TG Excellence Berhad Perpetual Sukuk (Top Glove Corp Bhd) RM3 Billion - Information Memorandum

Transcription

1. Strictly Private & Confidential TG EXCELLENCE BERHAD (Registration No. 201901033302 (1342632-K)) INFORMATION MEMORANDUM IN RELATION TO THE ISSUANCE OF PERPETUAL ISLAMIC NOTES PURSUANT TO A PERPETUAL ISLAMIC NOTES ISSUANCE PROGRAMME OF UP TO RM3 BILLION IN NOMINAL VALUE BASED ON THE SHARIAH PRINCIPLE OF WAKALAH BI AL-ISTITHMAR BY TG EXCELLENCE BERHAD WITH A SUBORDINATED GUARANTEE BY TOP GLOVE CORPORATION BHD JOINT LEAD ARRANGERS CIMB INVESTMENT BANK BERHAD (REGISTRATION NO. 197401001266 (18417-M)) HONG LEONG INVESTMENT BANK BERHAD (REGISTRATION NO. 197001000928 (10209-W)) JOINT LEAD MANAGERS CIMB INVESTMENT BANK BERHAD (REGISTRATION NO. 197401001266 (18417-M)) HONG LEONG INVESTMENT BANK BERHAD (REGISTRATION NO. 197001000928 (10209-W)) OCBC AL-AMIN BANK BERHAD (REGISTRATION NO. 200801017151 (818444-T)) This Information Memorandum is dated 22 January 2020
2. STRICTLY CONFIDENTIAL – DO NOT FORWARD ATTACHED IS AN ELECTRONIC COPY OF THE INFORMATION MEMORANDUM DATED 22 JANUARY 2020 (“INFORMATION MEMORANDUM”), IN RELATION TO THE ISSUANCE OF PERPETUAL ISLAMIC NOTES UNDER THE SHARIAH PRINCIPLE OF WAKALAH BI AL-ISTITHMAR (“SUKUK WAKALAH”) PURSUANT TO A PERPETUAL ISLAMIC NOTES ISSUANCE PROGRAMME OF UP TO RM3 BILLION IN NOMINAL VALUE (“PERPETUAL SUKUK PROGRAMME”) BY TG EXCELLENCE BERHAD (REGISTRATION NO. 201901033302 (1342632-K)) (“ISSUER”) WITH A SUBORDINATED GUARANTEE BY TOP GLOVE CORPORATION BHD (REGISTRATION NO. 199801018294 (474423-X)). BY OPENING AND ACCEPTING THIS ELECTRONIC TRANSMISSION CONTAINING THE INFORMATION MEMORANDUM, THE RECIPIENT AGREES TO BE BOUND BY ALL THE TERMS AND CONDITIONS BELOW. IF YOU DO NOT AGREE TO ANY OF THE TERMS AND CONDITIONS, PLEASE DELETE THIS ELECTRONIC TRANSMISSION IMMEDIATELY. THE INFORMATION MEMORANDUM IS STRICTLY CONFIDENTIAL AND ANY DISTRIBUTION OF THE INFORMATION MEMORANDUM WITHOUT THE PRIOR WRITTEN CONSENT OF THE ISSUER, THE JOINT LEAD ARRANGERS (THE “JLAs”) AND THE JOINT LEAD MANAGERS (THE “JLMs”) IS UNAUTHORISED. THE PERSON RECEIVING THIS ELECTRONIC TRANSMISSION FROM THE ISSUER, THE JLAs/JLMs AND ITS/THEIR RESPECTIVE AGENTS IS PROHIBITED FROM DISCLOSING THE INFORMATION MEMORANDUM, ALTERING THE CONTENTS OF THE INFORMATION MEMORANDUM OR FORWARDING A COPY OF THE INFORMATION MEMORANDUM OR ANY PORTION THEREOF BY ELECTRONIC MAIL OR OTHERWISE TO ANY PERSON. THE INFORMATION MEMORANDUM IS NOT A PROSPECTUS AND HAS NOT BEEN REGISTERED NOR WILL IT BE REGISTERED AS A PROSPECTUS UNDER THE CAPITAL MARKETS AND SERVICES ACT, 2007 AS AMENDED FROM TIME TO TIME (“CMSA”). AT THE POINT OF ISSUANCE, THE SUKUK WAKALAH MAY ONLY BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF DIRECTLY OR INDIRECTLY TO A PERSON TO WHOM AN OFFER FOR SUBSCRIPTION OR PURCHASE OF, OR INVITATION TO SUBSCRIBE FOR OR PURCHASE THE SUKUK WAKALAH AND TO WHOM THE SUKUK WAKALAH ARE ISSUED WOULD FALL WITHIN PART 1 OF SCHEDULE 6 AND PART 1 OF SCHEDULE 7, READ TOGETHER WITH SCHEDULE 9 OF THE CMSA, SUBJECT TO ANY CHANGE IN THE APPLICABLE LAWS. THEREAFTER, THE SUKUK WAKALAH MAY ONLY BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF DIRECTLY OR INDIRECTLY TO A PERSON AN OFFER FOR SUBSCRIPTION OR PURCHASE OF, OR INVITATION TO SUBSCRIBE FOR OR PURCHASE THE SUKUK WAKALAH AND TO WHOM THE SUKUK WAKALAH ARE ISSUED WOULD FALL WITHIN PART 1 OF SCHEDULE 6 OR SECTION 229 (1)(b), READ TOGETHER WITH SCHEDULE 9 OR SECTION 257(3) OF THE CMSA, SUBJECT TO ANY CHANGE IN THE APPLICABLE LAWS. THIS TRANSMISSION SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THE SUKUK WAKALAH IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL UNDER THE LAWS OF SUCH JURISDICTIONS. TRANSMISSION OVER THE INTERNET MAY BE SUBJECT TO INTERRUPTIONS, TRANSMISSION BLACKOUT, DELAYED TRANSMISSION DUE TO INTERNET TRAFFIC, INCORRECT DATA TRANSMISSION DUE TO THE PUBLIC NATURE OF THE INTERNET, DATA CORRUPTION, INTERCEPTION, UNAUTHORISED AMENDMENT, TAMPERING, VIRUSES OR OTHER TECHNICAL, MECHANICAL OR SYSTEMIC RISKS ASSOCIATED WITH INTERNET TRANSMISSIONS. THE ISSUER, THE JLAs/JLMs OR ITS/THEIR RESPECTIVE AGENTS HAVE NOT ACCEPTED AND WILL NOT ACCEPT ANY RESPONSIBILITY AND/OR LIABILITY FOR ANY SUCH INTERRUPTION, TRANSMISSION BLACKOUT, DELAYED TRANSMISSION, INCORRECT DATA TRANSMISSION, DATA CORRUPTION, INTERCEPTION, AMENDMENT, TAMPERING OR VIRUSES OR ANY CONSEQUENCES THEREOF WHICH MAY RESULT IN A DIFFERENCE BETWEEN THE INFORMATION MEMORANDUM DISTRIBUTED TO YOU IN ELECTRONIC FORMAT AND THE HARD COPY VERSION AVAILABLE TO YOU ON REQUEST FROM US. THE FOREGOING IS IN ADDITION TO AND WITHOUT PREJUDICE TO ALL OTHER DISCLAIMERS AND AGREEMENTS WHICH A RECIPIENT OF THE INFORMATION MEMORANDUM SHALL BE DEEMED TO HAVE AGREED TO OR BE BOUND BY AS PROVIDED IN THE INFORMATION MEMORANDUM.
3. IMPORTANT NOTICE RESPONSIBILITY STATEMENTS This information memorandum dated 22 January 2020 (“Information Memorandum”) has been approved by the directors of TG Excellence Berhad (Registration No. 201901033302 (1342632-K)) (“TG Excellence” or the “Issuer”) and Top Glove Corporation Bhd (Registration No. 199801018294 (474423-X)) (“TG Corp” or “Kafalah Provider”) and they collectively and individually accept full responsibility for the accuracy of the information given and confirm that, after having made all reasonable enquiries in the circumstances, and to the best of their knowledge, information and belief, there are no false or misleading statements or other material facts the omission of which would make any statement in this Information Memorandum false or misleading and that there are no material omissions in this Information Memorandum. The opinions and intentions expressed in this Information Memorandum in relation to the Issuer and the Kafalah Provider are honestly held, have been reached after considering all relevant circumstances and are based on reasonable assumptions and there are no other facts in relation to the Issuer, the Kafalah Provider or the Perpetual Sukuk Programme (as defined in this Information Memorandum) the omission of which would, in the context of any issuance of Sukuk Wakalah (as defined in this Information Memorandum), make any statement in this Information Memorandum misleading in any material respect and all reasonable enquiries have been made by the Issuer and the Kafalah Provider to ascertain such facts and to verify the accuracy of all such information and statements. No representation or warranty, expressed or implied, is made such that the information remains unchanged in any respect as of any date or dates after those stated herein, with respect to any matter concerning the Issuer, the Kafalah Provider or any statement made in this Information Memorandum. The Issuer, the Kafalah Provider and their respective board of directors accept full responsibility for the information contained in this Information Memorandum. GENERAL STATEMENTS OF DISCLAIMER This Information Memorandum is provided on a confidential basis to potential investors for the sole purpose of assisting them to decide whether to subscribe for or purchase the perpetual Islamic notes issued under the Shariah principle of Wakalah Bi Al-Istithmar (“Sukuk Wakalah”) pursuant to a perpetual Islamic notes issuance programme of up to RM3 billion in nominal value by the Issuer ("Perpetual Sukuk Programme") with a subordinated guarantee by the Kafalah Provider (“Subordinated Guarantee”). At the point of issuance of the Sukuk Wakalah, the Sukuk Wakalah may not be issued, offered, sold, transferred or otherwise disposed of, directly or indirectly, nor shall any document or other material in connection therewith including this Information Memorandum be distributed, in Malaysia to any person unless such issue, offer, sale, transfer or disposal to such person qualifies as an excluded issue, excluded offer or excluded invitation under Part 1 of Schedule 6 and Part 1 of Schedule 7 of the CMSA read together with Schedule 9 (or section 257(3)) of the CMSA, subject to any change in applicable laws. Thereafter, the Sukuk Wakalah may not be issued, offered, sold, transferred or otherwise disposed of, directly or indirectly, nor shall any document or other material in connection therewith including this Information Memorandum be distributed, in Malaysia to any person unless such issue, offer, sale, transfer or disposal to such person qualifies as excluded offer or excluded invitation under Part 1 of Schedule 6 or section 229 (1)(b) of i
4. the CMSA read together with Schedule 9 (or section 257(3)) of the CMSA, subject to any change in applicable laws. No application is being made to list the Sukuk Wakalah on any stock exchange, nor is any such application contemplated. This Information Memorandum shall not be, in whole or in part, reproduced or used for any other purpose, or shown, given, copied to or filed with any other person including, without limitation, any government or regulatory authority except with the prior written consent of the Issuer or as required under Malaysian laws, regulations or guidelines. The Issuer has authorised CIMB Investment Bank Berhad (Registration No. 197401001266 (18417-M)) (“CIMB”) and Hong Leong Investment Bank Berhad (Registration No. 197001000928 (10209-W)) (“HLIB”) as the joint lead arrangers (collectively, the “JLAs”) and CIMB, HLIB and OCBC Al-Amin Bank Berhad (Registration No. 200801017151 (818444-T)) (“OCBC”) as the joint lead managers (“JLMs”), to distribute this Information Memorandum. None of the information or data contained in this Information Memorandum has been independently verified by the JLAs/JLMs of the Perpetual Sukuk Programme. Accordingly, no representation, warranty or undertaking, express or implied, is given or assumed by the JLAs/JLMs as to the authenticity, origin, validity, accuracy or completeness of such information and data or that the information or data remains unchanged in any respect after the relevant date shown in this Information Memorandum. Each of the JLAs/JLMs has not accepted and will not accept any responsibility for the information and data contained in this Information Memorandum or otherwise in relation to the Perpetual Sukuk Programme and shall not be liable for any consequences of reliance on any of the information or data in this Information Memorandum, except as provided by Malaysian laws. No person is authorised to give any information or data or to make any representation or warranty other than as contained in this Information Memorandum and, if given or made, any such information, data, representation or warranty must not be relied upon as having been authorised by the Issuer, the Kafalah Provider, the JLAs/JLMs or any other person. It is to be noted that although the Issuer has sought the advice of CIMB Islamic Bank Berhad (“Shariah Adviser”) with regards to the conformity of the Sukuk Wakalah and the structure and mechanism as described in the Principal Terms and Conditions of the Perpetual Sukuk Programme with Shariah principles, no representation, warranty or undertaking, express or implied, is given by the Issuer as to Shariah permissibility of the structure or the issue and trading of the Sukuk Wakalah and the Issuer, the JLAs/JLMs and the Shariah Adviser shall not be liable for any consequences of such reliance and/or assumption of any such compliance. Each recipient should perform and is deemed to have consulted its own professional advisers and obtained independent Shariah advice on the Shariah permissibility of the structure or the issue and trading of the Sukuk Wakalah. Any non-compliance with Shariah principles may have legal consequences. The Perpetual Sukuk Programme has been accorded an indicative credit rating of AAIS(cg) by Malaysian Rating Corporation Berhad. A credit rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time by the credit rating agency. This Information Memorandum has not been and will not be made to comply with the laws of any country (including its territories, all jurisdictions within that country and any possession areas subject to its jurisdiction), other than Malaysia (“Foreign Jurisdiction”), and has not been and will not be lodged, registered or approved pursuant ii
5. to or under any legislation (or with or by any regulatory authorities or other relevant bodies) of any Foreign Jurisdiction and it does not constitute an issue or offer or sale of, or an invitation to subscribe for or purchase of the Sukuk Wakalah or any other securities of any kind by any party in any Foreign Jurisdiction. The distribution or possession of this Information Memorandum in or from certain jurisdictions may be restricted or prohibited by law. Each recipient is required by the Issuer, the Kafalah Provider and the JLAs/JLMs to seek appropriate professional advice regarding, and to observe, any such restriction or prohibition. Neither the Issuer, the Kafalah Provider nor the JLAs/JLMs accepts any responsibility or liability to any person in relation to the distribution or possession of this Information Memorandum in or from any such Foreign Jurisdiction. This Information Memorandum is not and is not intended to be a prospectus and has not been registered or lodged under the laws of Malaysia or any Foreign Jurisdiction as a prospectus. Unless otherwise specified in this Information Memorandum, the information contained in this Information Memorandum is current as at the date hereof. By accepting delivery of this Information Memorandum, each recipient agrees to the terms upon which this Information Memorandum is provided to such recipient as set out in this Information Memorandum, and further agrees and confirms that (a) it will keep confidential all of such information and data, (b) it is lawful for the recipient to subscribe for or purchase the Sukuk Wakalah under all jurisdictions to which the recipient is subject, (c) the recipient has complied with all applicable laws in connection with such subscription or purchase of the Sukuk Wakalah, (d) the Issuer, the JLAs/JLMs and their respective affiliates, directors, officers, employees, agents and professional advisers are not and will not be in breach of the laws of any jurisdiction to which the recipient is subject as a result of such subscription or purchase of the Sukuk Wakalah, and they shall not have any responsibility or liability in the event that such subscription or purchase of the Sukuk Wakalah is or shall become unlawful, unenforceable, voidable or void, (e) it is aware that the Sukuk Wakalah can only be offered, sold, transferred or otherwise disposed of directly or indirectly in accordance with the relevant selling restrictions and all applicable laws, (f) it has sufficient knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of subscribing or purchasing the Sukuk Wakalah, and is able and is prepared to bear the economic and financial risks of investing in or holding the Sukuk Wakalah, (g) it is subscribing for or accepting the Sukuk Wakalah for its own account, (h) it is a person falling within one of the categories of persons specified in Part 1 of Schedule 6 and Part 1 of Schedule 7 of the CMSA read together with Schedule 9 (or Section 257(3)) of the CMSA, subject to any change in applicable laws at issuance and Part 1 of Schedule 6 or Section 229(1)(b) of the CMSA, read together with Schedule 9 or Section 257(3) of the CMSA, subject to any change in applicable laws thereafter and (i) the making of this disclosure and general statement of disclaimer does not impose any continuing duty to update or provide any information from time to time or at any time except as specifically provided by law. Each recipient is solely responsible for seeking all appropriate expert advice as to the laws of all jurisdictions to which it is subject. For the avoidance of doubt, this Information Memorandum shall not constitute an offer, issue or invitation to subscribe or purchase of the Sukuk Wakalah in relation to any recipient who does not fall within item (h) above. This Information Memorandum or any document delivered under or in relation to the issue, offer and sale of the Sukuk Wakalah is not, and should not be construed as, a recommendation by the Issuer, the Kafalah Provider, the JLAs/JLMs or any other party to the recipient to subscribe for or purchase the Sukuk Wakalah. This Information Memorandum is not a substitute for, and should not be regarded as, an independent iii
6. evaluation and analysis and does not purport to be all inclusive . Each issue of the Sukuk Wakalah will carry different risks and all potential investors are strongly encouraged to evaluate each issue on its own merit. Each recipient should perform and is deemed to have made its own independent investigation and analysis of the Issuer, the Kafalah Provider, the Sukuk Wakalah and all other relevant matters, and each recipient should consult its own professional advisers. Neither the delivery of this Information Memorandum nor the offering, sale or delivery of any Sukuk Wakalah shall in any circumstance imply that the information contained herein concerning the Issuer or the Kafalah Provider is correct at any time subsequent to the date hereof or that any other information supplied in connection with the Perpetual Sukuk Programme is correct as of any time subsequent to the date indicated in the document containing the same. The JLAs/JLMs expressly do not undertake to review the financial condition or affairs of the Issuer, the Kafalah Provider or its subsidiaries during the life of the Sukuk Wakalah or to advise any investor in the Sukuk Wakalah of any information coming to their attention. The recipient of this Information Memorandum or the potential investors should review, inter alia, the most recently published documents incorporated by reference into this Information Memorandum when deciding whether or not to purchase any Sukuk Wakalah. This Information Memorandum includes certain historical information, estimates, or reports thereon derived from sources mentioned in this Information Memorandum and other parties with respect to the Malaysian economy, the material businesses in which the Kafalah Provider and its subsidiaries operate and certain other matters. Such information, estimates, or reports have been included solely for illustrative purposes. No representation or warranty is made as to the accuracy or completeness of any information, estimate and or report thereon derived from such and other third party sources. Certain statements, information, estimates and reports in this Information Memorandum are based on historical data, which may not be reflective of the future, and others are forward-looking in nature and are subject to risks and uncertainties, including, among others, the Issuer’s and the Kafalah Provider’s business strategy and expectation concerning its position in the Malaysian economy, future operations, growth prospects and industry prospects. While the respective Boards of the Issuer and the Kafalah Provider believes that these forward-looking statements are reasonable, these statements are nevertheless subject to known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to differ materially from the future results, performance or achievements expressed or implied in such forward-looking statements. In light of all this, the inclusion of forward-looking statements in this Information Memorandum should not be regarded as a representation or warranty by the Issuer or the Kafalah Provider that the plans and objectives of the Issuer or the Kafalah Provider will be achieved. All discrepancies (if any) in the tables included in this Information Memorandum between the listed amounts and totals thereof are due to, and certain numbers appearing in this Information Memorandum are shown after, rounding. Where this Information Memorandum contains or refers to a summary of a document or agreement, the summary is not meant to be exhaustive. The contents of the summary may be subject to some other provisions in the relevant document or agreement. iv
7. STATEMENTS OF DISCLAIMER BY THE SECURITIES COMMISSION MALAYSIA (“SC”) In accordance with the CMSA, a copy of this Information Memorandum will be deposited with the SC, who takes no responsibility for its contents. The lodgement pursuant to the SC LOLA Guidelines (as defined herein) in relation to the proposed issuance of the Sukuk Wakalah has been made with the SC on 22 January 2020 pursuant to the Guidelines on Unlisted Capital Market Products under the Lodge and Launch Framework issued by the SC on 9 March 2015 (updated and effective on 15 June 2015 and revised on 26 November 2019) (“SC LOLA Guidelines”) (the “Lodgement”). The issue, offer or invitation in relation to the Sukuk Wakalah in this Information Memorandum or otherwise is subject to the Lodgement and the fulfilment of various conditions precedent including without limitation the execution of the agreements relating to the Perpetual Sukuk Programme. Each recipient of this Information Memorandum acknowledges and agrees that the Lodgement shall not be taken to indicate that the SC recommends the subscription or purchase of the Sukuk Wakalah. The SC shall not be liable for any non-disclosure on the part of the Issuer and the Kafalah Provider and assumes no responsibility for the correctness or completeness of any statements made or opinions or reports expressed or contained in this Information Memorandum. EACH ISSUANCE OF THE SUKUK WAKALAH WILL CARRY DIFFERENT RISKS AND ALL INVESTORS SHOULD EVALUATE EACH ISSUANCE OF THE SUKUK WAKALAH BASED ON ITS MERITS AND RISKS. INVESTORS SHOULD RELY ON THEIR OWN EVALUATION TO ASSESS THE MERITS AND RISKS OF THEIR INVESTMENT IN THE SUKUK WAKALAH. IT IS RECOMMENDED THAT PROSPECTIVE INVESTORS CONSULT THEIR FINANCIAL, LEGAL AND OTHER ADVISERS BEFORE PURCHASING OR SUBSCRIBING FOR THE SUKUK WAKALAH. CONFIDENTIALITY To the recipient of this Information Memorandum: This Information Memorandum and its contents are strictly confidential and are made strictly on the basis that it will remain confidential. Accordingly, this Information Memorandum and its contents, or any information, which is made available in connection with any further enquiries, must be held in complete confidence. In the event that there is any contravention of this confidentiality undertaking or there is a reasonable likelihood that this confidentiality undertaking may be contravened, the Issuer and/or the JLAs/JLMs may, at its discretion, apply for any remedy available to the Issuer and/or the JLAs/JLMs whether at law or equity, including without limitation, injunctions. Each of the Issuer and/or the JLAs/JLMs is entitled to fully recover from the contravening party all costs, expenses and losses incurred and/or suffered. For the avoidance of doubt, it is hereby deemed that this confidentiality undertaking shall be imposed upon the recipient, the recipient’s professional advisors, directors, employees and any other persons concerned with the Sukuk Wakalah and the Perpetual Sukuk Programme. v
