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2020

www.elk-desa.com.my

annual 2020 report

永聯資源有限公司 ELK-DESA RESOURCES BERHAD

198901002858 (180164-X)

5 Year Key Financial Information2

Corporate Information4

Corporate Profile and Structure5

Management Discussion and Analysis 6

Profile of Directors 14

Profile of Key Senior Management18

Corporate Governance Overview Statement 20

Directors’ Responsibility Statement in Financial Reporting 31

Additional Compliance Information Disclosures 32

Statement on Risk Management and Internal Control 33

Audit Committee Report42

Sustainability Statement 48

Particulars of Properties56

CONTENTSFinancial Statements 57

Analysis of Shareholdings 149

Analysis of ICULS Holdings152

Notice of Annual General Meeting 154

Annexure A to the Notice of Annual General Meeting 157

Statement Accompanying Notice of Annual General Meeting160

EnclosedForm of Proxy

ANNUAL REPORT 2020 • ELK-DEsa REsouRcEs BERhaD2

FIVE (5)-YEAR KEY FINANCIAL INFORMATION

Financial Year Ended 31 March2016

RM’0002017

RM’0002018

RM’0002019

RM’0002020

RM’000

IncoME StatEMEnt

Revenue 64,167 94,489 104,127 123,394 147,970Profit before Interest and Tax 27,948 31,666 37,754 48,058 60,059Profit before Tax 25,324 30,567 35,336 43,806 47,523Net Profit for the Financial Year 18,788 23,001 25,924 32,916 34,889

StatEMEnt oF FInancIal PoSItIon

Total Assets 371,898 382,287 470,338 547,563 750,578Total Liabilities 50,652 48,201 73,940 136,623 325,465Share Capital 184,800 243,130 307,440 343,163 344,340Share Premium 13,998 24,497 23,261 – –Retained Earnings 52,605 57,280 65,169 60,900 74,877ICULS - equity component 83,284 25,915 17,264 6,877 5,896Treasury shares (13,441) (16,736) (16,736) – –

total EQUItY 321,246 334,086 396,398 410,940 425,113

HIRE PURcHaSE (HP) PoRtFolIo

Gross HP Receivables 377,557 470,170 539,924 669,736 867,525Unearned HP Interest Income (91,337) (119,698) (139,509) (179,738) (237,496)

net HP Receivables 286,220 350,472 400,415 489,998 630,029

Net HP Receivables after Impairments 276,062 338,226 387,284 476,454 610,422Annual HP Disbursements 108,174 173,607 174,824 224,075 288,149

aSSEt QUalItY

Non Performing Loans (NPL) Ratio 1.2% 1.2% 1.0% 0.8% 1.4%Loan Loss Coverage 286% 289% 342% 359% 220%

SHaRE InFoRMatIon

Net Assets per Share (RM) 1.84 1.45 1.39 1.39 1.43Earnings per Share (sen) 12.86 10.66 9.91 11.22 11.75Net Dividend per Share (sen) 6.75 6.75 6.75 7.00 7.25Dividend Yield (%) 5.4% 5.8% 5.7% 5.0% 6.3%*Dividend Payout Ratio (%) 73% 68% 74% 63% 62%#

FInancIal RatIoS

Net Profit Margin (Group) 29.3% 24.3% 24.9% 26.7% 23.6%Net Profit Margin (HP Segment) 33.6% 34.9% 35.2% 37.8% 32.3%Net Profit Margin (Furniture Segment) -0.1% 0.6% 0.5% 2.1% 2.5%Cost to Income Ratio (HP Segment) 25.5% 24.3% 24.1% 28.0% 27.5%Return on Assets 5.3% 6.1% 6.1% 6.5% 5.4%Return on Equity 6.5% 7.0% 7.1% 8.2% 8.3%Gearing Ratio 0.10 0.08 0.13 0.28 0.71

* Based on the share price at the end of the financial year.# Based on 297,159,094 ELK-Desa Shares as at 30 June 2020.

3ANNUAL REPORT 2020 • ELK-DEsa REsouRcEs BERhaD

FIVE (5)-YEAR KEY FINANCIAL INFORMATION (CONT’d)

2016 2017 2018 2019 2020

EaRnIng PER SHaRE (sen)

12.86

10.669.91

11.2211.75

2016 2017 2018 2019 2020

REVEnUE (RM’000) AND

PRoFIt BEFoRE tax (RM’000)

25,324

64,167

30,567

94,489

35,336

104,127

43,806

123,394

47,523

147,970

Profit Before Tax Revenue

2016 2017 2018 2019 2020

nEt HP REcEIVaBlES (RM’000)

AND nPl RatIo (%)

286,220

1.2%

350,472

1.2%

400,415

1.0%

489,998

0.8%630,029

1.4%

Net HP Receivables NPL Ratio

2016 2017 2018 2019 2020

total aSSEtS (RM’000) AND

REtURn on aSSEtS (%)

371,898

5.3%

382,287

6.1%

470,338

6.1%

547,563

6.5%

750,578

5.4%

Total Assets Return on Assets

2016 2017 2018 2019 2020

total EQUItY (RM’000)

AND REtURn on EQUItY (%)

321,246

6.5%

334,086

7.0%

396,398

7.1%

410,940

8.2%

425,113

8.3%

Total Equity Return on Equity


CORPORATE INFORMATION

BoaRD oF DIREctoRS

Executive chairman

Mr. Teoh Hock Chai @ Tew Hock Chai

group Executive Director and chief Executive officer

Mr. Teoh Seng Hui

Executive Director and chief Financial officer

Mr. Teoh Seng Hee

non-Independent non-Executive Director

Mr. Teoh Seng Kar

Senior Independent non-Executive Director

Mr. Loong Foo Ching

Independent non-Executive Directors

Mr. Ng Soon Lai @ Ng Siek Chuan

Mr. Yee Kin Lan

Ms. Toh Jyh Wei

aUDIt coMMIttEE

Mr. Ng Soon Lai @ Ng Siek Chuan (Chairman)

Mr. Teoh Seng Kar

Mr. Loong Foo Ching

Mr. Yee Kin Lan

REMUnERatIon coMMIttEE

Mr. Teoh Hock Chai @ Tew Hock Chai (Chairman)

Mr. Loong Foo Ching


Ms. Toh Jyh Wei

noMInatIon coMMIttEE

Mr. Loong Foo Ching (Chairman)

Mr. Teoh Seng Kar


coMPanY SEcREtaRY

Mr. Loke Weng Fook (MIA 6573)

SHaRE REgIStRaR

Tricor Investor & Issuing House Services Sdn Bhdoffice:

Unit 32-01, Level 32, Tower AVertical Business Suite Avenue 3, Bangsar SouthNo. 8, Jalan Kerinchi 59200 Kuala Lumpur

Tel No : 603-2783 9299Fax No : 603-2783 9222E-mail : is.enquiry@ my.tricorglobal.comWebsite : www.tricorglobal.com

customer Service centre:

Unit G-3, Ground Floor Vertical Podium Avenue 3, Bangsar SouthNo. 8, Jalan Kerinchi 59200 Kuala Lumpur

aUDItoRS

BDO PLT (LLP0018825-LCA & AF0206) Chartered Accountants Level 8, BDO @ Menara CenTARa360 Jalan Tuanku Abdul Rahman50100 Kuala Lumpur

Tel No : 603-2616 2888Fax No : 603-2616 2970

REgIStERED oFFIcE

15-17, Jalan Brunei Utara Off Jalan Pudu 55100 Kuala Lumpur

Tel No : 603-2145 7000 Fax No : 603-2145 8258 E-mail : [email protected]

WEBSItE

www.elk-desa.com.my

PRIncIPal BanKERS

CIMB Bank Berhad

Malayan Banking Berhad

OCBC Bank (Malaysia) Berhad

Public Bank Berhad

StocK ExcHangE lIStIng

Main Market of the Bursa Malaysia Securities Berhad

Stock name & code:

ELKDESA (5228)

ELKDESA-LA (5228LA)


CORPORATE PROFILE AND STRUCTURE

# Premier Auto Assets Berhad is included as a deemed subsidiary company of ELK-Desa Capital Sdn Bhd as a result of compliance with applicable accounting standards. This is a special purpose vehicle owned by SPV Corporate Services Sdn Bhd as share trustee for the issuance of up to RM1.0 billion in nominal value of Medium Term Notes.

ElK-DESa RISK agEncY SDn BHD

198101002939 (69053-U) (100% wholly owned)

PREMIER aUto aSSEtS BERHaD

201901017510 (1326838-D)(Deemed subsidiary)#

ElK-DESa FURnItUREMaRKEtIng SDn BHD201501040915 (1166235-A)

(100% wholly owned)

ElK-DESa FURnItUREInDUStRIES SDn BHD201501040829 (1166148-U)

(100% wholly owned)

ElK-DESa FURnItURE SDn BHD

201501006943 (1132275-V) (100% wholly owned)

ElK-DESa caPItal SDn BHD

198101010867 (76994-P) (100% wholly owned)

ElK-DESa RESoURcES BERHaD

198901002858 (180164-X)

ElK-DESa RESoURcES BERHaD is incorporated and domiciled in Malaysia. It was listed on the Main Market of Bursa Malaysia Securities Berhad on 18 December 2012.

ELK-Desa Resources Berhad has two business segments through its wholly-owned subsidiaries, ELK-Desa Capital Sdn Bhd and ELK-Desa Furniture Sdn Bhd.

The ELK-Desa Capital Group is primarily involved in the business of hire purchase financing for used motor vehicles as well as selling general insurance policies as an insurance agent.

The ELK-Desa Furniture Group is primarily involved in the business of trading and wholesaling of home furniture.


MANAGEMENT dISCUSSION & ANALYSIS

BUSInESS oVERVIEW

ELK-Desa Resources Berhad (“ELK-Desa” or the “Group”) is a fast growing non-bank lender that has carved a niche as a reputable hire purchase financer in the used motor vehicles sector.

Targeting specifically buyers who are seeking small value financing, a market segment that remains underserved by financial institutions, ELK-Desa has successfully differentiated itself in this highly competitive industry to deliver a 18% compound annual growth rate (“CAGR”) in hire purchase loan portfolio over the past five years.

Further leveraging on its hire purchase financing presence, the Group also cross-sells motor related general insurance products to its hire purchase customers. These products are mainly from leading insurance brands, Tokio Marine Insurans (Malaysia) Berhad and Berjaya Sompo Insurance Berhad.

While its hire purchase financing business is still the Group’s primary business activity and income generator, ELK-Desa is also involved in the furniture trading business. Having started operations in mid-2015, the furniture trading segment is currently focused in the wholesaling of home furniture in the domestic market.

Incorporated and based in Malaysia, ELK-Desa has been listed under the Finance Sector on the Main Market of Bursa Malaysia Securities Berhad (“Bursa Securities”) since 18 December 2012.

As a public listed organisation, ELK-Desa strives to enhance its appeal as a dynamic and growth-oriented counter in Bursa Securities in order to attract quality institutions and individual investors. At the same time, the Group has also built itself a reputation as a reliable dividend stock amongst investors by consistently delivering dividend yield averaging approximately 5.6% per year along with a dividend payout ratio that averages around 68% per year.

REVIEW oF FInancIal RESUltS, PERFoRMancE anD FInancIal conDItIon

The ongoing Coronavirus (“Covid-19”) outbreak and the unprecedented Movement Control Order (“MCO”) declared by the Malaysian Government, have resulted in disruptions to our Group’s business and operations as we do not fall under the essential services.

Despite the disruptions, for the financial year ended 31 March 2020 (“FYE2020”), ELK-Desa registered a 20% increase in revenue to RM147.97 million compared to RM123.39 million last year. This improvement was mainly due to higher contribution from the Group’s hire purchase financing business.

FYE 2019 FYE 2020

20%

REVEnUE (RM MILLION)

123.39

147.97


The Group’s profit before tax for FYE2020 jumped by a notable 8% to a record RM47.52 million from RM43.81 million previously due to higher contribution from its hire purchase financing division. Profit after tax for FYE2020 rose to RM34.89 million compared to RM32.92 million a year ago.

In tandem with the Group’s improved performance, the Group’s basic Earnings per Share (“EPS”) was 11.75 sen as compared to 11.22 sen in the previous financial year.

In FYE2020, the Group’s total assets grew by 37% to RM750.58 million while total liabilities increased by 138% to RM325.46 million as compared to FYE2019.

In line with the current Group’s capital management strategy to finance the growth in Hire Purchase Receivables through leveraging, the Group’s total borrowings (excluding debt securities) increased by 71% to RM195.61 million in FYE2020.

During the financial year under review, the Group established its maiden Medium Term Notes (“MTN”) programme of up to RM1.00 billion in nominal value via Premier Auto Assets Berhad (“Premier Auto”). Premier Auto is a special purpose vehicle that was set up as the issuer of the MTN programme. The tenure of the MTN Programme is 10 years and Premier Auto may periodically issue MTNs of various tenures, up to an aggregate limit of RM1.00 billion.

The first tranche of Senior MTNs totalling RM105.00 million (comprising RM85.00 million of Class A MTNs rated AAA and RM20.00 million of Class B MTNs rated AA3), were issued in July 2019. This has been reflected in the substantial increase in the Group’s total debt securities to RM104.15 million in FYE2020 as compared to RM0.63 million one year ago.

Nevertheless, the Group’s gearing as at 31 March 2020 remains at a manageable level of 0.71 times.

As at 31 March 2020, the shareholders’ funds grew by 3% to RM425.11 million and the Net Assets per Share (“NA”) stood at RM1.43.

Return on equity (“ROE”) increased slightly from 8.2% to 8.3%. However, it is important to note that the Group’s business was affected by the Covid-19 pandemic and the subsequent MCO that started from 18 March 2020 onwards.

Return on assets (“ROA”) decreased from 6.5% to 5.4% as a result of larger cash reserves of which bulk of the cash reserves was built as part of the requirements under the asset backed securitisation MTN structure. The sufficient level of cash reserves proved to be providential especially in view of the current crisis situation.

MANAGEMENT dISCUSSION & ANALYSIS (CONT’d)

PRoFIt aFtER tax (RM MILLION)

FYE 2019 FYE 2020

32.9234.89

6%


SEgMEntal PERFoRMancE – HIRE PURcHaSE FInancIng DIVISIon

Hire Purchase Segment (RM’000)

FYE2020 FYE2019 Variance (amount)

Variance (%)

Revenue 104,673 84,900 19,773 23%Other Income 3,811 2,397 1,414 59%Depreciation of Property, Plant and Equipment & Right of Use Assets (756) (562) (194) 35%Impairment Allowance (23,656) (16,949) (6,707) 40%Other Expenses (25,703) (22,685) (3,018) 13%Profit before Interest & tax 58,369 47,101 11,268 24%Finance Costs (12,377) (4,252) (8,125) 191%Profit before tax 45,992 42,849 3,143 7%Credit Loss Charge 4.2% 3.8% 0.4%Cost to Income Ratio 27.5% 28.0% (0.5)%

ELK-Desa’s hire purchase financing division remains its main income generator, contributing 97% to the Group’s FYE2020 earnings.

During the year under review, the Division’s revenue increased by 23% to RM104.67 million from RM84.90 million a year ago. Approximately 88% of the revenue was derived from hire purchase interest income, which recorded an improvement of 26% to RM91.79 million from RM73.02 million last year.

Other income increased by 59% mainly due to additional income derived from holding a higher level of cash reserves.

Impairment allowance increased significantly by 40% to RM23.66 million. Credit loss charge (i.e. Impairment Allowance over Average Net Hire Purchase Receivables) increased from 3.8% to 4.2%. The higher impairment allowance and credit loss charge were mainly due to a 29% larger hire purchase receivables portfolio and higher expected credit loss provisions in view of the uncertain economic effects arising from the ongoing Covid-19 outbreak. In addition, the unprecedented MCO has disrupted our hire purchase operations and payment behaviour of the hirers. During the financial year, the Group’s impairment loss model was re-assessed and fine-tuned to better reflect the economic situations arising from the Covid-19 outbreak.

Other expenses increased by 13% to RM25.70 million mainly due to higher staff costs. Notably, during this financial year, the number of staff force remains at the same level as the previous financial year, despite having to serve and manage the significant growth in hirers’ base.

Finance costs increased by 191% to RM12.38 million because of higher borrowings to support the growth of our hire purchase portfolio.

Profit before tax increased by 7% to RM45.99 million, in view of the increased hire purchase interest income that was offset by the higher impairment allowances arising from Covid-19 effects.



Net hire purchase receivables grew by a notable 29% to RM630.03 million as at 31 March 2020. This was one of the key factors that had led to the Division’s increased revenue and profit during the year under review.

Net hire purchase receivables have grown at a compounded annual growth rate (“CAGR”) of 18% over the last five years, reinforcing ELK-Desa’s commitment towards expanding its hirer base without compromising the quality of its assets.

On the quality of its hire purchase assets, the Group’s non-performing loans (“NPL”) ratio increased to 1.4% as at FYE2020 compared to 0.8% in the previous year.This was largely due to the closure of all our operating units and office premises in view of the MCO declared across Malaysia from 18 March 2020 to 3 May 2020. Nevertheless, the NPL ratio of 1.4% remains at a manageable level and the Management strives towards bringing it down to the pre-MCO levels. As a result of the higher NPL, loan loss coverage decreased from 359% to 220% as at 31 March 2020, which still provides a strong buffer for the Group against future credit losses.

As a result of the Group’s on-going efforts to manage operating costs prudently and effectively, cost to income ratio for the hire purchase financing division for FYE2020 remains at a low 27.5%.

SEgMEntal PERFoRMancE – FURnItURE DIVISIon

Furniture Segment (RM’000)

FYE2020 FYE2019 Variance (amount)

Variance (%)

Revenue 43,297 38,494 4,803 12%Other Income 200 141 59 42%Cost of inventories sold (28,132) (24,439) (3,693) 15%Depreciation of Property, Plant and Equipment & Right of Use Assets (1,544) (361) (1,183) 328%Impairment Allowance (559) (579) 20 (3)%Other Expenses (11,572) (12,299) 727 (6)%Profit before Interest & tax 1,690 957 734 77%Finance Costs (159) - (159) NAProfit before tax 1,531 957 574 60%

ELK-Desa’s furniture division, which is currently a small and non-core business activity of the Group, also contributed positively during the year under review.

The total furniture revenue increased by 12% to RM43.30 million. Gross profit margin decreased marginally from 37% to 35%. This is because of steeper discounts offered to dealers during the year.


nEt HP REcEIVaBlES (RM MILLION)

FYE 2019 FYE 2020

490.00

630.03

29%


Impairment allowance decreased by 3% to RM0.56 million, mainly due to improved payment cycle from furniture dealers. Other expenses decreased by 6% to RM11.57 million mainly due to reclassification of rental expenses of premises from Other Expenses category to the Depreciation of Rights of Use Assets category pursuant to the adoption of MFRS16 Leases on 1 April 2019.

The furniture division continued to grow positively in its fifth year of commencing its business operations, recording a profit before tax of approximately RM1.53 million for FYE2020.

REVIEW oF oPERatIonS

Hire Purchase Financing Division

The Group operates its hire purchase financing business via its wholly-owned subsidiary, ELK-Desa Capital Sdn Bhd. With two offices, one in the heart of Kuala Lumpur and the other in Klang, Selangor, the Division employs a total of 194 individuals.

As ELK-Desa’s hire purchase business is centered on the small value used car sector, which is generally not an area of focus for the typical financial institutions, the Group relies on a broad hirer base as a strategy to reduce its credit risk.

As of 31 March 2020, the Group’s hire purchase financing division has a hirer base of approximately 44,000 individuals. Its average outstanding net hire purchase receivables per hirer is approximately RM14,300. These numbers collectively show that the Group’s credit exposure per hirer is relatively low.

In the past three years, the Group has stepped up its hire purchase financing efforts by increasing the maximum loan size to RM35,000. This effectively allowed the Group to include a larger range of popular vehicle models and re-balance its vehicle financing mix.

ELK-Desa conducts its hire purchase financing business mainly through dealers. As such, the Group prides itself for having cultivated an extensive dealer network that is more than 1,000 strong.

ELK-Desa is committed to fostering a close and mutually beneficial relationship with its dealers by processing financing requests quickly and efficiently as well as paying out in a timely manner so that dealers are able to sell their used car stocks at a faster rate.

The Group’s hire purchase financing business is dependent on the economic environment that correlates to consumer confidence and spending habits. The business also faces credit risks that stem from the hirers’ ability to repay instalments in a timely manner. In order to mitigate credit risks, the Group has put in place a stringent credit management policy while monitoring repayments very closely. The Group also minimises its exposure to credit risk by not relying heavily on any single large hirer.

The hire purchase financing business also faces strategic risk, whereby the business may be impacted by the failure to respond to competition, changes in political, economic and regulatory conditions. On the latter, the industry is regulated under the Hire Purchase Act 1967 and the Group will be affected by any unfavorable terms of amendment to the said Act. Strategic risks are managed by paying close attention to all relevant trends and development that can potentially impact the Group’s hire purchase financing business and putting in place the capability to react or adapt to changing situations quickly.



Furniture Division

The Group Furniture Division is spearheaded by its wholly-owned subsidiary, ELK-Desa Furniture Sdn Bhd. The Division employs 92 individuals.

Furniture products are predominantly manufactured by contract manufacturers locally and from overseas. These products are distributed by the Group under its own brand, .

The Group Furniture Division focus on the domestic wholesale market and distribute furniture products to more than 800 furniture retailers throughout Malaysia.

Beside distributing our furniture products via our extensive dealers’ network, we have two furniture retail showrooms located in Klang, Selangor. These showrooms primarily cater to customers who live in and around their respective areas.

The Division has a small furniture assembly facility catering to the demands and requirements from our two retail showrooms and the wholesale business. The facility specialises in sofa assembly and offers customers the opportunity to customise their sofa sets with a wide range of colour choices and add-on features to match their unique home designs. This is a value-added service that positions attractively compared to competitors in the industry.

Despite being a relatively new brand in the furniture market, the feedback from visitors and customers have been positive. Most customers find the contemporary and urban-centric design of furniture, along with a reasonable price tag, highly appealing.

In terms of risks, the performance of the furniture industry is subject to a myriad of factors ranging from macro-economic conditions to consumer and business confidence. The furniture trading business is not expected to contribute significantly to the Group profit in the near term mainly due to the weak residential property market.

coRPoRatE DEVEloPMEntS

The Company’s RM100.00 million ICULS issued on 15 April 2014 became convertible on 15 April 2016. During the financial year, the Company had issued 997,937 new ordinary shares pursuant to conversions of 1,177,576 units of ICULS. As at 31 March 2020, the number of outstanding ICULS stood at 7,152,861 units.

Based on the conversion price of RM1.18, the number of new shares pending to be issued pursuant to the conversion is at approximately 6.1 million. The maturity date of the ICULS is on 14 April 2022 and any ICULS which are not converted would be mandatorily converted into new ELK-Desa shares.

DIVIDEnDS

The Board of Directors has declared a second single tier interim dividend of 3.75 sen per share in respect of the financial year ended 31 March 2020. The dividend shall be paid on 16 July 2020 to the shareholders whose name appeared in the record of depositors of the Company as at 30 June 2020.

In addition to the first single tier interim dividend of 3.50 sen per share which was paid on 15 January 2020, the total dividend for the financial year ended 31 March 2020 was 7.25 sen per share (FY2019: 7.00 sen). This represents a dividend payout ratio of approximately 62% of the net profit, which is higher than the dividend policy of 60% set by the Board. The Board is committed to uphold its dividend policy.



With the declaration of the second interim dividend, the Board of Directors will not recommend any final dividend for the financial year ended 31 March 2020.

The Board is mindful of sustaining, if not, improving the shareholders return while conserving sufficient financial resources in the Group for future expansion. ELK-Desa’s consistency in distributing dividends has positioned the counter amongst investors as a reliable dividend stock.

* Note: Dividend Yield is computed based on the share price at the end of the financial year.

FoRWaRD-looKIng StatEMEnt The current financial year (FY2021) is expected to be a very challenging year for the used car financing industry following the Covid-19 global crisis. The Group expects overall transactions in the used car market to decline significantly due to several unfavorable macro-economic conditions.

Unemployment is expected to increase significantly as we move further towards the second half of 2020. This would translate into a lower propensity to spend by consumers. Business confidence is also expected to remain low as the total impact and cost of the pandemic have yet to be determined. Investments by the private sector are expected to be subdued.

These factors play a vital role in the decision making process when it comes to purchasing a used car. At the same time, they may also affect our borrowers’ ability to fulfill their repayment commitment.


DIVIDEnD PaYoUt anD DIVIDEnD YIElD*

5.4%5.8% 5.7%

5.0%

6.3%

FYE 2016 FYE 2017 FYE 2018 FYE 2019 FYE 2020

Dividend Payout Ratio (%) Dividend Yield (%)

73%

68%

74%

63%62%



In view of this muted operating outlook, ELK-Desa does not expect its hire purchase portfolio to grow further in the near future and is bracing itself for performance to be adversely affected in the next 12 months.

As such, in the immediate to medium term, the Group intends to preserve the quality of its assets by intensifying its credit risk management. It will also remain agile and focused on streamlining its existing processes to improve operational efficiencies and optimise operating cost.

Negative consumer sentiment amidst a sluggish property market will also affect the Group’s furniture trading business. As a wholesaler for the domestic market, ELK-Desa must now take a more cautious approach in engaging and working with credible and reliable furniture dealers in order to protect its cash flow and minimise defaults.

While we are paying close attention to these developments, we believe that the second hand car and furniture industries would be able to withstand the difficulties in the medium to long term, given the various economic stimulus packages announced by the Government to enhance the cash flows for households and businesses.

In view of the bleak outlook ahead, the Board and the Management of ELK-Desa are committed to working diligently and cohesively to protect the shareholders’ value and ensure that the Group is able to weather the storm for the financial year ending 31 March 2021.


PROFILE OF DIRECTORS

MR. tEoH HocK cHaI @ tEW HocK cHaI

Executive Chairman | Malaysian | Male | Aged 75 | Chairman of Remuneration Committee

Mr. teoh Hock chai is the Executive Chairman of ELK-Desa Resources Berhad and was appointed to the Board on 19 November 2004.

On 16 March 1971, Mr. Teoh founded Eng Lee Kredit Sdn Bhd which is currently a substantial shareholder of ELK-Desa Resources Berhad. Presently, he is the Executive Chairman of Eng Lee Kredit Sdn Bhd.

Mr. Teoh Hock Chai also serves as the Advisor and Trustee to the Kuala Lumpur & Selangor Car Dealers & Credit Companies Association (KLSCDCCA).

Mr. Teoh Hock Chai is the father of Mr. Teoh Seng Hui, Mr. Teoh Seng Kar and Mr. Teoh Seng Hee who are Directors of the Company.

MR. tEoH SEng HUI

Group Executive Director and Chief Executive Officer | Malaysian | Male | Aged 48

Mr. teoh Seng Hui is the Group Executive Director and Chief Executive Officer of ELK-Desa Resources Berhad. Mr. Teoh was appointed to the Board on 1 October 2006. He was redesignated as Group Executive Director on 13 November 2014 and subsequently appointed as the Chief Executive Officer on 22 February 2018.

He graduated from the University of Kent at Canterbury, United Kingdom with a Bachelor’s degree in Accounting and Law in 1993. Thereafter, he gained many years of experience in the hire purchase and furniture business.

He is also a Director of Eng Lee Kredit Sdn Bhd.

Mr. Teoh Seng Hui is the son of Mr. Teoh Hock Chai @ Tew Hock Chai who is the Executive Chairman and a major shareholder of the Company. He is also the brother of Mr. Teoh Seng Kar and Mr. Teoh Seng Hee who are Directors of the Company.


PROFILE OF dIRECTORS (CONT’d)

MR. tEoH SEng HEE

Executive Director and Chief Financial Officer | Malaysian | Male | Aged 39

Mr. teoh Seng Hee is the Executive Director and Chief Financial Officer of ELK-Desa Resources Berhad. He was appointed as the Chief Financial Officer on 13 November 2014 and subsequently appointed to the Board on 18 February 2016.

He graduated from Nanyang Technological University, Singapore with a First Class Honours Bachelor’s degree in Engineering (Electrical & Electronics) in 2004 and Master of Science (Management) Degree from Nanyang Business School, Singapore in 2008.

Since joining the ELK-Desa Group in 2008, Mr. Teoh has been actively involved in the corporate planning, finance and general management of the Group.

He is also a Director of Eng Lee Kredit Sdn Bhd.

Mr. Teoh Seng Hee is the son of Mr. Teoh Hock Chai @ Tew Hock Chai who is the Executive Chairman and a major shareholder of the Company. He is also the brother of Mr. Teoh Seng Hui and Mr. Teoh Seng Kar who are Directors of the Company.

MR. tEoH SEng KaR

Non-Independent Non-Executive Director | Malaysian | Male | Aged 42 | Member of Audit Committee | Member of Nomination Committee

Mr. teoh Seng Kar is a Non-Independent Non-Executive Director of ELK-Desa Resources Berhad and was appointed to the Board on 26 November 2010.

