the course of action to be taken by Management in managing the changes; and

(f) to perform SWOT Analysis for all options of the proposed strategies and business objectives and to monitor and report to the Board on the progress of the implementation and integration for new project, merger & acquisition and corporate exercise during the scheduled meetings until it is implemented and integrated completely into the Group.

In addition, the Risk Owners, within their area of expertise, are delegated with operational responsibilities with the following roles and responsibilities:

(a) manage the risks of the business processes under his/her control;(b) continuously identify risks and evaluate existing controls. If controls deemed ineffective, inadequate or non-

existent, to establish and implement controls to reduce the likelihood and/or impact. (c) to report to the RSMWG of the emergence of new business risks or change in the existing business risks

through the use of prescribed form on a timely manner and assist the RSMWG.(d) to assist with the development of the management action plans and implement these action plans;(e) assist the RSMWG with the yearly update of the changes in the Key Risks Register, management action

plans and the status of these plans;(f) ensure that staffs working under the him/her understand the risk exposure of the relevant process under his

/ her duty and the importance of the related controls; and(g) ensuring adequacy of training for staff on risk and opportunity management.

The Board

Audit and Risk Management Committee

(Oversight Governance Body)

Internal Audit Function

Risk and Sustainability Management Working

Risk Owners

Statement On Risk Management And Internal Control



RISK MANAGEMENT Cont’d

Systematic risk management process is stipulated in the Risk Management Framework, whereby each step of the risk and opportunity identification, evaluation, control identification, treatment and control activities are laid down for application by RSMWG and Risk Owners. Risk and opportunity assessment, at gross and residual level, are guided by the likelihood rating and impact rating established by the Board based on the risk appetite acceptable by the Board. Based on the risk management process, Key Risk Registers were compiled by RSMWG and Risk Owners, with relevant key risks and opportunities identified rated based on the agreed upon risk and opportunity rating before reported to the Managing Director. The Key Risk Registers were primarily used for the identification of high residual risks which is above the risk appetite of the Group that require the Management and the Board’s immediate attention and risk treatment as well as for future risk monitoring. In addition, key opportunities identified were registered in relevant Key Risk Registers for the monitoring of implementation of action plans to ensure its achievement. As an important risks and opportunities monitoring mechanism, the Management is scheduled to review the Key Risk Registers of key operating subsidiaries and assessment of emerging risks and opportunities identified at strategic and operational level on annual basis or on more frequent basis if circumstances required and to report to the Audit Committee on the results of the review and assessment.

During the financial year under review, RSMWG conducted a risk assessment exercise whereby existing strategic, governance, financial, fraud and key operational risks as well as opportunities of the Company and all operating subsidiaries were assessed and incorporated into the Key Risk Registers for on-going risk and opportunities monitoring. Key Risk Profile (included but not limited to, Key Risk Registers, existing control activities for risks mitigation and opportunities optimization, likelihood and impact rating used and risk management process employed for review and assessment exercise by the Management) was compiled and tabled to the Audit Committee for its review and deliberation on its adequacy and effectiveness and for its reporting the results of review to the Board, which assumes the primary responsibility of the risk management of the Group.

The above formal process has been practiced by the Group since 28 November 2019 and up to the date of approval of this statement.

Since its listing on the ACE Market, strategic risk management practice was implemented and presented to the Board for review and deliberation to ensure proposed plans and strategies are in line with the Group’s risk appetite. In addition, specific strategic and key operational risks and opportunities are highlighted and deliberated by the ARMC and/or the Board during the review of the financial performance of the Group in the scheduled meetings.

As first-line-of-defense, respective Risk Owners are responsible for managing the risks under their responsibilities. Risk Owners are responsible for effective and efficient operational monitoring and management by way of maintaining effective internal controls and executing risk and control procedures on a day-to-day basis. Changes in the key risks or emergence of new risks are identified through daily operational management and controls and review of financial and operational reports by respective level of Management generated by internal management information system supplemented by external data and information collected. Respective Risk Owners are responsible to assess the changes to the existing risks and emergence of new risks and to formulate and implement effective controls to manage the risks. Material risks are highlighted to the Managing Director for the final decision on the formulation and implementation of effective internal controls and reported to the ARMC and the Board by the Managing Director and/or the Executive Director respectively.

The monitoring of the risk management by the Group will be enhanced by the internal audits carried out by the Internal Audit Function with specific audit objectives and business risks identified for each internal audit cycle based on the internal plan reviewed by the Audit Committee.

Please refer to the “Operational and Financial Risks” of the Management Discussion and Analysis for thesignificant risks faced by the Group and the mitigation plans implemented.




INTERNAL CONTROL SYSTEM

The key features of the Group’s internal control systems are described below:-

• Board of Directors/Board Committees

The role, functions, composition, operation and processes of the Board are guided by formal Board Charter whereby roles and responsibilities of the Board, individual Directors, the Independent Non-Executive Chairman, the Managing Director and the Management are specified to preserve the independence of the Board from the Management.

Board Committees (i.e. ARMC, Remuneration Committee and Nomination Committee) are established to carry out duties delegated by the Board, governed by written terms of reference.

Meetings of Board of Directors and respective Board Committees are carried out on scheduled basis to review the performance of the Group, from financial perspective.

• Integrity and Ethical Value

The tone from the top on integrity and ethical value are enshrined in formal Code of Conducts approved by the Board. This formal code forms the foundation of integrity and ethical value of the Group.

Integrity and ethical value expected from the employees are incorporated in the Letter of Appointment and Employees Handbook whereby the ethical behaviours expected from the employees are stated. Codes of conduct expected from employees to carry out their duties and responsibilities assigned are also established and formalised in Employee Job Description.

To further enhance the ethical value throughout the Group, formal Whistleblowing Policy has been implemented for all stakeholders to raise genuine concerns about possible improprieties in matters of unethical behaviour, malpractices, illegal acts or failure to comply with regulatory requirements at the earliest opportunity.

• Organisation Structure, Accountability and Authorisation

The Group has a well-defined organisation structure in place with clear lines of reporting and accountability. The Group is committed to employing suitably qualified staff so that the appropriate level of authorities and responsibilities can be delegated while accountability of performance and controls are assigned accordingly to competent staffs to ensure operational efficiency. The establishment and communication of job responsibilities and accountability of performance and controls for key positions are further enhanced via the job descriptions established by the Management.

• Policies and Procedures

The Group has documented policies and procedures that are periodically reviewed and updated to ensure its relevance to regulate key operations in compliance with its International Organisation for Standardisation (“ISO”) certifications as well as internal control requirements.

• Human Resource Policy

Employees Handbook, Letter of Appointment and Code of Conducts sets out general employment terms and conditions, the tone for control, consciousness and conducts. They are designed to provide guidelines to employees with the objective of ensuring all employees understand issues and matters during the tenure of their employment. Together with employees’ job descriptions, the guidelines clearly defined the Group’s values and policies, Group’s expectations of employees and employees’ expectations towards the Group.

• Information and Communication

At operational level, clear reporting lines established across the Group and operation reports are prepared for dissemination to relevant personnel for effective communication of critical information throughout the Group for timely decision making and execution in pursuit of the strategies and business objectives. Matters that require the Board and the Executive Directors’ attention are highlighted for review, deliberation and decision on a timely basis.




INTERNAL CONTROL SYSTEM Cont’d

• Information and Communication Cont’d

The Group puts in place effective and efficient information and communication infrastructures and channels,i.e. computerized systems, secured intranet, electronic mail system and modern telecommunication, so that operation data and management information can be communicated timely and securely to dedicated personnel within the Group for decision making and for communication with relevant external stakeholders for execution and information collection. Apart from that, relevant financial and management reports are generated for different level of the organization structure for review and decision making. The Management and Board meetings are held for effective two-way communication of information at different level of Management and the Board.

• Monitoring and Review

At operational level, Objectives and Key Results (“OKR”) system is put in place to monitor the performance of key divisions/departments against targets established for prompt Management’s actions to be taken for unsatisfactory operational performance. Periodical Management meetings are held to discuss and review financial and operational performance of key divisions/departments of the Group. The monitoring of compliance with relevant laws and regulations are further enhanced by review of specific areas of safety, health and environment by independent consultants engaged by the Group and enforcement agencies.

Apart from the above, quarterly financial statement which contains key financial results is presented to the Board for their review. Financial performance report are also presented by the Executive Director and Head of Finance during the Board’s meeting for the Board to assess the financial performance.

In addition to the internal audits, significant control issues highlighted by the External Auditors as part of their statutory audits and the monitoring of compliance with ISO certification carried out by internal ISO auditors surveillance audit by independent consultants engaged by the Group serve as the fourth-line-of- defense.

INTERNAL AUDIT FUNCTION

The review of the adequacy and effectiveness of the Group’s risk management and internal control system is outsourced to an independent professional firm, NeedsBridge Advisory Sdn Bhd. The outsourced internal auditor reports directly to the ARMC by providing insights and recommendations from their analyses, evaluations and assessment of data on the adequacy and effectiveness of the Group’s system on the risk management and internal control. The engagement director, Mr. Pang Nam Ming, is a Certified Internal Auditor accredited by the Institute of Internal Auditors Global and a professional member of the Institute of Internal Auditors Malaysia.

The internal audits are to be carried out, in material aspects, in accordance with the International Professional Practices Framework established by the Institute of Internal Auditors Global. The audit engagement of the outsourced internal audit function is governed by the engagement letter with key terms include purpose and scope of works, accountability, independence, the outsourced internal audit function’s responsibilities, the management’s responsibilities, the authority accorded to the outsourced internal audit function, limitation of scope of works, confidentiality, proposed fees and engagement team. The appointment and resignation of the internal audit function as well as the proposed internal audit fees are subject to review by the ARMC and for its reporting to the Board for ultimate approval.

To preserve the independence and objectivity, the outsourced internal audit function is not permitted to act on behalf of Management, decide and implement management action plan, perform on-going internal control monitoring activities (except for follow up on progress of action plan implementation), authorize and execute transactions, prepare source documents on transactions, have custody of assets or act in any capacity equivalent to a member of the Management or the employee.

The outsourced internal audit function is accorded unrestricted access to all functions, records, property, personnel, ARMC and other specialized services from within or outside the Group and necessary assistance of personnel in units of the Group where they perform audits.




INTERNAL AUDIT FUNCTION Cont’d

Based on the review of the terms of engagement of outsourced internal audit function during the financial year, the ARMC and the Board are satisfied:

• that the outsourced internal audit function is free from any relationships or conflicts of interest which could impair their objectivity and independence;

• with the scope of the outsourced internal audit function; • that the outsourced internal audit function possesses relevant experience, knowledge, competency and

authority to discharge its functions effectively, possesses sufficient resources and has unrestricted access to employees and information for the internal audit activities; and

• with the internal audit plan.

Risk-based internal audit plan in respect of financial year ended 31 December 2020 and 31 December 2021 was drafted by the outsourced internal audit function, after taking into consideration residual risks with potential high impact per the Key Risk Profile of the Group, the previous internal audits carried out in relation to ISO certifications (for Quality Control and Environmental) and the input by the Management after taking into consideration the existing business context and economic condition, and was reviewed and approved by the ARMC for its execution. Each internal audit cycles of the internal audit plan are specific with regard to audit objective, key risks to be assessed and scopes of the internal control review.

As third-line-of-defense, the internal control review procedures performed by the outsourced internal audit function are designed to understand, document and evaluate risks and related controls to determine the adequacy and effectiveness of governance, risk and control structures and processes and to formulate recommendations for improvement thereon. The internal audit procedures applied principally consisted of process evaluations through interviews with relevant personnel involved in the process under review, review of the Standard Operating Procedures and/or process flows provided and observations of the functioning of processes in compliance with results of interviews and/or documented Standard Operating Procedures and/or process flows. Thereafter, testing of controls for the respective audit areas through the review of the samples selected based on sample sizes calculated in accordance to predetermined formulation, subject to the nature of testing and verification of the samples.

During the financial year under review, the Group focused its resources to put in place formal Risk Management Framework and to perform risk assessment on group-wide basis (which forms the basis to determine the audit universe and to prioritize internal audit activities to be carried out) since the Company’s listing on the ACE Market of Bursa Malaysia Securities Berhad on 17 July 2019. Based on the approved internal audit plan, the outsourced internal audit function plans to conduct the internal audit on budgetary and treasury management as well as IT management during the financial year ending 31 December 2020. Upon the completion of the internal audit field works, internal audit reports are to be presented to the Audit Committee during its scheduled meetings during the financial year ending 31 December 2020 with the internal audit findings and recommendations as well as Management’s response and action plans are to be presented to the Audit Committee.

ASSURANCE FROM THE MANAGEMENT

In line with the Guidelines, the Board has received reasonable assurance in writing from the Managing Director, Executive Directors and all Senior Managers, including the Head of Finance, that the Group’s risk management and internal control systems have operated adequately and effectively, in all material aspects, to meet the Group’s objectives during the financial year under review.

OPINION AND CONCLUSION

Based on the review of the risk management results and process, monitoring and review mechanism stipulated above, the Board is of the opinion that the risk management and internal control systems are satisfactory and have not resulted in any material losses, contingencies or uncertainties that would require disclosure in the Group’s Annual Report. The Board continues to take pertinent measures to sustain and, where required, to improve the Group’s risk management and internal control system in meeting the Group’s strategies and business objectives.

The Board is committed towards maintaining an effective risk management and internal control system throughout the Group and where necessary put in place appropriate plans to further enhance the Group’s systems of internal control. Notwithstanding this, the Board will continue to evaluate and manage the significant business risks faced by the Group in order to meet its business objectives in the current and challenging business environment.




ASSURANCE PROVIDED BY EXTERNAL AUDITORS

Pursuant to paragraph 15.23 of the Listing Requirements, the External Auditors have reviewed this Risk Management and Internal Control Statement. Their review was performed in accordance with Audit and Assurance Practice Guide 3: Guidance for Auditors on Engagements to Report on the Statement on Risk Management and Internal Control included in the Annual Report, issued by the Malaysia Institute of Accountants. Based on their review, nothing has come to their attention that causes them to believe this Statement is not prepared, in all material aspects, in accordance with the disclosures required by paragraph 41 and 42 of the Statement on Risk Management and Internal Control: Guidelines for Directors of Public Listed Companies to be set out, nor is factually incorrect.

CONCLUSION

This Statement on Risk Management and Internal Control is made in accordance with the resolution of the Board dated 28 May 2020.



i-Stone Annual Report 2019 Report On Audit & Risk Management Committee

The Board of Directors is pleased to present the report of the Audit & Risk Management Committee (“ARMC”) for the financial year ended 31 December 2019 (“FY 2019”).

MEMBERSHIP AND MEETINGS

Members

The present members of the ARMC comprise of:-

Law Lee Yen – Chairperson, Independent Non-Executive DirectorProfessor Dr. Ruzairi Bin Hj Abdul Rahim – Member, Independent Non-Executive DirectorChia Gek Liang – Member, Independent Non-Executive Director

The details of the terms of reference of the ARMC are available for reference at www.i-stone.com.my

Meetings and Attendance

A total of 3 ARMC meetings were held during the FY 2019. At the invitation of the ARMC, the Executive Directors, External Auditors and Internal Auditors attended the meetings. The Group’s External Auditors attended one of the meetings where they were invited to discuss matters related to the statutory audit for the FY 2019. The attendance of each member at the ARMC meetings is as follows:-

Members AttendanceLaw Lee Yen 3/3Professor Dr. Ruzairi Bin Hj Abdul Rahim 3/3Chia Gek Liang 3/3

SUMMARY OF ACTIVITIES OF THE ARMC DURING THE FINANCIAL YEAR

In line with the ARMC Terms of Reference, the following activities were carried out during the FY 2019 and in respect of the financial statements for FY 2019:-

1. Reviewed the unaudited quarterly financial statements of the Group, focusing particularly on the financial reporting and compliance with the disclosure requirements prior to making recommendation to the Board for consideration and approval;

2. Reviewed the related party transactions entered into by the Group;3. Reviewed and approved the Internal Audit Plan for FY 2020;4. Reviewed the Risk Management Framework and Key Risk Report;5. Reviewed the external auditors’ scope of work and audit planning memorandum;6. Reviewed the Audited Financial Statements, focusing particularly on any changes in accounting policies and

practices, significant adjustments arising from audit or unusual events, the going concern assumption and compliance with the accounting standards and other requirements, prior to making recommendation to the Board for consideration and approval;

7. Considered the re-appointment of the external auditors and make recommendation to the Board for approval;8. Reviewed the ARMC Report and Statement on Risk Management and Internal Control, prior to making

recommendation to the Board for its approval; and9. Reported to the Board on significant issues and concerns discussed during the ARMC meetings.