8. The recipient must return this Information Memorandum and all reproductions thereof whether in whole or in part and any other information in connection therewith to the JLAs /JLMs promptly upon the JLAs/JLMs’ request, unless that recipient provides proof of a written undertaking satisfactory to the JLAs/JLMs with respect to destroying these documents as soon as reasonably practicable after the said request from the JLAs/JLMs. DOCUMENTS INCORPORATED BY REFERENCE The following documents issued from time to time after the date hereof shall be deemed to be incorporated in, and to form part of, this Information Memorandum:(i) the most recently published audited annual financial statements and, if published later, the most recently published interim financial report of the Issuer (if any) and the Kafalah Provider; (ii) the most recently published annual report of the Kafalah Provider; (iii) all supplements or amendments to this Information Memorandum circulated by the Issuer, if any, save that any statement contained herein or in a document which is deemed to be incorporated by reference herein shall be deemed to be modified or superseded for the purpose of this Information Memorandum to the extent that a statement contained in any such subsequent document which is deemed to be incorporated by reference herein modifies or supersedes such earlier statement (whether expressly, by implication or otherwise). Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Information Memorandum; (iv) any pricing supplements prepared and issued in relation to an issuance of the Sukuk Wakalah under the Perpetual Sukuk Programme, and (v) all announcements of the Kafalah Provider at Bursa Malaysia’s website, where applicable. THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK vi
9. TABLE OF CONTENTS DEFINITIONS .................................................................................................................................. 1 SECTION 1.0 EXECUTIVE SUMMARY .................................................................................. 4 SECTION 2.0 PRINCIPAL TERMS AND CONDITIONS ...................................................... 8 SECTION 3.0 CORPORATE INFORMATION ON THE ISSUER AND KAFALAH PROVIDER ....................................................................................................... 54 SECTION 4.0 BUSINESS OVERVIEW OF THE GROUP .................................................. 68 SECTION 5.0 INVESTMENT CONSIDERATIONS ............................................................. 80 SECTION 6.0 INDUSTRY OVERVIEW AND FUTURE PROSPECTS ............................. 98 SECTION 7.0 OTHER MATERIAL INFORMATION ......................................................... 103 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE KAFALAH PROVIDER FOR THE FYE2019 APPENDIX II UNAUDITED FINANCIAL STATEMENTS OF THE KAFALAH PROVIDER FOR THE 1QFYE2020
10. DEFINITIONS In this Information Memorandum , the following words or expressions shall have the following meanings except where the context otherwise requires: ARGMA - ASEAN Rubber Glove Manufacturers Association. Baht - Thai Baht, being the lawful currency of Thailand. BNM - Bank Negara Malaysia. Board - the board of directors. Bursa Malaysia - Bursa Malaysia Securities 200301033577 (635998-W)). CIMB - CIMB Investment Bank 197401001266 (18417-M)). CMSA - Capital Markets and Services Act, 2007 (as amended from time to time). Companies Act - Companies Act, 2016 (as amended from time to time). Euro - Euro, being the lawful currency of 19 out of 28 members of the European Union. Facility Agent - HLIB. FYE - the financial year ending/ended, as the case may be. Group or Kafalah Provider Group - the Kafalah Provider and its subsidiaries, associated companies and/or jointly controlled entities, collectively. HLIB - Hong Leong Investment Bank Berhad (Registration No. 197001000928 (10209-W)). Issuer or TG Excellence - TG Excellence Berhad (Registration No. 201901033302 (1342632-K)). Berhad Berhad (Registration No. (Registration No. Joint Lead Arrangers - collectively, CIMB and HLIB. or JLAs Joint Lead Managers or JLMs - collectively, CIMB, HLIB and OCBC. Joint Principal Advisers or JPAs - collectively, CIMB and HLIB. Kafalah Provider/ TG Corp - Top Glove Corporation Bhd (Registration No. 199801018294 (474423-X)). LPD - means the latest practicable date being 31 December 2019. 1
11. MARGMA - Malaysia Rubber Gloves Manufacturer Association . Material Subsidiaries - material subsidiaries of the Kafalah Provider:a) b) c) d) e) f) g) Top Glove Sdn Bhd; TG Medical Sdn Bhd; Top Quality Glove Sdn Bhd; GMP Medicare Sdn Bhd; Aspion Sdn Bhd; Top Glove Medical (Thailand) Co Ltd; and Top Care Sdn Bhd. MREPC - Malaysian Rubber Export Promotion Council. OCBC - OCBC Al-Amin Bank Berhad (Registration No. 200801017151 (818444-T)). OEM - original equipment manufacturer. Perpetual Sukuk Programme - the perpetual Islamic notes issuance programme of up to RM3 billion in nominal value based on the Shariah principle of Wakalah Bi Al-Istithmar with a Subordinated Guarantee by the Kafalah Provider. PRC - the People's Republic of China. Ringgit/RM and sen - Ringgit Malaysia and sen respectively, being the lawful currency of Malaysia. RMB - Renminbi, being the lawful currency of PRC. SC - Securities Commission Malaysia. SGD - Singapore Dollar, being the lawful currency of Singapore. Subordinated Guarantee - the unconditional and irrevocable subordinated guarantee based on the Shariah principle of Kafalah provided by the Kafalah Provider as a continuing obligation, in favour of the Sukuk Trustee for and on behalf of the Sukukholders. Sukuk Trustee - Amanahraya Trustees 200701008892 (766894-T)). Sukuk Wakalah - the perpetual Islamic notes issued or to be issued pursuant to the Perpetual Sukuk Programme. Sukukholders - the holders of the Sukuk Wakalah. Transaction Documents - the Transaction Documents shall include the following: Berhad (i) the Trust Deed; (ii) the programme agreement; (iii) the Subordinated Guarantee; 2 (Registration No.
12. (iv) the subscription agreement(s); (v) the securities lodgement form; and (vi) such other agreements as may be advised by the solicitor in connection with the Perpetual Sukuk Programme. Trust Deed - the trust deed constituting the Sukuk Wakalah entered or to be entered between the Issuer and the Sukuk Trustee. Trust Deeds Guidelines - the SC’s Trust Deeds Guidelines (revised on 12 July 2011 and effective on 12 August 2011) as may be replaced, substituted or revised from time to time. U.S. - the United States of America. Yen - Japanese Yen, being the lawful currency of Japan. 3
13. SECTION 1 .0 EXECUTIVE SUMMARY The information set out in this section is an executive summary of the principal features of the transaction. It is qualified in its entirety by, and must be read in conjunction with, the further detailed information appearing elsewhere in this Information Memorandum. 1.1 Brief background of the Issuer The Issuer was incorporated on 18 September 2019 in Malaysia under the Companies Act as a public company limited by shares under its existing name. The principal activities of the Issuer are activities auxiliary to finance N.E.C. The Issuer is a special purpose vehicle set up to raise funds for the Group. The registered office and principal place of business of the Issuer is located at Level 21, Top Glove Tower, 16 Persiaran Setia Dagang, Setia Alam, Seksyen U13, 40170 Shah Alam, Selangor. 1.2 Brief background of the Kafalah Provider TG Corp, the ultimate holding company of the Issuer, was incorporated on 23 December 1998 under the Companies Act as a public company limited by shares under its existing name. TG Corp was listed on the Second Board of the Kuala Lumpur Stock Exchange in 2001 and was transferred to the Main Board of the Kuala Lumpur Stock Exchange (now known as the Main Market of Bursa Malaysia) on 16 May 2002. On 28 June 2016, TG Corp completed a secondary listing on the Main Board of the Singapore Exchange Securities Trading Limited. As at the date of this Information Memorandum, TG Corp is one of the component stocks of the MSCI Global Standard Index, FTSE Bursa Malaysia Kuala Lumpur Composite Index (“KLCI”), FBM Top 100 Index, FBM Emas Index, FBM Emas Syariah Index, FBM Hijrah Syariah Index, FTSE4Good Bursa Malaysia Index and the Dow Jones Sustainability Indices (DJSI) for Emerging Markets. TG Corp is principally engaged in investment holding activities and provision of management services. 1.3 Brief summary of the structure of the Perpetual Sukuk Programme (Please refer to the definitions in Section 2.0 of this Information Memorandum for all terminologies used under this Section 1.3) The Perpetual Sukuk Programme entails the issuance of Sukuk Wakalah of up to RM3 billion in nominal value based on the Shariah principle of Wakalah Bi AlIstithmar. The Perpetual Sukuk Programme and the Sukuk Wakalah have been structured with a perpetual tenure and there is no fixed maturity date on which the Issuer is required to mandatorily redeem the Sukuk Wakalah. There is also no event of default or dissolution event where the Sukuk Wakalah can be declared to be immediately due and payable, save where a final and effective order is made or an effective resolution is passed by the respective shareholders for the liquidation, winding-up or dissolution of the Issuer or the Kafalah Provider, provided that a stay on such order has not been granted by the relevant court of competent jurisdiction within thirty (30) days from the date of such order. 4
14. Each Sukuk Wakalah issued under the Perpetual Sukuk Programme will be unsecured . The Kafalah Provider will provide the Subordinated Guarantee, as a continuing obligation in favour of the Sukuk Trustee for and on behalf of the Sukukholders, under which the Kafalah Provider agrees to pay any amount due and payable by the Issuer under the Sukuk Wakalah in the event the Issuer fails to pay such amount and such failure to pay continues for a period of seven (7) business days or more. Under the Perpetual Sukuk Programme, the Issuer may, at its sole discretion elect to defer part or all of the Expected Periodic Distribution Amount by giving not more than fifteen (15) nor less than five (5) business days before the relevant Periodic Distribution Date, a notice in writing to the Facility Agent and the Sukuk Trustee (for and on behalf of the Sukukholders), provided that no Issuer’s Compulsory Periodic Distribution Payment Event (as defined below) AND no Kafalah Provider’s Compulsory Periodic Distribution Payment Event (as defined below) has occurred. Issuer’s Compulsory Periodic Distribution Payment Event If, during the six (6) month period ending on the day before the relevant scheduled Periodic Distribution Date, either or both of the following have occurred: (i) a dividend, distribution or other payment (save and except for advances by the Issuer to the Kafalah Provider Group which source of fund is from the issuance proceeds of the Sukuk Wakalah) has been declared or paid by the Issuer in respect of any of the Issuer’s Junior Obligations or Parity Obligations (except on a pro-rata basis with the Sukuk Wakalah); and (ii) the Issuer’s Junior Obligations or Parity Obligations (except on a pro-rata basis with the Sukuk Wakalah) have been purchased, redeemed, reduced, cancelled, bought-back or acquired by the Issuer. Kafalah Provider’s Compulsory Periodic Distribution Payment Event If, during the six (6) month period ending on the day before the relevant scheduled Periodic Distribution Date, either or both of the following have occurred:(i) a dividend, distribution or other payment has been declared or paid by the Kafalah Provider in respect of any of the Kafalah Provider’s Junior Obligations or Parity Obligations (except on a pro-rata basis with the Sukuk Wakalah); and (ii) the Kafalah Provider’s Junior Obligations or Parity Obligations (except on a pro-rata basis with the Sukuk Wakalah) have been purchased, redeemed, reduced, cancelled, bought-back or acquired by the Kafalah Provider. The deferred Expected Periodic Distribution Amount which is otherwise scheduled to be paid on a Periodic Distribution Date is payable to the Sukukholders on the next Periodic Distribution Date following the deferral of the Expected Periodic Distribution Amount. However, the Issuer may at its sole discretion, elect to further defer any outstanding Arrears of Deferred Periodic Distribution by complying with the foregoing notice requirement. 5
15. Further , the Sukuk Wakalah may be redeemed at the option of the Issuer pursuant to an Optional Redemption, an Accounting Event Redemption, a Tax Event Redemption, and/or a Rating Event Redemption. Please refer to Section 2.0 below for details of the principal terms and conditions of the Perpetual Sukuk Programme. 1.4 Status of the Sukuk Wakalah (Please refer to the definitions in Section 2.0 of this Information Memorandum for all terminologies used under this Section 1.4) The Sukuk Wakalah shall constitute direct, unsecured, unconditional and subordinated obligations of the Issuer under the laws of Malaysia and shall at all times rank as follows:(i) below all present and future creditors of the Issuer; (ii) pari passu with the Parity Obligations; and (iii) above the Junior Obligations. Upon declaration of an Enforcement Event, the payment obligations of the Issuer under the Sukuk Wakalah shall rank ahead of the holders of Junior Obligations of the Issuer and rank junior to the claims of all other present and future creditors of the Issuer (other than Parity Obligations of the Issuer). 1.5 Status of the Subordinated Guarantee (Please refer to the definitions in Section 2.0 of this Information Memorandum for all terminologies used under this Section 1.5) The payment obligations of the Kafalah Provider under the Subordinated Guarantee shall constitute direct, unsecured, unconditional and subordinated obligations of the Kafalah Provider under the laws of Malaysia and shall at all times rank as follows: (i) below all present and future creditors of the Kafalah Provider; (ii) pari passu with the Parity Obligations of the Kafalah Provider; and (iii) above the Junior Obligations of the Kafalah Provider. Upon the declaration of an Enforcement Event, the payment obligations of the Kafalah Provider under the Subordinated Guarantee shall rank ahead of the holders of Junior Obligations of the Kafalah Provider and rank junior to the claims of all other present and future creditors of the Kafalah Provider (other than Parity Obligations of the Kafalah Provider). 1.6 Credit Rating The Perpetual Sukuk Programme has been accorded an indicative credit rating of AA- IS(cg) by Malaysian Rating Corporation Berhad vide its letter dated 21 January 2020. 6
16. 1 .7 Utilisation of proceeds (Please refer to the definitions in Section 2.0 of this Information Memorandum for all terminologies used under this Section 1.7) The proceeds from the issuance of the Sukuk Wakalah shall be utilised by the Kafalah Provider Group to refinance its existing financing/debt obligations (whether in whole or in part), repayment of intercompany borrowings, and/or to finance working capital requirements, investments, acquisition, capital expenditure and/or its general corporate purposes (which shall include, without limitation, the payment of fees, costs and expenses relating to the Perpetual Sukuk Programme). In any case, all utilisation of proceeds raised under the Sukuk Wakalah shall be Shariah-compliant. 1.8 Regulatory approvals obtained The Issuer has obtained the approval from the SC for waiver from compliance with paragraph 12.01(a) (in respect of items (i), (iv), (v), (vi), (vii) and (viii)) of the Trust Deeds Guidelines on 18 November 2019. 1.9 Selling Restrictions The Sukuk Wakalah may only be offered, sold, transferred or otherwise disposed of, directly or indirectly, to a person to whom an offer for subscription or purchase of, or invitation to subscribe for or purchase the Sukuk Wakalah and to whom the Sukuk Wakalah are issued would fall within: (i) Part 1 of Schedule 6 and Part 1 of Schedule 7; and (ii) read together with Schedule 9 or Section 257(3), of the CMSA, subject to any change in the applicable laws, and such other selling restrictions as may be applicable outside Malaysia. Thereafter, the Sukuk Wakalah may only be offered, sold, transferred or otherwise disposed of, directly or indirectly, to a person to whom an offer for subscription or purchase of, or invitation to subscribe for or purchase the Sukuk Wakalah and to whom the Sukuk Wakalah are issued would fall within: (i) Part 1of Schedule 6 or Section 229(1)(b); and (ii) read together with Schedule 9 or Section 257(3), of the CMSA, subject to any change in the applicable laws, and such other selling restrictions as may be applicable outside Malaysia. THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 7
17. SECTION 2 .0 PRINCIPAL TERMS AND CONDITIONS The principal terms and conditions relating to the Perpetual Sukuk Programme are set out below. Words and expressions used and defined in this Section 2.0, in the event of any inconsistency with the definition section of this Information Memorandum, shall only be applicable for this Section 2.0. 1. Issuer : TG Excellence Berhad (Registration No. 201901033302 (1342632-K)), a SPV wholly-owned by Top Glove Corporation Bhd. 2. Guarantor / Kafalah Provider : Top Glove Corporation Bhd (Registration No. 199801018294 (474423-X)). 3. Name of facility : A perpetual Islamic notes issuance programme of up to RM3 billion in nominal value based on the Shariah principle of Wakalah Bi Al-Istithmar (“Perpetual Sukuk Programme”). 4. One time issue or programme : Programme 5. Shariah Principle (for Sukuk) : Wakalah Bi Al-Istithmar 6. Facility description (for Ringgit-denominated sukuk, to provide description as cleared by SC) : Any perpetual Islamic note to be issued under the Perpetual Sukuk Programme will be issued under the Shariah principle of Wakalah Bi Al-Istithmar (“Sukuk Wakalah”). Pursuant to a Wakalah agreement entered between the Sukuk Trustee (acting on behalf of the holders of the Sukuk Wakalah (the "Sukukholders")) and the Issuer ("Wakalah Agreement"), the Sukuk Trustee shall appoint the Issuer as its agent ("Wakeel") to perform duties in respect of the Wakalah Portfolio (as defined below) for each tranche (as defined below) of the Sukuk Wakalah, including management of the Wakalah Portfolio, for a nominal fee, in accordance with the terms of the Wakalah Agreement. “tranche” shall mean each Sukuk Wakalah that has the same issue date, same First Call Date, and identical terms and conditions. The Wakeel shall manage the Wakalah Portfolio, including investment in the Wakalah Portfolio, and collection and distribution of income generated from the Wakalah Portfolio. The Shariah-compliant ("Wakalah Portfolio") combination of: 8 Wakalah portfolio shall comprise a
18. (a) the Ijarah Assets (as defined below); and (b) the Commodity Murabahah Investment (as defined below). The Shariah-compliant leasable assets ("Ijarah Assets") shall represent a minimum of 33% of the value of the Wakalah Portfolio ("Assets Minimum Requirements"). The Ijarah Assets would be a specific asset and may include factory, land, terrace house, warehouse, office tower and/or office building. The Ijarah Assets shall be free from encumbrances and if any of the Ijarah Assets are encumbered, the Issuer shall ensure the relevant consents have been obtained from the chargee to use such Ijarah Assets. For the avoidance of doubt, the above ratio of at least 33% of the value of the Wakalah Portfolio is only applicable at the point of initial investment for the Sukuk Wakalah, subject to the valuation principles set out in the Wakalah Agreement, and does not need to be maintained throughout the tenure of the Sukuk Wakalah. However, the Wakeel shall ensure that the Ijarah Assets shall at all times be a component of the Wakalah Portfolio. The Issuer shall from time to time issue Sukuk Wakalah to the Sukukholders and the Sukukholders shall subscribe to the Sukuk Wakalah by paying the issuance proceeds. Under the Wakalah Agreement, the Wakeel shall be authorised to utilise the proceeds arising from the issuance of such tranche of the Sukuk Wakalah for investment in the Wakalah Portfolio on behalf of the Sukuk Trustee (for the benefit of the Sukukholders). The Wakeel shall hold the Wakalah Portfolio on trust for the benefit of the Sukukholders of the relevant tranche. The Sukuk Wakalah shall represent the Sukukholders' proportionate undivided beneficial ownership and interest in the Wakalah Portfolio. At the point of issuance of the Sukuk Wakalah, the Wakeel (in its capacity as "Ijarah Assets Buyer") shall acquire the Ijarah Assets from the Issuer (in its capacity as "Ijarah Assets Seller") at the assets purchase price ("Assets Purchase Price") pursuant to a sale and purchase agreement ("Ijarah Assets Sale and Purchase Agreement"), subject to the Assets Minimum Requirements. The Assets Purchase Price shall be in compliance with the asset pricing requirements as set out in the SC LOLA Guidelines. 9