He graduated from Nanyang Technological University, Singapore with a Bachelor’s degree in Engineering (Mechanical and Production) in 2002. Thereafter, he gained broad experience in various industries relating to procurement consultancy, plantations and property development.

Currently, he is the Group Executive Director of Unico Holdings Berhad.

Mr. Teoh Seng Kar is the son of Mr. Teoh Hock Chai @ Tew Hock Chai who is the Executive Chairman and a major shareholder of the Company. He is also the brother of Mr. Teoh Seng Hui and Mr. Teoh Seng Hee who are Directors of the Company.



MR. loong Foo cHIng

Senior Independent Non-Executive Director | Malaysian | Male | Aged 70 | Chairman of Nomination Committee |

Member of Audit Committee | Member of Remuneration Committee

Mr. loong Foo ching is the Senior Independent Non-Executive Director of ELK-Desa Resources Berhad and he was appointed to the Board on 20 September 2012.

He graduated from University of London with a Bachelor of Laws (LL. B) - honours degree and was called to the Malaysian Bar as an advocate & solicitor in 1994. He also holds a Master of Laws (LL.M) degree from University of Malaya and is an associate member of the Chartered Institute of Bankers, London (now The London Institute of Banking and Finance) and a member of Asian Institute of Chartered Bankers. Prior to legal practice, Mr Loong has served a total of 25 years in the banking and finance industry initially with HSBC Group and later with Sabah Development Bank Group. The principal areas of his expertise include hire-purchase facility, consumer credit, leasing, real-estate financing, corporate loans and asset/liability management.He was on the board of 2 other listed companies as an Independent non-Executive Director between 2002 and 2015.

Mr Loong is currently the Honorary Legal Advisor to the Association of Hire Purchase Companies of Malaysia.

MR. ng Soon laI @ ng SIEK cHUan

Independent Non-Executive Director | Malaysian | Male | Aged 66 | Chairman of Audit Committee |

Member of Nomination Committee | Member of Remuneration Committee

Mr. ng Soon lai @ ng Siek chuan is an Independent Non-Executive Director of ELK-Desa Resources Berhad and was appointed to the Board on 20 September 2012. He is also a member of the Malaysian Institute of Accountants (“MIA”).

Mr. Ng Soon Lai has been an associate member of the Institute of Chartered Accountants in England and Wales (“ICAEW”) since 1977 and became a fellow member since 1982.

He had gained audit and accounting experience in London and Kuala Lumpur before embarking on his career path in the financial sector in 1980. He then served in various positions in a leading local merchant bank and a finance company. Subsequently, he joined Alliance Bank Malaysia Berhad in 1991 as its General Manager of Credit. He was appointed as the Chief Executive Director of Alliance Bank Malaysia Berhad in 1994 and to the Board of Alliance Merchant Bank Berhad in 2002. He then resigned from his position of Chief Executive Director of Alliance Bank Malaysia Berhad in 2005. Since then, he has held the post of Independent Non-Executive Director in several public companies.

Mr. Ng Soon Lai also sits on the Board of Tune Protect Group Berhad, China Construction Bank (Malaysia) Berhad and WCT Holdings Berhad.



MR. YEE KIn lan

Independent Non-Executive Director | Malaysian | Male | Aged 68 | Member of Audit Committee

Mr. Yee Kin lan is an Independent Non-Executive Director of ELK-Desa Resources Berhad and was appointed to the Board on 12 October 2012.

He holds a Master of Business Administration from the University of Hull, United Kingdom. He is a member of the Malaysian Institute of Management since 1989, and also a registered financial planner with the Malaysian Financial Planning Council since 2006.

Mr. Yee Kin Lan has extensive exposure and knowledge on the local banking and financial industry having spent his entire career working at three (3) different Malaysian banks before retiring in 2011. He started his career with Public Bank Berhad in 1983, and held various managerial positions including Branch Manager before leaving to join Pacific Bank Berhad, also as a Branch Manager in 1997. In 2001, Mr. Yee Kin Lan, along with other employees of Pacific Bank Berhad, was absorbed by Malayan Banking Berhad after a merger exercise. He was promoted to the position of Head of Business Development (Zone Manager) in 2002 and to Head of Regional Business in 2009 where he managed the operation control and business performance of all the branches within the Federal Territory region.

MS. toH JYH WEI

Independent Non-Executive Director | Malaysian | Female | Aged 36 | Member of Remuneration Committee

Ms. toh Jyh Wei is an Independent Non-Executive Director of ELK-Desa Resources Berhad and was appointed to the Board on 12 October 2012.

She holds a Bachelor of Laws (Honours) degree from the University of Sheffield, United Kingdom.

Ms. Toh Jyh Wei began her career at Patrick Mirandah Co. (M) Sdn Bhd, an intellectual property boutique practice as a Trademark Executive. Thereafter, she spent four (4) years in Singapore and worked as a Corporate Secretarial Associate at Tricor Singapore Pte Ltd and a Corporate Secretarial Associate at Keppel Corporation Ltd respectively. During her stint in Singapore, she has gained valuable exposure and experience by handling a portfolio of listed and non-listed companies across various industries, providing corporate secretarial advisory services to ensure that all listing and statutory requirements are complied with.

Currently, Ms. Toh Jyh Wei is managing an online retailing business that provides women’s apparel which she co-founded.

note: Save as disclosed, all Directors have no family relationship with any Director and/or major Shareholder of the Company, have no conflict of interest with the Company and have not been convicted for any offence within the past five years.

The Executive Directors are non-independant.


PROFILE OF KEY SENIOR MANAgEMENT

MR. tEoH HocK cHaI @ tEW HocK cHaI

Executive Chairman | Malaysian | Male | Aged 75 | Chairman of Remuneration Committee

For details of Mr. Teoh Hock Chai @ Tew Hock Chai’s profile, please refer to page 14 of the Annual Report.

MR. tEoH SEng HUI

Group Executive Director and Chief Executive Officer | Malaysian | Male | Aged 48

For details of Mr. Teoh Seng Hui’s profile, please refer to page 14 of the Annual Report.

MR. tEoH SEng HEE

Executive Director and Chief Financial Officer | Malaysian | Male | Aged 39

For details of Mr. Teoh Seng Hee’s profile, please refer to page 15 of the Annual Report.

MR. loKE WEng FooK

Group Accountant and Company Secretary | Malaysian | Male | Aged 64

Mr. loke Weng Fook is the Group Accountant and Company Secretary of ELK-Desa Resources Berhad. He was appointed to the current position on 1 November 2011. He is responsible for overseeing the accounting, taxation and corporate secretarial duties.

Mr. Loke is an Associate Member of the Chartered Institute of Management Accountants (“CIMA”) of the United Kingdom, a Chartered Global Management Accountant (“CGMA”) by designation and he is also a Chartered Accountant of the Malaysian Institute of Accountants (“MIA”).

Upon graduation, Mr. Loke gained extensive experience in accounting, taxation, corporate secretarial work, insurance agency operation and corporate restructuring work.


PROFILE OF KEY SENIOR MANAGEMENT(CONT’d)

MR. tEoH HocK SU

Senior Manager – Business & Operations (HP Division) | Malaysian | Male | Aged 61

Mr. teoh Hock Su is the Senior Manager of the Hire Purchase Business and Operations. He is responsible for overseeing the Group’s Hire Purchase Division.

After his secondary education, Mr. Teoh gained more than 35 years of experience in the hire purchase and trading of used cars business. He joined the ELK-Desa Group on 1 September 2004 as a Manager and was one of the pioneer staff to build the Hire Purchase Division. He was later promoted to his current position of Senior Manager on 1 April 2007.

Mr. Teoh Hock Su also serve as the Vice President of the Kuala Lumpur & Selangor Car Dealers & Credit Companies Association (KLSCDCCA).

Mr. Teoh Hock Su is the brother of Mr. Teoh Hock Chai @ Tew Hock Chai who is the Executive Chairman and a major shareholder of the Company. He is also the uncle of Mr. Teoh Seng Hui, Mr. Teoh Seng Kar and Mr. Teoh Seng Hee who are Directors of the Company.

MR. tEo cHong gUan

Director (Furniture Division) | Malaysian | Male | Aged 48

Mr. teo chong guan is a Director of the Furniture Division. He is responsible for overseeing the Group’s Furniture Division. He was appointed to the current position on 8 April 2015.

After his secondary education, Mr. Teo gained more than 25 years of experience in the furniture trading business ranging from retail, wholesale, manufacturing and export.

Mr. Teo Chong Guan is the nephew of Mr. Teoh Hock Chai @ Tew Hock Chai who is the Executive Chairman and a major shareholder of the Company. He is also the cousin brother of Mr. Teoh Seng Hui, Mr. Teoh Seng Kar and Mr. Teoh Seng Hee who are Directors of the Company.

note: Save as disclosed, all Key Senior Management have no family relationship with any Director and/or major Shareholder of the Company, have no conflict of interest with the Company and have not been convicted for any offence within the past five years.


Corporate GovernanCeOverview Statement

The Board of Directors (“Board”) of ELK-Desa Resources Berhad (the “Company”) recognises the importance of implementing high standards of corporate governance in the Company for the purposes of safeguarding the interest of its stakeholders and assets of the Group, comprising the Company and all its subsidiaries. In adopting corporate governance practices, the Board is mindful in considering the five pillars of transparency, accountability, ethical culture, sustainability and financial performance.

As such, the Board seeks to embed in the Group a culture that is aimed at delivering balance between conformance requirements with the need to deliver long-term strategic imperatives through performance, without compromising on personal or corporate ethics and integrity.

This Statement provides an overview of the Company’s application of the Principles set out in the Malaysia Code on Corporate Governance (“MCCG”) for the financial year under review and up to the date of this Statement. The details on how the Company has applied each Practice as set out in the MCCG are disclosed in the Corporate Governance Report, which is available for viewing on the Company’s website at www.elk-desa.com.my/corporate_governance_report.html.

PRINCIPLE A – BOARD LEADERSHIP AND EFFECTIVENESS

I. BOARD RESPONSIBILITIES

The Directors are collectively responsible to the Company’s shareholders for the long-term success of the Group for its overall strategic direction, its values and its governance. They are led by experienced and knowledgeable Board members who provide the Company with the core competencies and the leadership necessary for the Group to meet its business objectives and goals.

All members of the Board are aware of their responsibility to take decisions objectively to promote the success of the Group to create long-term value for shareholders and other stakeholders. The role and responsibilities of the Board are clearly set out in the Board Charter, which is available on the Company’s website at www.elk-desa.com.my/board_charter.html. The Board Charter is periodically reviewed and updated in tandem with changes to regulatory requirements, with final approval by the Board. The Board Charter was last reviewed on 18 February 2020.

To assist in the discharge of its stewardship role, the Board has delegated and conferred some of its authority and powers to its Committees, namely the Audit Committee, Nomination Committee and Remuneration Committee (“Board Committees”), via specific terms of reference approved by the Board, which are available on the Company’s website at www.elk-desa.com.my/term_of_reference.html. The Board Committees are entrusted with the responsibility to oversee specific aspects of the Company’s affairs in accordance with their respective terms of reference as approved by the Board and to report to the Board with their findings and recommendations. The decision whether to act on such recommendation, however, lies with the Board. The demarcation of roles and responsibilities of the Board of Directors, Board Committees, Executive Chairman and Group Executive Director/Chief Executive Officer are summarised as follows:

ANNUAL REPORT 2020 • ELK-DEsa REsouRcEs BERhaD 21

I. BOARD RESPONSIBILITIES (CONTINuED)

BoardResponsible for the overall business direction of and oversees the conduct of the business affairs.

Board ChairmanResponsible for leadership of the Board, by ensuring effective conduct of the Board and effective

communication with shareholders and stakeholders.

Audit Committee (“AC”)

Oversees matters relating to financial reporting,

external audit, internal audit, whistleblowing, related party

transactions and conflict of interest situations, risk

management as well as the establishment of an effective and sound framework of risk

management and internal control.

Nomination Committee (“NC”)

Oversees matters pertaining to the structure, size and

composition of the Board and Board Committees, including

identifying and nominating candidates to fill Board/ Board Committee vacancies, annual

evaluation of board-level effectiveness, and succession

planning.

Remuneration Committee (“RC”)

Establishes and reviews the Directors’ remuneration package to align with the long-term objectives and

business strategy of the Group, as well as to recommend

the remuneration for Senior Management.

Group Executive Director/Chief Executive OfficerResponsible in ensuring the efficiency and effectiveness of the operation for the Group, implementing

the policies, strategies and decisions adopted by the Board and highlighting material and relevant matters to the attention of the Board in an accurate and timely manner.

The Executive Chairman of the Board leads the Board in ensuring the effective conduct of the Board; sets the Board agenda and ensures that Board members receive complete and accurate information in a timely manner; leads the pace in Board meetings and discussions; encourages active participation of all Board members and allows dissenting views to be freely expressed.

The role of the day-to-day management of the Group’s business development and operations, including implementation of policies and decisions of the Board, is helmed by the Group Executive Director/Chief Executive Officer and assisted by the Executive Director/Chief Financial Officer. The Board believes that such division of power and responsibilities helps ensure balance in that that no one person in the Board has unfettered powers to make any major decisions for the Company unilaterally. To enhance accountability, the Board has established clear functions reserved for itself and those delegated to Management.

The Board members have full access to the Company Secretary, who is a qualified professional, to provide advisory services to the Board, particularly on corporate governance issues and compliance with the relevant policies and procedures, laws and regulatory requirements, in addition to the administrative matters.

Corporate GovernanCe overview Statement (Cont’D)



The Board has also developed a Code of Ethics and Conduct which essentially sets out the standards of conduct expected from Board members and employees of the Group and all other affected personnel. This Code is augmented by a Whistleblowing Programme which serves as an avenue for raising concerns relating to possible breach of business conduct, non-compliance with laws and regulatory requirements as well as other malpractices. The Group established a No Gift Policy in December 2018 to avoid conflict of interest in any ongoing or potential business dealings and decision making, and to demonstrate our commitment to maintaining high standards of ethics and integrity. The Code of Ethics and Conduct is available on the Company’s website at www.elk-desa.com.my/code_conduct.html.

Furthermore, in view of the legislative changes pertaining to introduction of corporate liability provision of Section 17A of the Malaysian Anti-Corruption Commission Act 2009, the Board has taken proactive measures to raise defences and put in place adequate procedures and training to prevent corrupt practices within the Group.

Board and Board Committee Meetings

For the financial year under review, the Board convened six (6) Board meetings, five (5) AC meetings, a NC meeting and a RC meeting and attendances of Directors are as follows:

Name Board Audit

CommitteeNomination Committee

Remuneration Committee

Mr. Teoh Hock Chai @ Tew Hock Chai 6/6 – – 1/1

Mr. Teoh Seng Hui 6/6 – – –

Mr. Teoh Seng Hee 6/6 – – –

Mr. Teoh Seng Kar 6/6 5/5 1/1 –

Mr. Loong Foo Ching 6/6 5/5 1/1 1/1

Mr. Ng Soon Lai @ Ng Siek Chuan 6/6 5/5 1/1 1/1

Mr. Yee Kin Lan 5/6 4/5 – –

Ms. Toh Jyh Wei 6/6 – – 1/1

– – – –

Total number of meetings for FY2020 6 5 1 1

At each new calendar year, the annual meeting calendar of the Board and Board Committees and the Annual General Meeting is prepared and circulated to facilitate the Directors’ time planning.

Agendas and board papers are circulated to the Directors at least one (1) week before the Board and Board Committee meetings so as to give the Directors sufficient time to consider the issues to be deliberated at meetings.




Board and Board Committee Meetings (Continued)

As stipulated in the Board Charter, the Directors are required to devote sufficient time to carry out their responsibilities. Each Director is expected to commit time as and when required to discharge the relevant duties and responsibilities, besides attending meetings of the Board or Board Committees.

Continuous Professional Development

The Board acknowledges the importance of continuous education and training programmes for its members to enable effective discharge of its responsibilities and to be apprised of changes to regulatory requirements and the impact such regulatory requirements have on the Group and the Directors. The Company Secretary would often circulate the relevant guidelines on statutory and regulatory requirements from time to time for the Board’s reference.

All Directors have completed the Mandatory Accreditation Programme as required by the Listing Requirements of Bursa. During the financial year under review, the training attended by the Directors included briefings, seminars, workshops and conferences conducted by the relevant regulatory authorities and professional bodies. Details of the training programmes attended/ participated by the Directors are as follows:

Training THC TSHui TSHee TSK LFC NSC YKL TJW

Audit Committee Conference 2019

Y

Artificial Intelligence & its role in FI

Y

Audit Committee Institute Breakfast Roundtable 2019 : Anti-Money Laundering & Sanctions, Inland Revenue Cyber Security

Y

Audit Committee Institute Breakfast Roundtable 2019 – Offence by Commercial Organisation – S 17A, MACC Act 2018, Governance Revelations from Inquest Reports Business Continuity Management ‘- Counting the Cost and Benefits‘- A Critical Perspective

Y




Continuous Professional Development (Continued)

Training THC TSHui TSHee TSK LFC NSC YKL TJW

Audit Oversight Board Conversation with Audit Committees

Y

Budget 2020 : Income Tax / RPGT / SST Latest Updates and Comprehensive Tax Planning

Y

CG Watch : How Does Malaysia Rank?

Y

Demystifying the Diversity Conundrum : The Road to Business Excellence

Y Y

Fide Elective Understanding the Evolving Cybersecurity Landscape

Y

Independent Directors Programme: The Essence of Independence

Y

Malaysian Financial Reporting Standards (“MFRS”) Refresher on MFRS 9, 15, 16 and 123

Y

Provision of Financial Assistance & Related Party Transactions

Y Y Y Y Y Y Y Y

Sustainability-Inspired Innovations: Enablers of the 21st Century

Y

The Convergence of Digitisation and Sustainability

Y

Note: THC: Mr. Teoh Hock Chai @ Tew Hock ChaiTSK: Mr. Teoh Seng KarYKL: Mr. Yee Kin Lan

TSHui: Mr. Teoh Seng HuiLFC: Mr. Loong Foo Ching TJW: Ms. Toh Jyh Wei

TSHee: Mr. Teoh Seng HeeNSC: Mr. Ng Soon Lai @ Ng Siek Chuan



II. BOARD COMPOSITION

The Board currently consists of eight (8) members, comprising three (3) Executive Directors and five (5) Non-Executive Directors, of whom four (4) are Independent Directors. Half of the Board comprises Independent Directors, fulfilling Practice 4.1 of the MCCG and exceeding the minimum requirement as set out in the Main Market Listing Requirements (“Listing Requirements”) of Bursa Malaysia Securities Berhad (“Bursa”), which stipulates that at least two (2) Directors or one-third (1/3) of the Board, whichever is higher, must be independent.

In addition, the Board has identified Mr. Loong Foo Ching as the Senior Independent Director of the Board. This position serves as a sounding board to the Executive Chairman, especially on the concerns of other Directors. Mr. Loong Foo Ching was appointed based on his experience with the Board, seniority amongst the other Independent Directors, and strong comprehension of the Company’s governance issues.

The Independent Directors provide unbiased and independent judgment in ensuring that the strategies proposed by the Management are fully deliberated, challenged and examined objectively, taking into account the interests of shareholders and other stakeholders. They are essential for protecting the interests of minority shareholders and can make significant contributions to the Company’s decision making by bringing in the quality of detached impartiality.

The Executive Directors are complemented by the experience and independent views of the Non-Executive Directors who are professionals in the field of law, corporate, finance and accounting. The Board members possess a fair range of business, banking, administration and retailing experience. The mix of skills and experience is vital in directing and supervising the Group’s overall business activities in light of the increasingly challenging economic and operating environment in which the Group operates. The profile of each Director is set out in the Company’s Annual Report 2020.

The Nomination Committee (“NC”), comprising three (3) members, all of whom are Non-Executive Directors, with the majority of them being Independent Directors, is entrusted to assess the structure, size and composition of the Board, identifying and recommending suitable candidates for Board membership, and also to assess annually the performance of the Directors, Board and Board Committees, succession plans and training courses for Directors. The Board has the ultimate responsibility of delivering the final decisions on the appointment. This process ensures that the suitable Board composition and the appropriate skillsets are identified and sought after to support the strategic direction and needs of the Company.

Based on the annual assessment conducted during the financial year under review, the NC was satisfied with the existing Board composition and has concluded that each Director possesses the requisite competence and capability to serve on the Board and had sufficiently demonstrated their commitment to the Group in terms of time, participation and contribution during the year under review, and has recommended to the Board for the re-election of the retiring Directors at the Company’s forthcoming Annual General Meeting (“AGM”). All assessments and evaluations carried out by the NC in the discharge of its functions were duly documented.



II. BOARD COMPOSITION (CONTINuED)

The Company’s Board Charter provides a limit of a cumulative term of nine (9) years on the tenure of an Independent Director. Upon completion of the nine years, an independent director may continue to serve on the Board subject to the director’s re-designation as a non-independent director. The nine years can either be a consecutive service of nine years or a cumulative service of nine years with intervals. Notwithstanding this, the independent directors may continue to serve as an independent member of the Board, if the Nomination Committee concludes and the Board concurred that the director is able to exercise independent judgement after nine years of service, subject to shareholders’ approval for his/her re-election upon retirement by rotation.

As the Company was listed on the Main Market of Bursa Malaysia Securities Berhad on December 2012, there are no Independent Directors who have exceeded or will be exceeding the cumulative term of nine (9) years during the financial year under review or in the coming financial year. The NC has conducted an assessment of the independence of Independent Directors for the financial year 2020 based on the criteria on independence adopted by the Board. Following the recommendation of the NC, the Board is of the opinion that the independence of the existing Independent Directors remains unimpaired and their judgement over business dealings of the Company had not been influenced by the interest of the other Directors or substantial shareholders.

The Company has a gender diversity policy to have at least one female Director in the composition of the Board. Currently, the Board has one (1) female Director out of the eight (8) Directors and is always mindful of the importance of diversity in the Board to effectively manage the Company’s business. The Board does not have a specific policy for setting targets for ethnic or age composition on the Board, as the Board and the NC apply meritocracy in assessing Directors and candidates for directorships i.e. evaluating the suitability of Directors/ candidates based on their competence, character, time availability, time commitment, knowledge, experience and other qualities in meeting the needs of the Group. The Board constantly advocates fair and equal participation and opportunity for all individuals of the right calibre.

A summary of key activities undertaken by the NC in discharging its duties during the financial year under review include, among others:

• assessingandappraisingtheperformancesandeffectivenessoftheBoard,BoardCommitteesandindividual Directors based on set criteria approved by the Board, such as factors pertaining to the structure, operations, Director’s roles and responsibilities and Chairman’s roles and responsibilities and the competence, integrity, character, experience and time commitment of individual Directors including the independence of Independent Directors;

• reviewingthetermofofficeandperformanceoftheACanditsindividualmembersinaccordancewith the AC Terms of Reference;

• assessingandappraisingtheperformanceoftheGroupExecutiveDirector/ChiefExecutiveOfficerand the Executive Director/Chief Financial Officer;

• reviewingandrecommendingtotheBoardregardingre-electionofDirectors;• reviewingtrainingattendedbytheDirectors,consideringassessmentresultsoftheperformance

and effectiveness of the Board, Board Committees and individual Directors;• reviewingBoarddiversityandsuccessionplanning;• reviewingtheTermsofReferenceoftheNominationCommittee;• reviewingtheprocessandtoolsforDirectors’evaluation.



III. REMuNERATION

The Board has established a Remuneration Committee (“RC”) to implement the policies and procedures on matters relating to the remuneration of Directors and Senior Management and making recommendations on the same to the Board for approval. The remuneration policy and procedures, which are approved by the Board, are reviewed annually and are available on the Company’s website at www.elk-desa.com.my/remuneration_policy.html.

The Board has adopted the said remuneration policies and procedures to align the remuneration of Directors and Senior Management with the business strategy and long-term objectives of the Company. The Executive Directors are paid fees, salaries, allowance, performance-based incentive, including bonus and other customary benefits, as appropriate. The remuneration is set based on performance, qualifications and experience of the Directors. The salary level for Executive Directors takes into account the nature of the role, performance of the business and the individual and market positioning.

The remuneration of Non-Executive Directors comprises fees, meeting allowances and other benefits. The Board ensures that the remuneration for Non-Executive Directors does not conflict with their obligation to bring objectivity and independent judgement in relation to their duties and responsibilities.

Directors are required to abstain from deliberation and voting on their own remuneration at Board Meetings.

The aggregate fees and remuneration received/receivable by each Director from the Company and on Group basis for the financial year ended 31 March 2020 are as follows:

Salary & Other Bonus Fees emoluments EPF Total RM RM RM RM RM

The CompanyNon-Executive DirectorsMr. Teoh Seng Kar – 50,000 9,000 – 59,000Mr. Lim Keng Chin* – – 2,250 – 2,250Mr. Loong Foo Ching – 90,000 9,750 – 99,750Mr. Ng Soon Lai @ Ng Siek Chuan – 101,887 9,198 – 111,085Mr. Yee Kin Lan – 68,000 6,750 – 74,750Ms. Toh Jyh Wei – 60,000 5,250 – 65,250

Subtotal Directors’ Remuneration – 369,887 42,198 – 412,085

Executive DirectorsMr. Teoh Hock Chai @ Tew Hock Chai – 120,000 – – 120,000Mr. Teoh Seng Hui – 50,000 – – 50,000Mr. Teoh Seng Hee – 50,000 – – 50,000

Subtotal Directors’ Remuneration – 220,000 – – 220,000

Total Directors’ Remuneration – 589,887 42,198 – 632,085



III. REMuNERATION (CONTINuED)

Salary & Other Bonus Fees emoluments EPF Total RM RM RM RM RM

The GroupNon-Executive DirectorsMr. Teoh Seng Kar – 50,000 9,000 – 59,000Mr. Lim Keng Chin* – – 2,250 – 2,250Mr. Loong Foo Ching – 90,000 16,950 – 106,950Mr. Ng Soon Lai @ Ng Siek Chuan – 101,887 9,198 – 111,085Mr. Yee Kin Lan – 68,000 6,750 – 74,750Ms. Toh Jyh Wei – 60,000 5,250 – 65,250

Subtotal Directors’ Remuneration – 369,887 49,398 – 419,285

Executive DirectorsMr. Teoh Hock Chai @ Tew Hock Chai 920,000 120,000 592 110,400 1,150,992Mr. Teoh Seng Hui 760,000 50,000 829 91,200 902,029Mr. Teoh Seng Hee 600,000 50,000 829 72,000 722,829

Subtotal Directors’ Remuneration 2,280,000 220,000 2,250 273,600 2,775,850

Total Directors’ Remuneration 2,280,000 589,887 51,648 273,600 3,195,135

Note:* Remuneration pertaining to Mr. Lim Keng Chin’s directorship with the Company/ the Group from the beginning of

the financial year under review up to his retirement as a Non-Independent Non-Executive Director of the Company on 8 August 2019.

The Board is of the view that disclosure of Senior Management’s remuneration on a named basis, may not be in the best interest of the Group due to confidentiality and security concerns, for example, vulnerability of these personnel being poached by competitors, notwithstanding that the disclosure is in bands of RM50,000 each. In addition, the Group is operating in the highly competitive finance industry where poaching of executives is commonplace.

As an alternative, the Board believes that the disclosure of aggregate remuneration of Key Management personnel in Note 35 (c) of the audited financial statements, in accordance with the requirements of Paragraph 17 of MFRS 124 “Related Party Disclosure”, are adequate as an alternative means to assess whether key Senior Management personnel are fairly remunerated.



PRINCIPLE B – EFFECTIVE AuDIT AND RISK MANAGEMENT

I. AuDIT COMMITTEE

In assisting the Board to discharge its duties on financial reporting, auditing, risk management and internal controls, the Board has established an Audit Committee which comprises four (4) members, all of whom are Non-Executive Directors, with the majority of them being Independent Directors. The composition of the Audit Committee, including its roles and responsibilities as well as a summary of its activities carried out for the financial year ended 31 March 2020, are set out in the Audit Committee Report of this Annual Report. One of the key responsibilities of the Audit Committee in its specific terms of reference is to ensure that the financial statements of the Group and Company comply with applicable accounting standards in Malaysia and provisions of the Companies Act 2016. Such financial statements comprise the quarterly financial report announced to Bursa and the annual statutory financial statements.

Details of the Audit Committee, including activities undertaken for the financial year under review, are set out in the Audit Committee Report included in this Annual Report.

II. RISK MANAGEMENT AND INTERNAL CONTROL FRAMEWORK

The Board has an overall responsibility for maintaining a sound system of risk management and internal control of the Group that provides reasonable assurance on the effective and efficient conduct of business operations, compliance with laws and regulations as well as internal procedures and guidelines.