INTERNAL AUDIT FUNCTION AND SUMMARY OF ACTIVITIES

The Board recognises that an internal audit function is essential to ensuring the effectiveness of the Group’ssystem of internal control, risk management and overall governance process.

The Group has outsourced the internal audit function to Needsbridge Advisory Sdn Bhd, an internal audit consulting firm. The engagement was done during the FY 2019 where the ARMC and Board approved the proposed internal audit plan for FY 2020 and Risk Management Framework and Key Risk Report.

The Internal Auditors report directly to the ARMC on a periodic basis based on the agreed internal audit plan.

PERFORMANCE OF THE ARMC

The performance of the ARMC was assessed through self-evaluation. The results of the self-assessment were documented and assessed by the Nomination Committee prior to presentation to the Board for review. During the FY2019, the Board is satisfied that the ARMC have carried out their duties in accordance with their Terms of Reference.

FINANCIAL STATEMENTS46

DIRECTORS’ REPORT

51STATUTORY

DECLARATION

56STATEMENTS OF

FINANCIAL POSITION

58STATEMENTS OF CHANGES

IN EQUITY

62NOTES TO THE FINANCIAL

STATEMENTS

50STATEMENT BY

DIRECTORS

52INDEPENDENT

AUDITORS’ REPORT

57STATEMENTS OF PROFIT

OR LOSS AND OTHER COMPREHENSIVE INCOME

60STATEMENTS OF CASH

FLOWS



The directors have pleasure in presenting their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 December 2019.

PRINCIPAL ACTIVITIES

The principal activity of the Company is that of investment holding company. The principal activities of the subsidiaries are disclosed in Note 5 to the financial statements.

There have been no significant changes in the nature of these activities during the financial year.

FINANCIAL RESULTS

Group Company RM RM

Profit for the year attributable to: - Owners of the Company 8,406,202 8,224,086 Non-controlling interests 129,785 -

8,535,987 8,224,086

In the opinion of the directors, the results of the operations of the Group and of the Company during the financial year have not been substantially affected by any item, transaction or event of a material and unusual nature.

DIVIDENDS

The amount of dividends paid by the Company since the end of the previous financial period were as follows:

RM In respect of the financial year ended 31 December 2019:Interim single-tier tax exempt dividend, declared on 26 November 2019 and paid on 31 December 2019 - RM0.0015 per ordinary share 1,832,216

The directors do not recommend any final dividend in respect of the current financial year.

RESERVES AND PROVISIONS

There were no material transfers to or from reserves or provisions during the financial year other than those disclosed in the financial statements.

ISSUE OF SHARES AND DEBENTURES

During the financial year, the Company increased its issued and paid up share capital from RM100 to RM55,699,539 by way of issuance of 1,221,477,100 new ordinary shares as follows:

(i) 977,181,100 new ordinary shares at an issue price of approximately RM0.017 each for a total consideration of RM16,612,079 as full settlement for the acquisition of the entire issued and paid up share capital of i-Stone Technology Sdn. Bhd. (“IST”); and

(ii) 244,296,000 new ordinary shares at an issue price of RM0.16 each for a total cash consideration of RM39,087,360 pursuant to the initial public offering of the Company on the ACE Market of Bursa Malaysia Securities Berhad.

The new ordinary shares issued during the financial year ranked pari passu in all respect with the existing ordinary shares of the Company.

There was no issue of debentures by the Company during the financial year.

Directors’ Report



OPTIONS

No option has been granted during the financial year covered by the Statements of Profit or Loss and Other Comprehensive Income to take up unissued shares of the Company. As at the end of the financial year, there were no unissued shares of the Company under options.

DIRECTORS

The directors who served during the financial year up to the date of this report are: -

Dato’ Azman Bin Mahmood Chia Gek Liang Law Lee Yen Chan Kok San Chin Chung Lek Tee Sook Sing Professor Dr. Ruzairi Bin Hj Abdul Rahim

The name of the director of the Company’s subsidiaries in office during the financial year and up to the date of this report other than those named above is as follows: -

Hing Fook Sern

DIRECTORS’ BENEFITS

Since the end of the previous financial period, no director has received or become entitled to receive any benefit, other than a benefit included in the aggregate amount of fees and emoluments received or due and receivable by the directors from the Company, or the fixed salary of a full time employee of the Company as disclosed in the financial statements, by reason of a contract made by the Company with the director or with a firm of which the director is a member, or with a company in which the director has a substantial financial interest other than certain directors who have substantial financial interests in companies which traded with the Company in the ordinary course of business.

Neither at the end of the financial year, nor at any time during that financial year, did there subsist any arrangement to which the Company was a party, being arrangements with the object of enabling directors of the Company to acquire benefits by means of the acquisitions of shares in, or debentures of, the Company or any other body corporate.

DIRECTORS’ INTERESTS

According to the Register of Directors’ Shareholdings required to be kept under Section 59 of the Companies Act, 2016, the interests and deemed interests of Directors in office at the end of the financial year in the shares of the Company and of its related corporations during the financial year are as follows: -

<--------------------- Number of ordinary shares --------------------->As at

1.1.2019 Acquired DisposedAs at

31.12.2019CompanyDato’ Azman Bin Mahmood - 100,000 - 100,000Chia Gek Liang - 100,000 - 100,000Law Lee Yen - 100,000 100,000 -Chan Kok San - 322,289,500 74,646,000 247,643,500Chin Chung Lek - 117,196,200 27,144,000 90,052,200Tee Sook Sing - direct - 87,897,900 20,358,800 67,539,100 - indirect - 329,614,300 - 329,614,300Professor Dr. Ruzairi Bin Hj Abdul Rahim - 101,000 - 101,000

By virtue of their interests in the shares of the Company, Chan Kok San and Tee Sook Sing are also deemed interested in the shares of the subsidiaries during the financial year to the extent that the Company has interests.

Directors’ Report



DIRECTORS’ REMUNERATION

Details of directors’ remuneration are set out in Note 18 to the financial statements.

AUDITORS’ REMUNERATION

Details of auditors’ remuneration are set out in Note 18 to the financial statements.

INDEMNITY AND INSURANCE FOR DIRECTORS, OFFICERS AND AUDITORS

No indemnity has been given to or insurance effected for the directors, officers and auditors of the Company pursuant to Section 289 of the Companies Act, 2016.

OTHER STATUTORY INFORMATION

(a) The directors, before the Statements of Profit or Loss and Other Comprehensive Income and Statements of Financial Position of the Group and of the Company were prepared, took reasonable steps: -

(i) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and have satisfied themselves that there were no known bad debts and that no allowance for doubtful debts was necessary; and

(ii) to ensure that any current assets which were unlikely to be realised in the ordinary course of business including the values of current assets as shown in the accounting records of the Group and of the Company had been written down to an amount which the current assets might be expected so to realise.

(b) The directors are not aware of any circumstances, at the date of this report, which would render: -

(i) it necessary to write off any bad debts or to providing of allowance for doubtful debts in respect of the financial statements of the Group and of the Company; and

(ii) the values attributed to the 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 would 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 of the Group and 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 liability 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 substantially affect the ability of the Group and of the Company to meet their obligations as and 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 and of the Company for the financial year in which this report is made.

SIGNIFICANT EVENTS

The significant events during the financial year are as disclosed in Note 28 to the financial statements.

SUBSEQUENT EVENTS

The subsequent events after the financial year are as disclosed in Note 29 to the financial statements.

Directors’ Report



AUDITORS

The auditors, ECOVIS MALAYSIA PLT (formerly known as ECOVIS AHL PLT), retire at the forthcoming annual general meeting and do not wish to seek re-appointment.

Signed on behalf of the Board of Directors in accordance with a resolution of the directors,

...................................................................................... CHAN KOK SAN

...................................................................................... TEE SOOK SING

JOHOR BAHRU

Date: 28 May 2020

Directors’ Report


i-Stone Annual Report 2019 Statement By DirectorsPursuant To Section 251(2) Of The Companies Act 2016

We, CHAN KOK SAN and TEE SOOK SING, being two of the directors of I-STONE GROUP BERHAD, do hereby state that, in the opinion of the directors, the financial statements set out on pages 56 to 109 are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the Companies Act 2016 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as of 31 December 2019 and of their financial performance and cash flows for the year then ended.

Signed on behalf of the Board of Directors in accordance with a resolution of the directors,

...................................................................................... CHAN KOK SAN

...................................................................................... TEE SOOK SING

JOHOR BAHRU

Date: 28 May 2020


i-Stone Annual Report 2019Statutory DeclarationPursuant To Section 251(1) Of The Companies Act 2016

I, TEO YELING (MIA 31334), being the officer primarily responsible for the financial management of I-STONE GROUP BERHAD, do solemnly and sincerely declare that the financial statements set out on pages 56 to 109, are to the best of my knowledge and belief, correct and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by the abovenamed )TEO YELING (MIA 31334) at Johor Bahru in the state )of Johor Darul Ta’zim on 28 May 2020 ) .................................................................................

TEO YELING (MIA 31334)

Before me,

Commissioner for OathsJohor Bahru



Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of I-STONE GROUP BERHAD, which comprise the statements of financial position as at 31 December 2019 of the Group and of the Company, and the statements of profit or loss and other comprehensive income, changes in equity and cash flows of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory information.

In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Group and of the Company as of 31 December 2019, and of their financial performance and their cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 2016 in Malaysia.

Basis for Opinion

We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing (“ISAs”). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence and Other Ethical Responsibilities

We are independent of the Group and of the Company in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants (“By-Laws”) and the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code.

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the Group and of the Company for the current year. We have determined that there are no key audit matters to communicate in our report on financial statements of the Company. The key audit matter for the audit of the financial statements of the Group are described below. These matters were addressed in the context of our audit of the financial statements of the Group as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

We have fulfilled the responsibilities described in the Auditors’ responsibilities for the audit of the financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matter below, provide the basis of our audit opinion on the accompanying financial statements.

ECOVIS MALAYSIA PLT (f.k.a. ECOVIS AHL PLT) 201404001750 (LLP0003185-LCA) & AF 001825 Chartered Accountants, No.54, Jalan Kempas Utama 2/2, Taman Kempas Utama, 81200 Johor Bahru, Johor Darul Ta’zim, Malaysia Phone:+607 – 562 9000 Fax:+607 – 562 9090 E-Mail:[email protected]

A member of ECOVIS International, a network of tax advisors, accountants, auditors and lawyers, operating in more than 60 countries across 6 continents.

ECOVIS International is a Swiss association. Each Ecovis Member Firm is an independent legal entity in its own country and is only liable for its own acts or omissions, not those of any other entity. ECOVIS MALAYSIA PLT is a Malaysia Member Firm of ECOVIS International.

Independent Auditors’ Report To The Members Of I-Stone Group Berhad (Incorporated in Malaysia)



Key audit matter ___________________________________________

(a) Revenue recognition

The revenue of the Group comprises sale of manufactured goods and sales from distribution of goods as referred to in Note 16.

Revenue from sale of goods is recognised when the goods are delivered, installed and ready to use by the customers at their premises. We consider revenue recognition for sale of goods to be a potential cause for higher risk of material misstatement from the perspective of timing of recognition and the amount of revenue recognised. Accordingly, we regarded revenue recognition to be a key audit matter.

___________________________________________

(b) Impairment of receivables

As at 31 December 2019, the Group has significant exposure to credit risk arising from its trade receivables which represents approximately 31% of total assets of the Group as referred to in Note 8.

We focus on this area as the assessment of recoverability of receivables involved significant management judgement and estimation uncertainty in determining insolvency or significant financial difficulties of the trade receivables and probability of default or significant delay in payments. Expected credit loss model requires the use of judgement and estimates in determining the probability of default by considering the ageing of receivables, historical loss experience and forward-looking information.

How our audit addressed the key audit matter___________________________________________

Our audit procedures in relation to revenue recognition included obtaining an understanding of the key revenue processes and testing the design and operating effectiveness of key controls in respect of the revenue processes.

We performed substantive testing on a sampling basis to verify that revenue recognition criteria are being properly applied.

We tested cut-off through assessing sales transactions taking place before and after reporting date as well as reviewing sales returns and credit notes issued after the reporting date to assess whether revenue is recognised in the correct period.

___________________________________________

Our audit procedures in relation to management’s impairment assessment included obtaining an understanding of the Group’s control over the customers collection process, how the Group identifies and assess the impairment of trade receivables and the estimation for impairment.

We reviewed the ageing analysis of trade receivables and tested the reliability thereof; as well as reviewed subsequent collections for major customers and overdue amounts.

We examined other evidence including customer correspondences and made inquiries of management regarding the action plans to recover overdue amounts.

We also evaluated techniques and methodology in the expected credit loss approach against the requirement of MFRS 9, Financial Instruments.

Independent Auditors’ Report To The Members Of I-Stone Group Berhad (Incorporated in Malaysia)


i-Stone Annual Report 2019 Independent Auditors’ Report To The Members Of I-Stone Group Berhad (Incorporated in Malaysia)

Information Other than the Financial Statements and Auditors’ Report Thereon

The directors of the Company are responsible for the other information. The other information comprises the Directors’ Report and other information included in the annual report, but does not include the financial statements of the Group and of the Company and our auditors’ report thereon.

Our opinion on the financial statements of the Group and of the Company does not cover the other informationand we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements of the Group and of the Company, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements of the Group and of the Company or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Directors for the Financial Statements

The directors of the Company are responsible for the preparation of financial statements of the Group and of the Company that give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 2016 in Malaysia. The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of financial statements of the Group and of the Company that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements of the Group and of the Company, the directors are responsible for assessing the ability of the Group and of the Company to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements of the Group and of the Company as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on basis of these financial statements.

As part of an audit in accordance with approved standards on auditing in Malaysia and ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

(a) Identify and assess the risks of material misstatement of the financial statements of the Group and of the Company, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

(b) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the Company’s internal control.

(c) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.


i-Stone Annual Report 2019Independent Auditors’ Report To The Members Of I-Stone Group Berhad (Incorporated in Malaysia)

(d) Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s or the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements of the Group and of the Company or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group or the Company to cease to continue as a going concern.

(e) Evaluate the overall presentation, structure and content of the financial statements of the Group and of the Company, including the disclosures, and whether the financial statements of the Group and of the Company represent the underlying transactions and events in a manner that achieves fair presentation.

(f) Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial statements of the Group. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial statements of the Group and of the Company for the current year and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on other legal and regulatory requirements

In accordance with the requirements of the Companies Act 2016 in Malaysia, we report that the subsidiaries of which we have not acted as auditors, are disclosed in Note 5 to the financial statements.

Other Matters

This report is made solely to the members of the Company, as a body, in accordance with Section 266 of the Companies Act 2016 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

ECOVIS MALAYSIA PLT KHOR KENG LIEHAF 001825 02733/07/2021 JChartered Accountants Chartered Accountant JOHOR BAHRU

Date: 28 May 2020



Group Company2019 2019 2018

Note RM RM RM

ASSETS

NON-CURRENT ASSETS Property, plant and equipment 3 23,270,339 - - Investment properties 4 283,807 - - Investment in subsidiaries 5 - 41,612,079 - Goodwill on consolidation 6 855,802 - -

24,409,948 41,612,079 -

CURRENT ASSETS Inventories 7 5,487,718 - - Trade receivables 8 24,439,160 - - Other receivables 8 580,910 48,171 - Amount due by subsidiaries 9 - 1,460,000 - Cash and bank balances 10 24,140,415 16,589,500 100 TOTAL CURRENT ASSETS 54,648,203 18,097,671 100 TOTAL ASSETS 79,058,151 59,709,750 100

EQUITY AND LIABILITIES

EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY Share capital 11 54,516,242 54,516,242 100 Retained profits/(Accumulated losses) 26,759,866 5,117,548 (1,274,322) Reserves 12 (15,992,868) - - TOTAL EQUITY 65,283,240 59,633,790 (1,274,222)

NON-CURRENT LIABILITIES Lease liabilities 13 1,256,194 - - Deferred tax liabilities 14 650,973 - -

1,907,167 - -

CURRENT LIABILITIES Trade payables 15 5,348,593 - - Other payables 15 5,756,088 66,583 1,274,322 Lease liabilities 13 478,201 - - Current tax liabilities 284,862 9,377 -

11,867,744 75,960 1,274,322 TOTAL LIABILITIES 13,774,911 75,960 1,274,322 TOTAL EQUITY AND LIABILITIES 79,058,151 59,709,750 100

The accompanying notes form an integral part of the financial statements.