19. In order to facilitate the Ijarah transaction , the Issuer may source the Ijarah Assets from its related corporation(s), who shall, first, transfer the Ijarah Assets to the Issuer by way of hibah (gift). The Wakeel (in its capacity as "Lessor") shall lease the Ijarah Assets to the Issuer (in its capacity as "Lessee") at the rental (equivalent to the expected periodic distribution amount ("Expected Periodic Distribution Amount")) ("Rental") pursuant to an Ijarah agreement ("Ijarah Agreement") for a period of 99 years with option to renew exercisable by the Lessee upon expiry of such period. The Rental shall be the only income generated from the Wakalah Portfolio which shall be distributed as the Expected Periodic Distribution Amount (“Portfolio Income”). The Wakeel will be responsible for, among others, major maintenance and/or structural repair and to procure the takaful/insurance coverage in respect of the Ijarah Assets. The costs and expenses related to the Wakeel's responsibilities shall be referred to as the "Wakalah Services Charge Amount", which shall be reimbursed by the Sukuk Trustee to the Wakeel upon the payment of the Exercise Price (as defined below). The Wakeel shall also ensure that the takaful/insurance is for a covered/insured amount at all times and shall be responsible for the related payment of the relevant takaful contribution or insurance premium. The balance of the proceeds of the Sukuk Wakalah following the acquisition of the Ijarah Assets shall be utilised for investment in the commodity murabahah investment ("Commodity Murabahah Investment"): (a) Pursuant to the Commodity Murabahah Investment Agreement, the Issuer (in its capacity as "Commodity Buyer") shall issue to the Wakeel and Sukuk Trustee a purchase order ("Purchase Order") with an irrevocable and unconditional undertaking to purchase the Shariah-compliant Commodities from the Wakeel (in its capacity as "Commodity Seller") at the Deferred Sale Price (as defined below). (b) The Wakeel (on behalf of the Sukukholders), via a commodity trading participant, shall purchase on spot basis the Shariahcompliant Commodities from a commodity supplier(s) at Bursa Suq Al-Sila' or a commodity broker acceptable to the Shariah 10
20. Adviser ("Commodity Broker A") at the commodity purchase price equivalent to such balance of the proceeds of the Sukuk Wakalah that remain following the acquisition of the Ijarah Assets ("Commodity Purchase Price"). The Commodity Purchase Price shall be in compliance with the asset pricing requirements under the SC LOLA Guidelines. (c) The Commodity Seller shall (on behalf of the Sukukholders) sell the Shariah-compliant Commodities to the Commodity Buyer for a deferred sale price equivalent to Commodity Purchase Price plus the profit margin ("Deferred Sale Price") payable on a deferred basis upon the terms of a sale and purchase agreement ("Commodity Sale and Purchase Agreement"). (d) The Commodity Buyer, via a commodity trading participant, shall subsequently sell the Commodities to Bursa Malaysia Islamic Services Sdn Bhd or a commodity broker other than Commodity Broker A acceptable to the Shariah Adviser ("Commodity Broker B") on spot basis for an amount equal to the Commodity Purchase Price. The Wakeel shall have the right to substitute from time to time (i) throughout the tenure of the Sukuk Wakalah at the option of the Wakeel or (ii) upon the occurrence of a Partial Loss Event (as defined below) or Total Loss Event (as defined below), or (iii) in the event that the asset becomes Shariah non-compliant, via an exchange agreement entered into between the Wakeel (in its capacity as the Lessor), the Issuer (in its capacity as the Lessee) and the Sukuk Trustee, the Ijarah Assets with qualified asset(s) that is/are Shariah-compliant and approved by the Shariah Adviser. The Wakeel would acquire the replacement assets from the Issuer who may source such replacement assets from its related corporation(s) (via Hibah). The replacement assets shall form part of the Wakalah Portfolio. “Partial Loss Event” means the occurrence of loss or destruction of, or damage to any part of the Ijarah Assets. “Total Loss Event” means the occurrence of total loss or destruction of, or damage to the whole (and not part only) of the Ijarah Assets. In the event the Ijarah Assets are affected by a Partial Loss Event or Total Loss Event, proceeds 11
21. of the takaful /insurance claim over the affected Ijarah Assets shall be utilised for the replacement or repair of the affected Ijarah Assets. The Wakeel shall irrevocably and unconditionally undertake to make good the difference if the proceeds of takaful/insurance are insufficient to repair the affected Ijarah Assets. Any excess from the takaful/insurance proceeds over the amount required to replace or repair the affected Ijarah Assets shall be retained by the Wakeel as incentive fee. For the avoidance of doubt, under a Total Loss Event a new Ijarah Agreement will be entered into. The Issuer (as "Ijarah Obligor") shall grant a purchase undertaking ("Purchase Undertaking") to the Wakeel and the Sukuk Trustee, under which the Ijarah Obligor shall purchase the Ijarah Assets from the Wakeel at the Exercise Price upon an Enforcement Event (as defined in Events of default or enforcement events, where applicable herein). The Wakeel shall grant a sale undertaking ("Sale Undertaking") to the Issuer, under which the Wakeel shall sell the Ijarah Assets to the Issuer at the relevant Exercise Price upon the Issuer exercising its rights to redeem the Sukuk Wakalah pursuant to the Redemption Events (as defined in Call option and details, if applicable herein). On each periodic distribution date ("Periodic Distribution Date"), the Wakeel shall distribute the Portfolio Income equivalent to the Expected Periodic Distribution Amount to the Sukukholders in the form of periodic distributions (“Periodic Distribution”), unless the Issuer exercises the Optional Deferral of Distribution (as defined below). Pursuant to the Optional Deferral of Distribution, the Sukukholders agree that the Issuer may defer payment (in whole or in part) of the Expected Periodic Distribution Amount on the Periodic Distribution Date by giving an Optional Deferral Notice (as defined below). Upon redemption of the Sukuk Wakalah pursuant to an Enforcement Event or a Redemption Event, the Ijarah Obligor shall purchase from the Wakeel (pursuant to the exercise of the Purchase Undertaking) or the Wakeel shall sell to the Issuer (pursuant to the exercise of the Sale Undertaking), as the case may be, the Ijarah Assets at the relevant Exercise Price. The Commodity Buyer shall also pay the Deferred Sale Price upon 12
22. redemption of the Sukuk Wakalah pursuant to an Enforcement Event or a Redemption Event . Proceeds from the Wakalah Portfolio equivalent to the aggregate of the relevant Exercise Price and the Deferred Sale Price shall be paid to the Sukukholders to redeem the outstanding Sukuk Wakalah following the occurrence of an Enforcement Event or a Redemption Event. Upon full payment to the Sukukholders, the Sukuk Wakalah will then be cancelled. The Kafalah Provider shall provide an unconditional and irrevocable subordinated guarantee under the Shariah principle of Kafalah (the "Subordinated Guarantee”), as a continuing obligation, in favour of the Sukuk Trustee for and on behalf of the Sukukholders under which the Kafalah Provider shall agree to pay any amount due and payable by the Issuer under the Sukuk Wakalah, including the Exercise Price, Deferred Sale Price, Expected Periodic Distribution Amount, Arrears of Deferred Periodic Distribution, Ta’widh (compensation) and other charges and all sums expressed to be from time to time due and payable under the Sukuk Wakalah in the event the Issuer fails to pay such amount and such failure to pay continues for a period of seven (7) business days or more. Periodic Distribution Deferral The Sukukholders agree that the Issuer may defer payment (in whole or in part) of the Expected Periodic Distribution Amount on the Periodic Distribution Date by giving an Optional Deferral Notice. (1) Partial Deferral In the event that the Issuer defers any part of the Expected Periodic Distribution Amount (the part of the Expected Periodic Distribution Amount being deferred shall constitute the "Arrears of Deferred Periodic Distribution"), and provided that the Issuer has given the Optional Deferral Notice: (i) the Wakeel shall distribute Portfolio Income to the Sukukholders up to such part of the Expected Periodic Distribution Amount not deferred; and (ii) the Arrears of Deferred Periodic Distribution will be payable on the 13
23. subsequent Periodic Distribution Date , unless further deferment(s) is requested by the Issuer by giving the Optional Deferral Notice. (2) Full Deferral In the event that the Issuer defers distribution of all of the Expected Periodic Distribution Amount, (such Expected Periodic Distribution Amount being deferred shall constitute the Arrears of Deferred Periodic Distribution) and provided that the Issuer has given the Optional Deferral Notice, the Arrears of Deferred Periodic Distribution will be payable on the subsequent Periodic Distribution Date, unless further deferment(s) is requested by the Issuer by giving the Optional Deferral Notice. For avoidance of doubt, upon Partial or Full Deferral, the Arrears of Deferred Periodic Distribution will not attract Ta’widh nor additional profits nor be compounded. 7. Currency : Ringgit 8. Expected facility/programme size (for programme, to state the option to upsize) : RM3 billion Option to upsize: Yes 9. Tenure of facility/programme : Perpetual 10. Availability period of sukuk programme : The Sukuk Wakalah may be issued at any time upon completion of the relevant Transaction Documents and fulfillment of all conditions precedent to the satisfaction of the JLAs, unless waived by the JLAs, provided that the first issuance of the Sukuk Wakalah shall be made within sixty (60) business days from the date of the Lodgement with the SC. 11. Clearing and settlement platform : Payments Network Malaysia Sdn Bhd and includes its successors-in-title (“PayNet”) 12. Mode of issue :  Private placement/direct placement  Bought deal  Book building ☐ Tender 14
24. 13 . Selling restrictions : (i) At issuance ☐    ☐ ☐  Exclusively to persons outside Malaysia Part 1 of Schedule 6 of the CMSA Part 1 of Schedule 7 of the CMSA Read together with Schedule 9 of CMSA Schedule 8 of CMSA Section 2(6) of the Companies Act,2016 Other Selling Restrictions at Issuance The Sukuk Wakalah may only be offered, sold, transferred or otherwise disposed of, directly or indirectly, to a person to whom an offer for subscription or purchase of, or invitation to subscribe for or purchase the Sukuk Wakalah and to whom the Sukuk Wakalah are issued would fall within Part 1 of Schedule 6 and Part 1 of Schedule 7 of the Capital Markets and Services Act, 2007 as amended from time to time ("CMSA") read together with Schedule 9 or Section 257(3) of the CMSA, subject to any change in the applicable laws. (ii) After issuance ☐   ☐ ☐  Exclusively to persons outside Malaysia Part 1 of Schedule 6 of the CMSA Read together with Schedule 9 of CMSA Schedule 8 of CMSA Section 2(6) of the Companies Act, 2016 Other Selling Restrictions after Issuance The Sukuk Wakalah may only be offered, sold, transferred or otherwise disposed of, directly or indirectly, to a person to whom an offer for subscription or purchase of, or invitation to subscribe for or purchase the Sukuk Wakalah and to whom the Sukuk Wakalah are issued would fall within Part 1 of Schedule 6 or Section 229(1)(b) of the CMSA read together with Schedule 9 or Section 257(3) of the CMSA, subject to any change in the applicable laws. 14. Tradability and transferability : Non-tradable and non-transferable. Tradable and transferable. X Restricted transferability. 15
25. 15 . Details of security/collateral pledged, if applicable : Unsecured. 16. Details of guarantee, if applicable : The Kafalah Provider shall provide an unconditional and irrevocable Subordinated Guarantee, as a continuing obligation, in favour of the Sukuk Trustee for and on behalf of the Sukukholders under which the Kafalah Provider shall agree to pay any amount due and payable by the Issuer under the Sukuk Wakalah, including the Exercise Price, Deferred Sale Price, Expected Periodic Distribution Amount, Arrears of Deferred Periodic Distribution, Ta’widh (compensation) and other charges and all sums expressed to be from time to time due and payable under the Sukuk Wakalah in the event the Issuer fails to pay such amount and such failure to pay continues for a period of seven (7) business days or more. 17. Convertibility of issuance and details of the convertibility : Non-convertible. 18. Exchangeability of issuance and details of the exchangeability : Non-exchangeable. 19. Call option and details, if applicable : The Issuer may redeem the Sukuk Wakalah pursuant to the following: (1) Optional Redemption (as defined in the section entitled Other terms and conditions – Optional Redemption); (2) Accounting Event Redemption (as defined in the section entitled Other terms and conditions - Accounting Event Redemption); (3) Tax Event Redemption (as defined in the section entitled Other terms and conditions – Tax Event Redemption); and (4) Rating Event Redemption (as defined in the section entitled Other terms and conditions – Rating Event Redemption); (collectively, the "Redemption Events" and each a "Redemption Event"). 20. Put option and details, if applicable : No put option. 16
26. 21 . Details of covenants: (a) Positive covenants in respect of the Issuer : To include but not limited to the following: (1) the Issuer shall maintain in full force and effect all relevant authorisations, consents, rights, licences, approvals and permits (governmental and otherwise) and will promptly obtain any further authorisations, consents, rights, licences, approvals and permits (governmental and otherwise) which is necessary to enable it to own its assets, to carry on its business or for the Issuer to enter into or perform its obligations under the Transaction Documents to which it is a party or to ensure the validity, enforceability, admissibility in evidence of the obligations of the Issuer or the rights of the Sukukholders under the Transaction Documents and the Issuer shall comply with the same; (2) the Issuer shall at all times on demand execute all such further documents and do all such further acts that are necessary at any time or times to give legal effect to the terms and conditions of the Transaction Documents; (3) the Issuer shall exercise reasonable diligence in carrying out its business and affairs in a proper and efficient manner and accordance with sound financial and commercial standards and practices; (4) the Issuer shall promptly perform and carry out all its obligations under all the Transaction Documents to which it is a party (including but not limited to payment of amounts due under the Sukuk Wakalah on the relevant dates on which such amounts are due and payable, subject to the Optional Deferral of Distribution as defined in the section entitled Other terms and conditions – Optional Deferral of Distribution) and ensure that it shall immediately notify the Sukuk Trustee in the event that the Issuer is unable to fulfil or comply with any of the provisions of the Transaction Documents; (5) the Issuer shall prepare its financial statements on a basis consistently applied in accordance with approved accounting standards in Malaysia and those financial statements shall give a true and fair view of the results of the operations of the Issuer for 17
27. the period to which the financial statements are made up in line with the approved accounting standards ; (6) the Issuer shall promptly comply with all applicable laws including the provisions of the CMSA and/or the notes, circulars, conditions or guidelines issued by the SC from time to time to the extent that compliance with such notes, circulars, conditions or guidelines have not been waived by SC; (7) the Issuer shall at all times maintain a paying agent who is based in Malaysia and the Issuer shall procure the paying agent to notify the Sukuk Trustee, through the Facility Agent, if the paying agent does not receive payment from the Issuer on the due dates as required under the Trust Deed and the terms and conditions of the Sukuk Wakalah (unless any payment is deferred in accordance with the terms of the Sukuk Wakalah); (8) the Issuer shall keep proper books and accounts at all times and to provide the Sukuk Trustee and any person appointed by it (e.g. auditors) access to such books and accounts to the extent permitted by law; (9) the Issuer shall ensure that the terms in the Transaction Documents do not contain any matter which is inconsistent with the provisions of the information memorandum relating to the Perpetual Sukuk Programme; (10) the Issuer shall maintain adequate Takaful/insurance for the nature of its business which a prudent company carrying on business similar to that of the Issuer would maintain with reputable Takaful providers / insurance companies and shall notify the Sukuk Trustee within seven (7) business days of any event which may give rise to any claim or right of action under any Takaful / insurance; (11) the Issuer shall open and maintain the Shariah-compliant Sukuk Trustees' Reimbursement Account for Sukukholders’ actions (the “Sukuk Trustee’s Reimbursement Account”) with a sum of Ringgit Malaysia Thirty Thousand (RM30,000.00) to be set up from the monies 18
28. received by the Issuer when the Sukuk Wakalah are issued . The Sukuk Trustee’s Reimbursement Account shall be solely operated by the Sukuk Trustee and the money in the Sukuk Trustee’s Reimbursement Account may be used for defraying expenses that may be incurred in carrying out its duties in relation to the occurrence of Enforcement Events which are provided under the Transaction Documents; and (12) any other covenants as advised by the Solicitor and mutually agreed between the JLAs and the Issuer. (b) Positive covenants in respect of the Kafalah Provider : To include but not limited to the following: (1) the Kafalah Provider shall maintain in full force and effect all relevant authorisations, consents, rights, licences, approvals and permits (governmental and otherwise) and will promptly obtain any further authorisations, consents, rights, licences, approvals and permits (governmental and otherwise) which is necessary to enable it to own its assets, to carry on its business or for the Kafalah Provider to enter into or perform its obligations under the Transaction Documents to which it is a party or to ensure the validity, enforceability, admissibility in evidence of the obligations of the Kafalah Provider or the rights of the Sukukholders under the Transaction Documents and the Kafalah Provider shall comply with the same; (2) the Kafalah Provider shall execute all such further documents and do all such further acts that are necessary at any time or times to give legal effect to the terms and conditions of the Transaction Documents to which it is a party; (3) the Kafalah Provider shall exercise reasonable diligence in carrying out its business and affairs in a proper and efficient manner and in accordance with sound financial and commercial standards and practices; (4) the Kafalah Provider shall promptly perform and carry out all its obligations under all the Transaction Documents to which it is a party and ensure that it shall immediately notify the Sukuk Trustee in the event that the 19
29. Kafalah Provider is unable to fulfil or comply with any of the provisions of the Transaction Documents to which it is a party ; (5) the Kafalah Provider shall prepare its financial statements on a basis consistently applied in accordance with approved accounting standards in Malaysia and those financial statements shall give a true and fair view of the results of the operations of the Kafalah Provider for the period to which the financial statements are made up in line with the approved accounting standards; (6) the Kafalah Provider shall promptly comply with all applicable laws including the provisions of the CMSA and/or the notes, circulars, conditions or guidelines issued by the SC from time to time to the extent that compliance with such notes, circulars, conditions or guidelines have not been waived by SC; (7) the Kafalah Provider shall keep proper books and accounts at all times and provide the Sukuk Trustee and any person appointed by it (e.g. auditors) access to such books and accounts to the extent permitted by law and to the extent that the granting of such access would not result in the Kafalah Provider breaching any duty of confidentiality and/or its obligations to maintain confidentiality, be it statutory or contractual provided that:- (8) (i) the Kafalah Provider shall use its reasonable endeavours to obtain the necessary consent from the relevant counterparty to enable the Kafalah Provider to grant any such necessary access; and (ii) nothing in this clause shall oblige the Kafalah Provider from divulging trade secrets or such other information that will jeopardise the competitive position of the Kafalah Provider and/or its subsidiaries, associated companies and/or jointly controlled entities (“Kafalah Provider Group”); the Kafalah Provider shall maintain adequate Takaful/insurance for the nature of its business which a prudent company carrying on business similar to that of the Kafalah 20