The Audit Committee assists the Board in reviewing the adequacy and operating effectiveness of the system of risk management and internal control in the Group. The Audit Committee does this via the deployment of an independent outsourced internal audit function that conducts internal audit based on an internal audit plan approved by the Audit Committee. Findings raised from internal audit are presented directly to the Audit Committee, including the remedial measures and action plans agreed by Management to address the matters so highlighted. For more details of the internal audit function, refer to the Statement on Risk Management and Internal Control which is included in this Annual Report 2020 as well as the Corporate Governance Report that is made available on the Company’s website at www.elk-desa.com.my/corporate_governance_report.html. The Audit Committee is also responsible to oversee the risk management framework and policies while the Senior Management is tasked to manage business risks, including creating and maintaining an effective process to identify, evaluate, control, report and manage risk.

Details of the Group’s Risk Management framework, activities carried out for the financial year under review and reporting processes are set out in the Risk Management and Internal Control Statement included in this Annual Report 2020.



PRINCIPLE C – INTEGRITY IN CORPORATE REPORTING AND MEANINGFuL RELATIONSHIP WITH STAKEHOLDERS

I. COMMuNICATION WITH STAKEHOLDERS

The Board recognises the importance of being transparent and accountable to the Company’s stakeholders and acknowledges that continuous communication between the Company and stakeholders would facilitate mutual understanding of each other’s objectives and expectations. As such, the Board consistently ensures the supply of clear, comprehensive and timely information to the Company’s stakeholders via various disclosures and announcements, including quarterly and annual financial results, which provide investors with up-to-date financial information of the Group. All these announcements and other information about the Group are available on the Company’s website at www.elk-desa.com.my which shareholders, investors and the public may access.

In addition, the Directors also ensure that engagement with shareholders occurs at least once a year during the AGM to better understand their needs and obtain their feedback.

II. CONDuCT OF GENERAL MEETINGS

The AGM, which is the principal forum for shareholder dialogue, allows shareholders to review the Group’s performance via the Company’s Annual Report and pose questions to the Board for clarification.

At the 30th AGM held on 8 August 2019, all the Directors (including the chair of the Board Committees) were present in person to engage directly with, and were accountable to, the shareholders for their stewardship of the Company. During the AGM, shareholders participated in deliberating resolutions being proposed or on the Group’s operations in general. The Directors and Senior Management appropriately responded to all questions raised and provided clarification as required by the shareholders.

Electronic voting system has been used for voting in Annual General Meetings. The Company allows shareholders to appoint more than one proxy in the event the shareholder is unable to attend the meeting. Moreover, the Company has always conducted its meetings at accessible locations that are not remote. The Board is mindful and will consider the feasibility of leveraging on technology to facilitate voting in absentia and remote shareholders’ participation at general meetings, considering amongst others, the cost-benefit of such facilities, security concerns, etc.

This Statement is dated 30 June 2020.



DireCtorS’ reSponSiBiLitY Statement in FinanCiaL rePOrtinG

The Directors are required by the Act, to prepare the financial statements for each financial year which have been made out in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards, the requirements of the Act in Malaysia, and the Listing Requirements.

The Board is satisfied that for the year ended 31 March 2020, the financial statements presented gives a true and fair view of the state of affairs, results and cash flows of the Group and the Company.

In presenting the financial statements of the Group, the Directors have:

• adoptedappropriateaccountingpoliciesandappliedthemconsistently;• madejudgmentsandestimatesthatarereasonableandprudent;and• preparedthefinancialstatementsonagoingconcernbasisastheDirectorshaveareasonableexpectation,

having made enquiries, that the Group and the Company have adequate resources to continue in operational existence for the foreseeable future.

The Directors have ensured that all relevant approved accounting standards and the requirements of the Act were followed in the preparation of these financial statements.

The Directors have overall responsibilities for taking such steps as are reasonably open to them to safeguard the assets of the Group, to prevent and detect fraud and other irregularities.


aDDitionaL CompLianCe inFOrmatiOn DiSCLOSUreS

In compliance with the Listing Requirements, the following information is provided:

a) Audit and Non-Audit Fees

The audit and non-audit fees paid and payable to the Company’s External Auditors and a firm associated to it for the financial year ended 31 March 2020 were as follows:

The Company The Group

Audit Fees (RM) 29,600 111,800

Non-Audit Fees (RM) 5,800 176,132

Note: The non-audit fees incurred includes the professional services (i.e. reporting accountant and tax advisory) provided in relation to the medium term note programme established during the financial year, tax advisory services fees and tax agent fees.

b) Material Contracts

There were no material contracts entered into by the Company and its subsidiaries involving the interest of Directors and/or Chief Executive who is not a director and/or major shareholders and/or related parties as at the end of the financial year ended 31 March 2020 except for the transactions disclosed in Note 35 to the Financial Statements.

c) Recurrent Related Party Transactions

The Recurrent Related Party Transactions were set out in Note 35 of the Financial Statements and were in the ordinary course of business and were carried out on terms not more favourable to the related party than those generally available to the public.


Statement on riSK manaGement anD internaL COntrOL

This Statement on Risk Management and Internal Control is made pursuant to Paragraph 15.26(b) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) (“LR”), which requires the Board of Directors (“Board”) of ELK-Desa Resources Berhad (“ELK-Desa” or the “Company”) to include in the Company’s Annual Report a statement about the state of risk management and internal control of the Company and its subsidiaries (the “Group”), as a group.

The following statement outlines the nature and scope of the Group’s risk management and internal control system during and for the financial year ended 31 March 2020.

RESPONSIBILITY

The Board recognises the importance of having in place a sound system of risk management and internal control framework for the objective of continuous creation and preservation of corporate value and safeguarding of the assets of the Group as well as shareholders’ investment. The Board acknowledges its overall responsibility for the Group’s system of internal control and risk management, including reviewing the adequacy and integrity of the Group’s internal control system to achieve the aforementioned objectives. In view of inherent limitations in any system of risk management and internal control, such a system put into effect by Management can only manage and minimise risks to an acceptable level, but not eliminate all risks that may impede the achievement of the Group’s business objectives. Therefore, the system can only provide reasonable but not absolute assurance against the occurrence of any material misstatement, loss or malpractices.

The adequacy and operating effectiveness of the Group’s internal controls were reviewed by the Audit Committee in conjunction with internal audits conducted by the Internal Auditor during the financial year ended 31 March 2020. Audit issues tabled by the Internal Auditor and actions taken by Management to address the issues were deliberated at Audit Committee meetings. Minutes of the Audit Committee meetings which recorded these deliberations were presented to the Board.

RISK MANAGEMENT FRAMEWORK AND COMPLIANCE STRuCTuRE

The Board has delegated the responsibility of risk management oversight and control to the Audit Committee. The Audit Committee reviews the Enterprise Risk Management (“ERM”) framework and ensures that Senior Management creates and maintains an effective process to identify, evaluate, control, report and manage risk.


Roles and Responsibilities

ERM Policy and Framework

The Board is aware that the Group’s business activities invariably expose the Group to a range of risks. As such, the Group has established an ERM Framework to proactively identify, evaluate and manage key risks to an optimal level. In line with the Group’s commitment to delivering sustainable value, this framework aims to provide an integrated and organised approach entity-wide. It has incorporated the ERM methodology which is guided by ISO 31000:2018, Risk Management – Guidelines.

The Group has formalised a method for the documentation of risks and controls in the format of risk registers. Key risks of the Company are identified and assessed, taking into consideration the Group’s strategic plans approved by the Board and are categorised and analysed to highlight the source of risks, their impacts and the likelihood of occurrence. The Group’s risk profile and risk registers of significant risks are presented to the Audit Committee and Board for deliberation and approval for adoption. Comprehensive action plans to address key risks are continuously being developed, implemented and monitored. The risk registers of the Group’s significant risks are monitored by the respective risk owners.

When reviewing strategic plans, the Board also considers the Group’s key risk profile to enable the formulation of realistic and practical Group strategic plans.

Board of Directors

Audit Committee

• OversightoftheGroupERMFramework• ApprovestheGroupERMFramework(incorporatingpolicyandprocesses)

including changes or additions• SetstheriskappetitefortheGroup• Ensures riskmanagement process, in accordance with the ERM

Framework, is adequate and carried out effectively

• ReviewsERMFramework(incorporatingpolicyandprocesses)includingchanges or additions

• EnsuresSeniorManagementcreatesandmaintainsaneffectiveprocessto identify, evaluate and manage risk

• ProvidesguidanceinrespectofriskmanagementandsupportSmanagementin the monitoring of risk across ELK-DESA

• Develops,implementsandsustainstheERMFramework• Identifies and prioritises risks and participates in theCompany’s risk

identification and assessment process. Ensures risks are identified, managed and regularly assessed and that controls are operating effectively

• PreparestheRiskManagementReportthatprovidesaregularupdateonrisks as well as key indicators measuring the extent of the risks

Statement on riSK manaGement anD internaL ControL(Cont’D)


INTERNAL CONTROL

The key elements of internal control established within the Group comprise the following:

• ControlEnvironment;• RiskAssessment;• ControlActivities;and• Monitoring.

Control Environment

Enhancing the Group’s ability to achieve its business objectives remains as the Board’s primary objective and direction in managing ELK-Desa Group. In ensuring that this objective is achieved, the Board continues to rely on Senior Management, led by the Group Executive Director/Chief Executive Officer, to ensure that the performances of businesses are in line with the approved business strategies and risk appetite. The Board in turn monitors the Group’s performance and profitability through the reports it received and its involvement in operational and strategic meetings. Matters arising which are significant in nature are brought to the attention of the Senior Management, who in turn, directs these matters, if necessary, to the Board for its attention. The Group’s financial performance is reviewed by Senior Management on a monthly basis to ensure that the performances of the various business units are monitored and benchmarked, and that the interests of stakeholders are addressed.

Structure

The Group has instituted an organisational structure with defined lines of accountability and delegated authority. The Board Committees are given specific terms of reference to discharge their respective responsibilities. Senior Management is delegated with the authority necessary for day-to-day decision-making pertaining to matters relating to the Group’s businesses.

Audit Committee

The Board has delegated the responsibility for reviewing the adequacy and operating effectiveness of the internal control system to the Audit Committee. Accordingly, the Audit Committee assesses the adequacy and operating effectiveness of the system of internal control through independent reviews conducted by and reports it receives from the Internal Auditor and External Auditor, as well as Management’s assessment on the Group’s risk management and internal control systems and reporting on the implementation of remedial action plans or improvement initiatives.

Senior Management

In the process of identifying, evaluating, monitoring and managing significant risks affecting the Group’s objectives, the Board relies on the direct participation of Senior Management. Various scheduled and ad-hoc Management meetings are held at strategic, operational and financial levels to review the financial and operational reports and monitor the Group’s performance. These meetings and reports provide the ideal platform for the identification of risks for each business unit and the controls to manage these risks. The Senior Management updates the Board on any significant matters which require the Board’s attention.



Internal Audit

The Group outsourced the internal auditing function to an external professional firm to provide an independent and objective assurance on its internal control system. The outsourced Internal Auditor reviews the Group’s internal control system by adopting a risk-based approach and in accordance with the International Professional Practices Framework, which is a globally recognised framework for internal audit effectiveness. The outsourced Internal Auditor presents its internal audit plan annually to the Audit Committee for approval. Internal Audit Reports highlighting issues raised by the Internal Auditor together with Management’s response to the internal audit findings are presented to the Audit Committee on a quarterly basis. The Internal Auditor also performs follow-up audits on the implementation of action plans agreed by Management in addressing previously highlighted audit findings.

Independent reviews will be conducted by the Internal Auditor to evaluate the effectiveness of the Group’s risk management processes and associated controls, monitor compliance with the framework and provide independent assurance to the Audit Committee on the effective operation thereof.

External Audit

The External Auditor provides assurances in the form of annual statutory audit of the financial statements of the Group and the Company. Any areas for improvement identified during the course of the statutory audit are brought to the attention of the Audit Committee through management letters or are articulated at the Audit Committee meetings.

Whistleblowing Programme

The Board has formalised a whistleblowing policy which provides a channel for internal and external parties, including the public, to provide information on frauds, wrongdoings and non-compliance of regulations and procedures by a vendor, business dealer, partner or employee of the Group.

The Whistleblowing Programme is governed by the Group’s Whistleblowing Policy and overseen by the Audit Committee. It allows the whistleblower to voice such concerns with complete confidentiality, knowing that the people who can address these issues are appropriately informed.

The whistleblower’s identity is always kept confidential and is protected against any form of reprisal or retribution within the Group. The Board is notified and updated on the investigation of any concern raised.



Risk Assessment

Risk Processes

Risk assessments are conducted on potential new projects, existing activities, processes and systems to ensure that risk exposures are aligned with the Group’s objectives, goals and risk appetite. The identification and management of risk is a continuous process linked to the achievement of the objectives. Any risks or opportunities arising from these assessments, which may be conducted on ad-hoc basis, regular meetings or interviews by ERM consultants, are identified, analysed and reported to the appropriate management level.

The Group maintains high-level risk registers, compiled by Senior Management, which help to facilitate and systematically document the identification, assessment and on-going monitoring of the Group’s significant risks, including actions to be taken to mitigate the risks. The document is formally reviewed half-yearly but emerging risks will be added as required, and mitigating actions and risk indicators are monitored regularly and updated as appropriate.

Each risk identified is evaluated and given a gross risk rating based on its impact and likelihood. The impact ratings are expressed after considering consequences relating to financials, business interruption, business strategies, stakeholders’ confidence and human resources factors. The likelihood ratings are expressed after considering the frequency and probability of the risk event occurring. All risks identified are evaluated based on consistent risk rating parameters established in the ERM Policy.

Action plans and mitigating controls are determined for all risks identified, evaluated and captured in the risk registers. Risk owners are assigned to each of the risks to ensure that the action plans and mitigating controls are executed on a timely basis. Monitoring of the Group’s overall risks and controls by Senior Management and review by independent assurance providers (i.e., internal audit or external audit) are also in place as the second and third lines of defence respectively to manage these risks.

Significant Risks

In pursuing the Company’s goal to create and sustain value for its stakeholders, the Board has approved a range of risk appetite for different risk categories, developed at the entity level by the Senior Management. The Board is aware of the inherent risks specific to the Group’s current business activities and has developed internal control measures to address such risks which are detailed as below.



a) Strategic risk

These are risks that affect the business direction and the sustainability of the Group which arise from failure to respond to competition, changes in economic, environmental, social, political and regulatory conditions or improper selection of business strategies. Failure in addressing competition risks may result in failure to retain business partners or losing out in competition with other financial institutions that provide hire purchase financing. The Group’s hire purchase business is dependent on the economic environment that correlates with consumer spending habits and the hirers’ repayment of instalments in a timely manner. The industry is also regulated by the Hire Purchase Act 1967 (“HP Act”) and the Group is affected by any unfavourable terms of amendments to the HP Act. The synergistic integration of the hire purchase financing and insurance agency businesses within the Group, the continuous positioning by the Group in the underserved niche market and maintaining a good business relationship with a large network of business partners, close surveillance of changes of the economy and regulatory legislation help mitigate the oversight of strategic risk.

b) Operational risks

These are risks of loss related to a deficiency in the Group’s internal processes, system procedures or management information system or human error. Senior Management communicates with subordinates and guides them effectively through a hybrid of communication means on any new or variation in internal procedural processes. The Group has also implemented crucial data storage, preventive security measures and recovery mechanism to prevent any major management information system disaster and cyber risks.

c) Credit risk

This relates to the potential loss due to customers failing to perform their contractual obligations. The Group has put in place a stringent credit management policy in the hire purchase disbursement strategy and stringent monitoring of repayment to mitigate this risk. The Group minimises its exposure to this risk by broadening the hirer base and not relying heavily on any single large hirer. Hire purchase financing is provided for selected popular models of used cars that offer relatively good resale value, incur relatively minimal or slower depreciation in value over their remaining useful lives and can be disposed of at a relatively quicker rate upon repossession.

d) Liquidity risk and funding risk

These are risks to the Group for being unable to maintain adequate liquidity in its cash and cash equivalents to meet its financial commitments when they fall due. Funding risk is associated with the inability of the Group to secure new sources of funding for business expansion and replacement of borrowings with higher cost. Internal funds generated from earned revenue remain as the main contributor to the funding for the Group’s operations. The long and cordial business relationship established with local financial institutions enables the Group to access cost-effective, short and long term working capital requirements. Moreover, the Group is also able to gain access to the capital markets to raise funds for its business expansion at a relatively lower cost as opposed to conventional bank borrowings.



e) Interest rate risk

This risk relates to loss of revenue that arises from fluctuation of interest rates on borrowed working capital. The Group’s continuous efforts to source for competitive financing packages and to retire borrowings with higher cost alleviate the impact of adverse borrowing interest rate movements on the Group’s financial performance. The Group also manages this risk by maintaining a mixture of fixed and floating rate borrowings.

During the financial year under review, two new risks associated with the corporate liability provision of the Malaysian Anti-Corruption Commission (Amendment) Act 2018 (“the Act”) have been identified and the key risk profile has been updated accordingly. The Management has duly assessed the impact, likelihood of occurrence and control effectiveness in respect of these risks. Steps have been taken to establish adequate procedures to raise defences against any possible implications of the Act.

Other emerging risk – Business Continuity Risk

The risks of unexpected events that threaten economic and social continuity, such as natural disasters like earthquakes and large-scale flooding, disruptive incidents, and pandemics have increased greatly in recent years. In the recent Covid-19 outbreak caused by a deadly infectious coronavirus which is still threatening Malaysia and the world, we have taken steps to prevent the spread of infection and to ensure business continuity, the Management created a “Covid-19 Preventive Measures Working Group” (CPM”) to institute preventive measures in everyday operations and the response process to be undertaken if an outbreak occurs within the business premises. The Management has maintained regular and effective communication with all employees to disseminate latest information, instructions, and procedures to employees through electronic means. During the Movement Control Order period, the Group has also ensured and maintained continuous engagement with key employees to enable remote working while maintaining continuity of business operations.

In view of this, the Group is in the midst of assessing and profiling the relevant risk and to consider approaches to its mitigation and management.

Control Activities

Senior Management is accountable for all risks assumed under their respective areas of responsibilities and to ensure that the Group’s objectives and goals are not impacted by internal and external risks beyond the acceptable levels. Control activities generally can be divided into three (3) main categories:

Preventive controls are introduced to deter undesirable events or incidence of mistakes. Segregation of duties is primarily designed to prevent fraudulent activity from happening and remaining undetected. Key finance-related tasks are divided among management staff. There are written guidelines and procedures for key business operating processes within the Group. Insurance covers are in place to prevent against any untoward material losses to the Group’s assets and its hire purchase receivables.



Control Activities (Continued)

Detective controls are designed to provide quick detection of errors and other undesirable events. These include reconciliations by supervisory personnel, physical counts of daily cash, inventory and fixed assets against the ledger statements. Management checks on the Group’s financial performance and cost expenses against the budget, predetermined benchmarks and previous year’s results to measure the extent to which financial objectives are being achieved. Credit control reports and receivables ledgers are scrutinised closely by a team of experienced management staff to ensure early detection of delinquent debts that may result in impairment losses.

Corrective controls are designed to identify errors in the risk assessment process and determine the actions to be taken to rectify those problems. These include knowledge-based training to upgrade Management’s and staff’s personal skill and job competency, and periodic reassessment of the current procedures and guidelines.

The Group envisages that a sound communication process is imperative to capture and provide information relating to risks and internal controls to employees. All managers and Heads of Department are responsible to communicate information on detected risks and the means of control to those who are responsible for monitoring and mitigating those risks. Information about new or revised policies, guidelines and procedures which shall be adhered to by employees are disseminated via circulars and internal memos duly authorised by the Senior Management.

Monitoring

There are processes to monitor the internal control policies and procedures designed and implemented by Management to ensure their effectiveness and also to identify any significant control weaknesses which prompt corrective actions.

The Board, through the Audit Committee, Senior Management and the Internal Auditor, reviews the internal control system on an on-going basis whilst the External Auditor performs review on an annual basis. The Internal Auditor performs separate independent evaluation of internal controls, including assessing the level of compliance with the existing framework, policies, guidelines and procedures and the recognised standards and guidelines. The outcome of the reviews highlighting areas of improvements is reported directly to the Audit Committee for monitoring and periodic review. Senior Management continues to be actively involved in monitoring and upgrading the control processes within all units in the Group.

For the financial year under review, the Board via the Audit Committee, with the assistance of the Internal Auditor, has performed eight (8) cycles of internal audit in reviewing the internal control system of the Group. The audit findings were tabled to the Audit Committee, which has been periodically updated by Management on action plans required to address any significant failings or weaknesses and the implementation progress of these action plans. For the detailed scope of internal audit activities carried out for the financial year under review, refer to the Audit Committee Report in the Company’s Annual Report 2020. The Internal Auditor had assured the Audit Committee that, throughout the financial year, in the respective internal audit cycles, there were no material issues or deficiencies noted that would significantly impair the overall system of internal control.



REVIEW OF THE STATEMENT BY EXTERNAL AuDITOR

As required by paragraph 15.23 of the LR, the External Auditor has reviewed this Statement on Risk Management & Internal Control for inclusion in the Annual Report 2020. As set out in their terms of engagement, the limited assurance review was performed in accordance with the Audit and Assurance Practice Guide 3 (“AAPG 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 Malaysian Institute of Accountants.

AAPG 3 does not require the External Auditor to consider whether this Statement covers all risks and controls, or to form an opinion on the adequacy and effectiveness of the Group’s risk and control procedures. The External Auditor has concluded that based on the procedures performed and evidence obtained, nothing has come to its attention that causes it to believe that the Statement on Risk Management and Internal Control (“SORMIC”) intended to be included in the annual report is not prepared, in all material respects, in accordance with the disclosures required by paragraphs 41 and 42 of the Statement on Risk Management and Internal Control: Guidelines for Directors of Listed Issuers to be set out, nor is the SORMIC factually inaccurate.

CONCLuSION

In accordance with the assessment of the Group’s system of internal control and risk management, the Board is of the view that the system of internal control and risk management established for the financial year under review, and up to the date of approval of this Statement, is sound and sufficient to safeguard the Group’s assets, the shareholders’ investments, and the interests of customers, regulators, employees and other stakeholders. The Board has also received written assurance from the Group Executive Director/Chief Executive Officer and Executive Director/Chief Financial Officer; that the Group’s risk management and internal control system is operating adequately and effectively, in all material aspects, based on the framework adopted by the Group.

During the year under review, a number of improvements to internal controls were identified and addressed. Nothing has come to the attention of the Board which would result in any material losses, contingencies or uncertainties that would require separate disclosure in the audited financial statements. Notwithstanding this, the Board will continue to ensure that the Group’s system of internal control and risk management continuously adapts to changes in the business environment.

This statement was approved by the Board of Directors on 30 June 2020.



aUDit COmmittee rePOrt

COMPOSITION OF AuDIT COMMITTEE

ELK-Desa Resources Berhad’s (“ELK-Desa” or the “Company”) Audit Committee (“AC”) comprises four (4) members, all of whom are Non-Executive Directors (“NEDs”) where three (3) are Independent NEDs and one (1) Non-Independent NED, during the financial year ended 31 March 2020. The Audit Committee is composed of the following members:

Name of Committee Members Designation

Mr. Ng Soon Lai @ Ng Siek Chuan (Chairman) Independent Non-Executive Director

Mr. Teoh Seng Kar Non-Independent Non-Executive Director

Mr. Loong Foo Ching Senior Independent Non-Executive Director

Mr. Yee Kin Lan Independent Non-Executive Director

The AC Chairman, Mr. Ng Soon Lai @ Ng Siek Chuan, is a fellow member of the Institute of Chartered Accountants in England and Wales (“ICAEW”) and a member of the Malaysian Institute of Accountants (“MIA”). Accordingly, the Company complies with Paragraphs 15.09(1)(c) and 15.10 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“LR”). All members of the Audit Committee are experienced and familiar in banking or industries relevant to the businesses in which the Group operates. They are able to read and understand financial statements, general accounting principles, and challenge management’s assertion on financials. The profiles of members of the Audit Committee are available in the Company’s Annual Report.

ATTENDANCE OF AuDIT COMMITTEE

For the financial year ended 31 March 2020, the AC held a total of five (5) meetings. The details of attendance of AC members are outlined in the Corporate Governance Overview Statement in this Annual Report.

Senior Management, represented by the Group Executive Director/Chief Executive Officer (“CEO”) and the Executive Director/Chief Financial Officer (“CFO”), attended AC meetings at the invitation of the AC to provide clarification on AC queries, for example, on audit issues. The External Auditor, outsourced Internal Auditor and risk management functions were also invited to AC meetings to present external audit, internal audit, and updates on risk management matters respectively.

TERMS OF REFERENCE

The Terms of Reference of the AC is published on the Company’s website at www.elk-desa.com.my. During the financial year, the Board had, via the Nomination Committee, reviewed the term of office and evaluated the performance of the AC and is satisfied that the AC and its members had discharged their functions, duties and responsibilities in accordance with the AC’s Terms of Reference for the financial year ended 31 March 2020.


SuMMARY OF ACTIVITIES OF THE AuDIT COMMITTEE

For the financial year under review, the AC carried out the following activities in accordance with its Terms of Reference:

1) Financial Reporting

a) In August 2019, November 2019, February 2020 and June 2020, the AC reviewed and deliberated on ELK-Desa Group’s (the “Group”) first, second, third and fourth quarterly financial statements respectively, which were presented by the CFO of the Company, prior to recommending the quarterly financial statements to the Board for consideration and approval.

b) The quarterly financial statements were prepared in compliance with the Malaysian Financial Reporting Standards (“MFRS”) 134 Interim Financial Reporting, International Accounting Standards (“IAS”) 34 Interim Financial Reporting and Paragraph 9.22, including Appendix 9B, of the LR.

To gain a deeper understanding of the financial performance of the Group, the AC also reviewed the detailed management analysis of the financial performance which included key information such as the annual income and expenditure budget, operational statistics and cash flows movements.

c) In June 2020, the AC reviewed the Group’s annual audited financial statements for the financial year ended 31 March 2020, presented by the CFO, prior to recommending the same to the Board for consideration and approval. The External Auditor, Messrs. BDO PLT, were present during the review and the AC has obtained assurance from Messrs. BDO PLT that the financial statements give a true and fair view of the financial position of the Group, its financial performance and cash flows for the financial year ended 31 March 2020 in accordance with relevant financial reporting standards and the Companies Act 2016.

d) At the various Board meetings held for the approval of quarterly financial statements and annual audited annual financial statements in August 2019, November 2019, February 2020 and June 2020, the AC Chairman briefed the Board on key important issues discussed by the AC in relation to the financial statements.

2) External Audit

a) In November 2019, the External Auditor presented the annual audit plan for the financial year ended 31 March 2020 to the AC for its consideration. The audit plan outlining the audit strategy and scope of statutory audit was developed to ensure adequate coverage of the Group’s various business activities. The AC reviewed and noted the audit plan and sought clarification from the External Auditor on the approach to be taken.

The External Auditor also provided the AC with updates on audit-related matters, including new financial reporting standards, and changes to relevant guidelines on the statutory and regulatory requirements.

At this meeting, the External Auditor gave written confirmation to the AC that they, together with their external audit team, have complied with relevant ethical requirements regarding professional independence.

aUDit Committee report(Cont’D)


2) External Audit (Continued)

b) In June 2020, the External Auditor presented to the AC on the audit findings for the financial year ended 31 March 2020. The AC deliberated with the External Auditor on key audit matters, i.e., being matters that, in the External Auditor’s professional judgment, were of most significance in the audit of the financial statement of the current period. AC reviewed with the External Auditor, the External Auditor’s evaluation of the system of internal controls pertaining to financing reporting.

At this meeting, the External Auditor also provided confirmation on its professional independence, including that of their team members, to the AC.

c) The AC held private sessions with the External Auditor without the presence of other members of the Board and Senior Management in November 2019 and June 2020 to allow the AC to ask questions on matters that might not have been specifically addressed as part of the audit. There was no major issue of concern being reported during the private sessions. The External Auditor confirmed that assistance and cooperation were provided by the employees of the Group during the course of auditing.

d) In June 2020, the AC reviewed and recommended to the Board for approval, the audit fees payable to the External Auditor.

e) In June 2020, the AC conducted an annual assessment of the suitability and independence of the External Auditor based on feedback from Senior Management who have had substantial contact with the audit team throughout the year. Being satisfied with Messrs. BDO’s PLT performance, technical competency, adequacy of resources and its professional independence, the AC recommended to the Board the re-appointment of Messrs. BDO PLT as the Group’s External Auditor for the financial year ending 31 March 2021.

Subsequently, the Board concurred with recommendation by the AC on the re-appointment of Messrs. BDO PLT as the Group’s External Auditor for the financial year ending 31 March 2021 and will propose the same to shareholders for approval at the forthcoming Annual General Meeting.

3) Internal Audit

a) In February 2020, the outsourced internal audit function presented the annual internal audit plan covering the hire purchase and furniture divisions to the AC for review. The objective of internal audit activities is to review the business divisions, departments and functions’ procedures, systems and controls as identified in the Risk-based Internal Audit Plan, and assess whether the risk management and internal control system are adequate and are functioning effectively to achieve: compliance with applicable laws; regulations and standard operating procedures; management of strategic and operational risks; reliability and integrity of information; safeguarding of assets; and operational effectiveness and efficiency. The AC approved the plan as well as the internal audit fees proposed for the financial year ending 31 March 2021.