Statements Of Financial Position As At 31 December 2019



Group Company1.1.2019

to31.12.2019

1.1.2019to

31.12.2019

22.3.2018to

31.12.2018Note RM RM RM

REVENUE 16 77,731,229 - -

COST OF SALES (55,230,375) - -

GROSS PROFIT 22,500,854 - -

ADD: OTHER INCOME 645,753 9,746,822 -

LESS: DISTRIBUTION EXPENSES (1,017,833) - -

LESS: ADMINISTRATIVE EXPENSES (10,793,156) - -

LESS: OTHER EXPENSES (465,245) (1,513,359) (1,274,322)

PROFIT/(LOSS) FROM OPERATIONS 10,870,373 8,233,463 (1,274,322)

LESS: FINANCE COSTS 17 (568,602) - -

PROFIT/(LOSS) BEFORE TAX 18 10,301,771 8,233,463 (1,274,322)

INCOME TAX EXPENSE 19 (1,765,784) (9,377) -

PROFIT/(LOSS) FOR THE YEAR/PERIOD 8,535,987 8,224,086 (1,274,322)

OTHER COMPREHENSIVE INCOME, NET OF TAX:

ITEMS THAT MAY BE SUBSEQUENTLY RECLASSIFIED TO PROFIT OR LOSS

Foreign currency translation differences for foreign operations 53,776 - -

TOTAL COMPREHENSIVE INCOME/ (EXPENSE) FOR THE YEAR/PERIOD 8,589,763 8,224,086 (1,274,322)

PROFIT ATTRIBUTABLE TO:

OWNERS OF THE COMPANY 8,406,202

NON-CONTROLLING INTERESTS 129,785

8,535,987

TOTAL COMPREHENSIVE INCOME

ATTRIBUTABLE TO:

OWNERS OF THE COMPANY 8,461,954

NON-CONTROLLING INTERESTS 127,809

8,589,763

BASIC/DILUTED EARNINGS PER

ORDINARY SHARE (SEN) 20 1.10


Statements Of Profit Or Loss And Other Comprehensive Income For The Year Ended 31 December 2019



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Statements Of Changes In EquityFor The Year Ended 31 December 2019



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Non-distributable

Distributable(Accumulated

losses)/ Retained profits

Share capital Total

Company Note RM RM RM

At date of incorporation 100 - 100

Loss/Total comprehensive expenses for the period - (1,274,322) (1,274,322)

At 31 December 2018 100 (1,274,322) (1,274,222)

Profit/Total comprehensive income for the year - 8,224,086 8,224,086

Contributions by and distributions to owners of the Company

- Issuance of ordinary shares 55,699,439 - 55,699,439

- Listing expenses (1,183,297) - (1,183,297)

- Dividends 21 - (1,832,216) (1,832,216)

Total transactions with owners of the Company 54,516,142 (1,832,216) 52,683,926

At 31 December 2019 54,516,242 5,117,548 59,633,790


Statements Of Changes In Equity (Cont’d)For The Year Ended 31 December 2019


i-Stone Annual Report 2019 Statements Of Cash FlowsFor The Year Ended 31 December 2019


to31.12.2019

1.1.2019to

31.12.2019

22.3.2018to

31.12.2018RM RM RM

CASH FLOWS FROM OPERATING ACTIVITIES Profit/(Loss) before tax 10,301,771 8,233,463 (1,274,322) Adjustments for: - Depreciation of investment properties 6,169 - - Depreciation of property, plant and equipment 1,330,540 - - Depreciation of right-of-use assets 40,852 - - Interest expenses 557,808 - - Property, plant and equipment written off 57,953 - - Provision for warranty 52,005 - - Net unrealised loss on foreign exchange 89,585 - - Gain on disposal of property, plant and equipment (19,773) - - Interest income (60,908) (56,148) - Dividend income (201,724) (9,690,674) - Rental income (26,327) - - Operating profit/(loss) before working capital changes 12,127,951 (1,513,359) (1,274,322)

Changes in working capital Inventories 3,191,087 - - Trade and other receivables (12,294,014) (48,171) - Trade and other payables (2,364,890) (1,203,742) 1,270,325 Cash generated from/(used in) operations 660,134 (2,765,272) (3,997) Interest paid (557,808) - - Interest received 60,908 56,148 - Tax paid (802,480) - - Net cash used in operating activities (639,246) (2,709,124) (3,997)



i-Stone Annual Report 2019Statements Of Cash Flows (Cont’d)For The Year Ended 31 December 2019


to31.12.2019

1.1.2019to

31.12.2019

22.3.2018to

31.12.2018RM RM RM

CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of subsidiary via merger (2,567,396) - - Advances to subsidiaries - (1,460,000) -

Dividend received 201,724 9,690,674 - Increase in investment of subsidiary - (25,000,000) - Proceeds from disposal of property, plant and equipment 61,500 - - Rental received 26,327 - - Purchase of property, plant and equipment (1,472,339) - - Net cash used in investing activities (3,750,184) (16,769,326) -

CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds from issuance of ordinary shares 37,904,063 37,904,063 100 (Repayment to)/Advances by a shareholder (3,997) (3,997) 3,997 Proceeds from hire purchase 1,517,867 - - Dividend paid (1,832,216) (1,832,216) - Repayment of hire purchase (379,718) - - Repayment of lease obligations (38,541) - - Repayment of term loans (12,371,311) - - Net cash from financing activities 24,796,147 36,067,850 4,097

NET INCREASE IN CASH AND CASH EQUIVALENTS 20,406,717 16,589,400 100 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR/PERIOD 100 100 - Cash acquired from subsidiary 2,800,137 - - Effect of exchange rate changes on the balance of cash held in foreign currencies (66,539) - - CASH AND CASH EQUIVALENTS AT END OF YEAR/PERIOD 23,140,415 16,589,500 100

Cash and cash equivalents (Note 10) 23,140,415 16,589,500 100



Notes To The Financial Statementsi-Stone Annual Report 2019

1. CORPORATE INFORMATION

The principal activity of the Company is that of investment holding company. The principal activities of the subsidiaries are disclosed in Note 5 to the financial statements. There have been no significant changes in the nature of these activities during the financial year.

The Company is a public limited liability company, incorporated and domiciled in Malaysia. On 17 July 2019, the Company’s entire enlarged issued and paid up share capital was listed on the ACE Market of Bursa Securities Malaysia Berhad.

The registered office of the Company is located at Lot 6.08, 6th Floor, Plaza First Nationwide, No.161, Jalan Tun H.S. Lee, 50000 Kuala Lumpur. The principal place of the business of the Company is located at No.12-2, Jalan Persiaran Teknologi, Taman Teknologi Johor, 81400 Senai, Johor Darul Ta’zim.

The consolidated financial statements of the Company as at and for the financial year ended 31 December 2019 comprise the Company and its subsidiaries (together referred to as the “Group” and individually referred to as “Group entities”).

The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the Directors on 28 May 2020.

2. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all periods presented in these financial statements and have been applied consistently by the Group entities, unless otherwise stated.

(a) Basis of preparation

The financial statements of the Group and the Company have been prepared under the historical cost convention and modified to include other bases of valuation as disclosed in other sections under significant accounting policies, and comply with Malaysian Financial Reporting Standards (MFRSs), International Financial Reporting Standards and the Companies Act, 2016 in Malaysia.

The financial statements are reported in Ringgit Malaysia (“RM”), which is the Company’s functional currency.

On 2 May 2019, the Company completed the acquisition of the entire issued and paid up share capital i-Stone Technology Sdn. Bhd. (“IST”), by way of issuance of 977,181,100 new ordinary shares for a total consideration of RM16,612,079 to the vendors of IST. The vendors have the same interest in the Company as they had in IST and there is no change to the assets and liabilities as a result of establishment of the Company.

This is the first financial statements on the consolidated results for the financial year ended 31 December 2019. The acquisition of IST is a business combination under common control. Accordingly, the Group is regarded as a continuing entity and the merger method of accounting is used.

Under the merger method of accounting, the financial statements of the subsidiary company is included in the consolidated financial statements as if the business combination had occurred from the earliest date presented and that the Group has operated as a single economic entity throughout the financial years presented in the consolidated financial statements.

(b) Statement of compliance

The following are accounting standards, amendments and interpretations of the MFRS framework that have been issued by the Malaysian Accounting Standards Board (“MASB”).

The Group plans to apply the below standards, amendments and interpretations in the respective financial years when the standards, amendments and interpretations become effective.


Notes To The Financial Statements i-Stone Annual Report 2019

2. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

(b) Statement of compliance (Cont’d)

MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2020

Amendments to MFRS 3, Business Combinations – Definition of BusinessAmendments to MFRS 9, Financial Instruments, MFRS 139, “Financial Instruments: Recognition and Measurement” and MFRS 7, Financial Instruments: Disclosures – Interest Rate Benchmark ReformAmendments to MFRS 101, Presentation of Financial Statements and MFRS 108, Accounting Policies, Changes in Accounting Estimates and Errors – Definition of MaterialAmendments to References to the Conceptual Framework in MFRS Standards

MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2021

MFRS 17, Insurance Contracts

MFRSs, Interpretations and amendments effective for a date yet to be confirmed

Amendments to MFRS 10, Consolidated Financial Statements and MFRS 128 Investments in Associates and Joint Ventures – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

The initial application of the accounting standards, amendments and interpretations are not expected to have any material financial impacts to the current period financial statements of the Group and of the Company upon their first adoption.

(c) Basis of consolidation

(i) Subsidiaries

Subsidiaries are entities, including structured entities, controlled by the Company. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Potential voting rights are considered when assessing control only when such rights are substantive. The Group considers it has de facto power over an investee when, despite not having the majority of voting rights, it has the current ability to direct the activities of the investee that significantly affect the investee’s return.

Investments in subsidiaries are measured in the Company’s statement of financial position at cost less any impairment losses, unless the investment is classified as held for sale or distribution. The cost of investments includes transaction costs.

(ii) Business combination

Merger methodThe results of subsidiary companies are presented as if the merger had been effected throughout the current and previous years. The assets and liabilities combined are accounted for based on the carrying amounts from the perspective of the common control shareholder at the date of transfer. On consolidation, the cost of the merger is cancelled with the values of the shares received. Any resulting credit differences is classified as equity and regarded as a non-distributable reserve. Any resulting debit difference is adjusted against any suitable reserve. Any other reserves which are attributable to share capital of the merged entities, to the extent that they have not been capitalised by a debit difference, are reclassified and presented as movement in other capital reserves.




(c) Basis of consolidation (Cont’d)

(ii) Business combination (Cont’d)

Acquisition methodBusiness combinations are accounted for using the acquisition method from the acquisition date, which is the date on which control is transferred to the Group.

For new acquisitions, the Group measures the cost of goodwill at the acquisition date as: - the fair value of the consideration transferred; plus - the recognised amount of any non-controlling interests in the acquiree; plus- if the business combination is achieved in stages, the fair value of the existing equity interest

in the acquiree; less- the net recognised amount (generally fair value) of the identifiable assets acquired and

liabilities assumed.

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss. For each business combination, the Group elects whether it measures the non-controlling interests in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets at the acquisition date.

Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

(iii) Acquisitions of non-controlling interests

The Group treats all changes in its ownership interest in a subsidiary that do not result in a loss of control as equity transactions between the Group and its non-controlling interest holders. Any difference between the Group’s share of net assets before and after the change, and any consideration received or paid, is adjusted to or against Group reserves.

(iv) Acquisitions from entities under common controls

Business combinations arising from transfers of interests in entities that are under the control of the shareholder that controls the Group are accounted for as if the acquisition had occurred at the beginning of the earliest comparative period presented or, if later, at the date that the common control was established; for this purpose, comparatives are restated. The assets and liabilities acquired are recognised at the carrying amounts recognised previously in the Group controlling shareholder’s consolidated financial statements. The components of the equity of the acquired entities are added to the same components within Group equity and any resulting gain or loss is recognised directly in equity.

(v) Loss of control

Upon the loss of control of a subsidiary, the Group derecognises the assets and liabilities of the former subsidiary, any non-controlling interests and the other components of equity related to the former subsidiary from the consolidated statement of financial position. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the former subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity accounted investee or as an available-for-sale financial asset depending on the level of influence retained.




(c) Basis of consolidation (Cont’d)

(vi) Non-controlling interests

Non-controlling interests at the end of the reporting period, being the equity in a subsidiary not attributable directly or indirectly to the equity holders of the Company, are presented in the consolidated statement of financial position and statement of changes in equity within equity, separately from equity attributable to the owners of the Company. Non-controlling interests in the results of the Group is presented in the consolidated statement of profit or loss and other comprehensive income as an allocation of the profit or loss and the comprehensive income for the year between non-controlling interests and the owners of the Company.

Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance.

(vii) Transactions eliminated on consolidation

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

Unrealised gains arising from transactions with equity-accounted associates and joint ventures are eliminated against the investment to the extent of the Group’s interest in the investees. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

(d) Foreign currencies

(i) Functional and presentation currency

The separate financial statements of each entity of the Group are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in Ringgit Malaysia (“RM”), which is also the Company’s functional currency.

(ii) Foreign currency transaction and balances

Transactions in foreign currencies are translated to the functional currency of the Group entities at exchange rates at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies at the end of the reporting period are retranslated to the functional currency at the exchange rate at that date.

Non-monetary assets and liabilities denominated in foreign currencies are not retranslated at the end of the reporting period, except for those that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined.

Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences arising on the retranslation of available-for-sale equity instruments or a financial instrument designated as a hedge of currency risk, which are recognised in other comprehensive income.

In the consolidated financial statements, when settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely to occur in the foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form part of a net investment in a foreign operation and are recognised in other comprehensive income, and are presented in the foreign currency translation reserve (“FCTR”) in equity.




(d) Foreign currencies (Cont’d)

(iii) Operations denominated in functional currencies other than Ringgit Malaysia

The assets and liabilities of operations denominated in functional currencies other than RM, including goodwill and fair value adjustments arising on acquisition, are translated to RM at exchange rates at the end of the reporting period. The income and expenses of foreign operations, excluding foreign operations in hyperinflationary economies, are translated to RM at exchange rates at the dates of the transactions.

Foreign currency differences are recognised in other comprehensive income and accumulated in the FCTR in equity. However, if the operation is a non-wholly owned subsidiary, then the relevant proportionate share of the translation difference is allocated to the non-controlling interests. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the FCTR related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal.

When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation, the relevant proportion of the cumulative amount is reattributed to non-controlling interests. When the Group disposes of only part of its investment in an associate or joint venture that includes a foreign operation while retaining significant influence of joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

(e) Financial instruments

(i) Initial recognition and measurement

Trade receivables and debt securities issued are initially recognised when they are originated. All other financial assets and financial liabilities are initially recognised when the Group or the Company becomes a party to the contractual provisions for the instrument.

A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at fair value through profit or loss (FVTPL), transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

An embedded derivate is recognised separately from the host contract where the host contract is not a financial asset, and accounted for separately if, and only if, the derivative is not closely related to the economic characteristics and risks of the host contract and the host contact is not measured at fair value through profit or loss. The host contract, in the event embedded derivative is recognised separately, is accounted for in accordance with policy applicable to the nature of the host contract.

(ii) Classification and subsequent measurement

Financial assets: Classification

On initial recognition, a financial asset is classified as measured at:

(a) amortised cost;(b) fair value through other comprehensive income (FVOCI) – debt investment;(c) fair value through other comprehensive income (FVOCI) – equity investment; or(d) fair value through profit or loss (FVTPL).

Financial assets are not reclassified subsequent to their initial recognition unless the Group or the Company changes its business model for managing financial assets in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.