30. Provider would maintain with reputable Takaful providers / insurance companies and shall notify the Sukuk Trustee within seven (7) business days of any event which may give rise to any claim or right of action under any Takaful / insurance, where such event may result in a Material Adverse Effect; and (9) (c) Negative covenants in respect of the Issuer any other covenants as advised by the Solicitor and mutually agreed between the JLAs and the Kafalah Provider. : To include but not limited to the following; wherein the Issuer SHALL NOT, for so long as any liability under the Perpetual Sukuk Programme remains undischarged, without the prior written consent of the Sukuk Trustee (acting on instructions of the Sukukholders): (1) other than those disclosed in writing to the JLAs or the Sukuk Trustee prior to the execution of the Transaction Documents, create or permit to exist any encumbrance, mortgage, charge (whether fixed or floating), pledge, lien, hypothecation, assignment by way of security, trust arrangement for the purpose of providing security or other security interest of any kind over the whole or any part of its property, assets or revenues (whether present or future); (2) add, delete, amend, supplement, vary or substitute its Memorandum or Articles of Association/Constitution in a manner which may be materially prejudicial to the interest of the Sukukholders; For the purpose of these terms and conditions, “Material Adverse Effect” shall mean any event which will materially and adversely affect the business or financial condition or results of the operations of the Issuer or the Kafalah Provider or the ability of the Issuer or the Kafalah Provider to perform any of its respective obligations under any of the Transaction Documents in accordance with its terms. (3) enter into any transactions, whether directly or indirectly with any of its interested persons (including its directors, chief executive and major shareholders or persons connected with them) (“Interested Persons”) unless such transaction is entered into: 21
31. (a) on terms no less favourable to the Issuer than those which could have been obtained in comparable transactions from persons who are not Interested Persons; and (b) with respect to transactions involving an aggregate payment or value equal to or greater than the agreed percentage ratios as set out in the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Malaysia”) (“Main Market Listing Requirements”), the Issuer obtains certification from an independent adviser that the transaction is carried out on fair and reasonable terms, Provided that the Issuer certifies to the Sukuk Trustee that the transaction complies with paragraph (a) above, that the Issuer has received the certification referred to in paragraph (b) (where applicable) and that the transaction has been approved by the majority of the board of directors or shareholders in a general meeting as the case may require; (d) Negative covenants in respect of the Kafalah Provider (4) utilise the proceeds of the Sukuk Wakalah except for the purposes set out in the Transaction Documents and the information memorandum nor change the utilisation of proceeds set out therein; (5) take steps to wind-up or dissolve itself; (6) lend any money to any party other than: (a) in its the ordinary course of business; (b) loans to the Issuer’s directors, officers or employees as part of their terms of employment; and/or (c) inter-company loans or advances to the Kafalah Provider and/or the Kafalah Provider Group; and (7) any other covenants as advised by the Solicitor and mutually agreed between the JLAs and the Issuer. : To include but not limited to the following; wherein the Kafalah Provider SHALL NOT, for so long as any liability under the Perpetual Sukuk Programme remains undischarged, without the prior written consent of the Sukuk Trustee (acting on instructions of the Sukukholders): 22
32. (1) other than those disclosed in writing to the JLAs or the Sukuk Trustee prior to the execution of the Transaction Documents, create or permit to exist any encumbrance, mortgage, charge (whether fixed or floating), pledge, lien, hypothecation, assignment by way of security, trust arrangement for the purpose of providing security or other security interest of any kind over the whole or any part of its property, assets or revenues (whether present or future) in the event any Expected Periodic Distribution Amount or Arrears of Deferred Periodic Distribution remains outstanding and unpaid or upon the occurrence of an Enforcement Event which is continuing. For the avoidance of doubt, the Kafalah Provider is allowed to give any guarantee, indemnity, undertaking, financial assistance or credit support letter including but not limited to letter of comfort or any other similar agreement or arrangement, which are not secured against any of the Kafalah Provider’s assets, in relation to the borrowings/financings of the Kafalah Provider Group and/or as required in the ordinary course of business of the Kafalah Provider Group; (2) add, delete, amend, supplement, vary or substitute its Memorandum or Articles of Association/Constitution in a manner which may be materially prejudicial to the interest of the Sukukholders; (3) enter into any transactions, whether directly or indirectly with any of its Interested Persons unless such transactions is entered into: (a) on an arms-length basis and on terms no less favourable to the Kafalah Provider than those which could have been obtained in comparable transactions from persons who are not Interested Persons; and (b) with respect to transactions involving an aggregate payment or value equal to or greater than the agreed percentage ratios as set out in the Main Market Listing Requirements, the Kafalah Provider obtains 23
33. certification from an independent adviser that the transaction is carried out on fair and reasonable terms , Provided that the Kafalah Provider certifies to the Sukuk Trustee that the transaction complies with paragraph (a) above, that the Kafalah Provider has received the certification referred to in paragraph (b) (where applicable) and that the transaction has been approved by the board of directors of the Kafalah Provider or shareholders of the Kafalah Provider in a general meeting, as the case may require. With respect to transactions constituting a recurrent related-party transaction of a revenue or trading nature (“RRPT”) which are provided for and permitted under the Main Market Listing Requirements, provided that the Kafalah Provider certifies to the Sukuk Trustee that the transaction complies with paragraph (a) above, that the Kafalah Provider has obtained or renewed, where applicable, the shareholders’ mandate in accordance with the Main Market Listing Requirements and that the Kafalah Provider furnishes at least one certificate to the Sukuk Trustee in respect of the RRPT contemplated under one shareholders’ mandate; (4) take steps to wind-up or dissolve itself; (5) lend any money to any party other than: (a) in its the ordinary course of business; (b) loans to the Kafalah Provider’s directors, officers or employees as part of their terms of employment; and/or (c) inter-company loans or advances to the any entity within the Kafalah Provider Group; and (6) any other covenants as advised by the Solicitor and mutually agreed between the JLAs and the Kafalah Provider. (e) Financial covenant : No financial covenant. (f) Information covenants in respect of the Issuer : To include but not limited to the following: (1) the Issuer shall provide to the Sukuk Trustee at least on an annual basis, a certificate confirming, executed by any two directors of the Issuer, that it has complied with all its obligations under the Transaction Documents 24
34. to which it is a party and that there does not exist or had not existed , from the date the Sukuk Wakalah were issued or the date of the previous certificate as the case may be, any Enforcement Event, and if such is not the case, to specify the same; (2) the Issuer shall deliver to the Sukuk Trustee the following: (a) as soon as they become available (and in any event within one hundred and eighty (180) days after the end of each of its financial years) copies of its consolidated annual financial statements for that year which shall contain the income statements and balance sheets of the Issuer and which are audited and certified without qualification (save and except such industry standard qualifications by auditors which would not have an adverse effect on the financial position of the Issuer) by a firm of independent certified public accountants acceptable to the Sukuk Trustee; (b) as soon as they become available (and in any event within ninety (90) days after the end of the first half of each of its financial year) copies of its unaudited half yearly income statements and balance sheets of the Issuer; (c) promptly, and to the extent permitted by law, any relevant information as the Sukuk Trustee may from time to time reasonably request in order to discharge its duties and obligations as Sukuk Trustee under the Transaction Documents relating to the Issuer's affairs; and (d) promptly, (i) all statutory notices or other documents received by the Issuer from its shareholders or creditors which contents would have a Material Adverse Effect; (ii) a copy of all accounts, reports, notice, statement or circular dispatched by the Issuer to its shareholders or its creditors generally at the same time as these documents are dispatched to these shareholders or creditors; 25
35. (3) the Issuer shall notify the Sukuk Trustee in writing immediately in the event that the Issuer becomes aware of: (a) the occurrence of any Enforcement Event; (b) the happening of any event that has caused or could cause, one or more of the following: (i) any amount payable under the Sukuk Wakalah to become immediately payable; (ii) the Sukuk Wakalah to become immediately enforceable; or (iii) any other right or remedy under the terms, provisions or covenants of the Sukuk Wakalah or the Trust Deed to become immediately enforceable; (c) any circumstance that has occurred that would materially prejudice the Issuer and/or the Kafalah Provider; (d) any substantial change in the nature of the business of the Issuer and/or the Kafalah Provider; (e) any change in the name of the Kafalah Provider; (f) any change in withholding tax position or taxing jurisdiction of the Issuer; (g) any cessation of liability of the Kafalah Provider for the payment of the whole or part of the moneys for which it was liable under the Subordinated Guarantee; (h) any other matter that may materially prejudice the interests of the Sukukholders; and (i) any change in the utilisation of proceeds arising from the issuance of the Sukuk Wakalah under the Perpetual Sukuk Programme; 26
36. (4) any other covenants as advised by the Solicitor and mutually agreed between the JLAs and the Issuer. (g) Information covenants in : To include but not limited to the following: respect of the Kafalah Provider (1) the Kafalah Provider shall provide to the Sukuk Trustee at least on an annual basis, a certificate executed by any two directors of the Kafalah Provider confirming, that it has complied with all its obligations under the Transaction Documents and that there does not exist or had not existed, from the date the Sukuk Wakalah were issued or the date of the previous certificate as the case may be, any Enforcement Event, and if such is not the case, to specify the same; (2) the Kafalah Provider shall deliver to the Sukuk Trustee the following: (a) as soon as they become publicly available (and in any event within one hundred and eighty (180) days after the end of each of its financial years) copies of its consolidated annual financial statements for that year which shall contain the income statements and balance sheets of the Kafalah Provider and which are audited and certified without qualification (save and except such industry standard qualifications by auditors which would not have an adverse effect on the financial position of the Kafalah Provider) by a firm of independent certified public accountants acceptable to the Sukuk Trustee; (b) as soon as they become available (and in any event within ninety (90) days after the end of the first half of each of its financial year) copies of its unaudited half yearly consolidated interim financial statements for that period which shall contain the income statements and balance sheets of the Kafalah Provider which are approved by the board of directors; (c) promptly, any relevant information as the Sukuk Trustee may from time to time reasonably request in order to discharge its duties and obligations as Sukuk Trustee under the Transaction 27
37. Documents to which it is a party relating to the Kafalah Provider ’s affairs to the extent permitted by law; and (d) promptly, (i) all statutory notices or other documents received by the Kafalah Provider from its shareholders or creditors which contents would materially and adversely affect the interests of the Sukukholders; and (ii) a copy of all accounts, reports, notice, statement or circular dispatched by the Kafalah Provider to its shareholders or creditors generally at the same time as these documents are dispatched to these shareholders or creditors, unless they have been made publicly available on the websites of the Kafalah Provider or Bursa Malaysia; (3) the Kafalah Provider shall notify the Sukuk Trustee in writing immediately in the event that the Kafalah Provider becomes aware of: (a) the occurrence of any Enforcement Event; (b) the happening of any event that has caused or could cause, one or more of the following: (i) any amount payable under the Sukuk Wakalah to become immediately payable; (ii) the Sukuk Wakalah to become immediately enforceable; or (iii) any other right or remedy under the terms, provisions or covenants of the Sukuk Wakalah or the Trust Deed to become immediately enforceable; (c) any circumstance that has occurred that would materially prejudice the Kafalah Provider; (d) any substantial change in the nature of the business of the Kafalah Provider; (e) any cessation of liability of the Kafalah Provider for the payment of the whole 28
38. or part of the moneys for which it was liable under the Subordinated Guarantee ; (f) any change in withholding tax position or taxing jurisdiction of the Kafalah Provider; and (g) any other matter that may materially prejudice the interests of the Sukukholders; (4) 22. Details of designated account(s), if applicable any other covenants as advised by the Solicitor and mutually agreed between the JLAs and the Kafalah Provider. : No designated accounts. 23. Details of Credit Rating, if applicable (a) Name of credit rating agency : (b) Credit rating (state whether final or indicative) and amount rated : Malaysian Rating Corporation Berhad Not rated. Rated as follows. Combination of rated and unrated as follows. X Credit Rating Final/ Indicative Rating Partial Amount Rated AAIS(cg) Indicative No RM3 billion Name of Tranche/ Series/ Class: Not applicable 24. Conditions precedent : Conditions precedent shall consist of conditions which are standard and customary for a facility of this nature, to the satisfaction of the JLAs and shall include but not limited to the following (all have to be in form and substance acceptable to the JLAs): (1) Main Documentation (a) (2) all relevant Transaction Documents have been executed, endorsed as exempted under Stamp Duty Exemption (No 23) Order 2000 or presented for registration where applicable. The Issuer and Kafalah Provider (a) 29 certified true copies of the Certificate of
39. Incorporation and the Memorandum and Articles of Association /Constitution, of the Issuer and Kafalah Provider; (3) (b) certified true copies of the latest Return for Allotment of Shares, Notification for Change in the Registered Address, and Notification of Change in the Register of Directors, Managers and Secretaries of the Issuer and Kafalah Provider; (c) certified true copy of board resolution(s) of the Issuer and the Kafalah Provider authorising, amongst others, the execution of the Transaction Documents; (d) a list of the Issuer's and the Kafalah Provider’s authorised signatories and their respective specimen signatures; (e) a report of the relevant company search of the Issuer and Kafalah Provider; and (f) a report of the relevant winding-up search of the Issuer and Kafalah Provider or in lieu of such winding up search result, the relevant statutory declaration of the Issuer and the Kafalah Provider. General (a) acknowledgement from the SC on the lodgement made in respect of the Perpetual Sukuk Programme under the SC LOLA Guidelines, and, where applicable, approval from regulatory authorities (including SC) in connection with the issuance of the Sukuk Wakalah, including but not limited to the approval on the waiver from complying with the Trust Deed Guidelines and the endorsement from the SC’s Islamic Capital Market Development; (b) the Perpetual Sukuk Progamme has received the requisite rating as stated in these terms and conditions; 30
40. (c) satisfactory evidence that the Sukuk Trustee’s Reimbursement Account has been opened in accordance with the Transaction Documents; (d) the JLAs have received from its Solicitor a satisfactory legal opinion addressed to them and the Sukuk Trustee advising with respect to, among others, the legality, validity and enforceability of the Transaction Documents and a confirmation addressed to the JLAs that all the conditions precedent have been fulfilled or otherwise waived; (e) evidence that all fees, costs and expenses in relation to the Perpetual Sukuk Programme have been paid or will be paid in full to the extent that the same are due and payable; (f) where required, satisfactory evidence that all requisite consents/approvals have been obtained from the relevant financiers in respect of the Issuer’s and Kafalah Provider’s existing indebtedness (where applicable), for the Issuer to issue the Sukuk Wakalah and for the Kafalah Provider to issue the Subordinated Guarantee; (g) confirmation from the Shariah Adviser that the structure, mechanism and the Transaction Documents are in compliance with Shariah principles; and (h) such other conditions precedent to be advised by the Solicitor and mutually agreed between the JLAs and the Issuer and the Kafalah Provider. 25. Representations and warranties: (a) in respect of the Issuer : Representations and warranties typical and customary for transaction of this nature which shall include but not limited to the following: (1) the Issuer is a company with limited liability duly incorporated and validly existing under the laws of Malaysia, and has full power to carry on its business and to own its property and assets, and has full beneficial ownership 31
41. of all its property and assets ; (2) the Memorandum and Articles of Association/Constitution of the Issuer incorporate provisions which authorise, and all necessary corporate and other relevant actions have been taken to authorise, and all relevant consents and approvals of any administrative, governmental or other authority or body in Malaysia have been duly obtained and are in full force and effect which are required to authorise, the Issuer to execute and deliver and perform the transactions contemplated in the Transaction Documents to which it is party in accordance with their terms; (3) neither the execution and delivery of any of the Transaction Documents to which it is a party nor the performance of any of the transactions contemplated by such Transaction Documents did or does as at the date this representation and warranty is made or repeated (a) contravene or constitute a default under any provision contained in any agreement, instrument, law, ordinance, decree, judgment, order, rule, regulation, licence, permit or consent by which the Issuer or any of its assets is bound or which is applicable to the Issuer, or any of its assets, (b) cause any limitation on the Issuer or the powers of its directors, whether imposed by or contained in its Memorandum and Articles of Association/Constitution or in any agreement, instrument, law, ordinance, decree, order, rule, regulation, judgment or otherwise, to be exceeded, or (c) cause the creation or imposition of any security interest or restriction of any nature on any of the Issuer’s assets; (4) each of the Transaction Documents to which it is a party is or will when executed and/or issued, as the case may be, be in full force and effect and constitutes, or will when executed or issued, as the case may be, constitute, valid and legally binding obligations of the Issuer enforceable in accordance with its terms; (5) no other registration, recording, filing or notarisation of the Transaction Documents and no payment of any duty or tax and no other action whatsoever is necessary apart from those required to be done as conditions 32