3) Internal Audit (Continued)

b) In August 2019, November 2019 and February 2020, the AC reviewed the internal audit reports. The internal audit reports included, among others, the control environment and activities for critical processes, key findings and recommendations to address audit findings highlighted, amongst others, to ensure compliance with applicable laws, regulations and procedures. At all meetings, Management was invited to brief the AC on operational processes, internal controls in place, actions to be taken by Management in addressing issues highlighted and status updates on follow-up actions arising from previous audits, particularly when concerning compliance matters or high-risk areas. The AC took note of Management’s actions plans and implementation progress.

There were eight (8) audit cycles on the internal control review of various processes of the Group for the financial year ended 31 March 2020 and the details were as follows:

Audit Scope Reported to AC Audit Grading

Internal Control Review of Sales and Credit Control Function of ELK-Desa Furniture Marketing Sdn Bhd

August 2019 Some improvement needed

Internal Control Review of ELK-Desa Capital Sdn Bhd in respect of:

1) Call Centre November 2019 Some improvement needed

2) Business Operation November 2019 Some improvement needed

3) Legal Action Process November 2019 Some improvement needed

4) Stock Management & E-discharge November 2019 Effective

Internal Control Review of ELK-Desa Capital Sdn Bhd in respect of:

1) Credit Control Process February 2020 Some improvement needed

2) Business Operation February 2020 Some improvement needed

3) Operations Support Process February 2020 Some improvement needed

Compliance and operational audits on all key business functions are conducted annually. Any major concerns arising from the current audit findings will be re-visited. All the audit issues are expected to be resolved by the following year’s audit. During the financial year, there was no significant financial impact to the Group arising from the audit issues.

c) In November 2019, the AC held private discussion with the Internal Auditor without the presence

of other members of the Board and Senior Management to allow the Internal Auditor to provide candid and more confidential comments to the AC on issues of concern. No significant issues were highlighted by the Internal Auditor during the private session.

The AC has assessed the independence and competency of the outsourced internal audit function and was satisfied that the internal audit function had adequate resources to discharge its duties and had demonstrated unbiased views and comments in relation to their audit findings.



4) Review of Related Party Transactions

a) In August 2019, AC reviewed the Related Party Transactions in respect of the renewal of a tenancy agreement between ELK-Desa Capital Sdn Bhd (“EDC”), the wholly owned subsidiary company and a substantial shareholder, Eng Lee Kredit Sdn Bhd (“The Landlord”) for the occupation of the shop office situated at No. 15-17, Jalan Brunei Utara Off Jalan Pudu, 55100 Kuala Lumpur (“Premises”) for the monthly rental to remain at RM33,000 per month for a tenure of 1 year with an option to renew for another year.

After having considered all aspects of the tenancy agreement, AC is of the view that the proposed renewal tenancy was in the best interest of the Company and not detrimental to the interest of the minority shareholders.

b) During the financial year, the AC reviewed on quarterly basis, the list of Recurrent Related Party Transactions (“RRPT”) transacted during the financial year ended 31 March 2020. The AC also reviewed procedures in place to ensure the RRPTs were in the best interest of the Group, fair and reasonable, and on commercial terms not more favourable to the related parties than those generally available to the public. The RRPTs included tenancy agreements between related parties and subsidiary companies.

5) Risk Management

a) In August 2019 and February 2020, the AC reviewed the Enterprise Risk Management Reports (“ERM Reports”) of the Group tabled by the Management. The ERM Reports provide a half-yearly review of the Group’s existing risk registers, any new and potential risks identified and updated Key Risk Profile and risk registers. Regular risk updates enable Management to take prompt action to monitor and mitigate key risks viewed as having a potentially negative impact on the future performance of the Group. Mitigation actions, as well as key indicators measuring the extent of the risks were included in the ERM Reports for review.

b) In November 2019 and June 2020, the AC was briefed by Management on any changes to the risk environment. There were no significant changes to the risk environment in which the Group is operating.

c) In February 2020, the AC assessed the corruption risks associated with both the hire purchase and furniture businesses.

d) In June 2020, the AC reviewed the Statement on Risk Management and Internal Control for the financial year ended 31 March 2020, which has also been reviewed by the External Auditor, and recommended it to the Board for approval and inclusion in the Company’s Annual Report 2020.

6) Whistleblowing

a) In August 2019, November 2019, February 2020 and June 2020, the Group’s outsourced whistleblowing function tabled periodic reports on whistleblowing to the AC. Since the inception of the Whistleblowing Programme, there were no reported incidents through the Whistleblowing Channels.



INTERNAL AuDIT FuNCTION

The Group outsources its internal audit function to an external professional firm (“Internal Auditor”) to provide independent review of the Group’s internal control system and assist the Board of Directors in the discharge of their duties and responsibilities. The Internal Auditor provides reasonable assurance to the AC and the Board on whether the internal control processes have been adequately established and are operating effectively.

The professional outsourced Internal Auditor conducted internal control assessments in accordance with the International Professional Practices Framework for internal auditing from the Institute of Internal Auditors.

During the financial year under review, the Internal Auditor interviewed key process owners to gain an understanding of the Group’s processes, identify risks associated with the processes, determine the existence of internal controls and their effectiveness relative to the business units’ objectives.

The Internal Auditor updated the AC on the internal audit plan of the Group, as well as present the outcome of its audits, on a quarterly basis to ensure the AC was kept abreast of the audit progress.

All documents were made available to the Internal Auditor as part of the internal control assessment process. The Internal Auditor performed testing on sampled transactions and activities pertaining to selected processes, focusing on reviewing the control objectives for those processes, written policies and procedures, applicable laws and regulations and operation-related documents. The Internal Auditor also documented processes reviewed through the use of process maps and process narratives and identified the key risks and existing controls in relation to the processes. The results of the reviews were presented to the AC through internal audit reports. Follow-up reviews in the form of full-scope audits, particularly on compliance matters or high-risk areas, were also conducted to ascertain that recommendations for improvements on reported weaknesses have been implemented by Management on a timely basis.

The cost of internal audit services incurred for the Group was approximately RM86,000 for the financial year ended 31 March 2020 (approximately RM120,000 for the previous financial year ended 31 March 2019).



SUStainaBiLitY Statement

EMBRACING SuSTAINABILITY

ELK-Desa Resources Berhad (“ELK-Desa” or the “Group”) is committed towards embracing the tenets of sustainability in a comprehensive manner. We believe that by adopting sustainability practices throughout our value chain, we are able to enhance value for our shareholders in a meaningful way while contributing positively to the well-being of our stakeholders at large.

ELK-Desa’s primary operation revolves around the provision of hire purchase financing solutions for the used car segment. As a non-bank lender in this niche market, the Group plays an important role in facilitating the transportation needs of those living and working in the Greater Kuala Lumpur area.

The Group is also making progress in expanding its furniture business. Although the contribution from the furniture business is not significant, this division has the potential to spur economic activity and job creation, more so in and around areas of its operations.

In view of its business activities, ELK-Desa plays a vital role in the growth of our national economy and, as such, it is important that the Group consistently operates in a transparent and sustainable manner. During the year, ELK-Desa reviewed and implemented initiatives that accorded with the key principles of sustainability, specifically in relation to the three sustainability pillars of economic, environmental and social (“EES”) themes.

TONE FROM THE TOP

The Board of Directors (“Board”) of ELK-Desa holds ultimate responsibility for the sustainability performance of the Group. The Board provides leadership for business sustainability and ensures that the strategic plan of the Company supports long-term value creation and includes strategies on economic, environmental and social considerations underpinning sustainability. The Board has tasked the Group Executive Director/ Chief Executive Officer (“CEO”), who is supported by the Executive Director/ Chief Financial Officer (“CFO”), to review, deliberate and approve the Group’s sustainability strategy and initiatives. Sustainability strategies and initiatives developed by the CEO are endorsed by the Board.

The CEO is also responsible for assessing the economic, environmental and social risks and opportunities of the Group to identify those which are material to the Group, including the management and performance thereof.

When it comes to implementing and executing these initiatives, the CEO delegates responsibilities to the relevant Heads of Department within the Group.


MATERIALITY ASSESSMENT PROCESS

ELK-Desa’s business sustainability is based on a myriad of factors, both internal as well as external. Considering a range of economic, environmental and social aspects of the business, there are factors that are much more important than others in creating long-term value to stakeholders. For the financial year under review, i.e. financial year ended 31 March 2020, ELK-Desa has undertaken a materiality assessment process to systematically assess the Group’s sustainability matters.

The scope of the materiality assessment includes both the Group’s business segments, i.e. Hire Purchase Financing division and Furniture division, which jointly contribute to 100% of the Group’s revenue. Likewise, this Statement will report on the said scope, considering economic, environmental and social matters for both the Hire-Purchase Financing and Furniture divisions.

The materiality assessment is conducted by ELK-Desa’s key Senior Management, led by the CEO and the CFO. During the conduct of materiality assessment, ELK-Desa has considered the following:

(a) the level of significance a sustainability matter relates to our Group’s strategic vision and business activities; (b) the impact, relevance and importance of the sustainability matter in relation to the Group’s internal and

external stakeholders; and (c) the ability of the Group to control and manage these matters.

Based on the criteria above, the ELK-Desa assesses and prioritise sustainability matters considering not only the Group’s businesses, but also the views and concerns of the Group’s internal and external stakeholders. The Group’s stakeholders include, but are not limited to, customers, dealers, employees, regulators, shareholders, suppliers and communities. The Group has in place appropriate engagement channels with its key stakeholders to allow the views and concerns of stakeholders to be expressed and heard. Stakeholders’ views and concerns, with regard to economic, environmental and social aspects of the Group’s businesses, were considered during the materiality assessment process.

Arising from the materiality assessment conducted during the financial year under review, the Group has included a new Material Sustainability Matter, i.e. Technology and Innovation, which it has identified as an increasingly crucial matter to consider in the age of rapid technological advancement as global businesses are increasingly faced with new risks and opportunities arising from technology advancement and adoption.

MATERIAL SuSTAINABILITY MATTERS

ELK-Desa has identified the following Material Sustainability Matters of the Group, considering the Group’s significant economic, environmental and social aspects and their influence on stakeholders’ assessments and decisions. The Material Sustainability Matters are discussed in detail in the following.

SUStainaBiLitY Statement(Cont’D)


MATERIAL SuSTAINABILITY MATTERS (CONTINuED)

Ethical, Transparent, and Fair Business Practices

It is of utmost importance that the Company and its subsidiaries, including management and employees, observe the highest standards of ethics and integrity in the conduct of business, especially where the core business of the Group involves financing and handling of money. Therefore, the Group’s employees are required to adhere to strict ethics and integrity standards in the performance of their duties to ensure compliance with laws and regulations and safeguard the interest of the Group’s business.

The Group has established policies on anti-corruption and guiding principles for ethical business practices, embedded in the Group’s Code of Ethics and Conduct and the Employees Handbook. The Group pledges to not bribe anyone nor accept bribe from anyone for any reasons, and customary business courtesies which may be customary shall be guided by reasonable ethical or cultural practices and shall not be inappropriately lavish or excessive, and shall not be material enough to influence, or appear to be able to influence, business decisions. The Group also have a No-Gift Policy in its Code of Ethics and Conduct which prohibits its employees to solicit or receive any gifts which may influence business decision-making or put a person in a conflict of interest situation.

Management is expected to set the tone at the top and demonstrating the carrying out of ethical business behaviours. Employees are encouraged to raise ethics-related concerns or questions while Management is expected to address the concerns or questions accordingly.

Furthermore, to ensure that the Group has in place adequate procedures to prevent the conduct of bribery in its businesses, the Group has performed a review of its internal controls, processes, and procedures to identify areas to be improved upon. Arising from the review, the Group has developed an Anti-Bribery Management System which enables a systematic process for the assessment of bribery risk areas within the Group and the subsequent management and reporting of these risk areas.

Maintaining transparent and fair business dealings with dealers and customers remains to be a crucial factor to build and promote the reliability, trustworthiness, and stakeholders’ confidence in the Group’s products and services. The Group ensures open and transparent engagement channels, including a well-maintained and up-to-date corporate website, are in place to effectively communicate applicable policies and expectations to dealers and customers.

The Group also has established Standard Operating Procedures (“SOPs”) guiding business operations, especially for the Group’s hire-purchase financing business, which has considered the application of ethical business practices. With these SOPs in place, employees are able to carry out their duties and responsibilities with clear guidance on acceptable and unacceptable practices, and business operations are able to function in a more systematic manner. Through the internal audit function, the Group monitors employees’ compliance with the Group’s SOPs and governing laws and regulations. In addition, the Group has also established a whistleblowing mechanism accessible by internal and external stakeholders for the purpose of raising concerns, especially where business ethics is concerned, without fear of reprisal.

For the financial year, the Group has recorded zero cases of whistleblowing case concerning anti-corruption, anti-money laundering or ethical business practices.

The Group will continuously review its policies and processes in place to enable the observance of high ethical and integrity standards in the conduct of the Group’s business.




Responsible Financing

As a hire-purchase financier, ELK-Desa recognises the Group’s roles and responsibility to ensure customers are adequately informed of the financial products procured. It is in the best interest of the customer, as well as the business, to be adequately informed to ensure obligations stipulated in the hire-purchase agreement are carried out by both the customer and the business. Furthermore, as a responsible organisation, the Group commits that if it has come to its knowledge any transaction is associated with corruption, human trafficking, smuggling activities or those prohibited by law, it will not support the financing of such activities or transactions.

Guided by the Hire-Purchase Act 1967, ELK-Desa’s hire-purchase financing business complies strictly to provisions of the laws and relevant regulations in the conduct of its business. The Group ensures preparation of hire-purchase agreements includes all relevant information setting out clear details of the hire-purchase arrangement, including but not limited to the cash price, deposit, terms charges, number of instalments, instalment amount, etc. Other details in the hire-purchase agreement include the rights of the financier and the rights of the customer, amongst others. By clearly stipulating the terms in the hire-purchase agreement, customers will be provided with clear expectation of the financing amount and their contractual repayment obligations, amongst other important information, in enabling informed decision making. In addition, prior to the signing of hire-purchase agreement, employees are required to verbally highlight and explain key terms of the hire-purchase arrangement to customers to ensure customers are well-informed of the agreement terms.

Furthermore, the Group has in place stringent credit approval process, which considers customers’ financial background and capability, such as their sources of income, to avoid financing customers who may not seem to be able to take on further financial obligations. This process indirectly prevents the Group’s hire-purchase financing business from causing customers to live beyond their means, as well as safeguarding the assets of the Group. As a result, the Group has been able to maintain a reasonably low non-performing loan ratio and credit loss charge, as follows:

FY2018 FY2019 FY2020

Non-performing loan ratio 1.0% 0.8% 1.4%

Credit loss charge 5.5% 3.8% 4.2%

Further analysis of the non-performing loan ratio and credit loss charge is set out in the Management Discussion and Analysis section of this Annual Report.

Car Ownership Affordability

The nature of ELK-Desa’s hire-purchase financing business creates economic and social value especially to the community underserved by financial institutions. It provides financial solutions to this underserved segment to facilitate vehicle ownership for qualified low-to-middle income and self-employed individuals. Vehicle ownership in a fast-paced city environment such as the Klang Valley can serve as an enabler towards harnessing better economic opportunities, that in turn may translate into higher disposable income. ELK-Desa views its hire-purchase business as one that promotes financial inclusion, supporting the underserved community to not get left behind as the nation works towards a developed nation status.




Car Ownership Affordability (Continued)

By providing hire-purchase financing solutions to qualified individuals in an efficient and productive manner, ELK-Desa also contributes to the used-car industry by matching demand and supply, directly and in-directly generating business growth for players in the industry such as car dealers.

Human Capital Management and Development(Talent Attraction and Retention/ Employment Benefit/ Labour Practices, Human Rights, Workforce Diversity and Equal Opportunities)

The Group aims to create a conducive work environment that encourages the development of employee talents and skills. This is in line with the Group’s belief for equal opportunity, fair labour practices and the protection of human rights. The Group’s human resources policies consider and adhere to fair labour practices, human rights and non-discrimination standards, where employees or candidates for employees are assessed based on their merit irrespective of race, religion, cultural background or gender. The Group has a balanced and diverse workforce reflective of the national demographics, as follows:

Hire-Purchase Financing Segment Furniture Segment Total

FY2018 FY2019 FY2020 FY2018 FY2019 FY2020 FY2018 FY2019 FY2020

Male 38 58 57 62 58 59 100 116 116

Female 112 137 137 31 36 33 143 173 170

Malay 81 114 110 14 14 13 95 128 123

Chinese 52 56 57 54 55 56 106 111 113

Indian 16 24 25 8 8 7 24 32 32

Others 1 1 2 17 17 16 18 18 18

Aged below 35 77 115 110 54 46 46 131 161 156

Aged between 35 – 50

47 57 59 31 38 33 78 95 92

Aged above 50 26 23 25 8 10 13 34 33 38 The Group believes that attracting and retaining the right talent is important to business and operation continuity as specific skills and experiences are required in each of its business segments. The Group’s businesses are spearheaded by Management with extensive knowledge and experiences in areas such as credit, hire-purchase, the used-car industry and the furniture industry. Bearing in mind the need for grooming talents and skills and succession planning, the Group places efforts investing in technical and non-technical development of its employees by providing training to employees.




Human Capital Management and Development (Continued)

For the financial year under review, the Group has provided training on the following areas to its employees:

• effectiveinterviewingskill;• lawofattraction;• leadershipdevelopmentprogram;• executivedevelopmentprogram;• teambuilding;• negotiationskillforcreditcontroldepartment;• basicfirefighting;• basicoccupationalfirstaid,CPR&AED;• hire-purchaselawandregulations;and• brainstorming.

In addition, the Group also brings employees together by conducting company activities, such as team-building events and community contribution activities, to foster harmonious and closer working relationship among employees.

Occupational Health and Safety

As ELK-Desa’s business involves financing activities, the Group is aware of its responsibility in ensuring the safety of its employees. Some of the main concerns relating to occupational safety include the risks of burglary and robbery. The Group has employed security measures such as installation of CCTVs, security guards, security management and logistics service providers throughout its hire-purchase financing business operations. Briefings are also provided on a periodic basis to guide employees on dealing with emergency situations, safety, fire prevention, etc.

For the Group’s furniture segment, business focus is placed on wholesaling and trading activities and hence the risk of occupation safety and health risk is still minimal for this segment. Nevertheless, the Group undertakes necessary measures and ensures any relevant regulations and guidelines established by government authorities and regulators are complied with.

On a group-wide basis, the Group provides personal accident and medical coverage to all its employees in additions to contribution to social security organisation (“SOCSO”).

As a response to the outbreak of the Covid-19 in Malaysia, the Management has set up a Covid-19 Preventive Measures Task Force (“CPM”) to deal with the pandemic situation. CPM functions to look into the preventive measures to avoid the spreading of the virus in our office premises and to prevent our employees from contracting the deadly disease. Preventive measures undertaken include body temperature checks, face masks/shields for frontline staff, sanitiser dispensers located at the customer hall and offices, routine cleaning of the office premises especially the high touch points areas, education on hygiene care, work-from-home arrangements, staggered working hours, meeting and discussion through internet chat or tele-video conferences.

For the financial year ended 31 March 2020, the Group has not recorded any employee who has sustained serious injury, fatality, or infection of Covid-19, at the workplace.




Technology and Innovation

Faced with a global, fast-paced technology revolution, the Group is always keeping itself abreast of development and changes in the industries it operates in. Adaptation of technology and innovative business strategies and responses have never been more relevant to all businesses across various industries.

Aware of the potential of technology and innovation to enhance business efficiency, the Group continues to undertake initiatives which leverage on technology to enhance its business model and infrastructure. From time to time, the Group performs assessments and reviews on its systems, business processes and infrastructure to ensure its robustness and integrity, and, where opportunities arise, the Group invests to upgrade its systems and infrastructure through, amongst others, capability enhancement exercises.

In addition, during annual budget planning, the Group includes technology and capability enhancement as a specific budget item to ensure sufficient resources and attention are provided and invested in this area to support the long-term growth of the Group’s business.

During the financial year under review, the Group has invested in electronic platforms that allow better human resource management and processes for its Hire Purchase Financing division which include, amongst others, electronic time attendance, leave management, overtime application and automation of employees’ health benefits. The Group believe the investments are able to boost operating efficiencies and provide greater convenience for its employees in exchange for better productivity.

Furthermore, promoting innovative business includes strengthening the Group’s engagement with its key stakeholders, such as customers, dealers, and employees. Through engagements with its key stakeholders, the Group is able to hear the voices and ideas of these stakeholders who are also the Group’s business partners. Close business engagements with stakeholders have also allowed the Group’s business to develop innovative business solutions, for example, the Group’s partnership with banks and various payment gateways to enable hirers of the Group’s Hire Purchase Financing division to conveniently make payment through the banks’ ATMs, cash deposit machines, and online payment channels.

Leveraging on technology has also enabled the Group to be more prepared in responding to the Covid-19 outbreak, where Management and employees working remotely were able to communicate and engage more actively and effectively using technology such as teleconferencing for conducting remote meetings and discussions with various stakeholders, which has helped the business sustain its activities and operations during the Movement Control Order.




Cybersecurity

The Group’s businesses leverage on technology to facilitate financial records and financial reporting, and thus protection of the infrastructure supporting the enabling technology is important in ensuring operational efficiency. In addition, information technology system used may contain sensitive information which may be detrimental to the Group if not safeguarded.

The Group has employed external professional expert to assist the management of the Group’s IT system and cybersecurity, including ensuring necessary safeguards are established and effective. The established safeguards, such as anti-virus software, firewall, data mirroring and offsite backup, etc., provide protection to both hardware and software involved in the IT system and infrastructure.

In addition to actively ensuring safeguards are in place, the Group’s also responds quickly to any compromise of IT systems to minimise the impact. Remedial actions will then be formulated to prevent recurrence. For the financial year under review, there were no cases of major IT breaches that caused significant disruption or loss to the Group’s businesses.

Conclusion

The Group is aware that as the Group’s businesses develop, sustainability risks and opportunities may shift and hence the Group will continue to adapt its strategic sustainability priorities accordingly.

Led by the Board, the Group will continue to monitor and assess the economic, environmental and social considerations of its businesses and review or develop policies, procedures, or initiatives to address sustainability matters so as to facilitate ELK-Desa’s sustainability.



Location OwnerDescription of Property and Existing use

Date of Acquisition

Net Book Value (RM)

No. 56 and 58 Lorong Tapah, Off Jalan Goh Hock Huat, 41400 Klang Selangor Darul Ehsan

ELK-Desa Capital Sdn Bhd

Two (2) freehold adjoining intermediate and corner four storey shop offices with approximate built-up area of 17,760 sq.ft.

13 February 2015

3.70 million

No. 92, Lebuh Tapah, Off Jalan Goh Hock Huat 41400 Klang Selangor Darul Ehsan

ELK-Desa Capital Sdn Bhd

One (1) freehold corner four storey shop office with approximate built-up area of 15,498 sq.ft.

08 March 2018

3.14 million

partiCULarS of PrOPertieSAs At 31 March 2020

Directors’ Report 58 Statement by Directors 65

Statutory Declaration 65 Independent Auditors’ Report 66

FINANCIALSTATEMENTSStatements of Financial Position 70

Statements of Profit or Loss and Other Comprehensive Income 72 Statements of Changes in Equity 74 Statements of Cash Flows 76 Notes to the Financial Statements 78


DireCtorS’rePOrt

The Directors have pleasure in submitting their report and the audited financial statements of the Group and of the Company for the financial year ended 31 March 2020.

PRINCIPAL ACTIVITIES

The Company is principally an investment holding company. The principal activities and the details of the subsidiaries are set out in Note 6 to the financial statements. There have been no significant changes in the nature of these activities during the financial year.

RESuLTS

Group Company RM RM

Profit for the financial year 34,888,642 21,475,923

Attributable to: Owners of the parent 34,888,642 21,475,923

DIVIDENDS

Dividends paid, proposed or declared since the end of the previous financial year were as follows:

RM

Final single tier dividend of 3.50 sen per ordinary share, paid on 28 August 2019 in respect of the financial year ended 31 March 2019 10,395,854Interim single tier dividend of 3.50 sen per ordinary share, paid on 15 January 2020 in respect of the financial year ended 31 March 2020 10,400,145

20,795,999

On 9 June 2020, the Directors declared a second interim single tier dividend of 3.75 sen per ordinary share in respect of the financial year ended 31 March 2020. The financial statements for the current financial year do not reflect this declared dividend. This dividend will be accounted for as an appropriation of retained earnings in the next financial year.

The Directors do not recommend any payment of 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.

OPTIONS GRANTED OVER uNISSuED SHARES

No options were granted to any person to take up unissued ordinary shares of the Company during the financial year.

ISSuE OF SHARES AND DEBENTuRES

During the financial year, the Company has issued 997,937 new ordinary shares resulting from the conversion of 1,177,576 units of Irredeemable Convertible Unsecured Loan Stock (“ICULS”) at the conversion price of RM1.18 for each ordinary share.

The newly issued shares rank pari-passu in all respects with the existing shares of the Company. There were no other issues of shares during the financial year.

The Company did not issue any debentures during the financial year.

DIRECTORS

The Directors who have held office during the financial year and up to the date of this report are as follows:

ELK-Desa Resources Berhad

Teoh Hock Chai @ Tew Hock ChaiTeoh Seng HuiTeoh Seng Hee Teoh Seng KarLoong Foo ChingNg Soon Lai @ Ng Siek Chuan Yee Kin Lan Toh Jyh WeiLim Keng Chin (Retired on 8 August 2019)

DireCtorS’ report(Cont’D)


DIRECTORS (CONTINuED)

Subsidiaries of ELK-Desa Resources Berhad

Pursuant to Section 253(2) of the Companies Act 2016, the Directors of the subsidiaries of ELK-Desa Resources Berhad during the financial year and up to the date of this report are as follows:

Teoh Hock Chai @ Tew Hock ChaiTeoh Seng HuiTeoh Seng Hee Lim Keng ChinLoke Weng FookTeo Chong Guan Teo Tiong NamGan Chee KiongLui Kwee HuiLee Yun Choong

DIRECTORS’ INTERESTS

The Directors holding office at the end of the financial year and their beneficial interests in the ordinary shares and ICULS of the Company and of its related corporations during the financial year ended 31 March 2020 as recorded in the Register of Directors’ Shareholdings kept by the Company under Section 59 of the Companies Act 2016 in Malaysia were as follows:

---Number of ordinary shares--- Balance BalanceShares in the as at as at Company 1.4.2019 Acquired Disposed 31.3.2020

Direct interests Teoh Hock Chai @ Tew Hock Chai 8,000,000 2,525,000 (7,025,000) 3,500,000Teoh Seng Hui – 2,000,000 – 2,000,000Teoh Seng Hee 160,677 1,675,000 – 1,835,677Teoh Seng Kar 94,080 1,675,000 – 1,769,080

Indirect interestsTeoh Hock Chai @ Tew Hock Chai 110,000,000 5,280,000 – 115,280,000Teoh Seng Hui – 1,080,000 (1,080,000) –



DIRECTORS’ INTERESTS (CONTINuED)

By virtue of his shareholdings in ELK Group Sdn. Bhd., Eng Lee Kredit Sdn. Bhd., Zhongxin Capital Sdn. Bhd. and Hock Chai Realty Sdn. Bhd., all of which are companies incorporated in Malaysia, Teoh Hock Chai @ Tew Hock Chai is deemed to have interests in the Company pursuant to Section 8 of the Companies Act 2016 in Malaysia.

By virtue of his interests in the ordinary shares of the Company, Teoh Hock Chai @ Tew Hock Chai is also deemed to be interested in the ordinary shares of all the subsidiaries to the extent the Company has an interest.

None of the other Directors holding office at the end of the financial year held any beneficial interest in the ordinary shares and ICULS of the Company and of its related corporations during the financial year.

DIRECTORS’ BENEFITS

Since the end of the previous financial year, none of the Directors have received or become entitled to receive any benefit (other than those benefits included in the aggregate amount of remuneration received and receivable by the Directors as shown in the financial statements) by reason of a contract made by the Company or a related corporation with the Director, or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest other than the following:

(a) remuneration received by certain Directors as Directors/executives of the subsidiaries; and

(b) by virtue of transactions entered into in the ordinary course of business as disclosed in Note 35 to the financial statements.

There were no arrangements during and at the end of the financial year, to which the Company is a party, which had the object of enabling the Directors to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

DIRECTORS’ REMuNERATION

The details of Directors’ remuneration are disclosed in Note 35(c) to the financial statements.

INDEMNITY AND INSuRANCE FOR DIRECTORS, OFFICERS AND AuDITORS

During the financial year, the total amount of indemnity coverage and insurance premium paid for the Directors and the officers of the Group and of the Company were RM5,000,000 and RM26,000 respectively.

There were no indemnity given to or insurance effected for the auditors of the Group and of the Company during the financial year.