(e) Financial instruments (Cont’d)

(ii) Classification and subsequent measurement (Cont’d)

A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:

- it is held within a business model whose objective is to hold assets to collect contractual cash flows, and

- its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

- it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and

- its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

On initial recognition of an equity investment that is not held for trading, the Group and the Company may irrevocably elect to present subsequent changes in the investment’s fair value in OCI. This election is made on investment-by-investment basis.

All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Group and the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

Financial assets: Subsequent measurement and gains and losses

(a) Financial assets at amortised cost

These assets are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss. Any gain or loss on derecognition is recognised in profit or loss.

Interest income is recognised by applying effective interest rate to the gross carrying amount except for credit impaired financial assets where the effective interest rate is applied to the amortised cost.

(b) Financial assets at FVTPL

These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognised in profit or loss.

(c) Debt investments at FVOCI

These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognised in profit or loss. Other net gains and losses are recognised in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss.

Interest income is recognised by applying effective interest rate to the gross carrying amount except for credit impaired financial assets where the effective interest rate is applied to the amortised cost.





(ii) Classification and subsequent measurement (Cont’d)

(d) Equity investments at FVOCI

These assets are subsequently measured at fair value. Dividend are recognised as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognised in OCI and are never reclassified to profit or loss.

All financial assets, except for those measured at fair value through profit or loss, are subject to review for impairment.

Financial liabilities: Classification and subsequent measurement and gains and losses

Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument) or it is designated as such on initial recognition.

Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expenses, are recognised in profit or loss. For financial liabilities categorised as fair value through profit or loss upon initial recognition, the Group and the Company recognise the amount of change in fair value of the financial liability that is attributable to change in credit risk in the other comprehensive income and remaining amount of the change in fair value in the profit or loss, unless the treatment of the effects of changes in the liabillity’s credit risk would create or enlarge an accounting mismatch.

Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss.

(iii) Derecognition

Financial assets

The Group or the Company derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfer the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Group and the Company neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial assets.

The Group or the Company may enter into transactions whereby it transfers assets recognised in its statement of financial position, but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognised.

Financial liabilities

The Group or the Company derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire. The Group or the Company also derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognised at fair value.

On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognised in profit or loss.





(iv) Offsetting

Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group and the Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.

(f) Property, plant and equipment

(i) Recognition and measurement

Items of property, plant and equipment are measured at cost less any accumulated depreciation and any accumulated impairment losses.

Cost includes expenditures that are directly attributable to the acquisition of the asset and any other costs directly attributable to bringing the asset to working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. The cost of self-constructed assets also includes the cost of materials and direct labour. For qualifying assets, borrowing costs are capitalised in accordance with the accounting policy on borrowing costs. Cost also may include transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.

Purchased software that is integral to the functionality of the related equipment is capitalised as part of the equipment.

The cost of property, plant and equipment recognised as a result of a business combination is based on fair value at acquisition date. The fair value of property is the estimated amount or which a property could be exchanged between knowledgeably, prudently and without compulsion. The fair value of other items of plant and equipment is based on the quoted market prices for similar items when available and replacement cost when appropriate.

When significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and is recognised net within ‘other income’ and ‘other expenses’ respectively in profit or loss.

(ii) Subsequent costs

The cost of replacing a component of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the component will flow to the Group or the Company, and its cost can be measured reliably. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.

(iii) Depreciation

Depreciation is based on the cost of an asset less its residual value. Significant components of individual assets are assessed, and if a component has a useful life that is different from the remainder of that asset, then that component is depreciated separately.

Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each component of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term.





(iii) Depreciation (Cont’d)

Freehold land is not depreciated. Property, plant and equipment under construction is not depreciated until the assets are ready for their intended use.

The annual depreciation rates used for the current and comparative periods are as follows: -

Leasehold land 60 yearsBuildings 2%Plant and machinery 10% - 20%Furniture and equipment 10% - 20%Motor vehicles 20%Renovation 10% - 20%Right-of-use assets 3 years

Depreciation methods, useful lives and residual values are reviewed at the end of the reporting period and adjusted as appropriate.

(g) Leased asset

(i) Definition of a lease

A contract is, or contains, a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group assesses whether:

• the contract involves the use of an identified asset – this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified;

• the customer has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and

• the customer has the right to direct the use of the asset. The customer has this right when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. In rare cases where the decision about how and for what purpose the asset is used is predetermined, the customer has the right to direct the use of the asset if either the customer has the right to operate the asset; or the customer designed the asset in a way that predetermines how and for what purpose it will be used.

At inception or on reassessment of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease and non-lease component on the basis of their relative stand-alone prices. However, for leases of properties in which the Group is a lessee, it has elected not to separate non-lease components and will instead account for the lease and non-lease components as a single lease component.

(ii) Recognition and initial measurement

(a) As a lessee

The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.





(ii) Recognition and initial measurement (Cont’d)

(a) As a lessee (Cont’d)

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the respective Group entities’ incremental borrowing rate. Generally, the Group entities use their incremental borrowing rate as the discount rate.

Lease payments included in the measurement of the lease liability comprise the following:• fixed payments, including in-substance fixed payments less any incentives receivable;• variable lease payments that depend on an index or a rate, initially measured using the

index or rate as at the commencement date;• amounts expected to be payable under a residual value guarantee;• the exercise price under a purchase option that the Group is reasonably certain to

exercise; and• penalties for early termination of a lease unless the Group is reasonably certain not to

terminate early.

The Group excludes variable lease payments that linked to future performance or usage of the underlying asset from the lease liability. Instead, these payments are recognised in profit or loss in the period in which the performance or use occurs.

The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low-value assets. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

(b) As a lessor

When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease.

To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease.

If an arrangement contains lease and non-lease components, the Group applies MFRS 15 to allocate the consideration in the contract based on the stand-alone selling prices.

When the Group is an intermediate lessor, it accounts for its interests in the head lease and the sublease separately. It assesses the lease classification of a sublease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset. If a head lease is a short-term lease to which the Group applies the exemption described above, then it classifies the sublease as an operating lease.

(iii) Subsequent measurement

(a) As a lessee

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of property, plant and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.





(iii) Subsequent measurement (Cont’d)

(a) As a lessee (Cont’d)

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a revision of in-substance fixed lease payments, or if there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, or if the Group changes its assessment of whether it will exercise a purchase, extension or termination option.

When the lease liability is remeasured, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

(b) As a lessor

Operating leaseThe Group recognises lease payments received under operating leases as income on a straight-line basis over the lease term as part of “revenue”.

Finance leaseThe Group recognises finance income over the lease term, based on a pattern reflecting a constant periodic rate of return on the Group’s net investment in the lease. The Group aims to allocate finance income over the lease term on a systematic and rational basis. The Group applies the lease payments relating to the period against the gross investment in the lease to reduce both the principal and the unearned finance income. The net investment in the lease is subject to impairment requirements in MFRS 9, Financial Instruments.

(h) Goodwill

Goodwill which arises on business combinations is measured at cost less any accumulated impairment losses. In respect of equity accounted associates and joint venture, the carrying amount of goodwill is included in the carrying amount of the investment and an impairment loss on such an investment is not allocated to any asset, including goodwill, that forms part of the carrying amount of the equity accounted associates and joint venture.

Goodwill is not amortised but is tested for impairment annually and whenever there is an indication that it may be impaired.

(i) Contract asset and liability

A contract asset is recognised when the Group’s or the Company’s right to consideration is conditional on something other than the passage of time. A contract asset is subject to impairment in accordance to MFRS 9, Financial Instrument.

A contract liability is stated at cost and represents the obligation of the Group or the Company to transfer goods or services to a customer for which consideration has been received (or the amount is due) from the customers.




(j) Investment property

(i) Investment property carried at cost

Investment properties are properties which are owned or held under a leasehold interest to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. These include freehold land, leasehold land and buildings which in substance is a finance lease held for a currently undetermined future use. Investment properties initially and subsequently measured at cost are accounted for similarly to property, plant and equipment.

Freehold land has an unlimited useful life and therefore is not depreciated. Depreciation is computed on the straight-line method over the estimated useful life of the assets, at the following annual rates:

Buildings 2%

Cost includes expenditure that is directly attributable to the acquisition of the investment property. The cost of self-constructed investment property includes the cost of materials and direct labour, any other costs directly attributable to bringing the investment property to a working condition for their intended use and capitalised borrowing costs.

Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gain or loss on the retirement or disposal of an investment property is recognised in profit or loss in the year of retirement or disposal.

(ii) Transfer to/from investment property

When an item of property, plant and equipment is transferred to investment property following a change in its use, the carrying amount of item immediately prior to transfer is recognised as the deemed cost of the investment property for subsequent accounting.

When the use of a property changes such that it is reclassified as property, plant and equipment or inventories, its carrying amount at the date of reclassification becomes its deemed cost for subsequent accounting.

(k) Inventories

Inventories are measured at the lower of cost and net realisable value.

The cost of inventories is calculated using the first-in, first-out basis and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of work-in-progress and finished goods, cost includes an appropriate share of production overheads based on normal operating capacity.

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.

(l) Contract cost

(i) Incremental cost of obtaining a contract

The Group or the Company recognises incremental costs of obtaining contracts when the Group or the Company expects to recover these costs.




(l) Contract cost (Cont’d)

(ii) Cost to fulfil a contract

The Group or the Company recognises a contract cost that relate directly to a contract or to an anticipated contract as an asset when the cost generates or enhances resources of the Group or the Company, will be used in satisfying performance obligations in the future and it is expected to be recovered.

These contract costs are initially measured at cost and amortised on a systematic basis that is consistent with the pattern of revenue recognition to which the asset relates. An impairment loss is recognised in the profit or loss when the carrying amount of the contract cost exceeds the expected revenue less expected cost that will be incurred. Where the impairment condition no longer exists or has improved, the impairment loss is reversed to the extent that the carrying amount of the contract cost does not exceed the amount that would have been recognised had there been no impairment loss recognised previously.

(m) Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, balances and deposits with banks and highly liquid investments which have an insignificant risk of changes in fair value with original maturities of three month or less, and are used by the Group and the Company in the management of their short-term commitments. For the purpose of the statement of cash flows, cash and cash equivalents are presented net of bank overdrafts and pledged deposits.

(n) Impairment

Financial instruments and contract assets

The Group and the Company recognise loss allowances for Expected Credit Losses (‘ECLs’) on financial assets measured at amortised cost, debt investments measured at FVOCI and contract assets and lease receivables.

The Group and the Company apply a two-step approach to measure the ECL on financial assets other than trade receivables, contract assets and lease assets.

The Group and the Company measure loss allowances at an amount equal to lifetime expected credit loss, except for debt securities that are determined to have low credit risk at the reporting date, cash and bank balance and other debt securities for which credit risk has not increased significantly since initial recognition, which are measured at 12-month expected credit loss. Loss allowances for trade receivables, contract assets and lease receivables are always measured at an amount equal to lifetime expected credit loss.

The Group and the Company assess at each financial year end whether there has been a significant increase in credit risk for financial assets by comparing the risk of default occurring over the expected life with the risk of default since initial recognition.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECL, the Group and the Company consider reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s and the Company’s historical experience and informed credit assessment and including forward-looking information.

Lifetime expected credit losses are the expected credit losses that result from all possible default events over the expected life of the asset, while 12-month expected credit losses are the portion of expected credit losses that result from default events that are possible within the 12 months after the reporting date. The maximum period considered when estimating ECLs is the maximum contractual period over the Group or the Company is exposed to credit risk.




(n) Impairment (Cont’d)

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group and the Company expect to receive). ECLs are discounted at the effective interest rate of the financial asset.

The Group and the Company estimate the expected credit losses on trade receivables using a provision matrix with reference to historical credit loss experience.

An impairment loss in respect of financial assets measured at amortised cost is recognised in profit or loss and the carrying amount of the asset is reduced through the use of an allowance account.

An impairment loss in respect of debts investments measured at fair value through other comprehensive income is recognised in profit or loss and the allowance account is recognised in other comprehensive income.

At each reporting date, the Group and the Company assess whether financial assets carried at amortised cost and debt securities at fair value through other comprehensive income are credit impaired. A financial asset is credit impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

Write-off

The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Group and the Company determine that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group’s and the Company’s procedures for recovery of amounts due.

Other assets

The carrying amounts of the other assets (except for inventories, deferred tax asset, assets arising from employee benefits, investment property measured at fair value and non-current assets (or disposal groups) classified as held for sale) are reviewed at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill and intangible assets that have indefinite useful lives or that are not yet available for use, the recoverable amount is estimated each period at the same time.

For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or cash-generating units. Subject to an operating segment ceiling test, for the purpose of goodwill impairment testing, cash-generating units to which goodwill has been allocated are aggregated so that the level at which impairment testing is performed reflects the lowest level at which goodwill is monitored for internal reporting purposes. The goodwill acquired in a business combination, for the purposes of impairment testing, is allocated to group of cash-generating units that are expected to benefit from the synergies of the combination.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash-generating unit.

An impairment loss is recognised if the carrying amount of an asset or its related cash-generating unit exceeds its estimated recoverable amount.

Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (group of cash-generating units) and then to reduce the carrying amounts of the other assets in the cash-generating unit (group of cash-generating unit) on a pro rata basis.




(n) Impairment (Cont’d)

Other assets (Cont’d)

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at the end of each reporting period for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount since the last impairment loss was recognised. An impairment loss is reversed only to the extent that asset’s carrying amount does not exceed the carrying amount that amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Reversals of impairment losses are credited to profit or loss in the financial year in which the reversals are recognised.

(o) Equity instruments

Instruments classified as equity are measured at cost on initial recognition and are not remeasured subsequently.

(i) Issue expenses

Cost directly attributable to the issue of instruments classified as equity is recognised as a deduction from equity.

(ii) Ordinary shares

Ordinary shares are classified as equity.

(p) Employee benefits

(i) Short-term employee benefits

Short-term employee benefit obligations in respect of salaries, annual bonuses, paid annual leave and sick leave are measured on an undiscounted basis and are expensed as the related service is provided.

A liability is recognised for the amount expected to be paid under short term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

(ii) Defined contribution plans

The Group’s contributions to statutory pension funds are charged to profit or loss in the financial year to which they relate. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.

(q) Provision

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pretax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost.

(i) Warranties

A provision for warranties is recognised when the underlying products or services are sold. The provision is based on historical warranty data and a weighting of all possible outcomes against the associated probabilities.




(r) Revenue

The Group recognises revenue from contracts with customers based on the five-step model as below:

(i) Identify contract(s) with a customer. A contract is defined as an agreement between two or more parties that creates enforceable rights and obligations and sets out the criteria that must be met.

(ii) Identify performance obligations in the contract. A performance obligation is a promise in a contract with a customer to transfer a good or service to the customer.

(iii) Determine the transaction price. The transaction price is the amount of consideration to which the Group expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.

(iv) Allocate the transaction price to the performance obligations in the contract. For a contract that has more than one performance obligation, the Group allocates the transaction price to each performance obligation in an amount that depicts the amount of consideration to which the Group expects to be entitled in exchange for satisfying each performance obligation.

(v) Recognise revenue when (or as) the Group satisfy a performance obligation.

The Group satisfies a performance obligation and recognises revenue over time if the Group’s performance:

(i) Does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to-date; or

(ii) Creates or enhances an asset that the customer controls as the asset is created or enhanced; or (iii) Provides benefits that the customer simultaneously receives and consumes as the Group

performs.

For performance obligations where any one of the above conditions is not met, revenue is recognised at the point in time at which the performance obligation is satisfied.

Revenue is measured at the fair value of consideration received or receivable in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties. Revenue is recognised when the Group satisfies a performance obligation by transferring a promised good or service to the customer, which is when the customer obtains control of the good or service.

(i) Revenue from contracts with customers

(a) Sales of manufactured or trading goods

The Group recognises revenue when customers obtain control of manufactured or trading goods at that point in time when customers take possession of the goods. Invoices are generated and revenue is recognised at that point in time.

For contracts that permit the customer to return an item, revenue is recognised to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognised will not occur. The amount of revenue recognised is adjusted for expected returns, which are estimated based on the historical data for specific type of goods. Returned goods are exchanged only for new goods – i.e. no cash refunds are offered. Therefore, refund liability and a right to recover returned goods asset are recognised.