42. precedent for the issuance of Sukuk Wakalah as stated in item Conditions precedent herein , to ensure the validity or enforceability in Malaysia of the liabilities and obligations of the Issuer or the rights of the Sukuk Trustee/Sukukholders under the Transaction Documents in accordance with their terms or to ensure the admissibility in evidence in Malaysia of the Transaction Documents; (6) the audited consolidated financial statements (including the statements of profit or loss and other comprehensive income and statements of financial position) of the Issuer for each financial year are prepared in accordance with approved accounting standards in Malaysia and give a true and fair view of the results of its operations for that year and the state of its affairs at that date; (7) there is no litigation, arbitration, winding-up or administrative proceeding or any other proceeding or claim which might by itself or together with any other such proceedings or claims which, if adversely determined, would have a Material Adverse Effect, is presently in progress or, pending or, to the best of the Issuer’s knowledge, threatened against the Issuer; and (8) such other representations and warranties as may be advised by the Solicitor and mutually agreed between the JLAs and the Issuer. (b) in respect of the Kafalah Provider : Representations and warranties typical and customary for transaction of this nature which shall include but not limited to the following: (1) the Kafalah Provider is a company with limited liability duly incorporated and validly existing under the laws of Malaysia, and has full power to carry on its business and to own its property and assets, and has full beneficial ownership of all its property and assets; (2) the Memorandum and Articles of Association/Constitution of the Kafalah Provider incorporate provisions which authorise, and all necessary corporate and other relevant actions have been taken to authorise, and all relevant consents and approvals of any administrative, governmental or other authority or body in Malaysia have been duly obtained and are in full force and effect which are required to 33
43. authorise the Kafalah Provider to execute and deliver and perform the transactions contemplated in the Transaction Documents to which it is a party in accordance with their terms ; (3) neither the execution and delivery of any of the Transaction Documents to which it is a party nor the performance of any of the transactions contemplated by the Transaction Documents did or does as at the date this representation and warranty is made or repeated (a) contravene or constitute a default under any provision contained in any agreement, instrument, law, ordinance, decree, judgment, order, rule, regulation, licence, permit or consent by which the Kafalah Provider or any of its assets is bound, or which is applicable to the Kafalah Provider, or any of its assets, (b) cause any limitation on the Kafalah Provider or the powers of its directors, whether imposed by or contained in its Memorandum and Articles of Association/Constitution or in any agreement, instrument, law, ordinance, decree, order, rule, regulation, judgment or otherwise, to be exceeded, or (c) cause the creation or imposition of any security interest or restriction of any nature on any of the Kafalah Provider’s assets; (4) each of the Transaction Documents to which it is a party is or will when executed and/or issued, as the case may be, be in full force and effect and constitutes, or will when executed or issued, as the case may be, constitute, valid and legally binding obligations of the Kafalah Provider enforceable in accordance with its terms; (5) no other registration, recording, filing or notarisation of the Transaction Documents and no payment of any duty or tax and no other action whatsoever is necessary apart from those required to be done as conditions precedent as stated in item Conditions precedent herein, to ensure the validity or enforceability in Malaysia of the liabilities and obligations of the Kafalah Provider or the rights of the Sukuk Trustee/Sukukholders under the Transaction Documents to which it is a party in accordance with their terms or to ensure the admissibility in evidence in Malaysia of the Transaction Documents; 34
44. 26 . Events of default or enforcement events, where applicable, including recourse available to investors (6) the audited consolidated financial statements (including the statements of profit or loss and other comprehensive income and statements of financial position) of the Kafalah Provider for each financial year are prepared in accordance with approved accounting standards in Malaysia and give a true and fair view of the results of its operations for that year and the state of its affairs at that date; (7) there is no litigation, arbitration, winding-up or administrative proceeding or any other proceeding or claim which might by itself or together with any other such proceedings or claims which, if adversely determined, would have a Material Adverse Effect, is presently in progress or, pending or, to the best of the Kafalah Provider’s knowledge, threatened against the Kafalah Provider; and (8) such other representations and warranties as may be advised by the Solicitor and mutually agreed between the JLAs and the Kafalah Provider. : Events of Default or Dissolution Events There are no events of default or dissolution events which will entitle the Sukuk Trustee or the Sukukholders to declare that any or all amounts under the Sukuk Wakalah to be immediately due and payable. Enforcement Events Upon the occurrence of any of the following enforcement events set out below, the Enforcement Method (as defined below) may be enforced. The enforcement events (collectively, the "Enforcement Events" and each an "Enforcement Event") are as follows: (1) where a final and effective order is made or an effective resolution is passed by the respective shareholders for the liquidation, winding-up or dissolution of the Issuer or the Kafalah Provider, provided that a stay on such order has not been granted by the relevant court of competent jurisdiction within thirty (30) days from the date of such order (“Winding-up”); and (2) the Issuer fails to pay (a) any amount in respect of the Exercise Price and/or the Deferred Sale Price as a result of a 35
45. Redemption Event and /or (b) any amount in respect of the Sukuk Wakalah whether in respect of the due and payable Expected Periodic Distribution Amount or part thereof and/or any Arrears of Deferred Periodic Distribution, and such failure to pay under items (a) and/or (b) continues for a period of seven (7) business days or more (for this purpose, such payment of Expected Periodic Distribution Amount or part thereof and Arrears of Deferred Periodic Distribution will not be due if the Issuer has elected to defer such Expected Periodic Distribution Amount or part thereof in accordance with the Transaction Documents) AND the Kafalah Provider fails to pay any amount due under the Subordinated Guarantee in relation to such failure on the part of the Issuer to pay under items (a) and/or (b) and such failure continues for a period of seven (7) business days or more. Enforcement-Method Upon the occurrence of an Enforcement Event under item (1) above, the Sukuk Trustee may at its discretion, and shall if so directed by an extraordinary resolution of the Sukukholders, declare that an Enforcement Event has occurred and that all amounts outstanding under the Sukuk Wakalah together with any outstanding Expected Periodic Distribution Amount or part thereof and any Arrears of Deferred Periodic Distribution are immediately due and payable by the Issuer pursuant to the Issuer's obligation to pay:(i) the Exercise Price for purchase of the Ijarah Assets pursuant to exercise of the Purchase Undertaking; and (ii) the Deferred Sale Price. Proceeds from the Wakalah Portfolio which is equivalent to the aggregate of the relevant Exercise Price and the Deferred Sale Price received from the Issuer (in its capacity as Ijarah Obligor and the Commodity Buyer) shall be paid to the Sukukholders to redeem the Sukuk Wakalah in accordance with the terms of the Transaction Documents. Once such payments are paid to the Sukukholders, the Wakalah arrangement as contemplated by the Wakalah Agreement in relation to such Sukuk Wakalah shall be terminated and shall be of no further effect. 36
46. Upon the occurrence of an Enforcement Event under item (2), the Sukuk Trustee may at its discretion, and shall if so directed by an extraordinary resolution of the Sukukholders, declare that an Enforcement Event has occurred and:(a) institute winding-up proceedings against the Issuer or Kafalah Provider as the case may be; and/or (b) prove in the winding-up of the Issuer or the Kafalah Provider (as the case may be) and/or claim in the liquidation of the Issuer or the Kafalah Provider (as the case may be) for such payment as it may think fit to enforce the Issuer’s or the Kafalah Provider’s payment obligations in respect of monies that are due and payable and remaining unpaid, under or arising from the Sukuk Wakalah and the Subordinated Guarantee (as the case may be). Without prejudice to the above, the Sukuk Trustee may at its discretion or shall, if directed to do so by an extraordinary resolution of the Sukukholders, without further notice institute such proceedings against the Issuer or the Kafalah Provider (as the case may be), as it may think fit to enforce any term or condition (other than the term or condition relating to the payment obligation of the Issuer or the Kafalah Provider in relation to Enforcement Event under item (2), which shall be enforced in accordance with the enforcement method above) binding on the Issuer under the Sukuk Wakalah, or the Kafalah Provider under the Subordinated Guarantee, the Trust Deed, and in no event shall the Issuer or the Kafalah Provider, by virtue of the institution of any such proceedings, be obliged to pay any sum or sums, in cash or otherwise, sooner than the same would otherwise have been payable by them unless an Enforcement Event under item (1) has occurred. For the avoidance of doubt, it is not allowed under the terms and conditions of the Sukuk Wakalah for acceleration of payments of all the outstanding Sukuk Wakalah, save for an Enforcement Event under item (1) above. 27. Governing laws : Laws of Malaysia. 28. Provisions on buy-back, if applicable : The Issuer or its subsidiaries or its agent(s) who is/are acting for the redemption or purchase, may at any time purchase the Sukuk Wakalah at any 37
47. price in the open market or by private treaty , and such Sukuk Wakalah purchased by the Issuer or its subsidiaries or its agent(s) shall be cancelled by the Issuer and cannot be resold or reissued. 29. Provisions on early redemption, if applicable : The Sukuk Wakalah are issued on a perpetual basis and may only be redeemed by the Issuer upon the occurrence of a Redemption Event. The Sukuk Wakalah redeemed by the Issuer shall be cancelled and cannot be reissued or resold. For the avoidance of doubt, any early redemption by the Issuer of any outstanding Sukuk Wakalah shall not accordingly reduce the size of the Perpetual Sukuk Programme. 30. Voting : Voting by the Sukukholders under the Perpetual Sukuk Programme shall be carried out as follows:Prior to upsizing of the Perpetual Sukuk Programme All matters which require the Sukukholders’ consent under the Perpetual Sukuk Programme shall be carried out on a collective basis. Post upsizing of the Perpetual Sukuk Programme All matters which require the Sukukholders’ consent under the Perpetual Sukuk Programme shall be carried out on a per series basis. Sukukholders holding a requisite amount under each series (to be determined under the Trust Deed) shall provide their consent for the relevant matters to be passed under the Perpetual Sukuk Programme and the consent from Sukukholders of all outstanding series shall have been obtained for any such resolution to be carried. “series” shall mean, in relation to any Sukuk Wakalah, such Sukuk Wakalah with the same issue date. 31. Permitted investments, if applicable : The amount standing to the credit of the Sukuk Trustee’s Reimbursement Account may be invested in Shariah-compliant deposits or instruments as approved by the Shariah Advisory Council (“SAC”) of SC, SAC of BNM or other recognised Shariah authorities. 32. Ta’widh : In the event the Wakeel breaches its fiduciary duty as a manager due to its failure to distribute any realised Expected Periodic Distribution Amount and/or the Ijarah Obligor/Commodity Buyer fails to pay any amounts due and payable to the 38
48. Sukukholders pursuant to the Purchase Undertaking or the Sale Undertaking and /or the Deferred Sale Price, the Wakeel and/or the Ijarah Obligor/Commodity Buyer shall pay to the Sukuk Trustee (acting on behalf of the Sukukholders) Ta’widh (compensation) on such failure to pay at the rate and in the manner prescribed by the SAC from time to time. 33. Ibra’ : Not applicable. 34. Kafalah : Please refer to the section entitled Details of guarantee. 35. Other terms and conditions : (a) Utilisation of proceeds : The proceeds from the issuance of the Sukuk Wakalah shall be utilised by the Kafalah Provider Group to refinance its existing financing/debt obligations (whether in whole or in part), repayment of intercompany borrowings, and/or to finance working capital requirements, investments, acquisition, capital expenditure and/or its general corporate purposes (which shall include, without limitation, the payment of fees, costs and expenses relating to the Perpetual Sukuk Programme). In any case, all utilisation of proceeds raised under the Sukuk Wakalah shall be Shariah-compliant. (b) Upsizing of a sukuk programme : The Issuer has the option to upsize the limit of the Perpetual Sukuk Programme at any time and from time to time subject to the following being fulfilled prior to the exercise of the option to upsize by the Issuer: (i) (ii) (iii) (iv) where relevant, the consents from existing financiers/lenders of the Issuer and/or the Kafalah Provider being obtained; the compliance with the relevant requirements under Part 3 of the SC LOLA Guidelines; confirmation from the Credit Rating Agency that the prevailing rating of the Perpetual Sukuk Programme will not be adversely affected upon the implementation of such upsizing; and the necessary corporate authorisations of the Issuer and/or the Kafalah Provider being obtained, and the Sukukholders shall be deemed to have consented to such upsizing of the limit of the Perpetual Sukuk Programme in the Trust Deed. No consent is required from the Sukuk Trustee, the 39
49. Facility Agent and any other party under the Perpetual Sukuk Programme when the upsizing of the limit of Perpetual Sukuk Programme is exercised by the Issuer . (c) Status : (A) Status of the Sukuk Wakalah The Sukuk Wakalah shall constitute direct, unsecured, unconditional and subordinated obligations of the Issuer under the laws of Malaysia and shall at all times rank as follows: (i) below all present and future creditors of the Issuer; (ii) pari passu with the Parity Obligations (as defined below); and (iii) above the Junior Obligations (as defined below). Upon the declaration of an Enforcement Event, the payment obligations of the Issuer under the Sukuk Wakalah shall rank ahead of the holders of Junior Obligations of the Issuer and rank junior to the claims of all other present and future creditors of the Issuer (other than Parity Obligations of the Issuer). (B) Status of the Subordinated Guarantee The payment obligations of the Kafalah Provider under the Subordinated Guarantee shall constitute direct, unsecured, unconditional and subordinated obligations of the Kafalah Provider under the laws of Malaysia and shall at all times rank as follows: (i) below all present and future creditors of the Kafalah Provider; (ii) pari passu with the Parity Obligations of the Kafalah Provider; and (iii) above the Junior Obligations of the Kafalah Provider. Upon the declaration of an Enforcement Event, the payment obligations of the Kafalah Provider under the Subordinated Guarantee shall rank ahead of the holders of Junior Obligations of the Kafalah Provider and rank junior to the claims of all other present and future creditors of the Kafalah Provider (other than Parity Obligations of the Kafalah Provider). 40
50. Definitions : "Junior Obligations" means any class of the Issuer's or Kafalah Provider’s (as the case may be) share capital including, without limitation, any ordinary shares and preference shares in the capital of the Issuer or the Kafalah Provider, as the case may be, and any other instruments or securities issued, entered into or guaranteed by the Issuer or the Kafalah Provider (as the case may be) whether by its terms or by operation of law, which are subordinated to the Sukuk Wakalah or Subordinated Guarantee (as the case may be). "Parity Obligations" means any instrument or security (other than ordinary shares or preference shares) issued, entered into or guaranteed by the Issuer or the Kafalah Provider (as the case may be) that is expressed to rank, whether by its terms or by operation or law, pari passu with the Sukuk Wakalah or Subordinated Guarantee (as the case may be). (d) Periodic Distribution Rate : The expected profit rate per annum (“Periodic Distribution Rate”) for each tranche of the Sukuk Wakalah, which may include reset of benchmark on specific intervals, shall be determined prior to each issuance of the Sukuk Wakalah, subject to the Stepped-Up Distribution Rate under the section entitled Other terms and conditions – Stepped-Up Distribution Rate below. Such Periodic Distribution Rate shall be on a fixed basis. If the Sukuk Wakalah are not redeemed by the First Call Date (as defined below), the Periodic Distribution Rate shall be stepped-up to the Stepped-Up Distribution Rate. “First Call Date” for each relevant tranche of the Sukuk Wakalah shall be determined prior to each issue date and First Call Date refers to the date where the Optional Redemption may first be exercised by the Issuer. (e) Periodic Distribution Frequency : The Issuer shall pay the Expected Periodic Distribution Amount on semi-annual basis, or such other period to be agreed, in arrears from the issue date (each a “Periodic Distribution Date”), subject to the Optional Deferral of Distribution as set out below in the section entitled Other terms and conditions – Optional Deferral of Distribution. (f) Periodic Distribution Basis : Actual/365 days. 41
51. (g) Stepped-Up Distribution Rate : The expected rate(s) to be determined prior to the issuance of each tranche of the Sukuk Wakalah, which shall be of a certain percentage above the prevailing Periodic Distribution Rate of the Sukuk Wakalah, commencing from the Stepped-Up Distribution Date, calculated based on the Periodic Distribution Basis. "Stepped-Up Distribution Date" means the date(s) where such applicable Stepped-Up Distribution Rate applies to the prevailing Periodic Distribution Rate, as determined prior to the issuance of the Sukuk Wakalah. (h) Optional Deferral of Distribution : The Issuer at its sole discretion, may opt to defer payment (in whole or in part) of the Expected Periodic Distribution Amount which is otherwise scheduled to be paid on a Periodic Distribution Date, to the next Periodic Distribution Date by giving an optional deferral notice in writing ("Optional Deferral Notice") signed by the Issuer not more than fifteen (15) nor less than five (5) business days prior to the relevant Periodic Distribution Date, to the Facility Agent and the Sukuk Trustee (for and on behalf of the Sukukholders), provided that no Issuer’s Compulsory Periodic Distribution Payment Event (as defined below) AND no Kafalah Provider’s Compulsory Periodic Distribution Payment Event (as defined below) has occurred. The Issuer may at its sole discretion, elect to further defer any outstanding Arrears of Deferred Periodic Distribution by complying with the foregoing notice requirement. The Issuer is not subject to any limit as to the number of times the Expected Periodic Distribution Amount and the Arrears of Deferred Periodic Distribution can be deferred except that the provisions on the Dividend and Capital Stopper shall be complied with until all outstanding Arrears of Deferred Periodic Distribution have been paid in full. For this purpose, each Optional Deferral Notice shall be accompanied by a certificate signed by a director and the company secretary OR a director and an authorised signatory OR two authorised signatories, as the case may be, of the Issuer and Kafalah Provider, confirming that no Issuer’s Compulsory Periodic Distribution Payment Event and no Kafalah Provider’s Compulsory Periodic Distribution Payment Event has occurred. Any such certificate shall be conclusive evidence that no Issuer’s Compulsory Periodic Distribution Payment Event and no Kafalah Provider’s 42
52. Compulsory Periodic Distribution Payment Event has occurred and the Facility Agent and the Sukuk Trustee shall be entitled to rely without any obligation to verify the same and without liability to any Sukukholder or any other person on any such Optional Deferral Notice or any certificate as aforementioned . Each Optional Deferral Notice shall be conclusive and binding on the Sukukholders. Payment of the Arrears of Deferred Periodic Distribution The Issuer may satisfy any Arrears of Deferred Periodic Distribution (in whole or in part) at any time calculated up to the date of payment of such Arrears of Deferred Periodic Distribution by giving notice of such election to the Facility Agent and the Sukuk Trustee (for and on behalf of the Sukukholders) not less than five (5) business days prior to the relevant payment date specified in such notice (which notice is irrevocable and shall oblige the Issuer to pay the relevant Arrears of Deferred Periodic Distribution on the payment date specified in such notice). In any event the Issuer shall satisfy any outstanding Arrears of Deferred Periodic Distribution (in whole but not in part) on the earliest of: (a) the date of redemption of the Sukuk Wakalah pursuant to any Redemption Event; (b) within fifteen (15) days after the occurrence of a breach of the Dividend and Capital Stopper (as defined below); and (c) the date such amounts becomes due under an Enforcement Event. Any partial payment of outstanding Arrears of Deferred Periodic Distribution by the Issuer shall be shared by the Sukukholders of the relevant tranche on a pro-rata basis. The deferral of any Expected Periodic Distribution Amount payment or any Arrears of Deferred Periodic Distribution payment in accordance with this paragraph shall not constitute an Enforcement Event for any purpose. (i) Issuer’s Compulsory Periodic Distribution Payment Event : If, during the six (6) month period ending on the day before the relevant scheduled Periodic Distribution Date, either or both of the following 43