OTHER STATuTORY INFORMATION REGARDING THE GROuP AND THE COMPANY

(I) AS AT THE END OF THE FINANCIAL YEAR

(a) Before the financial statements of the Group and of the Company were prepared, the Directors 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 provision for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate provision had been made for doubtful debts; and

(ii) to ensure that any current assets other than debts, which were unlikely to realise their book values in the ordinary course of business had been written down to their estimated realisable values.

(b) 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.

(II) FROM THE END OF THE FINANCIAL YEAR TO THE DATE OF THIS REPORT

(c) The Directors are not aware of any circumstances:

(i) which would render the amounts written off for bad debts or the amount of the provision for doubtful debts in the financial statements of the Group and of the Company inadequate to any material extent;

(ii) which would render the values attributed to current assets in the financial statements of the Group and of the Company misleading; and

(iii) 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.



OTHER STATuTORY INFORMATION REGARDING THE GROuP AND THE COMPANY (CONTINuED)

(II) FROM THE END OF THE FINANCIAL YEAR TO THE DATE OF THIS REPORT (Continued)

(d) In the opinion of the Directors:

(i) there has not arisen any item, transaction or event of a material and unusual nature 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; and

(ii) no contingent or other liability has become enforceable, or is likely to become enforceable, within the period of twelve (12) months after the end of the financial year which will or may affect the ability of the Group and of the Company to meet their obligations as and when they fall due.

(III) AS AT THE DATE OF THIS REPORT

(e) There are no charges on the assets of the Group and of the Company which have arisen since the end of the financial year to secure the liabilities of any other person.

(f) There are no contingent liabilities of the Group and of the Company which have arisen since the end of the financial year.

(g) The Directors are not aware of any circumstances not otherwise dealt with in this report or the financial statements which would render any amount stated in the financial statements of the Group and of the Company misleading.

SIGNIFICANT EVENTS DuRING THE FINANCIAL YEAR

Significant events during the financial year are disclosed in Note 39 to the financial statements.



AuDITORS

The auditors, BDO PLT (LLP0018825-LCA & AF 0206), have expressed their willingness to continue in office.

The details of auditors’ remuneration of the Company and its subsidiaries for the financial year ended 31 March 2020 are disclosed in Note 28 to the financial statements.

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

.................................................................. ..................................................................Teoh Hock Chai @ Tew Hock Chai Teoh Seng HuiExecutive Chairman Group Executive Director/Chief Executive Officer

Kuala Lumpur 30 June 2020



In the opinion of the Directors, the financial statements set out on pages 70 to 148 have been drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 31 March 2020 and of the financial performance and cash flows of the Group and of the Company for the financial year then ended.

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

.................................................................. ..................................................................Teoh Hock Chai @ Tew Hock Chai Teoh Seng HuiExecutive Chairman Group Executive Director/Chief Executive Officer Kuala Lumpur 30 June 2020

Statement BYDireCtOrS

I, Loke Weng Fook (CA 6573), being the officer primarily responsible for the financial management of ELK-Desa Resources Berhad, do solemnly and sincerely declare that the financial statements set out on pages 70 to 148 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 at )Kuala Lumpur this )30 June 2020 ) Loke Weng Fook

Before me:

Commissioner for OathsBaloo T. Pichai

StatUtorY DeCLaratiOn


REPORT ON THE AuDIT OF THE FINANCIAL STATEMENTS

Opinion

We have audited the financial statements of ELK-Desa Resources Berhad, which comprise the statements of financial position as at 31 March 2020 of the Group and of the Company, and the statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the financial year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out on pages 70 to 148.

In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Group and of the Company as at 31 March 2020, and of their financial performance and their cash flows for the financial year then ended in accordance with Malaysian Financial Reporting Standards (“MFRSs”), International Financial Reporting Standards (“IFRSs”) 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. These matters were addressed in the context of our audit of the financial statements of the Group and of the Company as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Impairment assessment of hire-purchase receivables

As at 31 March 2020, carrying amounts of hire-purchase receivables of the Group were RM610,421,610, which represented 81% of total assets of the Group. The details of hire-purchase receivables and its credit risk have been disclosed in Notes 7 and 37 to the financial statements respectively.

We determined this to be key audit matter as the impairment of hire-purchase receivables require significant judgement by the management and is based on the impairment model, which inputs used are disclosed in Note 7 to the financial statements.

inDepenDent aUDitOrS’ rePOrt TO THE MEMBERS OF ELK-DESA RESOURCES BERHAD(Incorporated in Malaysia)


Key Audit Matters (Continued)

Audit response

Our audit procedures included the following:

i. evaluated assessments performed by the management and assessed the adequacy of expected credit losses based on historical bad debts experience, credit profiles and past historical payment trends;

ii. recomputed the probability of default using historical data and forward looking information adjustments, incorporating the impact of the COVID-19 pandemic, applied by the Group;

iii. assessed the appropriateness of the indicators of significant increase in credit risk applied by the management and the resultant basis for classification of exposure into respective stages; and

iv. evaluated the basis applied by the management in determining cash flow recoverable in worst case scenarios, where applicable.

We have determined that there are no other key audit matters to communicate in our report in respect of the audit of the separate financial statements of the Company.

Information Other than the Financial Statements and Auditors’ Report Thereon

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

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

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

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

inDepenDent aUDitorS’ report(Cont’D)


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 MFRSs, IFRSs 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 the basis of these financial statements. As part of an audit in accordance with approved standards on auditing in Malaysia and ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

• IdentifyandassesstherisksofmaterialmisstatementofthefinancialstatementsoftheGroupandoftheCompany, 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.

• Obtainanunderstandingofinternalcontrolrelevanttotheauditinordertodesignauditproceduresthatare appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of internal control of the Group and of the Company.

• Evaluatetheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesand related disclosures made by the Directors.

• ConcludeontheappropriatenessoftheDirectors’useofthegoingconcernbasisofaccountingand,basedon the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the ability of the Group or of the Company 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.



Auditors’ Responsibilities for the Audit of the Financial Statements (Continued)

• Evaluatetheoverallpresentation,structureandcontentofthefinancialstatementsoftheGroupandofthe 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.

• Obtainsufficientappropriateauditevidenceregardingthefinancialinformationoftheentitiesorbusinessactivities 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 financial year and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Other Matters

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

BDO PLT Ho Kok KhiawLLP0018825-LCA & AF 0206 03412/02/2021 JChartered Accountants Chartered Accountant Kuala Lumpur30 June 2020



Group Company 2020 2019 2020 2019 Note RM RM RM RM

ASSETS

Non-current assets

Property, plant and equipment 5 10,621,921 10,667,280 13,366 15,144 Investments in subsidiaries 6 – – 393,000,000 330,000,000 Hire-purchase receivables 7 466,156,634 357,435,653 – – Amounts owing by subsidiaries 14 – – – 5,000,000 Right-of-use assets 8 2,325,635 – – – Deferred tax assets 9 5,232,016 3,337,307 86,838 151,064 484,336,206 371,440,240 393,100,204 335,166,208

Current assets

Inventories 10 12,386,172 11,057,387 – – Other assets 11 2,126,303 1,312,303 – – Trade receivables 12 13,912,372 11,506,486 – – Hire-purchase receivables 7 144,264,976 119,018,183 – – Other receivables, deposits and prepayments 13 1,912,425 1,783,133 34,500 69,621 Amounts owing by subsidiaries 14 – – – 56,260,315 Current tax assets – 35,447 – – Short term funds 15 14,042,200 16,408,066 3,327,687 5,292,110 Cash and bank balances 16 77,597,465 15,001,840 1,153,056 516,559 266,241,913 176,122,845 4,515,243 62,138,605

TOTAL ASSETS 750,578,119 547,563,085 397,615,447 397,304,813

StatementS of FinanCiaL POSitiOnAS AT 31 MARCH 2020

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


StatementS of finanCiaL poSition(Cont’D)



EQuITY AND LIABILITIES

Equity attributable to owners of the parent

Share capital 17 344,340,237 343,162,661 344,340,237 343,162,661 ICULS - equity component 18 5,895,891 6,877,394 5,895,891 6,877,394 Reserves 19 74,877,336 60,900,167 46,099,114 45,534,664 TOTAL EQuITY 425,113,464 410,940,222 396,335,242 395,574,719

LIABILITIES

Non-current liabilities

ICULS - liability component 18 361,824 629,435 361,824 629,435 Block discounting payables - secured 21 112,969,929 64,080,577 – – Medium term notes 22 54,317,953 – – – Borrowings - Others 23 14,322,000 – – – Lease liabilities 8 1,005,897 – – – Deferred tax liabilities 9 – 12,289 – – 182,977,603 64,722,301 361,824 629,435Current liabilities

Trade payables 24 11,156,469 13,915,203 – – Other payables and accruals 25 8,204,201 5,237,530 863,018 931,817 Block discounting payables - secured 21 64,159,143 50,223,162 – – Medium term notes 22 49,474,675 – – – Borrowings - Others 23 4,157,838 – – – Lease liabilities 8 1,387,690 – – – Current tax liabilities 3,947,036 2,524,667 55,363 168,842 142,487,052 71,900,562 918,381 1,100,659

TOTAL LIABILITIES 325,464,655 136,622,863 1,280,205 1,730,094

TOTAL EQuITY AND LIABILITIES 750,578,119 547,563,085 397,615,447 397,304,813



Revenue 26 147,970,336 123,394,170 21,455,000 51,125,000

Other income 4,011,832 2,538,672 1,622,019 3,262,053

Cost of inventories sold (28,132,326) (24,438,857) – –

Depreciation of property, plant and equipment 5 (934,563) (923,774) (1,778) (513)

Depreciation of right-of-use assets 8 (1,365,827) – – –

Impairment allowance on receivables (24,214,979) (17,527,594) – –

Other expenses (37,275,453) (34,984,632) (1,152,864) (1,372,517)

Finance costs 27 (12,535,771) (4,252,198) (70,909) (87,857)

Profit before tax 28 47,523,249 43,805,787 21,851,468 52,926,166

Income tax expense 29 (12,634,607) (10,889,871) (375,545) (762,858)

Profit for the financial year 34,888,642 32,915,916 21,475,923 52,163,308

Other comprehensive income, net of tax – – – –

Total comprehensive income 34,888,642 32,915,916 21,475,923 52,163,308

Profit attributable to: Owners of the parent 34,888,642 32,915,916 21,475,923 52,163,308

Total comprehensive income attributable to: Owners of the parent 34,888,642 32,915,916 21,475,923 52,163,308

StatementS of profit or LoSS anD OtHer COmPreHenSive inCOmeFOR THE FINANCIAL YEAR ENDED 31 MARCH 2020



Group 2020 2019 Note RM RM

Earnings per ordinary share attributable to owners of the parent (sen)

Basic earnings per ordinary share 30 11.75 11.22

Diluted earnings per ordinary share 30 11.54 10.90

Dividend per ordinary share in respect of the financial year, single tier tax exempt (sen):

- Interim dividend (paid) 31 3.50 3.50

- Final dividend (paid) 31 – 3.50

- Second interim dividend (declared) 31 3.75 –


StatementS of profit or LoSS anD otHer CompreHenSive inCome(Cont’D)


----

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StatementS of CHanGeS in eQUitYFOR THE FINANCIAL YEAR ENDED 31 MARCH 2020

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(10,

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– –

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(20,

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(1

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– 16

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(19,

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sfer

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– –

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Mar

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45,5

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– –

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75,9

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ts.

StatementS of CHanGeS in eQUitY(Cont’D)



CASH FLOWS FROM OPERATING ACTIVITIES

Profit before tax 47,523,249 43,805,787 21,851,468 52,926,166

Adjustments for: Depreciation of property, plant and equipment 5 934,563 923,774 1,778 513 Depreciation of right-of-use assets 8 1,365,827 – – – Property, plant and equipment written off 1 – – – Gain on disposal of property, plant and equipment – (4,510) – – Impairment allowances made for the financial year: - hire-purchase receivables 7(h) 25,260,469 18,511,431 – – - trade receivables 12(g) 613,933 578,849 – – Interest expenses 27 12,535,771 4,252,198 70,909 87,857 Interest income (2,370,879) (1,304,744) (1,570,855) (3,218,691) Unrealised gain on foreign exchange (40,003) (11,011) – – Reversal of impairment losses on trade receivables 12(g) (64,647) (36,694) – –

Operating profit before working capital changes 85,758,284 66,715,080 20,353,300 49,795,845

Changes in working capital: Inventories (1,328,785) (2,605,813) – – Other assets (814,000) 100,392 – – Hire-purchase receivables (159,228,243) (105,963,895) – – Trade receivables (2,907,251) (2,279,914) – – Other receivables, deposits and prepayments (129,292) 322,933 35,121 (35,121) Trade payables (2,758,734) 363,270 – – Other payables and accruals 1,670,661 834,621 (30,527) 49,378

Cash (used in)/from operations (79,737,360) (42,513,326) 20,357,894 49,810,102

Tax paid (13,146,974) (11,535,818) (457,974) (791,294) Tax refunded 37,733 71,788 7,724 –

Net cash (used in)/from operating activities (92,846,601) (53,977,356) 19,907,644 49,018,808

StatementS ofCaSH FLOwSFOR THE FINANCIAL YEAR ENDED 31 MARCH 2020



StatementS of CaSH fLowS(Cont’D)


CASH FLOWS FROM INVESTING ACTIVITIES

Investment in a subsidiary – – (10,000,000) –Purchase of property, plant and equipment 5 (889,205) (4,477,031) – (13,800)Proceeds from disposal of property, plant and equipment – 130,000 – –Fixed deposits placed with licensed banks with original maturity of more than three (3) months 16(c) (66,993,690) – – –Interest received 2,370,879 1,304,744 1,570,855 3,218,691Repayments from/(Advances to) a subsidiary – – 8,260,315 (33,014,013) Net cash used in investing activities (65,512,016) (3,042,287) (168,830) (29,809,122)

CASH FLOWS FROM FINANCING ACTIVITIES

Net drawdowns of block discounting payables 21(f) 63,161,736 63,937,840 – –Net drawdowns of term loan 23(e) 18,330,000 – – –Net proceeds from issuance of medium term notes 22(h) 103,424,025 – – –Payments of lease liabilities 8 (1,464,852) – – –Dividends paid 31 (20,795,999) (20,657,346) (20,795,999) (20,657,346)Interest paid (11,210,063) (5,115,469) (270,741) (675,751) Net cash from/(used in) financing activities 151,444,847 38,165,025 (21,066,740) (21,333,097)

Net decrease in cash and cash equivalents (6,913,770) (18,854,618) (1,327,926) (2,123,411)

Effects of exchange rate changes on cash and cash equivalents 1 – – –Cash and cash equivalents as at beginning of financial year 31,409,906 50,264,524 5,808,669 7,932,080

Cash and cash equivalents as at end of financial year 16(c) 24,496,137 31,409,906 4,480,743 5,808,669



1. CORPORATE INFORMATION

ELK-Desa Resources Berhad (“the Company”) is a public limited liability company, incorporated and domiciled in Malaysia, and is listed on the Main Market of Bursa Malaysia Securities Berhad.

The registered office and principal place of business of the Company is located at 15-17, Jalan Brunei Utara, Off Jalan Pudu, 55100 Kuala Lumpur.

The consolidated financial statements for the financial year ended 31 March 2020 comprise the Company and its subsidiaries. These financial statements are presented in Ringgit Malaysia (“RM”), which is also the functional currency of the Company.

The financial statements were authorised for issue in accordance with a resolution by the Board of Directors on 30 June 2020.

2. PRINCIPAL ACTIVITIES

The Company is principally an investment holding company. The principal activities of the subsidiaries are set out in Note 6 to the financial statements. There have been no significant changes in the nature of these activities during the financial year.

3. BASIS OF PREPARATION

The financial statements of the Group and of the Company have been prepared in accordance with Malaysian Financial Reporting Standards (“MFRSs”), International Financial Reporting Standards (“IFRSs”) and the requirements of the Companies Act 2016 in Malaysia.

The accounting policies adopted are consistent with those of the previous financial year except for the effects of adoption of new MFRSs during the financial year. The new MFRSs and Amendments to MFRSs adopted during the financial year are disclosed in Note 40.1 to the financial statements.

The Group and the Company applied MFRS 16 Leases for the first time during the current financial year, using the cumulative effect method as at 1 April 2019. Consequently, the comparative information were not restated and are not comparable to the financial information of the current financial year.

The financial statements of the Group and of the Company have been prepared under the historical cost convention except as otherwise stated in the financial statements.

noteS to tHe FinanCiaL StatementSAS AT 31 MARCH 2020


noteS to tHe finanCiaL StatementS(Cont’D)

4. OPERATING SEGMENTS

The Group is primarily involved in the provision of hire-purchase financing and other integrated services (i.e. insurance agent) to its hire-purchase customers, principally in Malaysia, all of which are categorised under hire-purchase financing business.

The Group has arrived at two (2) reportable segments that are organised and managed separately according to the nature of products and services, specific expertise and technologies requirements, which require different business and marketing strategies. The reportable segments are summarised as follows:

(a) Hire-purchase financing and other integrated services (i.e. insurance agent); and

(b) Trading of furniture.

Inter-segment revenue, if any, is priced along the same lines as sales to external customers and is eliminated in the consolidated financial statements. These policies have been applied consistently throughout the current and previous financial years.

The Chief Operating Decision Maker reviews the hire-purchase financing business together with other integrated services as a whole, for the purpose of making decisions on resource allocation and performance assessment as the revenue and income generated from other integrated services are mainly dependent on the hire-purchase financing business.

Even though loans and borrowings arise from financing activities rather than operating activities, they are allocated to the segments based on relevant factors (e.g. funding requirements). Details are provided in the reconciliations from segment assets and liabilities to the position of the Group.

Hire-purchase2020 financing Furniture Total RM RM RM

Segment revenue

Revenue from external customers 104,673,252 43,297,084 147,970,336

Other income 3,811,171 200,661 4,011,832Finance costs (12,376,951) (158,820) (12,535,771)

Depreciation of property, plant and equipment (638,106) (296,457) (934,563)Depreciation of right-of-use assets (118,023) (1,247,804) (1,365,827)Cost of inventories sold – (28,132,326) (28,132,326) Impairment allowance on receivables (23,656,214) (558,765) (24,214,979)Other expenses (25,703,391) (11,572,062) (37,275,453)



4. OPERATING SEGMENTS (CONTINuED)

Hire-purchase2020 financing Furniture Total RM RM RM

Segment profit before tax 45,991,738 1,531,511 47,523,249

Income tax expense (12,168,800) (465,807) (12,634,607)

Segment assets 718,562,358 32,015,761 750,578,119

Segment liabilities 320,424,658 5,039,997 325,464,655

2019

Segment revenue

Revenue from external customers 84,900,357 38,493,813 123,394,170

Other income 2,397,329 141,343 2,538,672Finance costs (4,252,198) – (4,252,198)

Depreciation of property, plant and equipment (562,500) (361,274) (923,774)Cost of inventories sold – (24,438,857) (24,438,857)Impairment allowance on receivables (16,948,745) (578,849) (17,527,594)Other expenses (22,685,537) (12,299,095) (34,984,632)

Segment profit before tax 42,848,706 957,081 43,805,787

Income tax expense (10,727,075) (162,796) (10,889,871)

Segment assets 521,775,079 25,788,006 547,563,085

Segment liabilities 134,621,589 2,001,274 136,622,863

Geographical information

No geographical information is presented as the Group does not have any overseas operations.

Major customers

There are no major customers with revenue equal or more than ten percent (10%) of the Group revenue. As such, information on major customers is not presented.



5. PROPERTY, PLANT AND EQuIPMENT

Balance BalanceGroup as at as at2020 1.4.2019 Additions Write off 31.3.2020 RM RM RM RM

Cost

Freehold land 3,500,000 – – 3,500,000Buildings 3,623,466 – – 3,623,466Computer equipment and software 1,300,668 179,772 – 1,480,440Office equipment 990,025 197,045 – 1,187,070Furniture and fittings 275,059 45,409 – 320,468Signboard 126,995 6,000 – 132,995Motor vehicles 1,159,140 – – 1,159,140Renovation 3,438,306 407,189 (235,000) 3,610,495Plant and machineries 86,186 53,790 – 139,976

14,499,845 889,205 (235,000) 15,154,050

Balance Charge for Balance as at the financial as at 1.4.2019 year Write off 31.3.2020 RM RM RM RM

Accumulated depreciation

Buildings 230,322 44,136 – 274,458Computer equipment and software 866,175 237,914 – 1,104,089Office equipment 437,126 89,892 – 527,018Furniture and fittings 134,874 21,021 – 155,895Signboard 47,633 22,170 – 69,803Motor vehicles 426,263 115,915 – 542,178Renovation 1,680,099 389,993 (234,999) 1,835,093Plant and machineries 10,073 13,522 – 23,595

3,832,565 934,563 (234,999) 4,532,129



5. PROPERTY, PLANT AND EQuIPMENT (CONTINuED)

Balance BalanceGroup as at as at2019 1.4.2018 Additions Disposal 31.3.2019 RM RM RM RM

Cost

Freehold land 1,800,000 1,700,000 – 3,500,000Buildings 2,124,269 1,499,197 – 3,623,466Computer equipment and software 916,323 384,345 – 1,300,668Office equipment 815,436 174,589 – 990,025Furniture and fittings 144,812 130,247 – 275,059Signboard 95,075 31,920 – 126,995Motor vehicles 1,045,818 113,322 – 1,159,140Renovation 3,197,630 399,021 (158,345) 3,438,306Plant and machineries 41,796 44,390 – 86,186

10,181,159 4,477,031 (158,345) 14,499,845

Balance Charge for Balance as at the financial as at 1.4.2018 year Disposal 31.3.2019 RM RM RM RM


Buildings 134,516 95,806 – 230,322Computer equipment and software 706,060 160,115 – 866,175Office equipment 356,264 80,862 – 437,126Furniture and fittings 124,079 10,795 – 134,874Signboard 31,384 16,249 – 47,633Motor vehicles 312,237 114,026 – 426,263Renovation 1,274,385 438,569 (32,855) 1,680,099Plant and machineries 2,721 7,352 – 10,073

2,941,646 923,774 (32,855) 3,832,565




Balance BalanceCompany as at as at2020 1.4.2019 Additions 31.3.2020 RM RM RM

Cost

Signboard 17,780 – 17,780

Balance Charge for Balance as at the financial as at 1.4.2019 year 31.3.2020 RM RM RM


Signboard 2,636 1,778 4,414

Balance BalanceCompany as at as at2019 1.4.2018 Additions 31.3.2019 RM RM RM

Cost

Signboard 3,980 13,800 17,780

Balance Charge for Balance as at the financial as at 1.4.2018 year 31.3.2019 RM RM RM


Signboard 2,123 513 2,636




Group Company 2020 2019 2020 2019 RM RM RM RM

Carrying amount Freehold land 3,500,000 3,500,000 – –Buildings 3,349,008 3,393,144 – –Computer equipment and software 376,351 434,493 – –Office equipment 660,052 552,899 – –Furniture and fittings 164,573 140,185 – –Signboard 63,192 79,362 13,366 15,144Motor vehicles 616,962 732,877 – –Renovation 1,775,402 1,758,207 – –Plant and machineries 116,381 76,113 – –

10,621,921 10,667,280 13,366 15,144

(a) All items of property, plant and equipment are initially measured at cost. After initial recognition, property, plant and equipment are stated at cost less any accumulated depreciation and any accumulated impairment losses.

(b) Depreciation is calculated to write off the cost of the assets to their residual values on a straight line

basis over their estimated useful lives. The principal depreciation periods are as follows:

Buildings 50 yearsComputer equipment and software 3 yearsOffice equipment 10 yearsFurniture and fittings 10 yearsSignboard 10 yearsMotor vehicles 10 yearsRenovation 10 yearsPlant and machineries 10 years

Freehold land has an unlimited useful life and is not depreciated.

6. INVESTMENTS IN SuBSIDIARIES

Company 2020 2019 RM RM

Unquoted shares, at cost 393,000,000 330,000,000



6. INVESTMENTS IN SuBSIDIARIES (CONTINuED)

Details of the subsidiaries, all of which are incorporated in Malaysia, are as follows:

Interest in equity held by Company Subsidiary

Name of Companies 2020 2019 2020 2019 Principal activities% % % %

ELK-Desa Capital Sdn. Bhd. 100 100 – – Provision of hire-purchase financing

ELK-Desa Furniture Sdn. Bhd. 100 100 – – Trading of furniture

Subsidiaries of ELK-Desa Capital Sdn. Bhd.

ELK-Desa Risk Agency Sdn. Bhd. – – 100 100 Insurance agent

*Premier Auto Assets Berhad – – – – Special purpose entity for asset-backed securitisation

Subsidiaries of ELK-Desa Furniture Sdn. Bhd.

ELK-Desa Furniture Marketing Sdn. Bhd.

– – 100 100 Wholesaling of furniture

ELK-Desa Furniture Industries Sdn. Bhd.

– – 100 100 Manufacturing of furniture

* Deemed subsidiary.

(a) Investments in subsidiaries, which are eliminated on consolidation, are stated in the separate financial statements of the Company at cost less impairment losses, if any.

(b) The Group has established a special purpose entity (“SPE”) on 15 May 2019 for undertaking asset-backed securitisation under Premier Auto Assets Berhad as disclosed in Note 39(a) to the financial statements. The Group does not have any direct or indirect shareholding in Premier Auto Assets Berhad and consolidated based on an evaluation of the substance of its relationship with the Group, which result in the Group receiving majority of the benefits related to the SPE’s operations and net assets.



6. INVESTMENTS IN SuBSIDIARIES (CONTINuED)

(c) On 26 August 2019, the Company subscribed an additional 53,000,000 ordinary shares in ELK-Desa Capital Sdn. Bhd. by way of capitalisation of RM53,000,000 of the amount owing by ELK-Desa Capital Sdn. Bhd..

(d) On 3 December 2019, the Company subscribed an additional 10,000,000 ordinary shares in ELK-Desa Furniture Sdn. Bhd. for a cash consideration of RM10,000,000.

(e) In the previous financial year, the Company subscribed an additional 30,000,000 ordinary shares in ELK-Desa Capital Sdn. Bhd. by the way of capitalisation of RM30,000,000 of amount owing by ELK-Desa Capital Sdn. Bhd..

7. HIRE-PuRCHASE RECEIVABLES

Group 2020 2019 RM RM

Gross hire-purchase receivables- not later than one (1) year 236,291,927 191,433,944

- later than one (1) year but not later than five (5) years 574,864,335 443,045,405- later than five (5) years 56,368,626 35,257,022 631,232,961 478,302,427

867,524,888 669,736,371Less: Unearned hire-purchase interest income (237,496,163) (179,738,721)

Net hire-purchase receivables 630,028,725 489,997,650Less: Allowance for impairment loss (19,607,115) (13,543,814)

610,421,610 476,453,836

Receivables are as follows:

Current assets- not later than one (1) year 144,264,976 119,018,183

Non-current assets- later than one (1) year but not later than five (5) years 415,084,504 325,784,920- later than five (5) years 51,072,130 31,650,733 466,156,634 357,435,653

610,421,610 476,453,836



7. HIRE-PuRCHASE RECEIVABLES (CONTINuED)

(a) The credit terms of hire-purchase receivables of the Group are in accordance with the repayment schedules as contained in the hire-purchase agreements.

(b) Certain hire-purchase agreements of hire-purchase receivables with a carrying amount of RM231,070,120 (2019: RM144,132,032) are assigned to licensed banks for block discounting facilities as disclosed in Note 21 to the financial statements.

(c) Certain hire-purchase agreements of hire-purchase receivables with a carrying amount of RM87,755,256 are secured for first tranche of medium term notes facilities as disclosed in Note 22 to the financial statements.

(d) The effective interest rate ranged from 12.94% to 18.17% (2019: 12.94% to 18.17%) per annum.

(e) All hire-purchase receivables are denominated in RM.

(f) Impairment for hire-purchase receivables are recognised based on the general approach within MFRS 9 using the forward looking expected credit loss (“ECL”) model. The measurement of ECL reflects an unbiased amount that is determined by reasonable as well as supportable information that is available without undue cost or effort at the end of the reporting period about past events and current conditions.

The methodology used to determine the amount of the impairment is based on whether there has been a significant increase in credit risk for exposures since initial recognition to determine whether the exposure is subject to twelve-month ECL or lifetime ECL at the end of each reporting period. For those in which the credit risk has not increased significantly since initial recognition of the financial asset, twelve month ECL along with gross interest income are recognised. At the end of the reporting period, the Group assesses 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. For those in which credit risk had increased significantly, lifetime ECL along with the gross interest income are recognised. For those that are determined to be credit impaired, lifetime ECL along with interest income on a net basis are recognised.

When determining whether the credit risk has increased significantly since initial recognition, the Group considers 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 historical experience, past due information i.e. overdue period of more than 60 days.

The probability of non-payment by hire-purchase receivables are adjusted by forward looking information, i.e. unemployment rate, inflation rate, Gross Domestic Products (“GDP”), incorporating the impact of the COVID-19 pandemic, and multiplied by the amount of the expected loss arising from default to determine the twelve-month or lifetime ECL for hire-purchase receivables.