(b) Services

Revenue is recognised at a point in time as those services are provided. The total consideration in the service contracts is allocated to all services based on their relative stand-alone selling prices.




(r) Revenue (Cont’d)

(ii) Dividend income

Dividend income is recognised in profit or loss on the date the Group’s or the Company’s right to receive payment is established, which in the case of quoted securities is the ex-dividend date.

(iii) Rental income

Rental income from investment property is recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income, over the term of the lease. Rental income from investment and subleased properties are recognised as other income.

(iv) Interest income

Interest income is recognised as it accrues using the effective interest method in profit or loss except for interest income arising from temporary investment of borrowings taken specifically for the purpose of obtaining a qualifying asset which is accounted for in accordance with the accounting policy on borrowing costs.

(s) Borrowing costs

Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method.

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets.

The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when expenditure for the asset is being incurred, borrowing costs are being incurred and activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalisation of borrowing costs is suspended or ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are interrupted or completed.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing eligible for capitalisation.

(t) Goods and services tax (“GST”)

Revenue, expenses and assets are recognised net of GST, unless the GST is not recoverable from the tax authority. The amount of GST not recoverable from the tax authority is recognised as an expense or as part of cost of acquisition of an asset. Receivables and payables relate to such revenue, expenses or acquisitions of assets are presented in the statement of financial position inclusive of GST recoverable or GST payable.

GST recoverable from or payable to tax authority may be presented on net basis should such amounts are related to GST levied by the same tax authority and the taxable entity has a legally enforceable right to set off such amounts.

(u) Income tax

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss except to the extent that it relates to a business combination or items recognised directly in equity or other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted by the end of the reporting period, and any adjustment to tax payable in respect of previous financial years.




(u) Income tax (Cont’d)

Deferred tax is recognised using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities in the statement of financial position and their tax bases. Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at the end of each reporting period and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Any unutilised portion of a tax incentive that is not a tax base of an asset is recognised as a deferred tax asset to the extent that it is probable that the future taxable profits will be available against the unutilised tax incentive can be utilised.

(v) Earnings per ordinary share

The Group presents basic earnings per share data for its ordinary shares (“EPS”).

Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held.

Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise convertible notes and share options granted to employees.

(w) Operating segments

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating results are reviewed regularly by the chief operating decision maker, which in this case is the managing director of the Group, to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available.

(x) Contingencies

(i) Contingent liabilities

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is not recognised in the statements of financial position and is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events, are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.




(x) Contingencies (Cont’d)

(ii) Contingent assets

Where an inflow of economic benefit of an asset is probable where it arises from past events and where existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity, the asset is not recognised in the statements of financial position but is being disclosed as a contingent asset. When the inflow of economic benefit is virtually certain, then the related asset is recognised.

(y) Fair value measurement

Fair value of an asset or a liability, except for share-based payment and lease transactions, is determined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The measurement assumes that the transaction to sell the asset or transfer the liability takes place either in the principal market or in the absence of a principal market, in the most advantageous market.

For non-financial asset, the fair value measurement takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the input used in the valuation technique as follows:

Level 1: quoted price (unadjusted) in active markets for identical assets or liabilities that the Group can access at the measurement date.

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or a liability, either directly or indirectly.

Level 3: unobservable inputs for the asset or liability.

The Group recognises transfer between levels of the fair value hierarchy as of the date of the event or change in circumstances that caused the transfers.

(z) Use of estimates and judgements

The preparation of the financial statements in conformity with MFRSs requires management to make judgements, estimates and assumptions that affect the application of accounting policies, and the reported amounts of assets, liabilities, income and expenses. 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 estimates are revised and in any future periods affected.

There are no significant areas of estimation uncertainty and critical judgements in applying accounting policies that have significant effect on the amounts recognised in the financial statements other than those disclosed in the following notes:

(i) Taxes

There are certain transactions and computations for which the ultimate tax determination may be different from the initial estimate. The Group and the Company recognise tax liabilities based on their understanding of the prevailing tax laws and estimates of whether such taxes will be due in the ordinary course of business. Where the final outcome of these matters is different from the amounts that were initially recognised, such difference will impact the income tax and deferred tax provisions in the year in which such determination is made.




(z) Use of estimates and judgements (Cont’d)

(ii) Impairment assessment of receivables

The Group uses a provision matrix to calculate expected credit losses for receivables. The provision rates are based on days past due for groupings of various customer segments that have similar loss patterns.

The provision matrix is initially based on the Group’s historical observed default rates. The Group will calibrate the matrix to adjust the historical credit loss experience with forward-looking information. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed.

The assessment of the correlation between historical observed default rates, forecast economic conditions and expected credit losses is a significant estimate. The amount of expected credit losses is sensitive to changes in circumstances and of forecast economic conditions. The Group’s historical credit loss experience and forecast of economic conditions may also not be representative of customer’s actual default in the future.

(iii) Impairment of goodwill

The Group perform an annual assessment of the carrying amount of its goodwill against the recoverable amount of the cash-generating units (“CGU”) to which the goodwill has been allocated. The measurement of the recoverable amount of CGUs are determined based on the value-in-use method, incorporating the present value of estimated future cash flows expected to arise from the respective CGU’s ongoing operations. Management judgment is used in the determination of the assumptions made, particularly the cash flow projections, discount rates and the growth rates used. The estimation of pre-tax cash flows is sensitive to the periods for which the forecasts are available and to assumptions regarding the long-term sustainable cash flows, and reflect management’s view of future performance.



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3. PROPERTY, PLANT AND EQUIPMENT (Cont’d)

2019Group RM

Net carrying amountLeasehold land 5,714,671 Buildings 10,916,704 Plant and machinery 2,330,389 Furniture and equipment 2,009,070 Motor vehicles 552,319 Renovation 1,563,573 Right-of-use assets 183,613

23,270,339

(a) Leasehold land is in respect of right-of-use assets for which the Group has land title. The net carrying amount of leasehold lands and buildings of the Group pledged for bank facilities granted to a subsidiary is RM14,663,461. The Group has not utilised the facilities at the end of the reporting year.

(b) The movement of property, plant and equipment of the Group held under the hire purchase arrangement for right-of-use assets as referred to in Note 13 are as follows: -

Plant and machinery

Motor vehicles Total

Group RM RM RM

At 1 January 2019 - - - Acquisition of subsidiary via merger- carrying amount as at acquisition date 1,675,007 599,032 2,274,039

1,675,007 599,032 2,274,039 Less: current year depreciation (178,572) (194,046) (372,618)

Carrying amount 1,496,435 404,986 1,901,421

(c) Right-of-use assets

The right-of-use assets are held under lease obligations as referred to in Note 13.

The Group has a lease contract for a property for three years that include extension option. This option is negotiated by management to provide flexibility in managing the leased-asset portfolio and align with the Group’s business needs. Management exercises judgement in determining whether these extension options are reasonably certain to be exercised. The Group’s obligations under these leases are unsecured.



4. INVESTMENT PROPERTIES

Group2019 RM

CostAt 1 January - Acquisition of subsidiary via merger 308,485 At 31 December 308,485

Accumulated depreciationAt 1 January - Acquisition of subsidiary via merger 18,509 Depreciation for the year 6,169 At 31 December 24,678 Net carrying amount 283,807

At cost: -Buildings 283,807

Investment properties comprise buildings leased to third parties. Each of the leases contains an initial non-cancellable period of average 2 years and subsequent renewals are negotiated with the lessee and on average renewed periods of 2 years.

The followings are recognised in profit or loss in respect of investment properties:

Group2019 RM

Rental income 24,000 Direct operating expenses - income generating 10,027

The fair value of investment properties is RM350,000. The directors have used the desktop valuations provided by external, independent property valuers, having appropriate recognised professional qualifications and recent experience in the location and category of properties being valued, to estimate the fair value of the investment properties as the directors considered that the market value is appreciating but with no substantial variation from the value stated in the desktop valuations.

Fair value of investment properties are categorised as Level 3 as described in Note 2(y) to the financial statements.



5. INVESTMENT IN SUBSIDIARIES

Company2019 2018 RM RM

Unquoted shares - at cost 41,612,079 -

Details of the subsidiaries are as follows: -

Name of subsidiaries

Country of incorporation Principal activities

Effective ownership

interest2019 2018

I-Stone Technology Sdn. Bhd.

Malaysia Investment holding company 100% -

Held through subsidiary:Bizit Systems (M) * Sdn Bhd

Malaysia Distribution of statistical analysis software, wireless communication devices and robotic arms

100% -

I-Stone Engineering * Sdn Bhd

Malaysia Design and fabrication of precision parts 100% -

I-Stone Solutions * Sdn Bhd

Malaysia Provision of data management system and engineering design services

100% -

I-Stone Systems * Sdn Bhd

Malaysia Manufacturing and modification of specialised automation machines, provision of maintenance and technical support services and supply of spare parts

100% -

P.A. Metal Technics * Sdn Bhd

Malaysia Design and fabrication of metal panels and frames

100% -

Bizit Systems And Solutions Pte. Ltd. * #

Singapore Distribution of statistical analysis software and wireless communication devices

100% -

I-Stone International Pte. Ltd. * #

Singapore Sales of specialised automation machines 100% -

* Subsidiary of I-Stone Technology Sdn. Bhd.

# Not audited by Ecovis Malaysia PLT



6. GOODWILL ON CONSOLIDATION

Group2019 RM

CostAt 1 January - Acquisition of subsidiary via merger 2,067,965 At 31 December 2,067,965

Accumulated impairment lossesAt 1 January - Acquisition of subsidiary via merger (1,212,163)At 31 December (1,212,163)Net carrying amount 855,802

Goodwill is tested for impairment on an annual basis by comparing the carrying amount with the recoverable amount of the cash-generating units based on value-in-use. Value-in-use is determined by discounting the cash flows projections based on the financial budgets approved by the management. The discount rate used is 12%.

A reasonably possible change in the assumptions above would not cause any impairment loss on goodwill.

7. INVENTORIES

Group2019 RM

At Cost: -Raw materials 1,051,756 Work-in-progress 4,075,625 Trading goods 360,337

5,487,718

Inventories recognised as cost of sales in profit or loss 54,871,837



8. TRADE AND OTHER RECEIVABLES

Group Company2019 2019 2018 RM RM RM

Trade receivables:Receivables from contracts with customers:- Third parties 24,439,160 - -

24,439,160 - -

Other receivables:- Sundry receivables 357,541 48,171 - - Sundry deposits 156,158 - - - Prepayments 67,211 - -

580,910 48,171 -

25,020,070 48,171 -

Credit terms of trade receivables range from 1 to 4 months.

9. AMOUNT DUE BY SUBSIDIARIES

This is unsecured, interest-free and repayable on demand.

10. CASH AND BANK BALANCES


Fixed deposits placed with licensed bank 1,001,000 - - Short-term funds 18,400,000 16,500,000 - Bank balances and cash 4,739,415 89,500 100

24,140,415 16,589,500 100

(a) The fixed deposits placed with licensed bank of the Group with carrying amount of RM1,000,000 are pledged for bank facilities granted to a subsidiary. The Group has not utilised the facilities at the end of the reporting year. The effective interest rate of fixed deposits is 3% per annum.

(b) Short-term funds represent investments in highly liquid money market instruments which are readily convertible to known amount of cash and are subject to an insignificant risk of change in value. The effective interest rate of short-term funds is ranging from 3.1% to 3.3% per annum.



10. CASH AND BANK BALANCES (Cont’d)

(c) For the purpose of the statement of cash flows, cash and cash equivalents comprise the following:


Fixed deposits placed with licensed bank 1,001,000 - - Short-term funds 18,400,000 16,500,000 - Bank balances and cash 4,739,415 89,500 100

24,140,415 16,589,500 100 Less: Fixed deposits pledged to licensed bank (1,000,000) - -

Cash and cash equivalents 23,140,415 16,589,500 100

(d) The reconciliation of liabilities arising from financing activities are as follows:

Amount due to a

shareholderLoans andborrowings

Hire purchasepayables

Leaseobligations Total

Group RM RM RM RM RM

At 1 January 2019 3,997 - - - 3,997

Cash flows:Financing obtained - - 1,517,867 - 1,517,867 Repayment (3,997) (12,371,311) (379,718) (38,541) (12,793,567)

Non-cash changes:Acquisition of subsidiary via merger - 12,371,311 410,376 - 12,781,687 Addition - - - 224,417 224,417 Effect of exchange rate changes - - - (6) (6)At 31 December 2019 - - 1,548,525 185,870 1,734,395

Amount due to a

shareholder TotalCompany RM RM

At 1 January 2018 - - Cash flows:Advances 3,997 3,997 At 31 December 2018 3,997 3,997

Cash flows:Repayment (3,997) (3,997)At 31 December 2019 - -



11. SHARE CAPITAL

Group/Company2019 2018

Number RM Number RM

Issued and fully paid shares classified as equity instruments: At 1 January 100 100 100 100 - Issuance of ordinary shares pursuant to the acquisition of IST 977,181,100 16,612,079 - - - Issuance of ordinary shares pursuant to Initial Public Offering 244,296,000 39,087,360 - - - Share issuance expenses - (1,183,297) - -

At 31 December 1,221,477,200 54,516,242 100 100

Ordinary sharesThe holders of ordinary share are entitled to receive dividends as declared from time to time, and are entitled to one vote per share at meetings of the Company.

During the financial year, the Company increased its issued and paid up share capital from RM100 to RM55,699,539 by way of issuance of 1,221,477,100 new ordinary shares as follows:

(i) 977,181,100 new ordinary shares at an issue price of approximately RM0.017 each for a total consideration of RM16,612,079 as full settlement for the acquisition of the entire issued and paid up share capital of i-Stone Technology Sdn. Bhd. (“IST”); and

(ii) 244,296,000 new ordinary shares at an issue price of RM0.16 each for a total cash consideration of RM39,087,360 pursuant to the initial public offering of the Company on the ACE Market of Bursa Malaysia Securities Berhad.

The new ordinary shares issued during the financial year ranked pari passu in all respect with the existingordinary shares of the Company.



12. RESERVES

Group2019 RM

Non-distributable Translation reserve 635,471 Merger reserve (16,628,339)

(15,992,868)

(a) Translation reserve

The foreign currency translation reserve is used to record foreign currency exchange differences arising from the translation of the financial statements of foreign operations whose functional currencies are different from that of the presentation currency of the Group. It is also used to record the exchange differences arising from monetary items which form part of the net investment in foreign operations, where the monetary item is denominated in either the functional currency of the reporting entity or the foreign operation.

(b) Merger reserve

The merger reserve arises from the difference between the nominal value of shares issued by the Company and the nominal value of shares of the subsidiary companies acquired under the merger method of accounting.

13. LEASE LIABILITIES

Group2019 RM

Non-current 1,256,194 Current 478,201

1,734,395

Represented by:Hire purchase payables 1,548,525 Lease obligations 185,870

1,734,395

The hire purchase payables are in respect of financing the property, plant and equipment as referred to in Note 3 (b).

The lease obligations for right-of-use assets included in property, plant and equipment as referred to in Note 3 (c) are initially measured at the present value of the lease payments that are not paid at the commencement date. The lease payments are discounted using the Group entities’ incremental borrowing rate of 5%.

The Group has recognised the lease payments associated with short-term leases and low value assets on a straight-line basis over the lease terms and recognised as rental expenses as disclosed in Note 18 to the financial statements.



14. DEFERRED TAX LIABILITIES

Group2019 RM

At beginning of the year - Acquisition of subsidiary via merger 477,247 Recognised in profit or loss (Note 19) 173,726

At end of the year 650,973

Represented by:Deferred tax assets - Deferred tax liabilities 650,973

650,973

The components of deferred tax assets and liabilities as at the end of the financial year, prior to offsetting are as follows: -

Unrealised foreign

exchange TotalGroup RM RM Deferred tax assets

At 1 January 2019 - - Acquisition of subsidiary via merger (11,721) (11,721)Recognised in profit or loss 11,721 11,721

At 31 December 2019 - -

Property, plant and equipment Total

Group RM RM Deferred tax liabilities

At 1 January 2019 - - Acquisition of subsidiary via merger 488,968 488,968 Recognised in profit or loss 162,005 162,005

At 31 December 2019 650,973 650,973



15. TRADE AND OTHER PAYABLES


Trade payables 5,348,593 - -

Other payables:Entity in which directors have interest - - 591,806 Sundry payables 147,862 27,971 517,019 Due to a shareholder - - 3,997 Accruals 3,434,394 38,612 161,500 Contract liabilities 2,166,413 - - Provision for warranty 7,419 - -

5,756,088 66,583 1,274,322

11,104,681 66,583 1,274,322

Credit terms of trade payables range from 1 to 3 months.