53. have occurred : (a) a dividend, distribution or other payment (save and except for advances by the Issuer to the Kafalah Provider Group which source of fund is from the issuance proceeds of the Sukuk Wakalah) has been declared or paid by the Issuer in respect of any of the Issuer's Junior Obligations or Parity Obligations (except on a pro-rata basis with the Sukuk Wakalah); and (b) the Issuer's Junior Obligations or Parity Obligations (except on a pro-rata basis with the Sukuk Wakalah) have been purchased, redeemed, reduced, cancelled, bought-back or acquired by the Issuer, an Issuer’s Compulsory Periodic Payment Event shall have occurred. (j) Kafalah Provider’s Compulsory Periodic Distribution Payment Event Distribution : If, during the six (6) month period ending on the day before the relevant scheduled Periodic Distribution Date, either or both of the following have occurred: (a) a dividend, distribution or other payment has been declared or paid by the Kafalah Provider in respect of any of the Kafalah Provider’s Junior Obligations or Parity Obligations (except on a pro-rata basis with the Sukuk Wakalah); and (b) the Kafalah Provider’s Junior Obligations or Parity Obligations (except on a pro-rata basis with the Sukuk Wakalah) have been purchased, redeemed, reduced, cancelled, bought-back or acquired by the Kafalah Provider, a Kafalah Provider’s Compulsory Periodic Distribution Payment Event shall have occurred. (k) Dividend and Capital Stopper : So long as any Expected Periodic Distribution Amount has been deferred and any Arrears of Deferred Periodic Distribution is outstanding, the Issuer and the Kafalah Provider shall not: (1) declare or pay any dividends, distributions or other payments, save and except for advances by the Issuer to the Kafalah Provider Group which source of fund is from the issuance proceeds of the Sukuk Wakalah, and will procure and ensure that no dividend, distribution or other payment is 44
54. made on any of its Junior Obligations or its Parity Obligations (except on a pro-rata basis with the Sukuk Wakalah); or (2) redeem, reduce, cancel, or acquire and will procure that no redemption, reduction, cancellation, or acquisition is made in respect of any of its Junior Obligations or its Parity Obligations (except on a pro-rata basis with the Sukuk Wakalah), until all Expected Periodic Distribution Amount due and payable, and any outstanding Arrears of Deferred Periodic Distribution has been paid in full. (l) Dividend and Capital Pusher (m) Optional Redemption : The payment by the Issuer or the Kafalah Provider, as the case may be, of any Arrears of Deferred Periodic Distribution (if any) will become due and payable within fifteen (15) days from any of the following date: (1) if the Issuer or the Kafalah Provider, as the case may be, has on such date declared or paid any dividends, distributions or other payments on any of its Junior Obligations, or its Parity Obligations (except on a pro-rata basis with Sukuk Wakalah); or (2) if the Issuer or the Kafalah Provider, as the case may be, has on such date redeemed, reduced, cancelled, or acquired any of its Junior Obligations, or its Parity Obligations (except on a pro-rata basis with Sukuk Wakalah). : The Issuer may, at its sole discretion, redeem at par, all (and not some only) of the Sukuk Wakalah at the relevant Exercise Price and the Deferred Sale Price on the First Call Date or any Call Date thereafter. The Issuer shall give not less than fifteen (15) days’ and not more than forty five (45) days’ prior written notice (which notice shall be irrevocable) to the Facility Agent and the Sukuk Trustee (for and on behalf of the Sukukholders) for the Optional Redemption. “Call Date” means the First Call Date and each Periodic Distribution Date thereafter. (n) Accounting Event : If as a result of any changes or amendments to the Malaysian Financial Reporting Standards ("MFRS") in Malaysia or any other accounting standards that may replace MFRS for the 45
55. purposes of the Issuer 's or the Kafalah Provider’s consolidated financial statements ("Relevant Accounting Standard"), the Sukuk Wakalah are no longer recorded, or will no longer be recorded entirely as "equity" pursuant to the Relevant Accounting Standard, an Accounting Event shall have occurred. (o) Accounting Event Redemption : If at any time an Accounting Event has occurred and is continuing and the Issuer may elect to deliver to the Facility Agent and the Sukuk Trustee:(i) a certified true copy of the opinion issued by the independent auditor of the Issuer or the Kafalah Provider opining that an Accounting Event has occurred; and (ii) a certificate signed by a director and the company secretary OR a director and an authorised signatory OR two authorised signatories, as the case may be, of the Issuer stating that the Issuer is entitled to effect the Accounting Event Redemption and setting forth a statement of facts showing that an Accounting Event has occurred, and thereafter the Issuer may at its sole discretion, redeem the Sukuk Wakalah (in whole, but not in part) at the relevant Exercise Price and the Deferred Sale Price. The Issuer shall give not less than fifteen (15) days' and not more than forty five (45) days’ prior written notice (which notice shall be irrevocable) to the Facility Agent and the Sukuk Trustee (for and on behalf of the Sukukholders) for the Accounting Event Redemption. (p) Tax Event : If:(a) the Issuer has or will become obliged to pay additional amounts of tax in relation to its payments under the Sukuk Wakalah ("Additional Amounts") or increase the payment of such Additional Amounts; or (b) the Expected Periodic Distribution Amount made by the Issuer would not in the immediately following Periodic Distribution Date be fully tax deductible by the Issuer for Malaysian income tax purposes, as a result of:- 46
56. (i) any change in, or amendment to, the laws (or any regulations, rulings or other administrative pronouncements of Malaysia) or any political subdivision or any authority thereof or therein having power to tax; or (ii) any change in the application or official interpretation of such laws, regulations, rulings or other administrative pronouncements, which change or amendment is made public on or after the issue date of the relevant Sukuk Wakalah; and such obligations cannot be avoided by the Issuer taking reasonable measures available to it, then a Tax Event shall have occurred. (q) Tax Event Redemption : If at any time a Tax Event has occurred and is continuing and the Issuer may elect to deliver to the Facility Agent and the Sukuk Trustee: (i) a certified true copy of the opinion issued by an independent tax adviser of reputable standing opining that a Tax Event has occurred; and (ii) a certificate signed by a director and the company secretary OR a director and an authorised signatory OR two authorised signatories, as the case may be, of the Issuer stating that the Issuer is entitled to effect the Tax Event Redemption and setting forth a statement of facts showing that a Tax Event has occurred, and thereafter the Issuer may, at its sole discretion, redeem the relevant Sukuk Wakalah (in whole, but not in part) at the relevant Exercise Price and the Deferred Sale Price. The Issuer shall give not less than (15) days’ and not more than forty five (45) days’ prior written notice (which notice shall be irrevocable) to the Facility Agent and the Sukuk Trustee (for and on behalf of the Sukukholders) for the Tax Event Redemption provided that no such notice shall be given earlier than ninety (90) days prior to the earliest date on which the Issuer would be obliged to pay such Additional Amounts. (r) Rating Event : If, as a result of any amendment, clarification or change in the rating methodology by the Credit Rating Agency that results in a lower equity credit for the relevant tranche of the Sukuk Wakalah, as compared to the equity credit which was first 47
57. assigned on the relevant issue date by the Credit Rating Agency or , if equity credit is not assigned for the relevant tranche of the Sukuk Wakalah on the relevant issue date, at the date when equity credit is assigned for the first time, a Rating Event shall be deemed to have occurred. (s) Rating Event Redemption : If at any time a Rating Event has occurred and is continuing and the Issuer may elect to deliver to the Facility Agent and the Sukuk Trustee: (i) a written confirmation that a Rating Event has occurred issued by the Credit Rating Agency; and (ii) a certificate signed by a director and the company secretary OR a director and an authorised signatory OR two authorised signatories, as the case may be, of the Issuer stating that the Issuer is entitled to effect the Rating Event Redemption, and thereafter the Issuer may, at its sole discretion, redeem the relevant Sukuk Wakalah (in whole, but not in part) at the Exercise Price and the Deferred Sale Price. The Issuer shall give not less than fifteen (15) days’ and not more than forty five (45) days’ prior written notice (which notice shall be irrevocable) to the Sukuk Trustee (for and on behalf of the Sukukholders) for the Rating Event Redemption. (t) Purchase and selling price/rental : Commodity Purchase Price In respect of each Commodity Murabahah Investment, the Commodity Purchase Price is equivalent to such balance of the proceeds of the Sukuk Wakalah that remains following the acquisition of the Ijarah Assets. The Commodity Purchase Price shall be in compliance with the asset pricing requirements under the SC LOLA Guidelines. Deferred Sale Price In respect of each Commodity Murabahah Investment, the Deferred Sale Price is equivalent to the Commodity Purchase Price plus the profit margin (to be determined prior to issuance of the relevant tranche of the Sukuk Wakalah) payable on a deferred basis upon the terms of the relevant Commodity Sale and Purchase Agreement. 48
58. Assets Purchase Price In respect of each Ijarah Asset , the Assets Purchase Price shall be determined prior to the issuance of the relevant tranche of the Sukuk Wakalah and shall be in compliance with the asset pricing requirements as set out in the SC LOLA Guidelines. Rental In respect of the Ijarah Assets, the Rental is equivalent to the Expected Period Distribution Amount pursuant to an Ijarah Agreement. (u) Exercise Price : Exercise Price in relation to the Purchase Undertaking In relation to the Purchase Undertaking pursuant to the following events, the Exercise Price is calculated as follows: (1) Enforcement Event The Exercise Price shall be equal to: (a) the nominal value of the Sukuk Wakalah; plus (b) any Expected Periodic Distribution Amount (including any Arrears of Deferred Periodic Distribution) payable and unpaid up to the date of Winding-up; plus (c) any Wakalah Services Charge Amount outstanding under the terms of the Wakalah Agreement; less (d) the Deferred Sale Price. The Issuer will be entitled to set-off the Exercise Price with any Wakalah Services Charge Amount outstanding under the terms of the Wakalah Agreement. Exercise Price in relation to the Sale Undertaking In relation to the Sale Undertaking pursuant to the following redemption events, the Exercise Price is calculated as follows: (1) Optional Redemption The Exercise Price shall be equal to: 49
59. (a) the nominal value of the Sukuk Wakalah; plus (b) any Expected Periodic Distribution Amount (including any Arrears of Deferred Periodic Distribution) payable and unpaid up to the date of redemption of the relevant Sukuk Wakalah pursuant to the Sale Undertaking; plus (c) any Wakalah Services Charge Amount outstanding under the terms of the Wakalah Agreement; less (d) the Deferred Sale Price. The Issuer will be entitled to set-off the Exercise Price with any Wakalah Services Charge Amount outstanding under the terms of the Wakalah Agreement. (2) Accounting Event Redemption, Tax Event Redemption and Rating Event Redemption (A) Prior to the First Call Date: The Exercise Price shall be equal to: (a) the higher of (a) 101% of the nominal value of all the outstanding Sukuk Wakalah or (b) the Make-Whole Amount (as defined below); (b) any Expected Periodic Distribution Amount (including any Arrears of Deferred Periodic Distribution) payable and unpaid up to the date of redemption of the relevant Sukuk Wakalah pursuant to the Sale Undertaking; plus (c) any Wakalah Services Charge Amount outstanding under the terms of the Wakalah Agreement; less (d) the Deferred Sale Price. The Issuer will be entitled to set-off the Exercise Price with any Wakalah Services Charge Amount outstanding under the terms of the Wakalah Agreement. 50
60. (B) On or after the First Call Date The Exercise Price shall be equal to: (a) the nominal value of the Sukuk Wakalah; plus (b) any Expected Periodic Distribution Amount (including any Arrears of Deferred Periodic Distribution) payable and unpaid up to the date of redemption of the relevant Sukuk Wakalah pursuant to the Sale Undertaking; plus (c) any Wakalah Services Charge Amount outstanding under the terms of the Wakalah Agreement; less (d) the Deferred Sale Price. The Issuer will be entitled to set-off the Exercise Price with any Wakalah Services Charge Amount outstanding under the terms of the Wakalah Agreement. "Make-Whole Amount" means the amount, equal to the sum of (a) the present value of the nominal value of the outstanding Sukuk Wakalah to be redeemed discounted from the First Call Date to the redemption date, and (b) the present value of all Expected Periodic Distribution Amount payable from the redemption date up to and including, the First Call Date, discounted to the redemption date on a semi-annual basis (assuming a 365 day year) at the relevant discount rate being the Relevant MGS Rate plus the relevant margin (“Make Whole Margin”) to be agreed between the Issuer and the JLAs prior to the issue date of the relevant tranche of the Sukuk Wakalah. "Relevant MGS Rate" means the rate in per cent per annum equal to the relevant Malaysian Government Securities ("MGS") rate for a tenure corresponding to the period between the relevant redemption date up to the First Call Date, or in the absence of such MGS rate, the interpolated rate based on the arithmetic mean of the 2 available closest MGS rates corresponding to the period between the relevant redemption date up to the First Call Date. (v) Issue Price : The Sukuk Wakalah shall be issued at par, at a premium or at a discount to the nominal value (to be determined prior to each issuance) and the Issue Price shall be calculated in accordance with 51
61. PayNet Procedures and Rules (as defined below). (w) Form and denomination : Form The Sukuk Wakalah shall be issued in accordance with the: (1) Operational Procedures for Securities Services and Operational Procedures for Ringgit Settlement in the Real Time Electronic Transfer of Funds and Securities System issued by PayNet or its successor-intitle or successor in such capacity ("PayNet Procedures"); and (2) Participation and Operation Rules for Payment and Securities Services issued by PayNet or its successor-in-title or successor in such capacity ("PayNet Rules") (PayNet Procedures and PayNet Rules are collectively referred to as "PayNet Procedures and Rules" as amended and/or substituted from time to time). The Sukuk Wakalah shall be represented by a global certificate (exchangeable for definitive certificates on the occurrence of certain limited events). The global certificate shall be deposited with BNM and shall be in bearer form. Denomination The denomination of the Sukuk Wakalah shall be Ringgit Malaysia One Thousand (RM1,000.00) or in multiples of Ringgit Malaysia One Thousand (RM1,000.00) thereof or such other denominations to be mutually agreed by the Issuer and the JLA as may be allowed under the PayNet Procedures and Rules at the time of issuance. (x) Taxation : All payments by the Issuer and/or the Kafalah Provider shall be made without withholding or deductions for or on account of any present or future tax, duty or charge of whatsoever nature imposed or levied by or on behalf of Malaysia, or any other applicable jurisdictions, or any authority thereof or therein having power to tax, unless such withholding or deduction is required by law, in which event the payer shall be required to make such additional amount so that the payee would receive the full amount which the payee would have received if no such withholding or deductions are made. 52
62. (y) Transaction Documents : The Transaction Documents shall include the following: (1) the Programme Agreement; (2) the Trust Deed; (3) the Subordinated Guarantee; (4) the Securities Lodgement Form; (5) the Subscription Agreements; (6) the relevant Islamic documents; and (7) such other agreements as may be advised by the Solicitor as may be necessary to the Sukuk Wakalah and agreed by the Issuer and Kafalah Provider. (z) No Set-off : Subject to applicable law, no Sukukholder may exercise, claim or plead any right of set-off, deduction, withholding or retention in respect of any amount owed to it by the Issuer or the Kafalah Provider in respect of, or arising under or in connection with the Sukuk Wakalah, and each Sukukholder shall, by virtue of its holding of any Sukuk Wakalah, be deemed to have waived all such rights of set-off, deduction, withholding or retention against the Issuer or the Kafalah Provider. Notwithstanding the above, if any of the amounts due and payable to any Sukukholder by the Issuer or the Kafalah Provider in respect of, or arising under or in connection with the Sukuk Wakalah is discharged by set-off, such Sukukholder shall, subject to applicable law, immediately pay an amount equal to the amount of such discharge to the Issuer or the Kafalah Provider (or, in the event of its winding-up or administration, the liquidator or as appropriate, administrator of the Issuer or the Kafalah Provider) and, until such time as payment is made, shall hold such amount in trust for the Issuer or the Kafalah Provider (or the liquidator or as appropriate, administrator of the Issuer or the Kafalah Provider) and accordingly any such discharge shall be deemed not to have taken place. THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 53
63. SECTION 3 .0 CORPORATE INFORMATION ON THE ISSUER AND KAFALAH PROVIDER 3.1 Corporate profile of the Issuer The Issuer was incorporated on 18 September 2019 in Malaysia under the Companies Act as a public company limited by shares under its existing name. The principal activities of the Issuer are activities auxiliary to finance N.E.C. The Issuer is a special purpose vehicle set up to raise funds for the Group. 3.2 Share capital of the Issuer The issued and paid-up share capital of the Issuer as at LPD is RM1.00 divided into 1 ordinary share. 3.3 Shareholder of the Issuer The Issuer is a wholly-owned subsidiary of Top Glove Sdn Bhd (Registration No. 199101010171 (220483-T)) which is in turn, wholly-owned by the Kafalah Provider. 3.4 Profiles of directors of the Issuer The profiles of the Directors of the Issuer as at the date of this Information Memorandum are as follows: Director Profile Tan Sri Dr. Lim Wee Chai   Malaysian, 62 years of age Appointed to the Board on 18 September 2019 Please refer to Section 3.8 below. Dato’ Lee Kim Meow   Malaysian, 60 years of age Appointed to the Board on 18 September 2019 Please refer to Section 3.8 below. Lim Cheong Guan   Malaysian, 54 years of age Appointed to the Board on 18 September 2019 Please refer to Section 3.8 below. Wong Chong Ban   Malaysian, 47 years of age Appointed to the Board on 18 September 2019 Mr. Wong graduated with a Bachelor of Science, Chemistry from the University of Malaya in 1998. He is currently a member of the Group’s 54
64. Executive committee (“Executive Committee”) and the Chief Operating Officer of the Group. He has more than 20 years of experience in the glove manufacturing industry. Ng Yong Lin   Malaysian, 34 years of age Appointed to the Board on 18 September 2019 Mr. Ng graduated with a Bachelor of Engineering, Computer Aided Design/Manufacturing from the University of Malaya in 2009. He is currently a member of the Executive Committee and the Senior General Manager of the Group. He has more than 10 years of experience in the glove manufacturing industry. Lim Jin Feng   Malaysian, 33 years of age Appointed to the Board on 18 September 2019 Mr. Lim graduated with a Bachelor’s Degree in International Business from California State University Fresno in 2010. He is currently on his 9th year management rotation in the Group. He spent his first 3 years in Sales & Marketing department, followed by 3 years in the Manufacturing department, and is now in his 3rd year in the Human Resource department. 3.5 Corporate profile of the Kafalah Provider TG Corp, the ultimate holding company of the Issuer, was incorporated on 23 December 1998 under the Companies Act as a public company limited by shares under its existing name. TG Corp was listed on the Second Board of the Kuala Lumpur Stock Exchange in 2001 and was transferred to the Main Board of the Kuala Lumpur Stock Exchange (now known as the Main Market of Bursa Malaysia) on 16 May 2002. On 28 June 2016, TG Corp completed a secondary listing on the Main Board of the Singapore Exchange Securities Trading Limited. As at the date of this Information Memorandum, TG Corp is one of the component stocks of the MSCI Global Standard Index, FTSE Bursa Malaysia KLCI, FBM Top 100 Index, FBM Emas Index, FBM Emas Syariah Index, FBM Hijrah Syariah Index, FTSE4Good Bursa Malaysia Index and the Dow Jones Sustainability Indices (DJSI) for Emerging Markets. TG Corp is principally engaged in investment holding activities and provision of management services. 55