The ECL allowances for hire-purchase receivables are based on the assumptions about risk of default and expected loss rates. It requires management to exercise significant judgement in determining the probability of default by hire-purchase receivables based on the financing portfolio data including historical data and repayment patterns and historical non-performing loans delinquency rates, appropriate forward looking information, significant increase in credit risk and estimated cash flows recoverable in worst-case scenarios, including estimation of recoveries from the repossessed vehicles net of outstanding balance owing from the receivables in determination of impairment losses.



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7. HIRE-PuRCHASE RECEIVABLES (CONTINuED)

(h) The reconciliation of movements in the impairment allowance is as follows:


Balance as at 1 April 13,543,814 11,413,936

- ECL allowances 5,862,464 1,978,465- Credit impaired 19,398,005 16,532,966

Impairment allowances made for the financial year (Note 28) 25,260,469 18,511,431

Write-offs for the financial year (19,197,168) (16,381,553)

Balance as at 31 March 19,607,115 13,543,814

As at 31 March 2020, RM19,197,168 (2019: RM16,381,553) of hire-purchase receivables were written off but they are still subject to credit recovery activity.

(i) Credit impaired refers to individually determined debtors who have defaulted on payments and are in significant financial difficulties as at the end of the reporting period.

(j) Information on financial risks of hire-purchase receivables is disclosed in Note 37 to the financial statements.

8. LEASES

The Group as lessee

Right-of-use assets

Effect on adoption Balance of Balance as at MFRS 16 as at 1.4.2019 (Note 40.2) Additions Depreciation 31.3.2020Carrying amount RM RM RM RM RM

Buildings – 3,442,004 249,458 (1,365,827) 2,325,635



8. LEASES (CONTINuED)

The Group as lessee (Continued)

Lease liabilities

Effect on adoption Balance of Balance as at MFRS 16 Lease Interest as at 1.4.2019 (Note 40.2) Additions payments expense 31.3.2020Carrying amount RM RM RM RM RM RM

Buildings – 3,442,004 249,458 (1,464,852) 166,977 2,393,587

Group 2020 RM

Represented by: Non-current liabilities 1,005,897Current liabilities 1,387,690

Total lease liabilities 2,393,587

Lease liabilities owing to non-financial institutions 2,393,587

(a) The right-of-use assets are initially measured at cost, which comprise the initial amount of the lease liabilities adjusted for any lease payments made at or before the commencement date of the leases.

After initial recognition, right-of-use assets are stated at cost less accumulated depreciation and accumulated impairment losses, if any, and adjusted for any re-measurement of the lease liabilities.

The right-of-use assets are depreciated on the straight-line basis over the earlier of the estimated useful lives of the right-of-use assets or the end of the lease term. The principal depreciation periods are as follows:

Buildings over the lease period from 1 to 3 years

(b) The Group has certain leases of buildings with lease term of 12 months or less, and low value leases of office equipment of RM20,000 and below. The Group applies the “short-term lease” and “lease of low-value assets” exemptions for these leases.





(c) The following are the amounts recognised in profit or loss:

Group 2020 RM Depreciation charge of right-of-use assets 1,365,827Interest expense on lease liabilities (included in finance costs) 166,977Expense relating to short-term leases (included in other expenses) 627,248Expense relating to leases of low-value assets (included in other expenses) 529,983Variable lease payments (included in other expenses) 70,030

2,760,065

(d) At the end of the financial year, the Group had total cash outflow for leases of RM1,464,852.

(e) The Group has a lease contract for a building that contains variable payments based on the 3% of monthly gross turnover. Variable payment term is applied for the building that is used as showroom for furniture business. Variable lease payments are recognised in profit or loss when the condition that triggers those payments occur.

(f) Sensitivity analysis for variable payments as at end of the reporting period was not presented as it is negligible.

(g) The following table sets out the carrying amounts, the weighted average incremental borrowing rate and the remaining maturities of the lease liabilities of the Group that are exposed to interest rate risk:

Weighted average incrementalGroup borrowing rate Within 1 - 2 2 - 5 More than per annum 1 year years years 5 years Total31 March 2020 % RM RM RM RM RM

Lease liabilitiesFixed rate 5.50% 1,387,690 1,005,897 – – 2,393,587

Sensitivity analysis for lease liabilities as at the end of the reporting period is not presented as fixed rate instruments are not affected by change in interest rate.





(h) Reconciliation of liabilities arising from financing activities

The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group’s statements of cash flows as cash flows from financing activities.

Group 2020 RM

Lease liabilitiesAt 1 April 2019, as previously reported –Effect on adoption of MFRS 16 3,442,004

As restated 3,442,004Additions 249,458Cash flows - Payments of lease liabilities (1,297,875)- Payments of lease interest (166,977)Non-cash flows - Interest expenses 166,977

At 31 March 2020 2,393,587

(i) Information on financial risks of lease liabilities is disclosed in Note 37 to the financial statements.



9. DEFERRED TAX

(a) The deferred tax assets and liabilities are made up of the following:

Group 2020 2019 Note RM RM

Balance as at 1 April 3,325,018 3,237,403

Recognised in equity component of ICULS (25,452) (347,613)

Recognised in profit or loss:- current year 1,501,863 439,904- under/(over) provision in prior years 430,587 (4,676)

29 1,932,450 435,228

Balance as at 31 March 5,232,016 3,325,018


Presented after appropriate offsetting as follows:

Deferred tax assets 5,232,016 3,337,307Deferred tax liabilities – (12,289)

5,232,016 3,325,018

Company 2020 2019 Note RM RM

Balance as at 1 April 151,064 542,569Recognised in equity component of ICULS (25,452) (347,613)

Recognised in profit or loss:- current year 29 (38,774) (43,892)

Balance as at 31 March 86,838 151,064



9. DEFERRED TAX (CONTINuED)

(b) The components and movements of deferred tax assets and liabilities during the financial year are as follows:

Group Hire- 2020 purchase Trade receivables ICuLS receivables Others Total RM RM RM RM RM

Deferred tax assets

Balance as at 1 April 2019 3,250,514 151,064 60,816 – 3,462,394Recognised in equity component of ICULS – (25,452) – – (25,452)Recognised in profit or loss 1,327,699 (38,774) (60,816) 681,216 1,909,325

4,578,213 86,838 – 681,216 5,346,267

Offsetting (97,430) – – (16,821) (114,251)

Balance as at 31 March 2020 4,480,783 86,838 – 664,395 5,232,016

Property,2020 plant and equipment Total RM RM

Deferred tax liabilities

Balance as at 1 April 2019 (137,376) (137,376)Recognised in profit or loss 23,125 23,125

(114,251) (114,251)Offsetting 114,251 114,251

Balance as at 31 March 2020 – –




(b) The components and movements of deferred tax assets and liabilities during the financial year are as follows: (Continued)

Group Hire- 2019 purchase Trade receivables ICuLS receivables Total RM RM RM RM

Deferred tax assets

Balance as at 1 April 2018 3,151,575 542,569 – 3,694,144Recognised in equity component of ICULS – (347,613) – (347,613)Effect of first time adoption of MFRS 9 (412,231) – 38,799 (373,432)Recognised in profit or loss 511,170 (43,892) 22,017 489,295

3,250,514 151,064 60,816 3,462,394Offsetting (125,087) – – (125,087)

Balance as at 31 March 2019 3,125,427 151,064 60,816 3,337,307

Property,2019 plant and equipment Total RM RM

Deferred tax liabilities

Balance as at 1 April 2018 (83,309) (83,309)Recognised in profit or loss (54,067) (54,067)

(137,376) (137,376)Offsetting 125,087 125,087

Balance as at 31 March 2019 (12,289) (12,289)




(b) The components and movements of deferred tax assets and liabilities during the financial year are as follows: (Continued)

Company ICuLS Total2020 RM RM

Deferred tax assets

Balance as at 1 April 2019 151,064 151,064Recognised in equity component of ICULS (25,452) (25,452)Recognised in profit or loss (38,774) (38,774)

Balance as at 31 March 2020 86,838 86,838

2019

Deferred tax assets

Balance as at 1 April 2018 542,569 542,569Recognised in equity component of ICULS (347,613) (347,613)Recognised in profit or loss (43,892) (43,892)

Balance as at 31 March 2019 151,064 151,064

10. INVENTORIES


At cost

Raw materials 453,295 490,639Work-in-progress 41,660 50,616Finished goods 11,891,217 10,516,132

12,386,172 11,057,387



10. INVENTORIES (CONTINuED)

(a) Inventories are stated at the lower of cost and net realisable value. Inventories represent raw materials, work-in-progress and finished goods of the Group.

(b) Cost of raw materials, work-in-progress and finished goods are determined using the weighted average cost method. Cost of raw materials represents all costs of purchase, cost of conversion plus the cost of bringing the inventories to their present location and condition. The cost of work-in-progress and finished goods includes the cost of raw materials, direct labour, other direct cost and a proportion of production overheads based on normal operating capacity of the production facilities. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs necessary to make the sale.

(c) Cost of inventories recognised as cost of sales during the financial year amounted to RM28,132,326 (2019: RM24,438,857).

11. OTHER ASSETS


Repossessed motor vehicles- Cost 66,485 75,054- Net realisable value 2,059,818 1,237,249

2,126,303 1,312,303

(a) Other assets are stated at lower of cost and realisable value. Other assets represent repossessed motor vehicles of the Group as a result of payments defaulted by the hire-purchase receivables. The other assets are held for subsequent disposals.

(b) Costs of repossessed motor vehicles represent the principal amounts of the outstanding hire-purchase financing receivables less impairment losses.

(c) Realisable value is the estimated selling price in the ordinary course of business, less the estimated costs necessary to make the sale.



12. TRADE RECEIVABLES


Trade receivables 14,573,732 11,841,912Less: Impairment losses (661,360) (335,426)

Total trade receivables 13,912,372 11,506,486

(a) Trade receivables arose from the sales of repossessed motor vehicles and trading furniture.

(b) The average credit terms offered by the Group in respect of trade receivables are cash on delivery to 120 days (2019: 120 days) from dates of invoices. They are recognised at their original invoice amounts, which represent their fair values on initial recognition.

(c) The currency exposure profile of trade receivables is as follows:


Ringgit Malaysia 13,133,289 10,857,180United States Dollar 779,083 649,306

13,912,372 11,506,486



12. TRADE RECEIVABLES (CONTINuED)

(d) The following tables provide information about the expected credit losses for trade receivables as at the end of the reporting period:

Gross carrying Loss Net amount allowance balanceGroup RM RM RM

As at 31 March 2020

Not past due 10,282,111 (17,884) 10,264,227

Past due: - 1 to 30 days 2,579,539 (27,566) 2,551,973- 31 to 60 days 816,309 (34,199) 782,110- 61 to 90 days 282,366 (15,262) 267,104- more than 90 days 190,286 (143,328) 46,958 3,868,500 (220,355) 3,648,145Credit impairedIndividually impaired 423,121 (423,121) –

14,573,732 (661,360) 13,912,372

Gross carrying Loss Net amount allowance balanceGroup RM RM RM

As at 31 March 2019

Not past due 9,840,995 (30,018) 9,810,977

Past due:- 1 to 30 days 1,166,432 (24,503) 1,141,929- 31 to 60 days 360,285 (17,790) 342,495- 61 to 90 days 204,019 (19,316) 184,703- more than 90 days 167,240 (140,858) 26,382 1,897,976 (202,467) 1,695,509Credit impairedIndividually impaired 102,941 (102,941) –

11,841,912 (335,426) 11,506,486



12. TRADE RECEIVABLES (CONTINuED)

(e) Impairment for trade receivables that do not contain a significant financing component are recognised based on the simplified approach using the lifetime expected credit losses.

The Group uses an allowance matrix to measure the expected credit loss of trade receivables from individual customers. Expected loss rates are calculated using the roll rate method separately for exposures in different segments based on the following common credit risk characteristic - geographic region and age of customer relationship.

During this process, the probability of non-payment by the trade receivables is adjusted by forward looking information such as Gross Domestic Product (“GDP”) and unemployment rate, incorporating the impact of the COVID-19 pandemic, and multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for the trade receivables. For trade receivables, which are reported net, such impairments are recorded in a separate impairment account with the loss being recognised within impairment allowance on receivables in the consolidated statements of profit or loss and other comprehensive income. On confirmation that the trade receivable would not be collectable, the gross carrying value of the asset would be written off against the associated impairment.

It requires management to exercise significant judgement in determining the probability of default by trade receivables and appropriate forward looking information.

(f) Trade receivables are not secured by any collateral or credit enhancement.

(g) The reconciliation of movements in impairment allowance on trade receivables is as follows:

2020 2019 RM RM

Balance as at 1 April 335,426 325,190Impairment allowance made for the financial year (Note 28) 613,933 578,849Reversal of impairment losses on trade receivables (Note 28) (64,647) (36,694)Write-offs for the financial year (223,352) (531,919)

Balance as at 31 March 661,360 335,426

(h) Credit impaired refers to individually determined debtors who have defaulted on payments and are in significant financial difficulties as at the end of the reporting period.

(i) Information on financial risks of trade receivables is disclosed in Note 37 to the financial statements.



13. OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS


Other receivables 1,039,242 894,657 – –Deposits 684,120 783,762 4,500 11,000

1,723,362 1,678,419 4,500 11,000Prepayments 189,063 104,714 30,000 58,621

1,912,425 1,783,133 34,500 69,621

(a) The currency exposure profile of other receivables is as follows:


Ringgit Malaysia 1,671,764 1,354,806 34,500 69,621United States Dollar 240,661 428,327 – –

1,912,425 1,783,133 34,500 69,621

(b) Impairment for other receivables are recognised based on the general approach within MFRS 9 using the forward looking expected credit loss model. The methodology used to determine the amount of the impairment is based on whether there has been a significant increase in credit risk since initial recognition of the financial asset. For those in which the credit risk has not increased significantly since initial recognition of the financial asset, twelve-month expected credit losses along with gross interest income are recognised. At the end of the reporting period, the Group assesses 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. For those in which credit risk had increased significantly, lifetime expected credit losses along with the gross interest income are recognised. For those that are determined to be credit impaired, lifetime expected credit losses along with interest income on a net basis are recognised.

The probability of non-payment by other receivables is adjusted by forward looking information such as Gross Domestic Product (“GDP”), unemployment rate and inflation rate as the key macroeconomic factors, incorporating the impact of the COVID-19 pandemic, and multiplied by the amount of the expected loss arising from default to determine the twelve-month or lifetime expected credit losses for other receivables. The Group determined significant increase in credit risk based on past due information, i.e. overdue amounts.

It requires management to exercise significant judgement in determining the probability of default by other receivables, appropriate forward looking information and significant increase in credit risk.

No expected credit loss is recognised arising from other receivables and deposits as it is negligible.

(c) Information on financial risks of other receivables and deposits is disclosed in Note 37 to the financial statements.



14. AMOuNTS OWING BY SuBSIDIARIES

(a) In the previous financial year, the amounts owing by subsidiaries in non-current assets represented advances, which were unsecured, bore interest at rates 5.00% to 5.50% per annum and were not payable within the next twelve (12) months in cash and cash equivalents.

(b) In the previous financial year, the amounts owing by subsidiaries in current assets represented advances, which were unsecured, bore interest at 5.00% per annum and were payable within the next twelve (12) months in cash and cash equivalents.

(c) The amounts owing by subsidiaries were denominated in RM.

(d) Impairment for amounts owing by subsidiaries were recognised based on the general approach within MFRS 9 using the forward looking expected credit loss model as disclosed in Note 13(b) to the financial statements.

(e) No expected credit loss was recognised arising from amounts owing by subsidiaries as it was negligible.

(f) Information on financial risks of amounts owing by subsidiaries was disclosed in Note 37 to the financial statements.

15. SHORT TERM FuNDS


Financial assets at fair value through profit or loss - Fixed income trust funds in Malaysia 14,042,200 16,408,066 3,327,687 5,292,110

(a) Short term funds of the Group and of the Company represent investments in highly liquid money market, which are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.

(b) Short term funds are denominated in RM.

(c) Short term funds are categorised as Level 1 in fair value hierarchy. There is no transfer between levels in the hierarchy during the financial year.

(d) Information on financial risks of short term funds is disclosed in Note 37 to the financial statements.



16. CASH AND BANK BALANCES


Cash and bank balances 9,597,024 8,536,661 146,305 116,330Fixed deposits with licensed banks 68,000,441 6,465,179 1,006,751 400,229

77,597,465 15,001,840 1,153,056 516,559

(a) The effective interest rate of deposits with both licensed banks of the Group and of the Company ranged from 2.70 % to 3.65% (2019: 3.10% to 3.50%) and 3.20% (2019: 3.10%) per annum respectively.

(b) The currency exposure profile of cash and bank balances are as follows:


Ringgit Malaysia 77,597,430 15,001,778 1,153,056 516,559United States Dollar 35 62 – –

77,597,465 15,001,840 1,153,056 516,559

(c) Cash and cash equivalents included in the statements of cash flows comprise the following as at the end of the reporting period:


Cash and bank balances 9,597,024 8,536,661 146,305 116,330Fixed deposits with licensed banks 68,000,441 6,465,179 1,006,751 400,229Short term funds (Note 15) 14,042,200 16,408,066 3,327,687 5,292,110Bank overdraft (Note 23) (149,838) – – –Fixed deposits placed with licensed banks with original maturity of more than three (3) months (66,993,690) – – –

As stated in statements of cash flows 24,496,137 31,409,906 4,480,743 5,808,669



16. CASH AND BANK BALANCES (CONTINuED)

(d) No expected credit losses were recognised arising from the deposits with financial institutions because the probability of default by these financial institutions were negligible.

(e) Information on financial risks of cash and bank balances is disclosed in Note 37 to the financial statements.

(f) Included in the fixed deposits with licensed banks of the Group amounting to RM63,977,996 is to be used by a special purpose entity for its operations.

17. SHARE CAPITAL

Group and Company 2020 2019

Number Number Note of shares RM of shares RM

Issued and fully paid ordinary shares Balance as at 1 April 296,148,507 343,162,661 298,417,611 307,439,983Issuance of shares pursuant to conversion of ICULS 997,937 1,177,576 10,560,896 12,461,862Transfer pursuant to Companies Act 2016 19 – – – 23,260,816Cancellation of treasury shares 20 – – (12,830,000) –

Balance as at 31 March 297,146,444 344,340,237 296,148,507 343,162,661

(a) During the financial year, the Company has issued 997,937 new ordinary shares resulting from the conversion of 1,177,576 units of Irredeemable Convertible Unsecured Loan Stock (“ICULS”) at the conversion price of RM1.18 for each ordinary share.

The newly issued shares rank pari-passu in all respects with the existing shares of the Company.

(b) In the previous financial year, the Company had issued 10,560,896 new ordinary shares resulting from the conversion of 12,461,862 units of Irredeemable Convertible Unsecured Loan Stock (“ICULS”) at the conversion price of RM1.18 for each ordinary share.

(c) The owners of the parent are entitled to receive dividends as and when declared by the Company and are entitled to one (1) vote per ordinary share at meetings of the Company. All ordinary shares rank pari passu with regard to the residual assets of the Company.



18. IRREDEEMABLE CONVERTIBLE uNSECuRED LOAN STOCKS (“ICuLS”)

(a) On 15 April 2014, the Company issued 100,000,000 Irredeemable Convertible Unsecured Loan Stock (“ICULS”) of RM1.00 nominal value each of RM100,000,000 and with a coupon rate of 3.25% per annum on the nominal value of the ICULS for a tenure of eight (8) years (“Rights ICULS”) on the basis of four (4) Rights ICULS of RM1.00 each in nominal value for every five (5) existing ordinary shares of RM1.00 each in the Company.

The proceeds from the ICULS are primarily intended but not limited to be utilised for the expansion of hire-purchase business and repayment of bank borrowings.

(b) The salient terms of the ICULS are as follows:

(i) Coupon rate and payment

The ICULS shall bear a coupon interest rate of 3.25% per annum on the nominal value of the ICULS payable on an annual basis.

(ii) Conversion rights

Each registered holder of the ICULS shall have the right on any market day during the conversion period to convert such amount of ICULS held into fully paid-up new shares of the Company at the conversion price.

Any remaining ICULS not converted at the end of the conversion period shall be mandatorily converted into new shares of the Company at the conversion price on the maturity date. Any fractional new shares of the Company arising from the mandatory conversion of the ICULS on the maturity date shall be disregarded and be dealt with by the Board as it may deem fit and expedient in the best interest of the Company.

(iii) Conversion price

The conversion price of the ICULS is RM1.18 for every one (1) new ordinary share of the Company.

(iv) Conversion period

The ICULS are convertible into new shares of the Company on any market day from the second (2nd) anniversary of the date of the issue of the ICULS up to and including the maturity date.

(v) Redemption

The ICULS will not be redeemable for cash. All outstanding ICULS will be mandatorily converted into new shares of the Company on the maturity date.



18. IRREDEEMABLE CONVERTIBLE uNSECuRED LOAN STOCKS (“ICuLS”) (CONTINuED)

(c) The amounts recognised in the statements of financial position of the Group and of the Company are analysed as follows:

Group and Company RM Net proceeds received from issuance of ICULS 98,658,736 ICULS - equity component (83,283,772)Deferred tax assets 4,855,252

ICULS - liability component on initial recognition on 15 April 2014 20,230,216

Group and Company 2020 2019 RM RM ICULS - equity component: As at 1 April 6,877,394 17,264,332 Conversion to ordinary shares (981,503) (10,386,938)

As at 31 March 5,895,891 6,877,394

ICULS - liability component: As at 1 April 629,435 2,260,704 Amortisation of ICULS - liability component (161,559) (182,882) Conversion to ordinary shares (106,052) (1,448,387)

As at 31 March 361,824 629,435

(d) During the financial year, there were a total of 1,177,576 (2019: 12,461,862) ICULS converted to ordinary shares, leaving a total of 7,152,861 (2019: 8,330,437) ICULS held by the Group and the Company at the end of the reporting period.



19. RESERVES


Non-distributable: Share premium Balance as at 1 April – 23,260,816 – 23,260,816 - Transfer pursuant to Companies Act 2016* – (23,260,816) – (23,260,816)

Balance as at 31 March – – – –

Distributable: Retained earnings 74,877,336 60,900,167 46,099,114 45,534,664

74,877,336 60,900,167 46,099,114 45,534,664

* Pursuant to the Companies Act 2016, the credit balance in the share premium account was transferred to the share capital account.

20. TREASuRY SHARES

The shares repurchased and held as treasury shares were measured and carried at the cost of repurchase on initial recognition and subsequently. It shall not be revalued for subsequent changes in the fair value or market price of the shares. The carrying amount of the treasury shares shall be offset against equity in the statement of financial position.

In the previous financial year, the Company cancelled the treasury shares as follows:

Number Total Price per share of shares consideration Highest Lowest Average units RM RM RM RM

Balance at 31 March 2017/1 April 2018 12,830,000 16,735,944 1.450 1.179 1.304Cancellation (12,830,000) (16,735,944) 1.450 1.179 1.304

Balance at 31 March 2019 – –

Since the expiration of the authority for the Company to purchase its’ own shares at the conclusion of the Twenty-Eighth Annual General Meeting on 2 August 2017, the Company did not propose to the shareholders for the renewal of share buy-back authority thereafter.



20. TREASuRY SHARES (CONTINuED)

On 22 February 2019, the Company cancelled all its accumulated 12,830,000 treasury shares with carrying amount of RM16,735,944 or at an average price of RM1.30 per ordinary shares. The share capital cancelled was transferred to retained earnings in accordance with the requirement of Section 127(13) of the Companies Act 2016 in Malaysia.

At the end of the previous financial year, there were no treasury shares held by the Company.

21. BLOCK DISCOuNTING PAYABLES - SECuRED


Gross block discounting payables:- not later than one (1) year 71,803,129 55,018,982- later than one (1) year but not later than five (5) years 121,437,857 67,089,105

193,240,986 122,108,087Less: Undue block discounting interest expenses (16,111,914) (7,804,348)

Net block discounting payables 177,129,072 114,303,739

Repayable as follows:

Current liabilities- not later than one (1) year 64,159,143 50,223,162

Non-current liabilities- later than one (1) year but not later than five (5) years 112,969,929 64,080,577

177,129,072 114,303,739

(a) Block discounting payables of the Group are secured by:

(i) the assignments of certain hire-purchase agreements as disclosed in Note 7(b) to the financial statements; and

(ii) corporate guarantee by the Company.



21. BLOCK DISCOuNTING PAYABLES - SECuRED (CONTINuED)

(b) Block discounting payables of the Group bear interest at rates ranging from 5.08% to 5.49% (2019: 5.21% to 5.22%) per annum.

(c) The tenure of the block discounting payables of the Group are repayable by equal monthly instalments of 36 to 60 months (2019: 36 to 48 months).

(d) All block discounting payables are denominated in RM. (e) Information on financial risks of block discounting payables is disclosed in Note 37 to the financial

statements.

(f) Reconciliation of liabilities arising from financing activities


Non-cash 1.4.2019 Cash flows changes 31.3.2020Group RM RM RM RM

Block discounting payables 114,303,739 63,161,736 (336,403) 177,129,072


Block discounting payables 50,641,277 63,937,840 (275,378) 114,303,739



22. MEDIuM TERM NOTES

Group 2020 RM

Current Medium Term Notes 50,000,000 Less: unamortised issuance expenses (525,325)

49,474,675

Non-current Medium Term Notes 55,000,000 Less: unamortised issuance expenses (682,047)

54,317,953

Total 103,792,628

(a) A special purpose entity, Premier Auto Assets Berhad was incorporated on 15 May 2019 for the purpose of an asset-backed securitisation exercise which involve the issuance of medium term notes (“MTNs”) under the Medium Term Notes Programme (“MTNs Programme”). Premier Auto Assets Berhad is a deemed subsidiary of the Company and the issuer of this programme.

(b) The MTNs of the Group are secured by the assignments of certain hire-purchase agreements as disclosed in Note 7(c) to the financial statements.

(c) On 19 July 2019, Premier Auto Assets Berhad has issued the first tranche of Senior Class MTNs amounting to RM105 million for a tenure of 1 to 3 years respectively.

(d) MTNs of the Group bear coupon interest rates ranging from 4.50% to 5.35% per annum.

(e) The interest is payable every half yearly and the principal is repayable in full upon maturity.

(f) All MTNs are denominated in RM.

(g) Information on financial risks of MTNs is disclosed in Note 37 to the financial statements.

(h) Reconciliation of liabilities arising from financing activities



MTNs – 103,424,025 368,603 103,792,628



23. BORROWINGS - OTHERS

Group 2020 RM

Current liabilities- Term loan 4,008,000- Bank overdraft 149,838

4,157,838

Non-current liability- Term loan 14,322,000

Total borrowings

- Term loan 18,330,000- Bank overdraft 149,838

18,479,838

(a) All borrowings are denominated in RM.

(b) The bank borrowings of the Group are secured by a corporate guarantee by the Company.

(c) The interest rates per annum of borrowings as at the end of reporting period were as follows:

Group 2020 %

Floating rates- Term loan 5.17- Bank overdraft 5.72

(d) Information on financial risks of term loan and bank overdraft are disclosed in Note 37 to the financial statements.



23. BORROWINGS - OTHERS (CONTINuED)

(e) Reconciliation of liabilities arising from financing activities The table below details changes in the Group’s liabilities arising from financing activities, including

both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group’s statements of cash flows as cash flows from financing activities.


Term loan – 18,330,000 – 18,330,000

24. TRADE PAYABLES


Dealers’ retentions 5,483,270 6,749,378Hire-purchase disbursement creditors 4,329,284 6,010,491Other temporary clearing accounts 162,874 337,968Furniture trade creditors 1,181,041 817,366

11,156,469 13,915,203

(a) The credit terms available to the Group in respect of trade payables are based on the terms of the agreements.

(b) Dealers’ retentions represent amounts retained from cars dealers for hire-purchase applications referred. The dealers’ retention will be refunded to the car dealers once the terms for the retention refund in accordance with the retention note have been fulfilled.

(c) Hire-purchase disbursement creditors represent hire-purchase disbursements that have not been disbursed to the car dealers. The hire-purchase disbursements will be disbursed to the car dealers upon the completion of all ownership transfer documents for the motor vehicles financed.



24. TRADE PAYABLES (CONTINuED)

(d) Trade payables in respect of furniture trade creditors are non-interest bearing and normal credit terms granted to the Group range from 30 to 60 days (2019: 30 to 60 days) from the dates of invoices.

(e) All trade payables are denominated in RM.

(f) Information on financial risks of trade payables is disclosed in Note 37 to the financial statements.

25. OTHER PAYABLES AND ACCRuALS


Other payables 1,968,808 1,617,713 – –Accruals 6,235,393 3,619,817 863,018 931,817

8,204,201 5,237,530 863,018 931,817

(a) Included in accruals of the Group is an amount which represents the coupon interest payable on the MTNs of RM1,245,877 (2019: Nil).

(b) Included in accruals of the Group and of the Company is an amount which represents the coupon interest payable on the ICULS of RM232,468 (2019: RM270,739).