The amount due to entity in which directors have interest included in other payables is unsecured, interest-free and repayable on demand. During the year of 2019, the above entity has become the subsidiary of the Company as referred to in Note 5.

The contract liabilities primarily relate to the advance consideration received from customer, which revenue is recognised at point in time at which the performance obligations are satisfied. The revenue will be recognised within 12 months of the end of the reporting period.

The provision for warranty relates mainly to sale of manufactured goods. The provision is based on estimates made from historical warranty data associated with similar products and services. The movement of the provision for warranty is as follow:

Group2019 RM

At 1 January 2019 - Acquisition of subsidiary via merger 23,845 Provision made during the year 52,005 Provision used during the year (68,431)At 31 December 2019 7,419



16. REVENUE

Group1.1.2019

to31.12.2019

RM

Revenue from contracts with customersSale of manufactured goods 68,382,123 Distribution 9,349,106

77,731,229

Timing of revenue recognitionAt a point in time at which the performance obligation is satisfied 77,731,229

17. FINANCE COSTS

Group1.1.2019

to31.12.2019

RM Interest expenses:- Bank overdraft 129,908 - Hire purchase 99,192 - Term loan 323,492 - Lease obligations 5,216 Bank commitment fee 10,794

568,602



18. PROFIT/(LOSS) BEFORE TAX


to31.12.2019

1.1.2019to

31.12.2019

22.3.2018to

31.12.2018 RM RM RM

Profit/(Loss) before tax are stated after charging/(crediting): - Auditors' remuneration: - - statutory audit 90,881 17,000 2,500 - non-statutory audit - - 200,000 Depreciation of investment properties 6,169 - - Depreciation of property, plant and equipment 1,330,540 - - Depreciation of right-of-use assets 40,852 - - Property, plant and equipment written off 57,953 - - Directors' remuneration Directors of the Company - fees 213,000 213,000 53,000 - salaries and other emoluments 1,081,037 5,200 - - defined contribution plans 115,070 - - Directors of subsidiaries - salaries and other emoluments 301,084 - - - defined contribution plans 6,237 - - Rental of premises 126,398 - - Rental of equipment 4,650 - - Staff costs (excludes directors' remuneration): - salaries, bonus, wages and others 13,724,911 - - - defined contribution plans 1,490,209 - - Net foreign exchange: - Realised gain (5,212) - - - Unrealised loss 89,585 - - Provision for warranty 52,005 - - Dividend income (201,724) (9,690,674) - Gain on disposal of property, plant and equipment (19,773) - - Interest income (60,908) (56,148) - Rental income (26,327) - -



19. INCOME TAX EXPENSE


to31.12.2019

1.1.2019to

31.12.2019

22.3.2018to

31.12.2018 RM RM RM

Recognised in profit or loss: -Current tax expenseMalaysian income tax: -- current year 1,212,949 9,377 - - prior years 100,126 - - Foreign tax: -- current year 56,270 - - - prior years 27,008 - - - withholding tax 195,705 - -

1,592,058 9,377 -

Deferred tax expense Origination and reversal of temporary differences 173,726 - -

173,726 - -

Total income tax expense 1,765,784 9,377 -

Reconciliation of tax expense: -Profit/(Loss) before tax 10,301,771 8,233,463 (1,274,322)

Income tax calculated using Malaysian tax rate of 24% (2018: 24%) 2,472,000 1,976,000 (306,000)Non-allowable expenses 685,973 363,377 306,000 Non-taxable income (55,184) (2,326,000) - Different tax rates in foreign jurisdictions (34,797) - - Income tax exemption under Pioneer Status (1,478,000) - - Different tax rate at 7% (2018: 6%) on first RM500,000 (2018: RM500,000) for qualified small and medium enterprise (122,200) (4,000) - Statutory tax exemption in Singapore (52,845) - - Deferred tax assets not recognised 27,998 - - Underprovision of tax expense in prior years 127,134 - - Foreign withholding tax 195,705 - - Tax expense for the year 1,765,784 9,377 -

Tax expense for other taxation authorities are calculated at the rates prevailing in those respective jurisdictions.

A subsidiary has been granted the Pioneer Status incentive under the Promotion of Investments Act 1986. The subsidiary will enjoy exemption from income tax on its statutory income from pioneer activities for a period of 5 years from 1 January 2017 to 31 December 2021.



19. INCOME TAX EXPENSE (Cont’d)

Unrecognised deferred tax assets

Deferred tax assets have not been recognised in respect of the following items:


to31.12.2019

1.1.2019to

31.12.2019

22.3.2018to

31.12.2018 RM RM RM

Unutilised tax losses 225,000 - - Unabsorbed capital allowances 91,000 - -

Potential deferred tax assets are not recognised in the financial statements because it is not probable that sufficient taxable profit will be available in the future to offset the tax losses. The unabsorbed capital allowances and approximately RM60,000 of the unutilised tax losses can only be carried forward for 7 consecutive years of assessment under Malaysia current tax legislation. The remaining unutilised tax losses do not expire under foreign tax legislation.

20. EARNINGS PER ORDINARY SHARE

Basic earnings per ordinary share

The calculation of basic earnings per ordinary share was based on the profit attributable to owners of the Company and a weighted average number of ordinary shares outstanding during the financial year, calculated as follows:

Group1.1.2019

to31.12.2019

RM

Profit for the year attributable to owners of the Company (RM) 8,406,202 Weighted average number of ordinary shares at 31 December 765,682,063 Basic earnings per ordinary share (sen) 1.10

Diluted earnings per ordinary share

The group has no dilution in their earnings per ordinary share as there are no dilutive potential ordinary shares.

21. DIVIDENDS

Group/Company1.1.2019

to31.12.2019

RM Interim single-tier tax exempt ordinary dividend, RM0.0015 per share, paid on 31 December 2019 1,832,216

1,832,216



22. OPERATING SEGMENTS

Operating segments are prepared in a manner consistent with the internal reporting provided to the managing directors of the Group (“Management”) as its operating decision maker in order to allocate resources to segments and to assess their performance.

For management purposes, the entities within the Group are organised into business units based on their business activities, as described below: -

Manufacturing-automation business (“Manufacturing”)

(i) Design, manufacturing and modification of specialised automation machines(ii) Design and fabrication of metal panels and frames and precision parts (iii) Maintenance and technical support services (iv) Provision of data management system

Other related products and services (“Distribution”)

(i) Distribution of manufacturing automation hardware and software

Management monitors the operating results of its business units separately for the purpose of making decisions for resource allocation and performance assessment.

Inter-segment revenue is priced along the same lines as sales to external customers and is eliminated on consolidation. These policies have been applied consistently throughout the reporting periods.

Segment assets exclude investment properties and goodwill on consolidation.

Segment liabilities exclude deferred tax liabilities.

Group Manufacturing Distribution Others Total2019 RM RM RM RM

RevenueExternal sales 68,382,123 9,349,106 - 77,731,229

Inter-segment 9,419,903 2,396,740 - 11,816,643

ResultsSegment results 11,673,431 423,270 (1,226,328) 10,870,373 Finance costs (568,602)Tax expense (1,765,784)Profit for the year 8,535,987

Other information Segment assets 56,275,576 4,797,046 - 61,072,622 Unallocated corporate assets 17,985,529

79,058,151

Segment liabilities 12,316,384 727,972 - 13,044,356 Unallocated corporate liabilities 730,555

13,774,911



22. OPERATING SEGMENTS (Cont’d)

(a) Geographical information

Segment revenue is based on geographical location from which the sale transactions originated.

Group2019 RM

Revenue from external customersMalaysia 50,665,607 Singapore 7,284,907 Indonesia 920,725 Philippines 17,835,049 Taiwan 806,736 Others 218,205

77,731,229

(b) Major customers

The following are major customers with revenue equal or more than ten percent (10%) of revenue of the Group:

Group2019 RM

Customer A (Group of companies) 46,516,104 Customer B 8,228,874

23. FINANCIAL INSTRUMENTS

(a) Categories of financial instruments

The table below provides an analysis of financial instruments categorised as follows:

(i) Financial assets measured at fair value through profit or loss (‘FVTPL’)(ii) Financial assets measured at amortised cost (‘FAAC’)(iii) Financial liabilities measured at amortised cost (‘FLAC’)



23. FINANCIAL INSTRUMENTS (Cont’d)


Financial assetsFAACTrade receivables 24,439,160 - - Other receivables (exclude prepayment) 513,699 48,171 - Amount due by subsidiaries - 1,460,000 - Cash and bank balances (exclude short-term funds) 5,740,415 89,500 100

30,693,274 1,597,671 100

FVTPLCash and bank balances- Short-term funds 18,400,000 16,500,000 -

49,093,274 18,097,671 100

Financial liabilitiesFLACTrade payables (5,348,593) - - Other payables (exclude provision for warranty and contract liabilities) (3,582,256) (66,583) (1,274,322)

(8,930,849) (66,583) (1,274,322)

(b) Financial risk management

The Group has exposure to the following risks from its use of financial instruments:- Credit risk- Liquidity risk- Market risk

(c) Credit risk

Credit risk is the risk of a financial loss to the Group or the Company that may arise if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group’s exposure to credit risk arises principally from its receivables from customers. The Company’s exposure to credit risk arises principally from loans and advances to subsidiaries. There are no significant changes as compared to prior periods.




(c) Credit risk (Cont’d)

(i) Trade Receivables (Cont’d)

Risk management objectives, policies and processes for managing the risk

The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the factors that may influence the credit risk of its customer base, including the default risk associated with the industry and country in which the customers operate.

The management has established a credit policy under which each new customer is analysed individually for creditworthiness before the Group’s standard payment and delivery terms and conditions are offered. The Group’s review includes external ratings, if they are available, financial statements, credit agency information, industry information and in some cases bank references. Sale limits are established for each customer and reviewed quarterly. Any sales exceeding those limits require approval from the management.

At each reporting date, the Group assesses whether any of the trade receivables are credit impaired.

The gross carrying amounts of credit impaired trade receivables are written off (either partially or full) when there is no realistic prospect of recovery. This is generally the case when the Group determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. Nevertheless, trade receivables that are written off could still be subject to enforcement activities.

Exposure to credit risk, credit quality and collateral

As at the end of the reporting period, the maximum exposure to credit risk arising from trade receivables are represented by the carrying amounts in the statement of financial position.

The Group does not require collateral in respect of trade and other receivables. The Group does not have trade receivable for which no loss allowance is recognised because of collateral.

Concentration of credit risk

The exposure to credit risk for trade receivables by geographical region is as follows:

2019 RM

Primary geographical marketsMalaysia 17,282,115 Singapore 1,154,828 Philippines 5,894,296 Others 107,921

24,439,160

Approximately 70% of the Group’s product sales was from a group of customers and a customer, and approximately 84% of the Group’s accounts receivable was from these customers. The Group determines concentration of risk by monitoring its trade receivable individually on an ongoing basis.

More than 93% of the Group’s customers have been transacting with the Group for over four years, and none of these customers’ balances have been written off or are credit-impaired at the reporting date. In monitoring customer credit risk, customers are grouped according to their credit characteristics, including their geographical location and trading history with the Group and existence of previous financial difficulties.





(i) Trade Receivables (Cont’d)

Concentration of credit risk (Cont’d)

The Group is monitoring the economic environment in countries in which customers operate and is taking actions to limits its exposure to customers in countries experiencing particular economic volatility.

A summary of the Group’s exposure to credit risk for trade receivables is as follows:

2019 2019Not credit-impairment

Credit-impairment

RM RM

Major customers 20,409,143 - Other customer:- Four or more years of trading history with the Group 2,453,461 - - Less than four years of trading history with the Group 1,576,556 - Total gross carrying amount 24,439,160 - Less: Allowance for impairment losses - -

24,439,160 -

Expected credit loss assessment for customers

The Group uses an allowance matrix to measure ECLs of its trade receivables. Consistent with the debt recovery process, invoices which are past due 12 months will be considered as credit impaired.

The Group provides for lifetime expected credit loss for all trade receivables. Expected loss rate incorporate past and forward-looking information such as forecast of economic conditions, geographic region, age of customer relationship and type of product purchased.

The following table provides information about the exposure to credit risk and ECLs for trade receivables.

Expected loss rate

Gross carrying amount

Loss allowance

Credit-impairment

RM RM2019Current (Not past due) - 21,647,507 - - Past due 1 to 30 days - 1,390,996 - - Past due 31 to 60 days - 1,184,199 - - Past due 61 to 90 days - 94,317 - - Past due more than 90 days - 122,141 - -

24,439,160 - -

Expected credit loss is considered to be remote as the Group does not have historical material bad debt.





(ii) Cash and cash equivalents

Cash and cash equivalents are mainly held with bank and financial institution counterparties, which are licensed by Bank Negara Malaysia under Financial Services Act 2013. As at the end of the reporting period, the maximum exposure to credit risk is represented by their carrying amounts in the statement of financial position.

Impairment on cash and cash equivalents has been measured on the 12-month expected loss basis and reflects the short maturities of the exposures. The Group considers that its cash and cash equivalents have low credit risk based on the creditworthiness of the counterparties.

(iii) Inter-company loans and advances


The Company provides unsecured loans and advances to subsidiary companies. The Company monitors the results of the subsidiary companies on an individual basis.

Exposure to credit risk, credit quality and collateral

As at the end of the reporting period, the maximum exposure to credit risk is represented by their carrying amounts in the statement of financial position.

Impairment losses

Generally, the Company considers loans and advances to subsidiary companies to have low credit risk. The Company determines the probability of default for these loans and advances individually using internal information available.

(iv) Other receivables

Credit risk on other receivables are mainly arising from sundry debtors and deposit receivables. The Company monitors the repayment on an individual basis.

As at the end of the reporting period, the maximum exposure to credit risk is represented by their carrying amounts in the statement of financial position.

As at the end of the reporting period, the Company did not recognise any allowance for impairment losses.

(d) Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s exposure to liquidity risk arises principally from its various payables, loans and borrowings.

The Group maintains a level of cash and cash equivalents and banking facilities deemed adequate by the management to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they fall due.

It is not expected that the cash flows included in the maturity analysis could occur significantly earlier or at significantly different amounts.




(d) Liquidity risk

Maturity analysis

The table below summarises the maturity profile of the Group’s and the Company’s liabilities as at the end of the reporting period based on undiscounted contractual payments.

GroupCarryingamount

Interest rate

Contractualcash flows

Under 1year

1-5years

Over five

years2019 RM RM RM RM RM

Trade payables 5,348,593 - 5,348,593 5,348,593 - - Other payables 3,582,256 - 3,582,256 3,582,256 - - Lease obligations 185,870 5.0% 196,908 87,515 109,393 - Hire purchase payables 1,548,525 4.5% - 6.2% 1,728,193 476,821 1,251,372 -

10,665,244 10,855,950 9,495,185 1,360,765 -

Company2019Other payables 66,583 - 66,583 66,583 - -

66,583 66,583 66,583 - -

2018Other payables 1,274,322 - 1,274,322 1,274,322 - -

1,274,322 1,274,322 1,274,322 - -

(e) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates that will affect the Group’s financial position or cash flows.

(i) Currency risk

The Group is exposed to foreign currency risk on sales and purchases that are denominated in a currency other than the respective functional currency of the Group entities. The currency giving rise to this risk are primarily U.S. Dollar (“USD”) and Singapore Dollar (SGD).


In respect of monetary assets and liabilities held in currencies other than Ringgit Malaysia, the Group does not hedge this exposure. However, the Group keeps this policy under review.