65. 3 .6 Share capital of the Kafalah Provider The issued and paid-up share capital of TG Corp as at LPD is RM789,300,057.56 which consists of 113,872,976 ordinary shares paid by cash and 2,446,916,372 ordinary shares paid by otherwise than cash. 3.7 Substantial Shareholders of the Kafalah Provider Based on the register of substantial shareholders of TG Corp as at LPD, the substantial shareholders of TG Corp and their shareholdings are as follows: No. of Ordinary Shares (Percentage Owned) Name Direct 689,547,952 (26.937%) Indirect 230,766,816 (9.015%) Puan Sri Tong Siew Bee 7,230,392 (0.282%) 913,084,376 (35.670%) Lim Hooi Sin 39,613,648 (1.548%) 880,667,120 (34.404%) Lim Jin Feng 34,000 (0.001%) 880,667,120 (34.404%) Firstway United Corp 183,888,776 (7.183%) - Employees Provident Fund Board 198,268,922 (7.745%) - Tan Sri Dr. Lim Wee Chai 3.8 Profiles of directors of the Kafalah Provider The profiles of the Directors of the TG Corp as at the date of this Information Memorandum are as follows: Director Profile Tan Sri Dr. Lim Wee Chai   Malaysian, 62 years of age Appointed to the Board on 4 September 2000 Executive Chairman Tan Sri Dr. Lim Wee Chai is the Executive Chairman of TG Corp and founder of the Group. He graduated with a Bachelor of Science Degree with Honours in Physics from the University of Malaya, Malaysia in 1982, a Master of Business Administration from the Sul Ross State University in Texas, U.S. in 1985, a Doctor of Philosophy in Management from the University of Selangor, Malaysia in 2015, a Honorary Doctorate in Business Administration from Oklahoma City University, U.S. in 2016 and a Honorary 56
66. Doctorate in Entrepreneurship from Management & Science University, Malaysia in 2018. He has more than 30 years of experience in the rubber and latex manufacturing business industry. Tan Sri Dr. Lim is currently the Chairman of the Group’s Employees’ Share Option Scheme committee (“ESOS Committee”), the Chairman of TG Corp’s Board Investment committee (“Board Investment Committee”), the Chairman of the Group’s Employees’ Share Grant Plan committee (“ESGP Commitee”) and a Trustee of the Top Glove Foundation. Tan Sri Dr. Lim is an Honorary Fellow of Institut Fizik Malaysia since 2019, the immediate past president/ Council Member of the Federation of Malaysian Manufactures (“FMM”) since 2018, the Honorary President of the Associated Chinese Chambers of Commerce and Industry of Malaysia since 2017, the Life Honorary President of the Federation of Hokkien Associations of Malaysia since 2017 and the Honorary President of the Kuala Lumpur and Selangor Chinese Chamber of Commerce and Industry since 2017. He also serves as the Director and Board Member of the Employees Provident Fund since 2015. On 2017, Tan Sri Dr. Lim was appointed as Deputy Chairman, Non-Independent and NonExecutive Director of Tropicana Corporation Bhd and subsequently he was re-designated as the Chairman in 2019. Tan Sri Dr. Lim is also the Honorary President of the Malaysia-China Chamber of Commerce since 2012, the Life Honorary Advisor of the Federation of Chinese Associations Malaysia since 2011, an Honorary Advisor of the Klang Chinese Chamber of Commerce since 2011, an Honorary Advisor of the Lim Association of Malaysia since 2011 and a Director of Kuen Cheng High School since 2008. Tan Sri Dr. Lim has been actively involved in many associations and organisations in Malaysia. He was the President of the FMM, having been in office in 2016/17. He served as the Director and Board Member of University of Malaya from 2015 to 2018, Council Member of the East Asia Business Council from 2011 to 2015, and Director of the Association of Malaysia Medical Industries. In addition, he was a Board member of the Malaysian Rubber Board from 1998 to 1999 and also the President of the MARGMA from 1997 to 1999. Prior to that, he served as Vice-President, Honorary Secretary 57
67. and Treasurer of MARGMA for seven years . Dato’ Lee Kim Meow   Malaysian, 60 years of age Appointed to the Board on 15 October 2003 Managing Director Dato’ Lee Kim Meow is the Managing Director of TG Corp which he joined in 1997. He obtained a Bachelor of Commerce Degree from the University of New South Wales, Australia majoring in Accounting, Finance and Information Systems in 1983 and a Bachelor of Law Degree from the University of London, United Kingdom in 1991. Currently, Dato’ Lee is a member of TG Corp’s Board Risk Management committee (“Board Risk Management Committee”). He is also a Trustee of Top Glove Foundation, the Chairman of ARGMA, Trustee of MARGMA Foundation and a Board Member of the MREPC. Dato’ Lee has more than 15 years of experience in the financial services, trading and manufacturing business having worked in established financial institutions and with a wellknown conglomerate with diversified interests in the ASEAN region. In the past 17 years, Dato’ Lee has been actively contributing to the development of the rubber glove industry in Malaysia as well as the ASEAN region. He served as a board member of the MREPC for 14 years from 2002 to 2016. He was a board member of the Malaysian Rubber Board (“MRB”) and the Tun Abdul Razak Research Centre from 2010 to 2011, and a past President of MARGMA. He was also the Chairman of the Organising Committee of the International Rubber Glove Conference and Exhibition from 2014 to 2016. Tan Sri Rainer Althoff Independent Non-Executive Director   Malaysian, 73 years of age Appointed to the Board on 14 March 2013 Tan Sri Rainer Althoff is an Independent NonExecutive Director of TG Corp. He obtained a Master degree (Diploma) in Electronics and Electrical Engineering from Bergische University in Wuppertal, Germany in 1969. Tan Sri Rainer Althoff is currently a member of the Board Risk Management Committee. He is presently a member of Rotary Club Kuala Lumpur DiRaja since 2001, Chief Executive Officer of ALC 58
68. International Sdn Bhd , Kuala Lumpur since 2009, member of International Advisory Panel to the Board of Directors of CIMB Bank Berhad since 2009, the (Non-Administrative) Honorary Chairman of The Brand Laureate World Foundation, Petaling Jaya since 2016, Executive Chairman of RaceRoom Sdn Bhd, Kuala Lumpur since 2017 and the (Non-Administrative) NonExecutive Chairman of Total Sports Asia Sdn Bhd since 2019. Tan Sri Rainer Althoff has more than 45 years of experience in the fields of electrical engineering and electronics. He was the President and CEO of Siemens Malaysia Sdn Bhd from 1998 to 2009 and also the spokesperson for all Siemens’s operations and affiliated companies in Malaysia. He was a Non-Executive Director of Proton Holdings Berhad from 2010 to 2012, the Chairman of Nokia Siemens Networks Sdn Bhd, Kuala Lumpur from 2009 to 2015 and Chairman of Coriant Malaysia Sdn Bhd from 2013 to 2015. He was an Executive Director of Lauda Interactive AG, Darmstadt/ Germany, Senior Advisor to TSystems Malaysia Sdn Bhd, Cyberjaya and a trustee of Jeffrey Cheah Foundation. Puan Sri Tong Siew Bee Non-Independent NonExecutive Director   Malaysian, 61 years of age Appointed to the Board on 4 September 2000 Puan Sri Tong is the co-founder of the Group and Non-Independent Non-Executive Director of TG Corp. She graduated with a Bachelor of Science Degree with Honours in Computer Science from University of Science, Malaysia in 1983 and a Master of Business Administration from the Sul Ross State University in Texas, U.S. in 1985. Puan Sri Tong is currently a member of TG Corp’s Board Sustainability Committee (“Board Sustainability Committee”) and a Trustee of Yayasan Pendidikan Tzu Chi Malaysia. Puan Sri Tong previously worked in the banking industry in the information technology field for more than 10 years. She was formerly attached to United Overseas Bank Berhad and Utama Bank Berhad. Lim Hooi Sin   Malaysian, 57 years of age Appointed to the Board on 4 September 2000 Executive Director Mr. Lim is an Executive Director of TG Corp. He obtained a Bachelor of Science Degree in 59
69. Management Science from Oklahoma State University , U.S. in 1985, a Master Degree in Business Administration (Specialised in Applied Statistics) from Arizona State University, U.S. in 1986 and a Charter Financial Consultant Diploma from the American College, PA, U.S. in 1990. Mr. Lim spent 14 years of his career with MetLife Financial Services, one of the largest insurance and financial services companies in the U.S. Prior to this appointment, he was a Management Trainee, Associate Branch Manager, Regional Marketing Specialist, Agency Director and a Director of Asian Market. His experiences include product development, marketing, recruiting, training and supervision of a large highly productive sales force. He was previously a Director of Arizona Asian American Association from 1996 to 1997. He also has more than 20 years of experience in the U.S. glove market, having been the founder of TG Medical USA, Inc. (a wholly owned subsidiary of TG Corp) in 1994, and served as its Executive Vice President from 2001 to 2005 and as President since 2005. He also sits on the board of several private limited companies. Lim Cheong Guan   Malaysian, 54 years of age Appointed to the Board on 31 August 2006 Executive Director Lim Cheong Guan is an Executive Director of TG Corp. He joined TG Corp as the Group Financial Controller in 2005 and is responsible for the accounting, treasury, corporate finance and investor relations of the Group. He obtained a Bachelor Degree in Accounting from the University of Malaya, Malaysia in 1990. He is a member of the Malaysian Institute of Accountants and a member of the Malaysian Institute of Certified Public Accountants. Mr. Lim is currently a member of the Board Risk Management Committee, Board Investment Committee, ESOS Committee and the ESGP Committee. He is also currently an advisor to the Administrative Committee of Top Glove Foundation since 2008, the Chairman of the Group’s Risk Working committee (“Risk Working Committee”) and the Head of Sustainability Steering Group since 2019. Mr. Lim has more than 28 years of experience in the fields of audit, manufacturing, plantation, 60
70. trading and property development . He began his career with Price Waterhouse in 1990 and subsequently held various key positions in a number of public listed companies in Malaysia whose business activities spanned manufacturing, plantation, trading and property development. Dato’ Lim Han Boon Senior Independent NonExecutive Director   Malaysian, 62 years of age Appointed to the Board on 21 February 2011 Dato’ Lim is a Senior Independent Non-Executive Director of TG Corp. He is the founder and Director of Envo BPO Services Sdn Bhd, an outsourcing company he founded in 2009. Dato’ Lim is a Chartered Accountant of the Malaysian Institute of Accountants. He also holds a Master of Business Administration Degree from the University of South Australia and attended the Harvard Business School Senior Management Development Programme in 2002. He is a member of the Chartered Management Institute, United Kingdom and a Fellow of the Association of Chartered Certified Accountants, United Kingdom. Dato’ Lim is currently the Chairman of TG Corp’s Board Audit committee (“Board Audit Committee”), a member of the Board Risk Management Committee, a member of the Board Sustainability Committee, a member of the TG Corp’s Board Nomination and Remuneration committee (“Board Nomination and Remuneration Committee”), a member of the Board Investment Committee, a member of the ESGP Committee and a member of the ESOS Committee. Presently, he is also an advisor of Outsourcing Malaysia, a Chapter of PIKOM, the National ICT Association, and a board member of Kuen Cheng High School Kuala Lumpur. Dato’ Lim started his career in the Chartered Accounting firm of Binder Hamlyn (now known as BDO). He has more than 20 years of experience in the areas of transportation and maritime logistics industry having worked for Kontena Nasional Bhd, for Northport (Malaysia) Bhd as its General Manager, Corporate Services and for NCB Holdings Bhd as the Group Financial Controller and Company Secretary. He also has a strong background in the global business services/outsourcing industry having spent more than ten years in this line, being the founder of Envo Bpo Services Sdn Bhd. 61
71. Datuk Noripah Binti Kamso Independent Non-Executive Director   Malaysian, 62 years of age Appointed to the Board on 18 March 2015 Datuk Noripah is an Independent Non-Executive Director of TG Corp. She obtained a Diploma in Business Studies from the Institute Technology Mara, Malaysia in 1978, a Bachelor of Science from the Northern Illinois University, Dekalb, Illinois, U.S. in 1980 and a Master in Business Administration from Marshall University, Huntington, West Virginia, U.S. in 1981. Datuk Noripah is currently the Chairman of the Board Risk Management Committee, a member of the Board Audit Committee, a member of the Board Nomination and Remuneration Committee, a member of the Board Investment Committee, a member of the Board Sustainability Committee, a member of the ESGP Committee and a member of the ESOS Committee. She is currently the Chairman of Bank Kerjasama Rakyat Malaysia Berhad, the Chairman of Yayasan Bank Rakyat, an Adjunct Professor for the Faculty Business Management, Universiti Teknologi MARA, Malaysia, an Adjunct Professor to the School of Economics, Finance and Banking, Universiti Utara Malaysia and the Board of Trustees of the International Council of Islamic Finance Educators. Datuk Noripah began her career as Development Officer, Project Division with Urban Development Authority from 1980 to 1983 and joined Bank of Commerce (M) Berhad as Senior Corporate Banker from 1983 to 1986. She joined the CIMB group from 1993 to 2014 and held various key positions in the CIMB group. She was the Chief Executive Officer of CIMB Futures Sdn Bhd from 1996 to 2012, the Chief Executive Officer of CIMB-Principal Asset Management Berhad from 2005 to 2013 and the founding Chief Executive Officer of CIMB Principal Islamic Asset Management Sdn Bhd from 2008 to 2012. Since 2008, she has successfully established a global platform for the firm to extend its reach to the United Kingdom, Europe, the Gulf Cooperation Council, Asia, U.S. and Australia. She was also a former advisor to CIMB Islamic Bank Berhad from 2013 to 2014. She was also the Past President of the Malaysian Futures Brokers Association in 2005. She was formerly a Global Practitioner in Residence in Principal Financial Group Centre 62
72. for Global Citizenship , U.S. in 2015. In the academic year 2016/17, she was a Fellow in Islamic Finance in Oxford Center for Islamic Studies (OCIS), an independent college of the University of Oxford, United Kingdom. Sharmila Sekarajasekaran Independent Non-Executive Director   Malaysian, 51 years of age Appointed to the Board on 18 March 2015 Ms. Sharmila is an Independent Non-Executive Director of TG Corp. She obtained a B.A. Law and Economics (Hons.) from Keele University, United Kingdom in 1993 and is an advocate and solicitor of the High Court of Malaya, an adjudicator of Asian International Arbitration Centre (Malaysia) and a Barrister-At-Law, Middle Temple, United Kingdom. Ms. Sharmila is currently the Chairman of the Board Sustainability Committee, a member of the Board Nomination and Remuneration Committee, member of the Board Audit Committee, a member of the ESGP Committee and a member of the ESOS Committee. She is also currently a consultant in the Recording Industry Association of Malaysia group (“RIM Group”) for the legal, operations and industry development departments, and a partner of Jerald Gomez and Associates. Ms Sharmila began her career as a legal assistant with Messrs Chooi & Co. and joined Messrs Tay & Partners as senior legal assistant in the Intellectual Property department in 2000. She joined the RIM Group in 2005 and has held various positions in the RIM Group. Datuk Dr. Norma Mansor Independent Non-Executive Director   Malaysian, 62 years of age Appointed to the Board on 12 May 2017 Datuk Norma is an Independent Non-Executive Director of TG Corp. She obtained a Bachelor of Economics (Honours) degree from the University of Malaya in 1980, a Master of Public Administration (MPA) from the University of Liverpool in 1981 and a Doctor of Philosophy (PhD) from the University of Liverpool in 1985. Datuk Norma is currently the Chairman of the Board Nomination and Remuneration Committee, a member of the Board Risk Management Committee, a member of the ESGP Committee and a member of the ESOS Committee. She is currently a director of the 63
73. Social Security Research Centre of the University of Malaya and the President of the Malaysian Economic Association . Datuk Norma started her career as a lecturer at the Department of Administrative Studies and Politics at University of Malaya in 1985. She was promoted to Associate Professor in 1992 and to Head of Department and Professor in 2000. She held the position as an Executive Director of the International Institute of Public Policy and Management from 2001 to 2004 and was subsequently appointed as Dean of the Faculty of Economics and Administration from 2004 to 2009. Datuk Norma’s past appointments include the Ragnar Nurkse Visiting Professor of the School of Innovation and Governance, Talinn University of Technology, Estonia in 2015 and she was seconded to the Prime Minister’s Department as Secretary to the National Economic Advisory Council (“NEAC”) from 2009 to 2011. Azrina Arshad   Malaysian, 51 years of age Appointed to the Board on 8 January 2019 Independent Non-Executive Director Puan Azrina is an Independent Non-Executive Director of the TG Corp. She obtained a Diploma in Architecture (LAM, PAM, RIBA Part I) from Universiti Institut Teknologi MARA, Malaysia in 1990 and a Postgraduate Diploma in Architecture (LAM, PAM, RIBA Part II) from Oxford Brookes University, United Kingdom in 1992. Puan Azrina is currently the Member of the Board Audit Committee, the Board Investment Committee and the Board Sustainability Committee. She is currently the Project Manager and Director of Zalaraz Sdn Bhd and works as a freelance Project Architect and Manager of Focus Architects, Urban Designers & Planner in Ara Damansara. She is also a Trustee of Yayasan Arshad Ayub. Puan Azrina started her career in 1993 as an assistant architect in Arca-3 Arkitek, Kuala Lumpur and thereafter worked in various capacities in several architectural firms such as Focus Architects, Urban Designers and Planners in Selangor. She was also a part time lecturer in Universiti Teknology Malaysia in 1994. 64
74. Puan Azrina was appointed as a NonIndependent and Non-Executive Director of Sanichi Technology Berhad from January 2010 to August 2011 . She is also a Director and Partner of I-Partnership Sdn Bhd (formerly known as Woods Bagot (M) Sdn Bhd) since year 1997, and the Founder and Director of the Teapot Café Sdn Bhd since 1996. She has given talks organised by the American Hardwood Export Council in Guangzhou and Chengdu in 2005. Lim Andy   Singaporean, 62 years of age Appointed to the Board on 8 January 2020 Independent Non-Executive Director Mr. Lim Andy is an Independent Non-Executive Director of TG Corp. He graduated with First Class Honours in degree of Engineering from the University of Cambridge, United Kingdom. He also obtained a Masters in Business Administration from the University of California at Los Angeles, U.S. Mr. Lim Andy is the Founder and Chairman of private equity firm Tembusu Partners and the Chairman and substantial shareholder of Viking Offshore & Marine Ltd, a public listed company in Singapore. He is also the Executive Director of Associated Leisure International, a family holding company and Chairman of MoneyWorld group of companies, a leading foreign exchange player with offices in PRC, Hong Kong and Singapore. His other Board appointments include member of the Home Affairs Uniformed Service Invest Board of Trustee. His past board appointments include President of Enterprise 50 Association, Board of Trustee for Honour Singapore, Chairman of Alpha Singapore and Council Member of the National Council for Anti-Drug Abuse. In 2016, Mr. Lim Andy was appointed as Honorary Consul General to the Republic of Lithuania after serving as Honorary Consul for 12 years. 65
75. 3 .9 Profiles of key management personnel of the Kafalah Provider The profiles of the key management personnel of TG Corp as at LPD are as follows: Key Management Personnel Profile Tan Sri Dr Lim Wee Chai Please refer to Section 3.8 above Dato’ Lee Kim Meow Please refer to Section 3.8 above Puan Sri Tong Siew Bee Please refer to Section 3.8 above Lim Hooi Sin Please refer to Section 3.8 above Lim Cheong Guan Please refer to Section 3.8 above Wong Chong Ban Please refer to Section 3.4 above Lew Sin Chiang  Malaysian, 46 years of age Mr. Lew graduated with a Bachelor of Science, Industrial Chemistry from the University Putra Malaysia. He is currently a member of the Executive Committee and the Senior General Manager of the Joint Manufacturing Committee. He has more than 20 years of experience in the glove manufacturing industry. Ng Yong Lin Please refer to Section 3.4 above 66
76. 3 .10 Corporate Structure of the Group The corporate structure of Group as at LPD is as follows: 67