(c) The currency exposure profile of other payables and accruals are as follows:


Ringgit Malaysia 8,053,558 5,237,530 863,018 931,817United States Dollar 150,643 – – –

8,204,201 5,237,530 863,018 931,817

(d) Information on financial risks of other payables and accruals are disclosed in Note 37 to the financial statements.



26. REVENuE


Revenue from contracts with customers - Sales of furniture 43,297,084 38,493,813 – –- Insurance commission 3,293,818 2,771,869 – –- Handling and processing fees 7,935,375 7,384,095 – –

54,526,277 48,649,777 – –Other revenue- Dividend income – – 21,455,000 51,125,000- Hire-purchase interest income 91,794,285 73,022,176 – –- Overdue and service charges 1,649,774 1,722,217 – –

93,444,059 74,744,393 21,455,000 51,125,000

147,970,336 123,394,170 21,455,000 51,125,000

The revenue of the Group and of the Company are derived entirely in Malaysia, except for an amount of RM4,148,019 (2019: RM3,443,279) of the Group, which is derived from the export sales of furniture to other countries such as Brunei and Middle East.

(i) Sales of furniture

Revenue from sales of furniture is recognised at a point in time when the goods have been transferred to the customers and coincides with the delivery of products and acceptance by customers.

There is no right of return and warranty provided to the customers on the sales of furniture.

There is no significant financing component in the revenue arising from sales of furniture as the sales are made on the normal credit terms not exceeding twelve (12) months.

(ii) Insurance commission and handling and processing fees

Revenue from services rendered is recognised at a point in time when the services have been rendered to the customers and coincide with the delivery of services acceptance by customers.

There is no significant financing component in the revenue arising from services rendered as the services are made on the normal credit terms not exceeding twelve (12) months.



26. REVENuE (CONTINuED)

(iii) Dividend income

Dividend income is recognised when the right to receive payment is established.

(iv) Hire-purchase interest income

Hire-purchase interest income is recognised upon commencement of the hire-purchase agreement using a constant periodic rate of return over the period of the agreement.

(v) Overdue and service charges

Overdue and service charges are recognised on a receipt basis.

27. FINANCE COSTS


Interest expenses on:- ICULS 70,909 87,857 70,909 87,857- block discounting payables 7,677,602 4,163,142 – –- MTNs 4,121,414 – – –- term loan 497,110 – – –- bank overdrafts 1,759 1,199 – –- lease liabilities 166,977 – – –

12,535,771 4,252,198 70,909 87,857



28. PROFIT BEFORE TAX

Other than those disclosed elsewhere in the financial statements, the profit before tax is arrived at:

Group Company 2020 2019 2020 2019

Note RM RM RM RM

After charging:

Auditors’ remuneration Statutory audit - current year 109,000 100,200 28,800 28,000 - under-provision in prior years 2,800 9,000 800 2,000 Non-statutory audit 4,000 4,000 4,000 4,000Impairment allowance on hire-purchase receivables - ECL allowances 5,862,464 1,978,465 – – - Credit impaired 19,398,005 16,532,966 – –

7(h) 25,260,469 18,511,431 – – - recovery of bad debts previously written off (1,604,255) (1,562,686) – –

23,656,214 16,948,745 – –Impairment allowance on trade receivables 12(g) 613,933 578,849 – – - recovery of bad debts previously written off (55,168) – – –

558,765 578,849Property, plant and equipment written off 1 – – –Realised loss on foreign exchange 205,643 113,473 – –Rental of:- premises 497,800 1,501,400 – –- showrooms 83,434 624,377 – –- stores and warehouses 61,444 176,552 – –- computers 391,246 386,321 – –- office equipment 193,337 192,281 – –



28. PROFIT BEFORE TAX (CONTINuED)

Other than those disclosed elsewhere in the financial statements, the profit before tax is arrived at: (Continued)

Group Company 2020 2019 2020 2019

Note RM RM RM RM

And crediting: Interest income on: - advances to the subsidiaries – – 1,395,657 2,984,729- fixed deposits 1,250,163 306,405 48,103 64,244- short term funds 908,180 765,173 124,914 166,615- others 212,536 233,166 2,181 3,103Gain on disposal of property, plant and equipment – 4,510 – –Reversal of impairment losses on trade receivables 12(g) 64,647 36,694 – –Unrealised gain on foreign exchange 40,003 11,011 – –

Interest income is recognised as it accrues, using the effective interest method.



29. INCOME TAX EXPENSE


Current tax expense based on profit for the financial year 14,261,687 11,441,294 336,363 721,566Under/(Over) provision in prior years 305,370 (116,195) 408 (2,600)

14,567,057 11,325,099 336,771 718,966

Deferred tax (Note 9)- current year (1,501,863) (439,904) 38,774 43,892- (over)/under provision in prior years (430,587) 4,676 – –

(1,932,450) (435,228) 38,774 43,892

12,634,607 10,889,871 375,545 762,858

(a) Income taxes include all taxes on taxable profit. Income taxes also include other taxes such as withholding taxes and real property gains taxes payable on the disposal of properties, if any.

Malaysian income tax is calculated at the statutory tax rate of 24% (2019: 24%) of the estimated assessable profit for the year.



29. INCOME TAX EXPENSE (CONTINuED)

(b) The numerical reconciliation between the income tax expense and the product of accounting profit multiplied by the applicable tax rates of the Group and of the Company are as follows:


Profit before tax 47,523,249 43,805,787 21,851,468 52,926,166

Tax at Malaysian statutory tax rate of 24% (2019: 24%) 11,405,580 10,513,389 5,244,352 12,702,280

Tax effects in respect of: Non-taxable income (290,191) (193,791) (5,191,749) (12,320,137)Utilisation of previously unrecognised deferred tax assets (133,775) – – –Deferred tax assets not recognised 173,663 7,287 – –Reversal of deferred tax assets on ICULS liability component (38,774) (43,892) (38,774) (43,892)Expenses not deductible for tax purpose 1,643,321 1,091,829 361,308 427,207Effect of first time adoption of MFRS 9 – (373,432) – –

12,759,824 11,001,390 375,137 765,458Under/(Over) provision ofincome tax expense in prior years 305,370 (116,195) 408 (2,600)(Over)/Under provision of deferred tax in prior years (430,587) 4,676 – –

12,634,607 10,889,871 375,545 762,858



29. INCOME TAX EXPENSE (CONTINuED)

(c) Amounts of temporary differences for which no deferred tax assets have been recognised in the statements of financial position are as follows:


Unabsorbed capital allowances – 165,762Unused tax losses – 254,529Other deductible temporary differences 1,039,581 453,090

1,039,581 873,381

Deferred tax assets of the subsidiaries have not been recognised in respect of these items as it is not probable that future taxable profits of the subsidiaries would be available against which the deductible temporary differences could be utilised.

The unused tax losses up to the year of assessment 2018 shall be deductible until year of assessment 2025. The unused tax losses for the year of assessment 2019 onwards will expire in 7 years.

30. EARNINGS PER ORDINARY SHARE

(a) Basic earnings per ordinary share

Basic earnings per ordinary share for the financial year is calculated by dividing the profit for the financial year attributable to equity holders of the parent by the weighted average number of ordinary shares outstanding during the financial year.

Group 2020 2019

Profit attributable to equity holders of the parent (RM) 34,888,642 32,915,916

Number of ordinary shares in issue net of treasury shares, applicable to basic earnings per ordinary share 296,148,507 284,807,317Effect of conversion of ICULS during the financial year 728,415 8,469,134

Adjusted weighted average number of ordinary shares applicable to basic earnings per ordinary share 296,876,922 293,276,451

Basic earnings per ordinary share (sen) 11.75 11.22



30. EARNINGS PER ORDINARY SHARE (CONTINuED)

(b) Diluted earnings per ordinary share

Diluted earnings per ordinary share for the financial year is calculated by dividing the profit for the financial year attributable to owners of the parent by the weighted average number of ordinary shares outstanding during the financial year adjusted for the effects of dilutive potential ordinary shares.

Group 2020 2019

Profit attributable to equity holders of the parent (RM) 34,888,642 32,915,916Interest expense on ICULS, net of tax (RM) 109,683 131,749

34,998,325 33,047,665

Number of ordinary shares in issue net of treasury shares, applicable to basic earnings per ordinary share 296,148,507 284,807,317Effect of conversion of ICULS during the financial year 728,415 8,469,134Effect of potential conversion of ICULS 6,331,338 9,931,809

Adjusted weighted average number of ordinary shares applicable to diluted earnings per ordinary share 303,208,260 303,208,260

Diluted earnings per ordinary share (sen) 11.54 10.90



31. DIVIDENDS

Group and Company 2020 2019

Dividend Amount of Dividend Amount of per share dividend per share dividend Sen RM Sen RM

In respect of financial year ended 31 March:

2018

Final single tier tax exempt dividend paid – – 3.50 10,292,128

2019

Final and interim single tier tax exempt dividend paid 3.50 10,395,854 3.50 10,365,218

2020

Interim single tier tax exempt dividend paid 3.50 10,400,145 – –

7.00 20,795,999 7.00 20,657,346

On 9 June 2020, the Directors declared a second interim single tier tax exempt dividend of 3.75 sen per ordinary share in respect of the financial year ended 31 March 2020. The financial statements for the current financial year do not reflect this declared dividend. This dividend will be accounted for as an appropriation of retained earnings in the next financial year.

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



32. EMPLOYEE BENEFITS


Salaries, wages and bonus 19,469,514 17,088,389 – –Defined contribution plan 1,989,847 1,608,372 – –Other employee benefits 412,225 355,988 220,000 176,000

21,871,586 19,052,749 220,000 176,000

Included in employee benefits is the remuneration of Executive Directors of the Group and of the Company amounting to RM2,775,850 (2019: RM2,364,490) and RM220,000 (2019: RM176,000) respectively.

33. COMMITMENTS

Operating lease commitments

The Group as lessee has entered into non-cancellable lease agreements for certain premises, storage and warehouses, factory, showrooms and computer equipment, resulting in future rental commitments which could, subject to certain terms in the agreements, be revised annually based on prevailing market rates. The Group has aggregate future minimum lease commitments as at the end of each reporting period as follows:


- Not later than one (1) year – 2,110,261- Later than one (1) year but not later than five (5) years – 2,811,196

– 4,921,457



34. CONTINGENT LIABILITIES

Company 2020 2019 RM RM

Corporate guarantee given to licensed banks for credit facilities granted to subsidiaries- limit of guarantee 252,500,000 132,500,000- amount utilised 211,720,824 122,108,087

The Group designates corporate guarantees given to banks for credit facilities granted to subsidiaries as insurance contracts as defined in MFRS 4 Insurance Contracts. The Group recognises these insurance contracts as recognised insurance liabilities when there is a present obligation, legal or constructive, as a result of a past event, when it is probable that an outflow of resources embodying economic benefits would be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

At the end of each reporting period, the Group assesses whether its recognised insurance liabilities are adequate, using current estimates of future cash flows under its insurance contracts. If this assessment shows that the carrying amount of the insurance liabilities is inadequate, the entire deficiency shall be recognised in profit or loss.

Recognised insurance liabilities are only removed from the statement of financial position when, and only when, it is extinguished via a discharge, cancellation or expiration.

The determination of treatment of contingent liabilities is based on management’s view of the expected outcome of the contingencies for matters in the ordinary course of the business.

The Directors are of the view that the chances of the third parties and financial institutions to call upon the guarantees are remote.



35. RELATED PARTY DISCLOSuRES

(a) Identities of related parties

Parties are considered to be related to the Group if the Group 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 and the party are subject to common control or common significant influence. Related parties could be individuals or other entities.

The Company has controlling related party relationships with its direct and indirect subsidiaries.

Related parties of the Group include:

(i) Direct and indirect subsidiaries as disclosed in Note 6 to the financial statements;

(ii) Key management personnel, which comprises persons (including the Directors of the Company) having authority and responsibility for planning, directing and controlling activities of the Group directly or indirectly; and

(iii) Affiliates, companies in which certain Directors who are also the substantial shareholders of the Company have substantial shareholdings interest.

(b) Significant related party transactions

In addition to the transactions detailed elsewhere in the financial statements, the Group and the Company had the following significant transactions with related parties during the financial year:


Dividend received from a subsidiary- ELK-Desa Capital Sdn. Bhd. – – 21,455,000 51,125,000

Interest received/receivable from subsidiaries- ELK-Desa Capital Sdn. Bhd. – – 1,067,260 2,649,999- ELK-Desa Furniture Marketing Sdn. Bhd. – – 328,397 334,730


NOTES TO THE FINANCIAL STATEMENTS(CONT’D)

35. RELATED PARTY DISCLOSURES (COnTInUED)

(b) Significant related party transactions (Continued)


Rental paid to a substantial shareholder- Eng Lee Kredit Sdn. Bhd. 396,000 413,333 – –

Rental and utilities premises paid to a related party- Zhongxin Realty Sdn. Bhd. 762,000 762,000 – –

Purchase of property from a substantial shareholder- Eng Lee Kredit Sdn. Bhd. – 3,100,000 – –

The Directors of the Group and of the Company are of the opinion that the above transactions were carried out based on negotiated terms and conditions and mutually agreed with the related parties.

Information regarding outstanding balances arising from related party transactions as at the end of the previous reporting period was disclosed in Note 14 to the financial statements.

(c) Compensation of key management personnel

Key management personnel are those persons having the authority and responsibility for planning, directing and controlling the activities of the entity, directly and indirectly, including any director (whether executive or otherwise) of the Group.

The remuneration of the Directors of the Group and of the Company during the financial year were as follows:


non-Executive Directors - Directors fees 369,887 443,226 369,887 443,226- Other emoluments 49,398 49,291 42,198 49,291

419,285 492,517 412,085 492,517



35. RELATED PARTY DISCLOSuRES (CONTINuED)

(c) Compensation of key management personnel (Continued)

The remuneration of the Directors of the Group and of the Company during the financial year were as follows: (Continued)


Executive Directors- Director fees 220,000 176,000 220,000 176,000- Short term employee benefits 2,280,000 1,952,000 – –- Defined contribution plan 273,600 234,240 – –- Other employee benefits 2,250 2,250 – –

2,775,850 2,364,490 220,000 176,000

(i) Other than the remuneration of the Directors of the Company as disclosed above, the remuneration paid/payable to the Directors of the subsidiaries amounted to RM846,721 (2019: RM861,289).

(ii) The estimated monetary value of benefits-in-kind received by the Directors of the Company otherwise than in cash from the Group amounted to RM41,115 (2019: RM30,951).

36. CAPITAL MANAGEMENT

The Group will manage its capital which comprises debts and equity with an objective to ensure that the Group would be able to continue as a going concern while maximising the return to shareholders.

The debts and equity balance will be adjusted accordingly in response to the changes in business and economic environment.

No changes were made in the objectives, policies or processes during the financial years ended 31 March 2020 and 31 March 2019.

The Group monitors capital using a gearing ratio. This ratio is calculated as total debts divided by total equity. Total debts are calculated as total borrowings (including ICULS liabilities component, block discounting payables, MTNs, term loan and bank overdraft). Capital represents equity attributable to the owners of the parent.



36. CAPITAL MANAGEMENT (CONTINuED)


Total debts 299,763,362 114,933,174 361,824 629,435

Total equity 425,113,463 410,940,222 396,335,242 395,574,719

Gearing ratio 0.71 0.28 0.01 0.01

Other than maintaining a net worth of RM80,000,000, the Group is required to maintain a maximum gearing ratio of 1.5 to ensure compliance with the bank covenants of its borrowings and all other externally imposed capital requirements.

Pursuant to the requirements of Practice Note No. 17/2005 of the Bursa Malaysia Securities, the Group is required to maintain a consolidated shareholders’ equity equal to or not less than twenty-five percent (25%) of the issued and paid-up capital and such shareholders’ equity is not less than RM40,000,000. The Group has complied with this requirement during the financial year ended 31 March 2020.

37. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The financial risk management policy of the Group seeks to ensure that adequate financial resources are available for the development of the businesses of the Group whilst managing its risks.

The Group is exposed mainly to credit risk, liquidity and cash flow risk, interest rate risk, foreign currency risk and market risk. The management reviews and agrees policies for managing each of these risks and they are summarised below:

(a) Credit risk

Cash deposits, short term funds, hire-purchase receivables, trade receivables, other receivables and amounts owing by subsidiaries could give rise to credit risk which requires the loss to be recognised if a counter party fails to perform as contracted. In order to manage this risk, it is the policy of the Group to monitor the financial standing of these counter parties and perform credit evaluation on customers requiring credit.



37. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINuED)

(a) Credit risk (Continued)

The primary exposure of the Group to credit risk arises mainly through its hire-purchase receivables. In the previous financial year, the Company’s primary exposure was through the amounts owing by subsidiaries. The credit terms are in accordance with the repayment schedules as contained in the hire-purchase agreements. The Group seeks to maintain strict control over its outstanding receivables via a credit control department to minimise credit risk. Overdue balances are reviewed regularly by senior management.

Deposits with licensed financial institutions that are neither past due nor impaired are placed with or entered into with licensed financial institutions with high credit ratings and no history of default.

Exposure to credit risk

At the end of the reporting period, the maximum exposure to credit risk for the Group is represented by the carrying amount of each class of financial asset recognised in the statements of financial position.

Credit risk concentration profile

As at the end of the reporting period, the Group and the Company have no other significant concentration of credit risk except that the Company had amounts owing by subsidiaries of RM61,260,315 in the previous financial year.

(b) Liquidity and cash flow risk

The Group adopts a prudent liquidity risk management in maintaining sufficient levels of cash and cash equivalents to meet its working capital requirements. In addition, the Group also manages its debt maturity profile, operating cash flows and the availability of funding so as to ensure that all refinancing, repayment and funding needs are met.




(b) Liquidity and cash flow risk (Continued)

Analysis of financial instruments by remaining contractual maturities

The tables below summarise the maturity profile of the Group’s and of the Company’s liabilities at the end of each reporting period based on contractual undiscounted repayment obligations.

Within One to OverGroup one year five years five years Total2020 RM RM RM RM

Financial liabilities ICULS - liability component – 361,824 – 361,824 Block discounting payables - secured 71,803,129 121,437,857 – 193,240,986 MTNs 54,334,075 56,873,992 – 111,208,067 Term loan 4,823,910 15,612,678 – 20,436,588 Bank overdraft 149,838 – – 149,838 Trade payables 11,156,469 – – 11,156,469 Other payables and accruals 8,204,201 – – 8,204,201 Lease liabilities 1,484,577 1,031,652 – 2,516,229

Total undiscounted financial liabilities 151,956,199 195,318,003 – 347,274,202

2019

Financial liabilities ICULS - liability component – 629,435 – 629,435 Block discounting payables - secured 55,018,982 67,089,105 – 122,108,087 Trade payables 13,915,203 – – 13,915,203 Other payables and accruals 5,237,530 – – 5,237,530

Total undiscounted financial liabilities 74,171,715 67,718,540 – 141,890,255




(b) Liquidity and cash flow risk (Continued)

Within One to OverCompany one year five years five years Total2020 RM RM RM RM

Financial liabilities ICULS - liability component – 361,824 – 361,824 Other payables and accruals 863,018 – – 863,018

Total undiscounted financial liabilities 863,018 361,824 – 1,224,842

2019

Financial liabilities ICULS - liability component – 629,435 – 629,435 Other payables and accruals 931,817 – – 931,817

Total undiscounted financial liabilities 931,817 629,435 – 1,561,252

(c) Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of the financial instruments of the Group and of the Company would fluctuate because of changes in market interest rates. The interest rate risk of the Group is related to the bank borrowings of the Group, fixed deposits with licensed banks and hire-purchase receivables while the interest rate risk of the Company is related to fixed deposits with licensed banks and amounts owing by subsidiaries. Interest rates exposure which arises from the borrowings of the Group is managed through the use of fixed and floating rate debts. The Group does not use derivative financial instruments to hedge this risk.

Sensitivity analysis for fixed rate instruments

The Group and the Company do not account for any fixed rate financial instruments at fair value through profit or loss, and the carrying amount of fixed rate financial instruments of the Group and of the Company are measured at amortised cost. Therefore, no sensitivity analysis for fixed rate instruments was prepared as the change in market interest rates at the end of the reporting period would not affect profit and loss.




(c) Interest rate risk (Continued)

Sensitivity analysis for floating rate instruments

The following table demonstrates the sensitivity of the profit after tax of the Group to a reasonably possible change in 100 basis points against interest rates of floating rate instruments, with all other variables held constant:

Group 2020 RM

Profit after tax

Term loan - increase by 1% (139,308) - decrease by 1% 139,308Bank overdraft - increase by 1% (1,139) - decrease by 1% 1,139



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(d) Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument would fluctuate because of changes in foreign exchange rates.

The Group is exposed to foreign currency exchange risk as a result of foreign transactions entered into in currencies other than Ringgit Malaysia. The Group monitors the movement in foreign currency exchange rates closely to ensure that the net exposure of each foreign currency is minimised. The Group does not use derivative financial instruments to hedge its foreign currency risk.

Sensitivity analysis for foreign currency risk

The following table demonstrates the sensitivity analysis of the Group to a reasonably possible change in the United States Dollar (“USD”) exchange rates against the respective functional currency of the Group entities, with all other variables held constant:

Group 2020 2019 RM RM Profit Profit after tax after tax

USD/RM - strengthen by 10% 66,054 81,905 - weaken by 10% (66,054) (81,905)

(e) Market risk

Market risk is the risk that the fair value of future cash flows of the financial instruments of the Group would fluctuate because of changes in market prices (other than interest or exchange rates).

The Group and the Company are exposed to equity price risks arising from short term funds quoted in Malaysia. This instrument is classified as financial asset designated at fair value through profit or loss.

At the end of each reporting period, the maximum exposure of the Group and of the Company to market risk is represented by the total carrying amount of this financial asset recognised in the statement of financial position, which amounted to RM14,042,200 (2019: RM16,408,066) and RM3,327,687 (2019: RM5,292,110) respectively. There has been no change to the exposure of the Company to market risk or the manner in which the risk is managed and measured.




(e) Market risk (Continued)

Sensitivity analysis for market risk

The following table demonstrates the sensitivity of the Group and of the Company to the changes in market quoted prices for unit trust funds at the end of the reporting period, with all other variables held constant:


Effects of 100bp changes in market quoted prices to profit after tax- Short term funds 140,422 164,081 33,277 52,921

38. FINANCIAL INSTRuMENTS

(a) Categories of financial instruments

2020 2019Group RM RM

Financial assets Fair value through profit or loss - Short term funds 14,042,200 16,408,066Amortised cost - Hire-purchase receivables 610,421,610 476,453,836- Trade receivables 13,912,372 11,506,486- Other receivables and deposits 1,723,362 1,678,419- Cash and bank balances 77,597,465 15,001,840

717,697,009 521,048,647


NOTES TO THE FINANCIAL STATEMENTS(CONT’D)

38. FINANCIAL INSTRUMENTS (CoNTINUEd)

(a) Categories of financial instruments (Continued)

2020 2019Group RM RM

Financial liabilities Amortised cost - ICULS - liability component 361,824 629,435- Block discounting payables - secured 177,129,072 114,303,739- MTNs 103,792,628 –- Term loan 18,330,000 –- Bank overdraft 149,838 –- Trade payables 11,156,469 13,915,203- Other payables and accruals 8,204,201 5,237,530- Lease liabilities 2,393,587 –

321,517,619 134,085,907

Company

Financial assets

Fair value through profit or loss- Short term fund 3,327,687 5,292,110Amortised cost- Amounts owing by subsidiaries – 61,260,315- Other receivables and deposits 4,500 11,000- Cash and bank balances 1,153,056 516,559

4,485,243 67,079,984

Financial liabilities

Amortised cost- ICULS - liability component 361,824 629,435- Other payables and accruals 863,018 931,817

1,224,842 1,561,252



38. FINANCIAL INSTRuMENTS (CONTINuED)

(b) Method and assumptions used to estimate fair values

The fair values of financial assets and financial liabilities are determined as follows:

(i) Financial instruments that are not carried at fair values and whose carrying amounts are at reasonable approximation of fair values.

The carrying amounts of financial assets and financial liabilities, such as trade and other receivables, trade and other payables, current portion of amounts owing by subsidiaries, term loan and bank overdraft, are reasonable approximation of fair values, either due to their short-term nature or that they are floating rate instruments that are re-priced to market interest rates on or near the end of the reporting period.

The carrying amounts of the current portion of borrowings are reasonable approximations of

fair values due to the insignificant impact of discounting.

(ii) Short term funds

The fair values of short term funds are determined by reference to the exchange quoted market bid prices at the close of the business at the end of each reporting period.

(iii) Hire-purchase receivables

The estimated market interest rate used for discounting contracted cash flows to determine the fair value of hire-purchase receivables are approximately equal to the effective interest rate used for computing the carrying amount of hire-purchase receivables.

(iv) Non-current amounts owing by subsidiaries

The fair value of this financial instrument was estimated by discounting the expected future cash flows at market lending rates for similar types of lending or borrowing arrangements at the end of the reporting period. At the end of the previously reporting period, these amounts were carried at amortised cost.



38. FINANCIAL INSTRuMENTS (CONTINuED)

(b) Method and assumptions used to estimate fair values (Continued)

(v) Block discounting payables

The fair values of block discounting payables are estimated by discounting the future contractual cash flows using the estimated borrowings rate applicable to the Group at the end of the reporting period for similar borrowings with similar duration and terms.

(vi) Liability component of ICULS

The fair value for liability component of ICULS is estimated by discounting cash flows at the weighted average cost of debts of the Company.

(vii) MTNs

The fair values for MTNs are estimated by discounting expected future cash flows at effective interest rate for similar type of borrowings arrangements at the end of the reporting period.

(c) Fair value hierarchy

Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3 fair value measurements are those derived from inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Fair value of hire-purchase receivables, amounts owing by subsidiaries, block discounting payables, MTNs and liability component of ICULS have been generally derived using discounted cash flow approach.



38.

FIN

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5



39. SIGNIFICANT EVENTS DuRING THE FINANCIAL YEAR

(a) A special purpose entity, Premier Auto Assets Berhad was incorporated on 15 May 2019 to facilitate an asset-backed securitisation (“ABS”) exercise. On 3 July 2019, Premier Auto Assets Berhad had made a lodgement with the Securities Commission Malaysia for the establishment of a 10-year Medium Term Notes Programme (“MTNs Programme”) with a nominal value of up to RM1 billion pursuant to the ABS exercise. Premier Auto Assets Berhad has issued the first tranche of Medium Term Notes amounted RM145,500,000 in nominal value, for tenure of 1 to 3 years from the date of first issuance which consist of RM105,000,000 Senior Class Medium Term Notes and RM40,500,000 Junior Class Medium Term Notes respectively. The proceeds from the issuance of Medium Term Notes shall be utilised by the Group for the expansion of hire-purchase business, working capital and refinancing the existing borrowings.

(b) The World Health Organisation declared the 2019 Novel Coronavirus infection (“COVID-19”) a pandemic on 11 March 2020. This was followed by the Government of Malaysia issuing a Federal Government Gazette on 18 March 2020, imposing a Movement Control Order (“MCO”) effective from 18 March 2020 to 31 March 2020 arising from the COVID-19 pandemic. The MCO was subsequently extended until 12 May 2020, followed by Conditional MCO until 9 June 2020 and then, Recovery MCO until 31 August 2020.

The effects of COVID-19 would impact the judgements and assumptions used in the preparation of the financial statements for the financial year ended 31 March 2020, such as expected credit losses of financial assets and fair value measurements of financial instruments. The Group and the Company have assessed the impact of COVID-19 and there were no material impact noted arising from the effects of COVID-19 as of 31 March 2020, other than incorporating the impact of the COVID-19 pandemic into the assessments of the ECL as disclosed in Notes 7, 12 and 13 to the financial statements.

Based on the assessment and information available at the date of authorisation of the financial statements, the Group has sufficient cash flows and undrawn facilities to meet its liquidity needs in the next 12 months after the end of the reporting period. The Group would continue to monitor its fund and operational needs.



40. ADOPTION OF NEW MFRSs AND AMENDMENT TO MFRSs

40.1 New MFRSs adopted during the financial year

The Group and the Company adopted the following Standards of the MFRS Framework that were issued by the Malaysian Accounting Standards Board (“MASB”) during the financial year:

Title Effective Date

MFRS 16 Leases 1 January 2019IC Interpretation 23 Uncertainty over Income Tax Treatments 1 January 2019Amendments to MFRS 128 Long-term Interests in Associates and Joint Ventures

1 January 2019

Amendments to MFRS 9 Prepayment Features with Negative Compensation 1 January 2019Amendments to MFRS 3 Annual Improvements to MFRS Standards 2015 - 2017 Cycle

1 January 2019

Amendments to MFRS 11 Annual Improvements to MFRS Standards 2015 - 2017 Cycle

1 January 2019


1 January 2019


1 January 2019

Amendments to MFRS 119 Plan Amendment, Curtailment or Settlement 1 January 2019

Adoption of the above Standards did not have any material effect on the financial performance or position of the Group and of the Company, except for the adoption of MFRS 16 as described in the following section.

MFRS 16 Leases

MFRS 16 supersedes MFRS 117 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. MFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to recognise most leases on the financial statements.