(e) Market risk (Cont’d)

(i) Currency risk (Cont’d)

Exposure to foreign currency risk

The Group’s exposure to foreign currency (a currency which is other than the functional currency of the Group entities) risk, based on carrying amounts as at the end of the reporting period was:

2019 Denominated in Group USD SGD TotalFunctional currency of Group entities RM RM RM

Trade and other receivables 5,991,007 1,194,429 7,185,436 Cash and bank balances 1,027,657 1,015,038 2,042,695 Trade and other payables (70,555) (1,068,166) (1,138,721)Lease obligations - (185,870) (185,870)Net exposure 6,948,109 955,431 7,903,540

Currency risk sensitivity analysis

A 10% strengthening of the Ringgit Malaysia against U.S. Dollar and Singapore Dollar at the end of the reporting period would have decreased pre-tax profit or loss by RM790,000. This analysis is based on foreign currency exchange rate variances that the Company considered to be reasonably possible at the end of the reporting period. The analysis assumes that all other variables, in particular interest rates, remained constant.

A 10% weakening of Ringgit Malaysia against the above currency at the end of the reporting period would have had equal but opposite effect on the above currency to the amounts shown above, on the basis that all other variables remained constant.

(ii) Interest rate risk

The Group’s fixed rate borrowings are exposed to a risk of change in their fair value due to changes in interest rates. The Group’s variable rate borrowings are exposed to a risk of change in cash flows due to changes in interest rates. Short term receivables and payables are not significantly exposed to interest rate risk.


The Group managed interest rate risk through effective use of its floating and fixed rate debts.




(e) Market risk (Cont’d)

(ii) Interest rate risk (Cont’d)

Exposure to interest rate risk

The interest rate profile of the Group’s significant interest-bearing financial instruments and lease liabilities, based on carrying amounts as at the end of the reporting period was:


Fixed rate instruments Financial assets 1,001,000 - - Lease liabilities (459,666) - -

541,334 - -

Floating rate instruments Financial assets 18,400,000 16,500,000 - Lease liabilities (1,274,729) - -

17,125,271 16,500,000 -

Interest rate risk sensitivity analysis

• Fair value sensitivity analysis for fixed rate instruments

The Company does not account for any fixed rate financial assets and liabilities at fair value through profit or loss, and the Company does not designate derivatives as hedging instruments under a fair value hedge accounting model. Therefore, a change in interest rates at the end of the reporting period would not affect profit or loss.

• Cash flow sensitivity analysis for variable rate instruments

A change of 100 basis points (“bp”) in interest rates at the end of the reporting period would have increased/(decreased) pre-tax profit or loss by RM171,000 of the Group and RM165,000 (2018: Nil) of the Company respectively.

(f) Fair value of financial instruments

The carrying amounts of cash and cash equivalents, short term receivables and payables approximate fair values due to the relatively short-term nature of these financial instruments.

24. CAPITAL COMMITMENTS

Group2019 RM

Property, plant and equipmentContracted but not provided for 84,400 Approved but not contracted for 6,800,000

6,884,400



25. CAPITAL MANAGEMENT

The Group’s objectives when managing capital is to maintain a strong capital base and safeguard the Group’s ability to continue as a going concern, so as to maintain investor, creditor and market confidence and to sustain future development of the business. The directors monitor and are determined to maintain an optimal debt-to-equity ratio that complies with debt covenants and regulatory requirements.

The debt-to-equity ratios were as follows:


Lease liabilities 1,734,395 - - Less: Cash and bank balances (24,140,415) (16,589,500) (100)Net debt (22,406,020) (16,589,500) (100)

Total equity 65,283,240 59,633,790 (1,274,222)

Debt-to-equity ratio N/A N/A N/A

* N/A = not applicable as net cash position

There was no change in the Group’s approach to capital management during the financial year.

The Group is required to maintain adjusted leverage ratio not more than 3.5 times to comply with a bank covenant, falling which, the bank may call an event of default. The Group has not breached this covenant.



26. RELATED PARTIES

Identity of related parties

For the purposes of these financial statements, parties are considered to be related to the Group if the Group or the Company has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group or the Company and the party are subject to common control or common significant influence. Related parties may be individuals or other entities.

Related parties also include key management personnel defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group either directly or indirectly. The key management personnel include all the directors of the Group.

The Group has related party relationship with its subsidiaries, directors and entities in which directors have interest.

Significant related party transactions

The significant related party transactions of the Group and of the Company are shown below:


A. Subsidiaries Dividend income - 9,500,000 -

B. Key management personnel Directors of the Company - fees 213,000 213,000 53,000 - salaries and other emoluments 1,081,037 5,200 - - defined contribution plans 115,070 - - - estimated monetary value of benefit-in-kind 32,100 - - Directors of subsidiaries - salaries and other emoluments 301,084 - - - defined contribution plans 6,237 - - Key management personnel - salaries and other emoluments 520,901 - - - defined contribution plans 62,252 - - - estimated monetary value of benefit-in-kind 13,000 - -

Significant related party balances related to the above transactions are disclosed in respective notes.



27. ACQUISITION OF SUBSIDIARIES AND NON-CONTROLLING INTERESTS

(a) Acquisition of subsidiaries

(i) Acquisition by the Company

The Company entered into a conditional share purchase agreement dated 31 October 2018 for the acquisition of the entire equity interest in i-Stone Technology Sdn. Bhd. (“IST”) for a purchase consideration of RM16,612,079. The purchase consideration was satisfied by the issuance of 977,181,100 new ordinary shares in the Company at an issue price of approximately RM0.017 each.

The acquisition of IST was completed on 2 May 2019. Consequently, IST became a wholly-owned subsidiary of the Company.

The merger method of accounting was adopted for consolidation in which the results of the subsidiary companies are presented as if the merger had been effected throughout the current and previous financial years. The assets and liabilities combined are accounted for based on the carrying amounts from the perspective of the common control shareholders at the date of transfer.

On 26 November 2019, the Company acquired additional 25,000,000 ordinary shares at RM1 each in IST for a total cash consideration of RM25,000,000. There was no change to the Group’s shareholding in the subsidiary.

(ii) Acquisition by the subsidiary

The subsidiary of the Company, IST entered into the following conditional share purchase agreements on 31 October 2018 with the selling shareholders to acquire the equity interest, as detailed below:

- to acquire the entire 100% equity interest in i-Stone International Pte. Ltd. for a cash consideration of RM534,019 (equivalent to SGD180,479, based on the exchange rate of SGD1.00:RM2.9589).

- to acquire the entire 100% equity interest in Bizit Systems and Solutions Pte. Ltd. for a total purchase consideration of RM2,259,304 (equivalent to SGD763,562, based on the exchange rate of SGD1.00:RM2.9589), satisfied via the issuance of 17,010 new IST shares at an issue price of RM13.282 each and a cash consideration of RM2,033,377.

Upon completion of the acquisition on 30 April 2019, all the above companies become wholly-owned subsidiaries of IST thereafter.

(b) Acquisition of non-controlling interests

The subsidiary of the Company, IST entered into the following conditional share purchase agreements on 31 October 2018 with the selling shareholders to acquire the equity interest, as detailed below:

- to acquire the remaining 10% equity interest in Bizit Systems (M) Sdn. Bhd. for a purchase consideration of RM30,801, satisfied via the issuance of 2,319 new IST shares at an issue price of RM13.282 each.

- to acquire the remaining 30% equity interest in i-Stone Engineering Sdn. Bhd. for a purchase consideration of RM440,285, satisfied via the issuance of 33,149 new IST shares at an issue price of RM13.282 each.

- to acquire the remaining 40% equity interest in P. A. Metal Technics Sdn. Bhd. for a total purchase consideration of RM349,928, satisfied by the issuance of 26,346 new IST shares at an issue price of RM13.282 each.

Upon completion of the acquisition on 30 April 2019, all the above companies become wholly-owned subsidiaries of IST thereafter.



28. SIGNIFICANT EVENTS

On 21 June 2019, the Company issued its Prospectus and undertook an Initial Public Offering (“IPO”)comprising:

(a) Public issue of 244,296,000 new ordinary shares in the Company at the IPO Price allocated in the following manner:

(i) 61,074,000 new shares available for application by the Malaysian Public;(ii) 12,215,000 new shares available for application by the eligible directors and employees under the

Pink Form Allocations;(iii) 122,148,000 new shares by way of private placement to identified Bumiputera investors approved

by Ministry of International Trade and Industry in Malaysia; and(iv) 48,859,000 new shares by way of private placement to selected investors.

(b) Offer for sale of 122,148,000 existing shares at the IPO Price by way of private placement to selected investors.

Thereafter, the Company’s enlarged issue share capital comprising 1,221,477,200 shares was listed on the ACE Market of Bursa Securities on 17 July 2019.

29. SUBSEQUENT EVENTS (a) The outbreak of novel coronavirus (COVID-19) continues to spread rapidly in many countries. The

COVID-19 is expected to impact the business operations of the Group as the degree of the impact on global business and economic activities is dependent on the duration of the pandemic and various preventive measures put in place by Malaysia and countries across the world.

The Group continues to monitor the developments of COVID-19 situation closely, assess and react actively to its impacts on the financial position and operating results of the Group. As of the date of the report, the Group is still assessing the related impact on the Group’s consolidated financial results, cash flows and financial position given the dynamic nature of these circumstances. Therefore, the related impact could not be reasonably estimated at this stage but will be reflected in the Group’s interim and annual financial statements in 2020.

(b) On 26 February 2020, the Company proposed to undertake the following proposals:

(i) Proposed consolidation of every five (5) existing ordinary shares in the Company (“Share(s)”) into one (1) Share held on an entitlement date to be determined later; and

(ii) Proposed establishment of an employees’ share option scheme (“ESOS”) of up to a maximum of fifteen percent (15%) of the total number of issued shares of the Company (excluding treasury shares, if any) at any point of time during the duration of the ESOS for the eligible employees and executive directors of the Company and its subsidiaries (excluding dormant subsidiaries).

30. COMPARATIVE FIGURES

No comparative information has been presented for the Group as this is the Group’s first set of financial statements. The financial statements of the Company of previous period which are presented for comparative purposes are for the period from 22 March 2018 (date of incorporation) to 31 December 2018.



No.

Registered owner/ Title details/ Postal address

Category of land use/ Expiry of lease

Age of building

Description of property/ Existing use/ Age of building

Date of Acquisition

Land area/ Built up

areasq m

Net book value

(RM)(a) i-Stone Systems

Sdn Bhd

HS(D) 50239, PTD 87654, Mukim of Senai, District of Kulai, Johor bearing the postal address of 12-2, Jalan Persiaran Teknologi, Taman Teknologi Johor 81400 Senai, Johor

Building /

Leasehold, 60 years (expiring on 1 April 2068)

4 years 1 storey factory with a 2-storey office building used as our centralised main office and manufacturing space of our Group

Leasehold land

22 Nov 2018 18,840 / 6,169

14,663,460

(b) i-Stone Systems Sdn Bhd

HS(D) 50240, PTD 87663, Mukim of Senai, District of Kulai, Johor bearing postal address of PTD 87663, Jalan Persiaran Teknologi, Taman Teknologi Johor 81400 Senai, Johor

Industrial /Leasehold, 60 years (expiring on 1 April 2068)

N/A Vacant land

Leasehold land

22 Nov 2018 2,860 326,344

(c) i-Stone Technology Sdn Bhd

Master Lot No. 21393, Strata Title No. GRN 102261/M1/17/49, Johor Bahru, Johor

No. 17-06, Level 17, Menara MSC Cyberport, Jalan Bukit Meldrum, 80300 Johor Bahru, Johor

Building /Freehold

20 years Office unit located on the 17th floor of a commercial building

Vacant

13 Nov 2014 N/A / 128 496,167

List Of Properties As At 31 December 2019



No.

Registered owner/ Title details/ Postal address

Category of land use/ Expiry of lease

Age of building

Description of property/ Existing use/ Age of building

Date of Acquisition

Land area/ Built up

areasq m

Net book value

(RM)(d) i-Stone

Technology Sdn Bhd



Building /Freehold


Office premise of Bizit Systems Malaysia

5 Oct 2016 N/A / 128 492,488

(e) i-Stone Technology Sdn Bhd

GRN 75551 Lot 20000 (formerly held under HS(D) 117437, PT 462) Seksyen 90, Kuala Lumpur

No. 8-23A, Block V03, Sunway Velocity Designer Office, Lingkaran SV, Off Jalan Peel 55100 Kuala Lumpur

Building /Freehold


Office premise of Bizit Systems Malaysia

30 Sept 2012

N/A / 88.5 652,913

(f) i-Stone Solutions Sdn Bhd



Building /Freehold


Rented out as office premises

6 Oct 2016 N/A / 82 283,806

List Of Properties As At 31 December 2019



Share Capital

Number of Issued Shares 1,221,477,200 Ordinary SharesClass of Shares Ordinary Shares Voting Rights One vote per ordinary share held

Distribution of Shareholdings

Size of Holdings No. of Holders % No. of Shares %Less than 100 4 0.097 147 0.000100 – 1,000 421 10.240 244,901 0.0201,001 - 10,000 1,419 34.517 9,505,100 0.77810,001 - 100,000 1,865 45.366 72,571,200 5.941100,001 to less than 5% of issued shares 398 9.681 406,357,152 33.2675% and above of issued shares 4 0.097 732,798,700 59.992Total 4,111 100.00 1,221,477,200 100.00

List of Thirty Largest Shareholders

Name of Shareholders No. of Shares % of Shares1. ONE UNITED EQUITY SDN BHD 329,614,300 26.9842. CHAN KOK SAN 247,610,500 20.2713. CHIN CHUNG LEK 88,534,800 7.2484. TEE SOOK SING 67,039,100 5.4885. CIMB ISLAMIC NOMINEES (TEMPATAN) SDN BHD

PMB INVESTMENT BERHAD FOR MAJLIS AMANAH RAKYAT53,050,000 4.343

6. CHAN SAI KONG 38,000,000 3.1107. CITIGROUP NOMINEES (ASING) SDN BHD

EXEMPT AN FOR CITIBANK NEW YORK (NORGES BANK 14)35,974,500 2.945

8. CIMB GROUP NOMINEES (TEMPATAN) SDN BHDCIMB COMMERCE TRUSTEE BERHAD FOR HONG LEONGREGULAR INCOME FUND

26,600,000 2.177

9. CGS-CIMB NOMINEES (TEMPATAN) SDN BHDPLEDGED SECURITIES ACCOUNT FOR MAK TIAN MENG(MY3136)

20,249,400 1.657

10. CITIGROUP NOMINEES (TEMPATAN) SDN BHDAXA AFFIN LIFE INSURANCE BERHAD FOR ACTIVEBALANCED FUND

17,486,200 1.431

11. CIMB GROUP NOMINEES (TEMPATAN) SDN BHDCIMB COMMERCE TRUSTEE BERHAD FOR MAYBANK MALAYSIA SMALLCAP FUND

15,540,700 1.272

12. ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHDPLEDGED SECURITIES ACCOUNT FOR MAK TIAN MENG(7001418)

14,500,000 1.187

13. CITIGROUP NOMINEES (TEMPATAN) SDN BHDURUSHARTA JAMAAH SDN. BHD. (AFFIN 2)

8,677,800 0.710

14. SIOW KIM WEE 8,000,000 0.65415. CITIGROUP NOMINEES (TEMPATAN) SDN BHD

UNIVERSAL TRUSTEE (MALAYSIA) BERHAD FOR PRINCIPAL ISLAMIC SMALL CAP OPPORTUNITIES FUND

7,471,982 0.611

16. CITIGROUP NOMINEES (TEMPATAN) SDN BHDAXA AFFIN LIFE INSURANCE BERHAD FOR ASIA PACIFICGROWTH FUND

5,226,500 0.427

Analysis Of Shareholdings As At 20 May 2020



List of Thirty Largest Shareholders Cont’d

Name of Shareholders No. of Shares % of Shares17. JOGINDER SINGH A/L GURBAK SINGH 4,000,000 0.32718. UOBM NOMINEES (TEMPATAN) SDN BHD

UNITED OVERSEAS BANK NOMINEES (PTE) LTD FOR NUMSIEW YOKE

3,530,000 0.288

19. RHB CAPITAL NOMINEES (TEMPATAN) SDN BHDBALACHANDRAN A/L GOVINDASAMY (JBA)

3,255,300 0.266

20. ALLIANCE INVESTMENT BANK BERHADEXEMPT AN CLR FOR PMB INVESTMENT BERHAD

3,250,000 0.266

21. KENANGA NOMINEES (TEMPATAN) SDN BHDPLEDGED SECURITIES ACCOUNT FOR MAK TIAN MENG

3,000,000 0.245

22. CGS-CIMB NOMINEES (TEMPATAN) SDN BHDPLEDGED SECURITIES ACCOUNT FOR CHONG SUI PING(MY2618)

2,700,000 0.221

23. ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHDPLEDGED SECURITIES ACCOUNT FOR LAI CHENG KUAN(8058893)

2,500,000 0.204

24. MAYBANK NOMINEES (TEMPATAN) SDN BHDPLEDGED SECURITIES ACCOUNT FOR YONG KOON SENG

2,299,000 0.188

25. AMANAHRAYA TRUSTEES BERHADAFFIN HWANG AIIMAN EQUITY FUND

2,297,700 0.188

26. DB (MALAYSIA) NOMINEE (TEMPATAN) SENDIRIAN BERHADEXEMPT AN FOR AFFIN HWANG ASSET MANAGEMENT BERHAD (TSTAC/CLNT-T)

2,083,400 0.170

27. HABIBAH BINTI MAMAT 2,051,800 0.16728. MAYBANK NOMINEES (TEMPATAN) SDN BHD

MAYBANK TRUSTEES BERHAD FOR CIMB-PRINCIPAL SMALL-CAP FUND (240218)

1,964,733 0.160

29. CGS-CIMB NOMINEES (TEMPATAN) SDN BHDPLEDGED SECURITIES ACCOUNT FOR TAN SIEW ENG @ TAN AING (MY0225)

1,800,000 0.147

30. SOONG KHYE LEONG 1,660,000 0.135

List of Substantial Shareholders

Name of Shareholders Direct Interest Indirect InterestNo. of Shares % of Shares No. of Shares % of Shares

One United Equity Sdn. Bhd. 329,614,300 26.984 0 0.00Tee Sook Sing 67,039,100 5.488 329,614,300 (a) 26.984Chan Kok San 247,610,500 20.271 0 0.00Chin Chung Lek 88,534,800 7.248 0 0.00

(a) Deemed interested by virtue of her shareholding in One United Equity Sdn. Bhd. pursuant to Section 8(4) of the Companies Act 2016 (“the Act”).