Lessor accounting under MFRS 16 is substantially unchanged from MFRS 117. Lessors would continue to classify leases as either operating or finance leases using similar principles as in MFRS 117. Therefore, MFRS 16 does not have a material impact for leases for which the Group and the Company are the lessor.



40. ADOPTION OF NEW MFRSs AND AMENDMENT TO MFRSs (CONTINuED)

40.1 New MFRSs adopted during the financial year (Continued)

MFRS 16 Leases (Continued)

The Group and the Company applied MFRS 16 using the modified retrospective approach, for which the cumulative effect of initial application is recognised in retained earnings as at 1 April 2019, if any. Accordingly, the comparative information presented is not restated.

On adoption of MFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as “operating leases” under the principles of MFRS 117. These liabilities were measured at the present value of the remaining lease payments, discounted using the incremental borrowing rate of the Group as of 1 April 2019. The incremental borrowing rate of the Group applied to the lease liabilities on 1 April 2019 was 5.50%.

In order to compute the transition impact of MFRS 16, a significant data extraction exercise was undertaken by management to summarise all property and equipment lease data such that the respective inputs could be uploaded into management’s model. The incremental borrowing rate method has been adopted where the implicit rate of interest in a lease is not readily determinable.

For leases previously classified as finance leases, the Group recognised the carrying amount of the lease asset and lease liability immediately before transition as the carrying amount of the right-of-use asset and the lease liability respectively at the date of initial application. The measurement principles of MFRS 16 are only applied after that date.

In applying MFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:

(a) Applying a single discount rate to a portfolio of leases with reasonably similar characteristics; (b) Relying on previous assessments on whether leases are onerous as an alternative to performing

an impairment review - there were no onerous contracts as at 1 April 2019; (c) Accounting for operating leases with a remaining lease term of less than 12 months as at 1

April 2019 and do not contain a purchase option as short-term leases; (d) Excluding initial direct costs for the measurement of the right-of-use asset at the date of initial

application; and (e) Using hindsight in determining the lease term where the contract contains options to extend

or terminate the lease.




40.2 Effect on adoption of MFRS 16

On transition to MFRS 16, the Group recognised right-of-use assets and lease liabilities. The impact on transition is summarised below:

Statement of Financial Position (Extracts)

As Effect on previously adoption of AsGroup stated MFRS 16 restated1 April 2019 Note RM RM RM

ASSETS

Non-current assets

Right-of-use assets (a) – 3,442,004 3,442,004

EQuITY AND LIABILITIES

Equity attributable to owners of the parent

Retained earnings 60,900,167 – 60,900,167

LIABILITIES

Non-current liabilities

Lease liabilities (b) – 2,224,258 2,224,258

Current liabilities

Lease liabilities (b) – 1,217,746 1,217,746

– 3,442,004 3,442,004




40.2 Effect on adoption of MFRS 16 (Continued)

(a) Right-of use assets were measured at the amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the financial statements as at 31 March 2019.

(b) Lease liabilities are measured as follows:

Group RM

Operating lease commitments at 31 March 2019 as disclosed under MFRS 117 4,921,457Weighted average incremental borrowing rate as at 1 April 2019 5.50%

Discounted operating lease commitments as at 1 April 2019 4,143,692Recognition exemption for leases of low-value assets (421,484)Recognition exemption for leases with less than 12 months of lease term at transition (280,204)

Lease liabilities recognised at 1 April 2019 3,442,004




40.3 New MFRSs that have been issued, but only effective for annual periods beginning on or after 1 January 2020

The following are Standards of the MFRS Framework that have been issued by the MASB but have not been early adopted by the Group and the Company:

Title Effective Date

Amendments to References to the Conceptual Framework in MFRS Standards 1 January 2020Amendments to MFRS 3 Definition of a Business 1 January 2020Amendments to MFRS 101 and MFRS 108 Definition of Material 1 January 2020Amendments to MFRS 9, MFRS 139 and MFRS 7 Interest Rate Benchmark Reform

1 January 2020

Amendments to MFRS 16 Covid-19-Related Rent Concessions 1 June 2020MFRS 17 Insurance Contracts 1 January 2021Amendments to MFRS 101 Classification of Liabilities as Current or Non- current

1 January 2022

Annual Improvements to MFRS Standards 2018 - 2020 1 January 2022Amendments to MFRS 3 Reference to the Conceptual Framework 1 January 2022Amendments to MFRS 116 Property, Plant and Equipment-Proceeds before Intended Use

1 January 2022

Amendments to MFRS 137 Onerous Contracts-Cost of Fulfilling a Contract 1 January 2022Amendments to MFRS 10 and MFRS 128 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

Deferred

The Group is in the process of assessing the impact of implementing these Standards, since the effects would only be observable for future financial years.




40.4 IFRIC Agenda Decision - An assessment of the lease term (IFRS 16)

The IFRS Interpretations Committee (“IFRIC”) issued a final agenda decision on 26 November 2019 regarding ‘Lease term and useful life of leasehold improvements (IFRS 16 and IAS 16)’.

The submission to the IFRIC raised a question pertaining the determination of the lease term of a cancellable lease or a renewable lease based on the requirements of IFRS 16.B34.

Based on the final agenda decision, the IFRIC concluded that the determination of the enforceable period of a lease and the lease term itself shall include broad economic circumstances beyond purely commercial terms.

The Group anticipates an increase in lease liabilities and corresponding right-of-use assets arising from the reassessment of the lease term of existing leasing arrangements due to this final agenda decision.

The Group is in the process of implementing the requirements of this final agenda decision and the impact upon adoption is expected to be recognised during the financial year ending 31 March 2021.


anaLYSiS of SHareHOLDinGS

AS AT 30 JUNE 2020

Issued and Paid-up Share Capital : RM344,355,164 consisting of 297,159,094 ordinary shares Voting Right : One vote per ordinary share

DISTRIBuTION OF SHAREHOLDINGS AS AT 30 JuNE 2020

Size of HoldingsNo. of

Holders% of

Holders No. of

Shares % of

Shares

1 - 99 1,883 10.69 36,619 0.01

100 - 1,000 7,429 42.15 4,247,691 1.43

1,001 - 10,000 7,110 40.34 22,141,898 7.45

10,001 - 100,000 1,040 5.90 27,605,772 9.29

100,001 - 14,857,953* 160 0.91 131,227,114 44.16

14,857,954 and above** 2 0.01 111,900,000 37.66

Total 17,624 100.00 297,159,094 100.00

* Less than 5% of Issued Shares** 5% and above of Issued Shares

30 LARGEST HOLDERS AS AT 30 JuNE 2020

NameNo. of

Shares Held% of

Shares

1 Eng Lee Kredit Sdn Bhd 96,600,000 32.51

2 Amity Corporation Sdn Bhd 15,300,000 5.15

3 Teo Siew Lai 10,486,100 3.53

4 Hock Chai Realty Sdn Bhd 8,680,000 2.92

5 ELK Group Sdn Bhd 8,200,000 2.76

6 Teo Kwee Hock 7,823,117 2.63

7 Malaysian Trustees BerhadUnico Holdings Berhad

5,097,239 1.72

8 Lim Keng Chin 5,000,000 1.68

9 Cimsec Nominees (Tempatan) Sdn Bhd CIMB Bank for Yap Heng Sang (PBCL-0G0835)

4,320,989 1.45

10 Teang Chek Moi @ Chong Moi Moi 4,000,000 1.35


30 LARGEST HOLDERS AS AT 30 JuNE 2020 (CONTINuED)

NameNo. of

Shares Held% of

Shares

11 Public Nominees (Tempatan) Sdn BhdPledged Securities Account for Phua Kiap Wite (E-KTN)

3,600,048 1.21

12 Lim Gaik Bway @ Lim Chiew Ah 3,538,259 1.20

13 Teoh Hock Chai @ Tew Hock Chai 3,500,000 1.18

14 Teoh Hock Keng 3,100,000 1.04

15 Maybank Nominees (Tempatan) Sdn BhdEtiqa Life Insurance Berhad (Life Non Par)

3,031,600 1.02

16 UOB Kay Hian Nominees (Tempatan) Sdn BhdPledged Securities Account For Lim Ching Neoh

2,175,220 0.73

17 Teoh Seng Hui 2,000,000 0.67

18 Teoh Seng Hee 1,835,677 0.62

19 Monica O-Lan @ Monica Ng O-Lan 1,814,726 0.61

20 Ng Kiat Lan 1,813,000 0.61

21 Zhongxin Capital Sdn Bhd 1,800,000 0.61

22 Teoh Seng Kar 1,769,080 0.60

23 Teoh Hong Kei 1,675,000 0.56

24 Ng Swat Lan 1,500,000 0.50

25 Beh Tong Sdn Bhd 1,479,696 0.50

26 Lim Guan Teik Holdings Sdn Bhd 1,386,490 0.47

27 Tiong See Chui 1,289,939 0.43

28 Ng Kiat Lan 1,149,418 0.39

29 Chan Chai Bee 1,140,050 0.38

30 Malacca Equity Nominees (Tempatan) Sdn BhdExempt An For Phillip Capital Management Sdn Bhd

1,033,100 0.35

anaLYSiS of SHareHoLDinGS(Cont’D)


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anaLYSiS of SHareHoLDinGS(Cont’D)


anaLYSiS ofiCULS HOLDinGS AS AT 30 JUNE 2020

Issue Size : RM100,000,000 in nominal value of ICULS of RM1.00 eachIssue Date : 15 April 2014Tenure of Issue : Eight (8) years from and inclusive of the date of issuance of the ICULSCoupon Rate : 3.25% per annum on the nominal value of the ICULS

DISTRIBuTION OF ICuLS HOLDINGS AS AT 30 JuNE 2020

Size of HoldingsNo. of

Holders% of

Holders No. of ICuLS

% of ICuLS

1 - 99 48 2.15 1,974 0.03

100 - 1,000 1,138 50.98 779,123 10.91

1,001 - 10,000 949 42.52 2,845,630 39.87

10,001 - 100,000 89 3.99 2,335,835 32.72

100,001 – 356,895* 8 0.36 1,175,372 16.47

356,896 and above** 0 0.00 0 0.00

Total 2,232 100.00 7,137,934 ^ 100.00

* Less than 5% of Issued ICULS** 5% and above of Issued ICULS ^ Excluding a total of 92,862,066 units of ICULS which had been converted to new ordinary shares of the

Company as at 30 June 2020.

30 LARGEST ICuLS HOLDERS AS AT 30 JuNE 2020

Name of ICuLS HoldersNo. of

ICuLS Held % of

ICuLS ^

1 A & E Integrated Technology Sdn Bhd 213,193 2.99

2 LTK (Melaka) Sdn Bhd 185,760 2.60

3 Teo Kwee Hock 144,900 2.03

4 Ngoo Wen Shin 142,640 2.00

5 See Hoy Chan Properties Sendirian Berhad 135,000 1.89

6 Chow Mok Sam 120,779 1.69

7 UOB Kay Hian Nominees (Tempatan) Sdn BhdPledged Securities Account For Teo Kwee Hock

118,100 1.65

8 Lim Seng Qwee 115,000 1.61


30 LARGEST ICuLS HOLDERS AS AT 30 JuNE 2020 (CONTINuED)

Name of ICuLS HoldersNo. of

ICuLS Held % of

ICuLS ^

9 Loh Teik Chye @ Loh Loon Teik 100,000 1.40

10 Tan Wei Meann Magdalene 100,000 1.40

11 Law Pey Nget 76,500 1.07

12 Lee Guan Seong 74,500 1.04

13 Eng (Ng) Kee Leok @ Ah Kau 70,000 0.98

14 Tai Kau @ Tai Nan Fatt 70,000 0.98

15 Teo Siew Lai 69,600 0.98

16 Lee Guan Huat 68,500 0.96

17 Kong Lek Chai @ Kong Ah Lim 67,000 0.94

18 Koh Seow San 53,040 0.74

19 Lee Yow Chee @ Lee Chun 51,049 0.72

20 Chew Geok Kee 51,000 0.71

21 Eu Mui @ Ee Soo Mei 50,000 0.70

22 Tan Shu Ayan 47,600 0.67

23 Ho Seng Hua 40,000 0.56

24 Lee Sing Gee 33,488 0.47

25 Ong Bee Lian 30,000 0.42

26 Tang Chin Heng 30,000 0.42

27 Xie Xin Poultry Merchant Sdn Bhd 30,000 0.42

28 Lim Hup Guan 28,888 0.40

29 Persatuan Peniaga Basikal & Motosikal Selangor & K. Lumpur 28,888 0.40

30 Cheong Yuet Thoe 26,624 0.37

^ Excluding a total of 92,862,066 units of ICULS which had been converted to new ordinary shares of the Company as at 30 June 2020.

anaLYSiS of iCULS HoLDinGS(Cont’D)


notiCe of annUaL GeneraL meetinG

NOTICE IS HEREBY GIVEN that the Thirty-First Annual General Meeting (“31st AGM”) of the Company will be held at Berjaya Times Square Hotel Kuala Lumpur, Bronx V & VI Ballroom, Level 14 West, No. 1, Jalan Imbi, 55100 Kuala Lumpur on 3 September 2020, Thursday at 10.00 a.m. for the following businesses:

Agenda

1. To lay the Statutory Audited Financial Statements for the financial year ended 31 March 2020 together with the Reports of the Directors and Auditors.

Refer to Explanatory

Note 1

Ordinary Business

2. To approve the payment of Directors’ fees of RM589,887 for the financial year ended 31 March 2020.

Resolution 1

3. To approve the payment of Directors’ benefits payable to the Non-Executive Directors up to an amount of RM150,000 for the period from 4 September 2020 until the next AGM of the Company.

Resolution 2

4. To re-elect the following Directors who are retiring by rotation pursuant to Clause 112 of the Company’s Constitution:

(i) Mr. Teoh Hock Chai @ Tew Hock Chai;(ii) Mr. Teoh Seng Kar; and(iii) Mr. Ng Soon Lai @ Ng Siek Chuan.

Resolution 3Resolution 4Resolution 5

5. To re-appoint Messrs. BDO PLT as Auditors of the Company and to authorise the Directors to fix their remuneration.

Resolution 6

As Special Business

To consider and if thought fit, to pass, with or without modifications, the Special Resolution as follows:

6. SPECIAL RESOLuTIONPROPOSED AMENDMENTS TO THE CONSTITuTION OF THE COMPANY (“Proposed Amendments”)

Special Resolution

“THAT the proposed amendments to the Constitution of the Company as set out in Annexure A be and are hereby approved and adopted; AND THAT the Board of Directors and Secretary of the Company be and are hereby authorised to take all steps as are necessary and expedient in order to implement, finalise and give full effect to the proposed amendments to the Constitution of the Company.”


7. To transact any other business of which due notice shall have been given in accordance with the Companies Act 2016 (“CA 2016”).

By order of the Board

LOKE WENG FOOK (MIA 6573)Company Secretary

Kuala Lumpur28 July 2020

Notes:

1. In respect of deposited securities, only members whose names appear in the Record of Depositors as at 25 August 2020, Tuesday, (“General Meeting Record of Depositors”) shall be eligible to attend the meeting.

2. A member who is entitled to attend and vote at a meeting of the Company, or at a meeting of any class of members, may appoint more than one (1) proxy to attend and vote instead of the member at the meeting provided that the member specifies the proportions of his/her shareholdings to be represented by each proxy.

3. A proxy need not be a member. There shall be no restriction as to the qualification of the proxy.

4. A proxy appointed to attend and vote at a meeting of the Company shall have the same rights as member to attend, participate, speak and vote at the meeting.

5. The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorised in writing or, if the appointer is a corporation, either under the corporation’s seal or under the hand of an officer or attorney duly authorised.

6. Where a member is an authorised nominee as defined under the Securities Industries (Central Depositories) Act 1991 (“Central Depositories Act”), he may appoint more than one (1) proxy in respect of each Securities Account he holds in ordinary shares of the Company standing to the credit of the said Securities Account.

7. Where a member is an exempt authorised nominee 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. An exempt authorised nominee shall mean an authorised nominee defined under the Central Depositories Act which is exempted from compliance with the provisions of subsection 25A(1) of the Central Depositories Act.

8. Where an exempt authorised nominee appoints two (2) or more proxies, the appointments shall be invalid unless he specifies the proportion of his holdings to be represented by each proxy.

9. The instrument appointing a proxy, and the power of attorney or other authority (if any) under which it is signed or a notarially certified or office copy of such power or authority, shall be deposited at the Company’s Registrar Office at Tricor Investor & Issuing House Services Sdn Bhd, Unit 32-01, Level 32, Tower A, Vertical Business Suite, Avenue 3, Bangsar South, No. 8, Jalan Kerinchi, 59200 Kuala Lumpur, 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, no later than 1 September 2020, Tuesday, at 10.00 a.m..

10. Pursuant to Paragraph 8.29A of Bursa Malaysia Securities Berhad Main Market Listing Requirements, all resolutions set out in the Notice of 31st AGM will be put to vote on a poll.

notiCe of annUaL GeneraL meetinG(Cont’D)


Explanatory Notes on Ordinary Business:

1. Statutory Audited Financial Statements for the financial year ended 31 March 2020

This Agenda item is meant for discussion only as the provisions of Section 248(2) and Section 340(1)(a) of the CA 2016 do not require a formal approval of the shareholders for the Audited Financial Statements. Hence, this item is not put forward to shareholders for voting.

2. Ordinary Resolution 1 – Payment of Directors’ Fees

The Remuneration Committee and the Board have reviewed the Directors’ fee based on Board duties, time commitment and responsibilities, Board members’ participation relating to the affairs of the Company, and the current financial performance of the Group. Remuneration Committee and the Board have also reviewed the remuneration packages and compensation payable to Executive Directors to ensure they are consistent with comparable companies and is otherwise fair and not excessive. The Directors’ fees for the financial year ended 31 March 2020 shall be payable in full after the shareholders have approved the payment.

3. Ordinary Resolution 2 – Directors’ Benefits Payable

The proposed Directors’ benefits payable to Non-Executive Directors comprises allowances and other benefits.

The total estimated amount of Directors’ benefits payable is calculated based on the number of scheduled Board’s and Board Committees’ meetings for the period from 4 September 2020 until the next AGM of the Company. This authority, unless revoked or varied by the Company in a general meeting, will expire at the conclusion of the next AGM of the Company.

4. Ordinary Resolutions 3, 4 and 5 – Re-election of Directors

The Nominating Committee (“NC”) of the Company has assessed the criteria and contribution of Mr. Teoh Hock Chai @ Tew Hock Chai, Mr. Teoh Seng Kar and Mr. Ng Soon Lai @ Ng Siek Chuan and has recommended for their re-election at the forthcoming AGM. The Board endorsed the NC’s recommendation that Mr. Teoh Hock Chai @ Tew Hock Chai, Mr. Teoh Seng Kar and Mr. Ng Soon Lai @ Ng Siek Chuan be re-elected as Directors of the Company.

5. Ordinary Resolution 6 – Re-appointment of Auditors

The Audit Committee (“AC”) reviewed the performance of the external auditors, Messrs. BDO PLT based on selected criterion and feedback gathered from the Management. In the evaluation process, AC had considered various aspect of audit including auditors’ objectivity and professional skepticism, relevance of audit findings; quality of services rendered and adequacy of resources; candor of communication with AC, quality of deliverables and value for money. The AC recommended to the Board that the overall performance of Messrs. BDO PLT is satisfactory. The Board recommends Messrs. BDO PLT’s re-appointment for shareholders’ approval at the 31st AGM.

Explanatory Note on Special Business:

6. Special Resolution - Proposed Amendments to the Constitution of the Company (“Proposed Amendments”)

The Proposed Special Resolution, if passed, will facilitate the members to deposit form of proxy to the Company via electronic means. The Proposed Amendments are set out in Annexure A to the Notice of the 31st AGM of the Company.

notiCe of annUaL GeneraL meetinG(Cont’D)


annexUre a

The existing Constitution of the Company is amended in the following manner where the Proposed Amendments are highlighted in bold, alongside it:-

Clause No. Existing Clause Proposed Amendment

100 Depositing form of proxy at the office

The instrument appointing a proxy, and the power of attorney or other authority (if any) under which it is signed or a notarially certified or office copy of such power or authority, shall be deposited at the Office or at such other place within Malaysia as is specified for that purpose in the notice convening the meeting not less than forty-eight (48) hours before the time appointed for holding the meeting or adjourned meeting, as the case may be, at which the person named as proxy in such instrument proposes to vote, or in the case of a poll, not less than twenty-four (24) hours before the time appointed for the taking of the poll, and in default the instrument of proxy shall not be treated as valid. A Member shall not be entitled to appoint more than two (2) proxies to attend and vote at the same meeting. Where a Member appoints two (2) proxies the appointments shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy.

Depositing form of proxy at the office

The instrument appointing a proxy, and the power of attorney or other authority (if any) under which it is signed or a notarially certified or office copy of such power or authority, shall be deposited at the Office or at such other place within Malaysia as is specified for that purpose in the notice convening the meeting not less than forty-eight (48) hours before the time appointed for holding the meeting or adjourned meeting, as the case may be, at which the person named as proxy in such instrument proposes to vote, or in the case of a poll, not less than twenty-four (24) hours before the time appointed for the taking of the poll, and in default the instrument of proxy shall not be treated as valid. A Member shall not be entitled to appoint more than two (2) proxies to attend and vote at the same meeting. For the purpose of depositing at the Office of the instrument appointing a proxy, the Company may also specify an electronic address in any of the sources specified in Clause 100A below. Where a Member appoints two (2) proxies the appointments shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy.



100A None Depositing form of proxy via electronic means

(1) Subject to the Act and the Listing Requirements, the Directors (or any authorised agent of the Company) shall accept the instrument appointing a proxy if it is transmitted to the Company by electronic means to the electronic address provided in a notice calling a meeting subject to such conditions and limitations as specified in such notice.

(2) The Directors may, if required, request such reasonable evidence as they, in their sole discretion, deem necessary to determine (a) the identity of the Member and the proxy, and (b) where the proxy is appointed by a person acting on behalf of the Member, the authority of that person to make such appointment.

(3) Pursuant to Clause 100 above, the appointment of a proxy by electronic means may be served at the electronic address specified by the Company in any of the following sources and shall be subject to any terms, conditions or limitations as may be set out therein:

(a) the notice convening the meeting;

(b) the instrument appointing a proxy as delivered to the Member by the Company;

(c) the website maintained by or on behalf of the Company; and/or

(d) any other sources which the Company think deemed expedient and fit from time to time.

annexUre a(Cont’D)



101 Validity of an instrument or proxy or attorney

A vote given in accordance with the terms of an instrument of proxy shall be valid, notwithstanding the previous death or unsoundness of mind of the principal or revocation of the instrument of proxy, or of the authority which the instrument of proxy was executed, or the transfer of the share in respect of which the instrument of proxy is given provided that no intimation in writing of such death, unsoundness of mind, revocation or transfer shall have been received by the Company at the Office before the commencement of the meeting or adjourned meeting (or in the case of a poll, before the time appointed for the taking of the poll) at which the instrument is used. A Member is not precluded from attending the meeting in person after lodging the instrument of proxy, however, such attendance shall automatically revoke the authority granted to the proxy.

Validity of an instrument or proxy or attorney

A vote given in accordance with the terms of an instrument of proxy shall be valid, notwithstanding the previous death or unsoundness of mind of the principal or revocation of the instrument of proxy, or of the authority which the instrument of proxy was executed, or the transfer of the share in respect of which the instrument of proxy is given provided that no intimation in writing of such death, unsoundness of mind, revocation or transfer shall have been received by the Company at the Office before the commencement of the meeting or adjourned meeting (or in the case of a poll, before the time appointed for the taking of the poll) at which the instrument is used. A Member is not precluded from attending the meeting in person after lodging the instrument of proxy, however, such attendance shall automatically revoke the authority granted to the proxy. Clause 100A shall also apply to a notice of the revocation of the authority of a proxy.

annexUre a(Cont’D)


Statement aCCompanYinG notiCe of annUaL GeneraL meetinGPursuant to Paragraph 8.27(2) of Bursa Malaysia Securities Berhad Main Market Listing Requirements

DETAILS OF INDIVIDuAL WHO IS STANDING FOR ELECTION AS DIRECTOR

There is no individual seeking election as a Director at the Thirty-First Annual General Meeting of the Company.

Details of the Directors standing for re-election are set out in the Profile of Directors of the Annual Report 2020.

✄ELK-DESA RESOuRCES BERHAD

198901002858 (180164-X)(Incorporated in Malaysia)

CDS Account No. No. of Shares held

Form of Proxy

I/We –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––(full name as per NRIC / Certificate of Incorporation in capital letters)

NRIC No./Co No. –––––––––––––––––––––––– of –––––––––––––––––––––––––––––––––––––––––––––––––––

––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––(full address)

being a member of ELK-DESA RESOURCES BERHAD hereby appoint

Full Name (in Block) NRIC/Passport No. Proportion of Shareholdings

No. of Shares %

Address

and / or* (*delete as appropriate)

Full Name (in Block) NRIC/Passport No. Proportion of Shareholdings

No. of Shares %

Address

or failing him/her * the Chairman of the Meeting as my/our proxy to vote on my/our behalf at the Thirty-First Annual General Meeting (“31st AGM”) of the Company to be held at Berjaya Times Square Hotel Kuala Lumpur, Bronx V & VI Ballroom, Level 14 West, No. 1, Jalan Imbi, 55100 Kuala Lumpur on 3 September 2020, Thursday at 10.00 a.m..

Please indicate with an “X” in the space provided below whether you wish your votes to be cast for or against the resolutions. In the absence of specified direction, your proxy will vote or abstain from voting at his/her discretion.

RESOLuTION FOR AGAINST

Approval of Directors’ fees (Resolution 1)

Approval of the payment of Directors’ benefits payable to the Non-Executive Directors

(Resolution 2)

Re-election of Mr. Teoh Hock Chai @ Tew Hock Chai as Director (Resolution 3)

Re-election of Mr. Teoh Seng Kar as Director (Resolution 4)

Re-election of Mr. Ng Soon Lai @ Ng Siek Chuan as Director (Resolution 5)

Re-appointment of Auditors (Resolution 6)

Approval of Proposed Amendments to the Constitution of the Company

(Special Resolution)

* Delete the words “the Chairman of the Meeting” if you wish to appoint some other person to be your proxy.

––––––––––––––––––––––––––––––––––––– –––––––––––––––––––––––– ––––––––––––––––––Signature of Shareholder /Common Seal Contact Number Date

Notes:1. In respect of deposited securities, only members whose names appear in the Record of Depositors as at 25 August 2020, Tuesday,

(“General Meeting Record of Depositors”) shall be eligible to attend the meeting.2. A member who is entitled to attend and vote at a meeting of the Company, or at a meeting of any class of members, may appoint more

than one (1) proxy to attend and vote instead of the member at the meeting provided that the member specifies the proportions of his/her shareholdings to be represented by each proxy.

Stamp

Please fold here

Please fold here

SHARE REGISTRARTricor Investor & Issuing House Services Sdn Bhd (Registration No. 197101000970 (11324-H))

Unit 32-01, Level 32, Tower AVertical Business SuiteAvenue 3 Bangsar SouthNo. 8, Jalan Kerinchi 59200 Kuala Lumpur

3. A proxy need not be a member. There shall be no restriction as to the qualification of the proxy. 4. A proxy appointed to attend and vote at a meeting of the Company shall have the same rights as member to attend, participate, speak

and vote at the meeting.5. The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorised in writing or, if the

appointer is a corporation, either under the corporation’s seal or under the hand of an officer or attorney duly authorised. 6. Where a member is an authorised nominee as defined under the Securities Industry (Central Depositories) Act 1991 (“Central Depositories

Act”), he may appoint more than one (1) proxy in respect of each Securities Account he holds in ordinary shares of the Company standing to the credit of the said Securities Account.

7. Where a member is an exempt authorised nominee 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. An exempt authorised nominee shall mean an authorised nominee defined under the Central Depositories Act which is exempted from compliance with the provisions of subsection 25A(1) of the Central Depositories Act.

8. Where an exempt authorised nominee appoints two (2) or more proxies, the appointments shall be invalid unless he specifies the proportion of his holdings to be represented by each proxy.

9. The instrument appointing a proxy, and the power of attorney or other authority (if any) under which it is signed or a notarially certified or office copy of such power or authority, shall be deposited at the Company’s Registrar Office at Tricor Investor & Issuing House Services Sdn Bhd, Unit 32-01, Level 32, Tower A, Vertical Business Suite, Avenue 3, Bangsar South, No. 8, Jalan Kerinchi, 59200 Kuala Lumpur, 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, no later than 1 September 2020, Tuesday at 10.00 a.m..

10. Pursuant to Paragraph 8.29A of Bursa Malaysia Securities Berhad Main Market Listing Requirements, all resolutions set out in the Notice of 31st AGM will be put to vote on a poll.

ELK

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2020

www.elk-desa.com.my

annual 2020 report

永聯資源有限公司 ELK-DESA RESOURCES BERHAD

198901002858 (180164-X)

ann ual p t - listed company

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