Directors’ Shareholdings

Directors Direct Interest Indirect InterestNo. of Shares % of Shares No. of Shares % of Shares

Dato’ Azman Bin Mahmood 100,000 0.008 0 0.00Tee Sook Sing 67,039,100 5.488 329,614,300 (a) 26.984Chan Kok San 247,610,500 20.271 0 0.00Chin Chung Lek 88,534,800 7.248 0 0.00Professor Dr. Ruzairi Bin Hj Abdul Rahim 120,800 0.010 0 0.00Chia Gek Liang 100,000 0.008 0 0.00Law Lee Yen 0 0.00 0 0.00

(a) Deemed interested by virtue of her shareholding in One United Equity Sdn. Bhd. pursuant to Section 8(4) of the Act.




NOTICE IS HEREBY GIVEN that the Second (2nd) Annual General Meeting of I-Stone Group Berhad (“the Company”) will be held at Kayangan Suite, Pulai Springs Resort Johor, Jalan Pontian Lama, 81110 Johor Bahru, Johor on Wednesday, 19th August 2020 at 10.00 a.m. for the following purposes: -

AGENDA

AS ORDINARY BUSINESS:

Please refer to Explanatory Note (a)

Resolution 1 Resolution 2

Resolution 3Please refer to

Explanatory Note (b)


Explanatory Note (c)


Explanatory Note (d)

Notes:-

(i) Only members whose names appear in the Record of Depositors as at 12 August 2020 will be entitled to attend and vote at the Meeting.

Notice of Annual General Meeting

1. To receive the Audited Financial Statements for the financial year ended 31 December 2019 together with the Reports of the Directors and Auditors thereon.

2. To re-elect the following Directors who retire pursuant to Article 131 of the

Company’s Constitution:-

(i) Dato’ Azman Bin Mahmood (ii) Mr. Chia Gek Liang

3. To approve the payment of Directors’ fees of up to RM216,000.00 and benefits of up to RM14,000.00 from this Annual General Meeting until the next Annual General Meeting of the Company.

4. To appoint Messrs. RSM Malaysia as Auditors of the Company in place of the retiring auditors, Messrs. Ecovis Malaysia PLT, and to authorise the Directors to fix their remuneration.

AS SPECIAL BUSINESS:

To consider and if thought fit, to pass the following resolution: - 5. Authority to Issue Shares

“THAT subject always to the Companies Act 2016, the Constitution of the Company and approvals from Bursa Malaysia Securities Berhad and any other governmental/regulatory bodies, where such approval is necessary, authority be and is hereby given to the Directors pursuant to Section 75 and Section 76 of the Companies Act 2016 to issue not more than ten per centum (10%) of the total number of issued shares of the Company at any time upon any such terms and conditions and for such purposes as the Directors may in their absolute discretion deem fit or in pursuance of offers, agreements or options to be made or granted by the Directors while this approval is in force until the conclusion of the next Annual General Meeting of the Company and that the Directors be and are hereby further authorised to make or grant offers, agreements or options which would or might require shares to be issued after the expiration of the approval hereof.”

6. To transact any other business for which due notice shall have been given.

By Order of the Board

NG HENG HOOI (MAICSA 7048492) (PC No. 202008002923)WONG MEE KIAT (MAICSA 7058813) (PC No. 202008001958)WONG MEE CHING (LS 9014) (PC No. 202008001420)Company Secretaries

Kuala LumpurDated: 30 June 2020



Notes:- (Cont’d)

(ii) A member of the Company entitled to attend and vote at the meeting is entitled to appoint not more than two (2) proxies to attend and vote in his stead. Where a member appoints two proxies, the appointment shall be invalid unless the member specifies the proportion of his holdings to be represented by each proxy.

(iii) Where a member of the Company is an exempt authorised nominee as defined under the Securities Industry (Central Depositories) Act, 1991 which holds ordinary shares in the Company for multiple beneficial owners in one (1) securities account (“Omnibus Account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each Omnibus Account it holds.

(iv) The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing, or if the appointor is a corporation, either under its common seal or the hand of its officer or its duly authorised attorney.

(v) The instrument appointing a proxy shall be deposited at the office of the Company’s Share Registrar at Unit 32-01, Level 32, Tower A, Vertical Business Suite Avenue 3, Bangsar South, No.8, Jalan Kerinchi, 59200 Kuala Lumpur, not less than forty-eight (48) hours before the time for holding the meeting or at any adjournment thereof.

Explanatory Notes

(a) Audited Financial Statements and Reports of Directors and Auditors

The Audited Financial Statements under Agenda 1 are meant for discussion only in accordance with the provisions of Section 340(1) of the Companies Act 2016 (“the Act”), and it does not require a formal approval of the shareholders. Hence, this agenda will not be put forward for voting.

(b) Directors’ fees and benefits

Pursuant to Section 230(1) of the Act, fees and benefits (“Remuneration”) payable to the Directors of the Company will have to be approved by the shareholders at a general meeting. The Company is requesting shareholders’ approval for the payment of Remuneration for the period from this Annual General Meeting until the conclusion of the next Annual General Meeting of the Company in 2021. The Remuneration comprises of fees and meeting allowances payable to directors.

(c) Change of Auditors

Messrs. Ecovis Malaysia PLT has indicated that they do not wish to seek for re-appointment as auditors at the forthcoming 2nd AGM of the Company.

The Notice of Nomination for the appointment of Messrs. RSM Malaysia as auditors (a copy of which is annexed and marked as “Appendix A”) has been received by the Company.

(d) Authority to Issue Shares

The Ordinary Resolution proposed under Resolution 5 of the Agenda is a general mandate for the Directors to issue and allot shares in the Company pursuant to Sections 75 and 76 of the Act. The proposed Resolution 5, if passed, will give authority to the Directors of the Company, from the date of this Annual General Meeting, to issue and allot shares or to make or grant offers, agreements or options in respect of shares to such persons, in their absolute discretion including to make or grant offers, agreements or options which would or might require shares in the Company to be issued after the expiration of the approval, without having to convene a general meeting, provided that the aggregate number of shares issued does not exceed 10% of the total number of issued shares of the Company for the time being. This authority, unless revoked or varied at a general meeting, will expire at the conclusion of the next Annual General Meeting of the Company. The general mandate sought will enable the Directors of the Company to issue and allot shares, including but not limited to making placement of shares for purposes of funding investment(s), working capital and general corporate purposes as deemed necessary. The general mandate gives authority to the Directors to raise funds in an effective and expeditious manner.

Notes in Notice of Meeting & Proxy Form

The appointment of a proxy may be made in hard copy form or by electronic form. In the case of an appointment made in hard copy form, the proxy form must be deposited with the Company’s Share Registrar at Unit 32-01, Level 32, Tower A, Vertical Business Suite, Avenue 3, Bangsar South, No. 8, Jalan Kerinchi, 59200 Kuala Lumpur, Malaysia or alternatively, the Customer Service Centre at Unit G-3, Ground Floor, Vertical Podium, Avenue 3, Bangsar South, No. 8, Jalan Kerinchi, 59200 Kuala Lumpur. In the case of electronic appointment, the proxy form must be deposited via TIIH Online at https://tiih.online . Please refer to the Annexure to the Form of Proxy for further information on electronic submission. All proxy form submitted must be received by the Company not less than forty-eight (48) hours before the time appointed for holding the General Meeting or adjourned General Meeting at which the person named in the appointment proposes to vote.




APPENDIX A

Date: 2 June 2020

ONE UNITED EQUITY SDN. BHD.Lot 6.08, 6th Floor Plaza First NationwideNo. 161 Jalan Tun H.S. Lee50000 Kuala Lumpur

The Board of DirectorsI-STONE GROUP BERHAD Lot 6.08, 6th Floor Plaza First NationwideNo. 161 Jalan Tun H.S. Lee50000 Kuala Lumpur

Dear Sirs,

NOTICE OF NOMINATION OF NEW AUDITORS IN PLACE OF RETIRING AUDITORS

We, being a shareholder of I-Stone Group Berhad, hereby give notice to nominate Messrs. RSM Malaysia, AF0768 as Auditors of the Company in place of the retiring auditors and propose the following resolution as an ordinary resolution at the forthcoming Annual General Meeting of the Company:

“THAT Messrs. RSM Malaysia, AF0768, having consented to act, be and are hereby appointed as Auditors of the Company in place of the retiring Auditors, Messrs. Ecovis Malaysia PLT to hold office until the conclusion of the next Annual General Meeting at a remuneration to be agreed between the Directors and the Auditors”.

Thank you.

Yours faithfully,For and on behalf ofOne United Equity Sdn. Bhd.

___________________Tee Sook SingDirector




ANNEXURE

ELECTRONIC SUBMISSION OF PROXY FORM VIA TIIH ONLINE

Dear shareholders,

We are pleased to inform that you as a shareholder can have the option to submit your proxy forms by electronic means through our system, TIIH Online (“e-Proxy”).

TIIH Online is an application that provides an online platform for shareholders (individuals only) to submit document/form electronically which includes proxy form in paperless form (“e-Submission”). Once you have successfully submitted your e-proxy form, you are no longer required to complete and submit the physical proxy form to the company or Tricor office.

To assist you on how to engage with e-Proxy, kindly read and follow the guidance notes which are detailed below:

1. Sign up as user of TIIH Online

2. Proceed with submission of e-Proxy

Using your computer, access our website at https://tiih.online

Sign up as a user by completing the registration form, registration is free

Upload a softcopy of your MyKad (front and back) or your passport

Administrator will approve your registration within one working day and notify you via email

Activate your account by re-setting your password

After the release of the Notice of Meeting by the Company, login with your username (i.e. e-mail address) and password

Select the corporate event: “Submission of Proxy Form”

Read and agree to the Terms & Conditions and confirm the Declaration

Select/insert the CDS account number and indicate the number of shares for your proxy(s) to vote on your behalf

Appoint your proxy(s) or chairman and insert the required details of your proxy(s)

Indicate your voting instructions – FOR or AGAINST, otherwise your proxy will decide your vote

Review & confirm your proxy(s) appointment

Print e-proxy for your record

Notes: (i) If you are already a user of TIIH Online, you are not required to sign up again (ii) An email address is allowed to be used once to register as a new user account, and the same

email cannot be used to register another user account (iii) At this juncture, only individual security holders are offered to register as user and participate

in e-Proxy

Number of Shares held

I/We_____________________________________________________________________________________

of_______________________________________________________________________________________

being a member / members of I-Stone Group Berhad hereby appoint the Chairman of the Meeting*

or _____________________________________________ (Passport/NRIC NO :________________________)

of_______________________________________________________________________________________

or failing him/her,________________________________(Passport/NRIC NO : ________________________)

of_______________________________________________________________________________________*Delete the words “the Chairman of the Meeting” if you wish to appoint another person to be your proxy.

as my/our proxy to vote for me/us on my/our behalf at the 2nd Annual General Meeting (“AGM”) of the Company to be held at Kayangan Suite, Pulai Springs Resort Johor, Jalan Pontian Lama, 81110 Johor Bahru, Johor on Wednesday, 19 August 2020 at 10.00 a.m. and at any adjournment thereof.

My/Our proxy is to vote as indicated below:RESOLUTIONS FOR AGAINST1. Re-election of Dato’ Azman Bin Mahmood as Director2. Re-election of Mr. Chia Gek Liang as Director3. Payment of Directors’ fees and benefits from this AGM until the

next AGM4. To appoint Messrs. RSM Malaysia as Auditors of the Company in

place of the retiring auditors, Messrs. Ecovis Malaysia PLT and to authorise the Directors to fix their remuneration

5. Authority to Issue Shares(Please indicate with an ‘X’ in the spaces provided how you wish your vote to be cast. If you do not do so, the proxy will vote or abstain from voting at his discretion).

Dated this _______day of_______________2020

Signature: ______________________________

Notes: -

(i) Only members whose names appear in the Record of Depositors as at 12 August 2020 will be entitled to attend and vote at the Meeting.(ii) A member of the Company entitled to attend and vote at the meeting is entitled to appoint not more than two (2) proxies to attend and

vote in his stead. Where a member appoints two proxies, the appointment shall be invalid unless the member specifies the proportion of his holdings to be represented by each proxy.

(iii) Where a member of the Company is an exempt authorised nominee as defined under the Securities Industry (Central Depositories) Act, 1991 which holds ordinary shares in the Company for multiple beneficial owners in one (1) securities account (“Omnibus Account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each Omnibus Account it holds.

(iv) The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing, or if the appointor is a corporation, either under its common seal or the hand of its officer or its duly authorised attorney.

(v) The instrument appointing a proxy shall be deposited at the office of the Company’s Share Registrar at Unit 32-01, Level 32, Tower A, Vertical Business Suite Avenue 3, Bangsar South, No.8, Jalan Kerinchi, 59200 Kuala Lumpur, not less than forty-eight (48) hours before the time for holding the meeting or at any adjournment thereof.

Notes in Notice of Meeting & Proxy Form

The appointment of a proxy may be made in hard copy form or by electronic form. In the case of an appointment made in hard copy form, the proxy form must be deposited with the Company’s Share Registrar at Unit 32-01, Level 32, Tower A, Vertical Business Suite, Avenue 3, Bangsar South, No. 8, Jalan Kerinchi, 59200 Kuala Lumpur, Malaysia or alternatively, the Customer Service Centre at Unit G-3, Ground Floor, Vertical Podium, Avenue 3, Bangsar South, No. 8, Jalan Kerinchi, 59200 Kuala Lumpur. In the case of electronic appointment, the proxy form must be deposited via TIIH Online at https://tiih.online . Please refer to the Annexure to the Form of Proxy for further information on electronic submission. All proxy form submitted must be received by the Company not less than forty-eight (48) hours before the time appointed for holding the General Meeting or adjourned General Meeting at which the person named in the appointment proposes to vote.

FORM OF PROXY

I-STONE GROUP BERHAD (1273151-K)

THE SHARE REGISTRARI-STONE GROUP BERHAD

Registration No.: 201801011135 (1273151-K)Unit 32-01, Level 32, Tower A,

Vertical Business Suite Avenue 3, Bangsar South, No.8, Jalan Kerinchi, 59200 Kuala Lumpur

Stamp

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Documents

CONTENTS · 2020. 11. 25. · contents 2 corporate information 5 directors’ profile 18 sustainability statement 36 additional compliance information 45 financial statements 3 corporate