77. SECTION 4 .0 BUSINESS OVERVIEW OF THE GROUP 4.1 History The Group started out as a local business enterprise in 1991 under the name of Top Glove Sdn Bhd which remains as one of TG Corp’s principal subsidiaries, with a single factory and three production lines. In 1994, the Group made its first overseas foray through the acquisition of TG Medical (U.S.A), Inc and established a marketing arm in the U.S.. The business continued to grow and by 1996, the Group owned and operated a total of three factories in Malaysia. In 2001, the total number of factories in Malaysia that the Group owned and operated increased to six. In the same year, the Group also commenced operations in Thailand. In 2002, the Group continued to expand operations in Thailand and established a second rubber glove manufacturing factory there. In the same year, the Group achieved further expansion of its global footprint by commencing operations in the PRC. The Group established its first latex concentrate plant in Thailand in 2006 in order to secure the majority of its required sourcing of latex. Also in 2006, the Group completed the acquisition of B Tech Industry Company Limited, a Thailand-based manufacturer of concentrated latex and block rubber products, for RM26.8 million. In 2007, the Group completed the acquisition of a majority stake of approximately 60% in Medi-Flex Limited, a Singapore-based medical and specialty glove manufacturer for SGD12 million through the subscription of new shares. During the FYE2007, the Group surpassed RM1 billion in sales revenue and achieved RM2 billion in sales revenue during the FYE2010. Throughout the years, the Group continued to grow locally whilst expanding overseas operations. By 2011, the Group owned and operated a total of 22 factories in Malaysia. The Group also acquired a marketing arm in Germany in 2011 to expand its sales to Europe. In 2012, in order to accommodate the increasing number of staff and meet the future corporate office space requirements of TG Corp, the Group commenced the construction of Top Glove Tower, its corporate headquarters in Setia Alam, Selangor. The construction of Top Glove Tower was completed in April 2015. Also in 2012, the Group completed the acquisition of GMP Medicare Sdn Bhd, a Malaysia-based manufacturer of rubber gloves, for RM23.5 million. In 2013, the Group established its first dedicated Group Research and Development (“R&D”) Centre to drive innovation as the Group considers it imperative that it invests in technology and future capabilities which can be translated into new products, processes and services that deliver value to customers. In 2014, the Group completed the acquisition of the remaining minority shares it did not hold in Medi-Flex Limited. By 2017, the Group owned and operated a total of 29 glove factories in Malaysia, Thailand and the PRC. During the FYE2017, the Group had exceeded RM3 billion in sales revenue. 68
78. In 2018 , the Group completed the acquisition of Eastern Press Sdn Bhd, a printing and packaging material manufacturer for RM46.25 million. In the same year, the Group also completed the acquisition of 85% stake in Duramedical Sdn Bhd (“Duramedical”), a Malaysian medical supplies manufacturer for RM2.85 million, the acquisition of the entire equity interest in Aspion Sdn Bhd (“Aspion”) which is one of the world’s largest manufacturers of surgical gloves by capacity for RM1,370 million, and the acquisition of the remaining 30% equity interest in Kevenoll Do Brasil, a company that distributes a wide range of latex gloves in Brazil. The Group has launched the Biogreen™ Biodegradable Nitrile Gloves (PowderFree) to meet the demand of environmental friendly glove and in line with the Group’s commitment towards sustainability. The flagship green product, Biogreen™ Biodegradable Nitrile Gloves (Powder-Free) was launched in June 2019 and is proven to biodegrade at least 10 times faster compared to conventional nitrile examination gloves. 4.2 Business overview The Group is the world’s largest manufacturer of gloves and a global leader in the medical examination glove and surgical glove manufacturing industries with marketing offices spanning Malaysia, Thailand, the PRC, the U.S., Germany and Brazil. The Group is principally engaged in the manufacturing, processing and distribution of gloves globally with manufacturing operations in Malaysia, Thailand and the PRC and in the midst of setting up a glove manufacturing operation in Vietnam. As at the date of this Information Memorandum, the Group has 33 glove manufacturing factories in Malaysia, Thailand and the PRC with 687 production lines and a total annual production capacity of approximately 70.5 billion gloves. In addition, the Group has two latex processing plants, one glove former factory, three chemical factories, one dental dam factory, one condom factory and two packaging material plants supporting its operations. In total, the Group owned and operated 43 factories. The Group’s products are exported to and sold in 195 countries worldwide, and include countries in North America, Latin America, Europe, Africa, Asia, Middle East and Oceania. To support the Group’s extensive distribution network, it has distribution platforms based in Malaysia, the U.S., Germany, Brazil, Thailand and the PRC which distribute the products manufactured by the Group to its customers. The Group derives its revenue mainly from the manufacturing and sale of examination gloves such as latex powdered gloves, latex powder-free gloves and nitrile gloves. In addition, the Group is the largest surgical glove manufacturer in the world by volume with an estimated 30% of the global market share in FYE2019, producing and selling a broad range of surgical glove products including latex surgical, nitrile surgical, double donning surgical and thermoformed film packed surgical gloves. The Group also manufactures and sells other ancillary glove products used in the industrial and food preparation sectors including vinyl, cleanroom, household, cast polyethylene, industrial/long length high risk and thermoplastic elastomer gloves. 69
79. The Group ’s customers come from both medical and non-medical industries and end users include hospitals, clinics and laboratories. The Group sells a majority of its products under third party labels where the Group has been engaged as an OEM. The remaining products are being sold under the Group’s own brand name, including, but not limited to, “Top Glove”, “Great Glove”, “TG Medical”, “Maxitex”, “Nugard”, “Fusione” and “Finessis”. The Group acts as a comprehensive one-stop glove sourcing centre, with more than a dozen variations of natural rubber and synthetic gloves. This allows the Group to offer its customers the convenience of sourcing a variety of gloves without having to approach different suppliers, thereby enabling the Group to capture market share in both developed and emerging markets. The Group places significant emphasis on quality control and production standards during the production process and all of its glove products have quality standard accreditation under the ISO 9001:2015 and/or ISO 13485:2016 certification. The Group also regularly sends its gloves to accreditation bodies all over the world and its products have been accredited by organisations such as the Food and Drug Administration (“FDA”) in the U.S., the Therapeutic Goods Administration (“TGA”) in Australia and the TUV Product Service GmbH in Germany. 4.3 Competitive strengths Market leader with established track record and a strong suite of products The Group is the world’s largest manufacturer of gloves with a strong track record and leading market position across all key product categories. From its establishment in 1991 as a local Malaysian enterprise with a single factory and three production lines, the Group has grown to become the global leader in the production of disposable latex powdered and latex powder-free gloves and is amongst the top three players in the disposable nitrile glove sector. With the acquisition of Aspion and together with its subsidiaries, (collectively, the “Aspion Group”) (“Aspion Acquisition”), the Group is also now the global leader in specialised surgical gloves. In FYE2019, the Group, including Aspion, had an estimated combined market share by volume of 30% in the surgical gloves market. The size of the Group’s operations and its market-leading position across various product categories allows it to achieve significant economies of scale which, in turn, lower the overall production costs of the Group. This, coupled with its focus on high quality control and production standards, has allowed the Group to become a well-known and trusted brand in the industry delivering positive results and robust volume growth in spite of the increasingly competitive environment. Strong performance and high standards of corporate governance Attesting to a consistently strong performance and high standards of corporate governance, TG Corp was added to the FBM Hijrah Syariah Index effective 24 June 2019. TG Corp was also included as an index component of the highlyregarded Dow Jones Sustainability Indices (DJSI) for Emerging Markets, ranking number 15 out of 44 global healthcare companies on the DJSI (Global). TG Corp is one of only 2 Malaysian companies featured in DJSI as at the LPD. 70
80. The Group was also honoured with several notable awards over the course of the FYE2019 . It received recognition at the 2nd ASEAN Corporate Governance Award 2018 under the Top 50 ASEAN PLCs category, as well as Minority Shareholders Watch Group ASEAN Corporate Governance Award 2018 under the category of Industry Excellence Award (Healthcare). The Group also emerged as the winner at the ASEAN Business Awards 2018 under the Priority Integrated Sector (Rubber-based) category, as well as the Most Outstanding Company in Malaysia (Industrials Sector) in 2019 Asiamoney Asia’s Outstanding Companies Poll. In addition, TG Corp was recognised as CSR Malaysia Company of the Year (Manufacturing of Gloves) at the CSR Malaysia Awards 2019. Versatile manufacturing capability with an extensive distribution network The Group’s manufacturing capability covers the full spectrum of products, within the rubber glove industry, including latex, nitrile, specialised surgical gloves, vinyl and other categories such as cast polyethene/thermoplastic elastomer gloves. This enables the Group to position itself as a comprehensive one-stop glove sourcing centre with more than a dozen varieties of glove products offering its customers the convenience of sourcing a variety of different gloves without having to approach different suppliers. Furthermore, the acquisition of Aspion allows the Group to access new and innovative technologies, manufacturing processes, know-how and proprietary materials in the specialised surgical gloves segment such as Aspion’s FINESSISTM® surgical gloves using FlexylonTM. These gloves are reported to be the safest available in terms of breach efficiencies, allergens, sensitivities and have a built-in reactive disinfection system. Through the Group’s extensive distribution network, which comprises key distribution platforms in Malaysia, Thailand, the PRC, Germany, the U.S., Brazil, it has established a strong global presence in all major developed and emerging markets, marketing its products to over 2,000 customers across 195 countries. The Group’s versatile manufacturing capability and extensive distribution network allows it to be adaptable and responsive to changing demands from both developed and developing markets. For example, the Group is implementing capacity expansion, by constructing six new glove factories and the refurbishment of two existing factories to cater to rising demand for nitrile gloves and nonmedical gloves in developed countries. This expansion is expected to increase the Group’s production capacity by 20.9 billion gloves, bringing the total annual production capacity to 91.4 billion by December 2021. In addition, the acquisition of Aspion allows the Group to access the developed markets, specifically North America, Western Europe and Japan, for specialised surgical gloves, which are complementary to the Group’s current portfolio of surgical glove products that are primarily marketed to developing markets. Strong research and development capabilities and technical expertise The Group is committed to carrying out continuous internal quality and cost efficiency improvements and has embarked on concerted efforts in automation, R&D and re-engineering. The Group’s R&D efforts have enabled it to engage in cost-optimisation practices and process improvements via continuous automation, which ensure its ability to maintain cost-efficiency, as well as to keep abreast of technological developments and extend the product pipeline in line with increasingly stringent market and health requirements. 71
81. The Group is also developing eco-friendly gloves , the first of which, launched in June 2019, was its flagship green product, Biogreen™ Biodegradable Nitrile Gloves (Powder-Free), which are proven to biodegrade at least 10 times faster compared to conventional nitrile examination gloves. The Group also continues to enhance its product portfolio with more specialised and cost-effective surgical gloves, while diversifying into non-glove products such as tourniquets. In tandem, the Group has also embarked on process innovation to address rapid technological advancements, evolving industry standards and volatile raw material prices. As at the date of this Information Memorandum, it has established 3 chemical plants for materials innovation, which have already developed 50 types of chemicals for improved manufacturing cost efficiency and consistent quality control. This has enabled the Group to scale down external chemical purchase, resulting in savings of up to RM15 million per year. With the Group’s focus on quality, innovation, automation, cost discipline and efficiency across all aspects of its operations, it is well-positioned to capitalise on the industry’s robust growth momentum and maintain its strong performance. Well-positioned to benefit from attractive industry fundamentals The Group’s market leading position as the world’s largest manufacturer of gloves coupled with its versatile manufacturing capabilities and global distribution network enable it to benefit from the strong growth in the rubber glove industry. As a protective barrier for medical staff, gloves are an indispensable item in the healthcare sector. According to the MARGMA, the rubber glove industry is expected to grow by approximately 8% to 10% annually in the next few years. This growth has been driven by various factors, such as increasing hygiene standards and healthcare awareness, progressively more stringent health regulations and the emergence of new health threats. Further growth in the usage of rubber gloves is expected, particularly from emerging markets as income, healthcare regulations and awareness increase. In 2017, the developed countries of the U.S., Europe and Japan accounted for an estimated 70% of demand for rubber gloves demand despite amounting to only 20% of the world’s population. Experienced and committed key management team TG Corp’s key management has extensive industry knowledge, experience and operational expertise, with over eight decades of combined experience in the rubber glove industry. Founder and Executive Chairman Tan Sri Dr. Lim Wee Chai and Managing Director Dato’ Lee Kim Meow are also members of multiple rubber-related organisations and committees such as the MARGMA, the MREPC and the ARGMA, and contribute to the development of the Malaysian and regional rubber glove industries through their active participation in these organisations and committees. Tan Sri Dr. Lim Wee Chai, is also the recipient of several awards and accolades in recognition of, amongst others, his stewardship of the Group and leadership in developing Top Glove as a world class manufacturer. Additionally, Mr. Lim Hooi Sin, Executive Director and founder of TG Medical (U.S.A), Inc (a wholly-owned subsidiary of the Kafalah Provider), has more than 20 years of experience in the U.S. glove market. His particular expertise in this region provides valuable support towards the Group’s expansion plans in the U.S.. 72
82. 4 .4 Business strategies Expand presence in various markets The Group aims to widen its market reach and to increase recognition of the Top Glove brand in various global markets. To this end, the Group will continue to leverage on its established manufacturing base in Malaysia, Thailand and the PRC together with its global distribution network, and build upon these foundations to increase its business portfolio. The Group is looking to capture growth from emerging markets in Africa, the Middle East, Latin America and Asia as well as continuing to expand its presence in developed markets such as North America, Europe and Japan. The Group is furthering its efforts to venture into developing countries in Africa, the Middle East, Latin America and Asia by expanding its distribution network in these regions to cater to the steady rise in healthcare awareness and hygiene standards. The FYE2019 results show that there is a robust growth in sale volume from the developed countries, with 19.5% growth in sales volume in North America, and 22.4% growth in sales volume in Japan, as compared to the sales volume in FYE2018 while demand growth in emerging markets continue to trend upward, with 2.2% growth in sales volume in Asia excluding Japan, and 8.8% growth in sales volume in Eastern Europe, as compared to the sales volume in FYE2018. The Group has enjoyed growth in nitrile glove sales of 1,723% over a ten-year period (from FYE2010 to FYE2019), and continues to deploy resources to keep up with such growing demand, especially in the U.S., Europe and Japan. Going forward, the Group will continue to increase nitrile glove production accordingly to cope with the rising demand. Sales of gloves to North America and Europe make up 27% and 31% of the Group’s sales volume for FYE2019 respectively and the Group seeks to increase sales to these regions by increasing sales of nitrile gloves in these markets from its new nitrile glove facilities. To further enhance the Group’s market presence in these developed and developing markets, it intends to leverage on existing independent intermediaries, and may appoint new independent intermediaries to undertake marketing and distribution of the Group’s products. In addition, the Group will continue to actively participate in international trade exhibitions and other similar marketing opportunities. Acquire new manufacturing facilities and expand production sites To ensure that the Group is well-positioned to meet the increasing demand for rubber gloves, it continues to expand its operations and build new optimised facilities with faster, more efficient and technologically advanced production lines with a view to increasing profitability. In this regard, the Group expects to commence operations at its new facilities, Factory 5A by the first quarter of 2020, Factory 40 (1st phase) and Factory 41 (1st phase) by the second quarter of 2020, Factory 8A (1st phase) by the fourth quarter of 2020, Factory 40 (2nd phase) and Factory 42 (1st phase) by the first quarter of 2021, Factory 41 (2nd phase) and Factory 45 (1st phase) by the fourth quarter of 2021 while refurbishment in existing facilities, Factory 2B will be completed by the first quarter of 2020. Factory 2B, 8A, 40, 42 and 45 will manufacture nitrile gloves while Factory 41 will manufacture polyvinyl chloride gloves. Factory 5A is capable of manufacturing 73
83. both latex and nitrile gloves . These additional factories are expected to add 174 new production lines with an additional annual production capacity of 20.9 billion gloves. As such, the Group’s existing 687 production lines are expected to increase to 861 production lines totalling an annual production capacity of 91.4 billion gloves by the end of 2021. Established in 2013, the Group’s in-house R&D department is dedicated to developing innovations that will help to move the manufacturing process forward and also drive product innovation. Through R&D, the Group seeks to achieve increased automation throughout the manufacturing process, in order to reduce reliance on manual labour and to improve the consistency, quality and efficiency of production lines. The Group has implemented new technologies and machines such as Artificial Intelligence (AI) Vision Cameras for online detection and removal of defective gloves, advanced auto packing machines and smart warehouses with automated guided vehicles (AGVs) and as a result, it is able to achieve manpower saving as well as improve product quality control. Due to extensive internal improvements focused on automation, R&D and engineering, the Group’s efforts have resulted in enhanced quality output and substantially reduced downtime, which has increased its levels of efficiency throughout the manufacturing process. Undertake mergers and acquisitions if the right opportunity arises The Group is keenly pursuing opportunities to acquire or merge businesses that provide synergies with its current business, in similar or related industries. In addition to the Aspion Acquisition, in January 2018, the Group acquired the entire shareholding in printing and packaging supplier Eastern Press Sdn Bhd. The acquisition is expected to provide the Group with synergistic benefits, enabling it to improve its supply chain coordination, provide for flexible planning and better lead time in relation to the supply of packaging material for glove products. Cost savings and better quality control are also expected from the acquisition. In May 2018, the Group completed the acquisition, through its wholly-owned subsidiary, Top Feel Sdn Bhd, of an 85% stake in Duramedical, a Malaysian medical supplies manufacturer for RM2.85 million. Duramedical is principally involved in the manufacture, sale and export of dental dams, exercise bands and other rubber products. During the same month, the Group completed the acquisition of the remaining 30% equity interest in Kevenoll Do Brasil, a company that distributes a wide range of latex gloves in Brazil. Whilst there is no assurance that any such mergers and acquisitions will necessarily result in successful integration, the Group believes that suitable mergers and acquisitions, joint ventures and strategic partnerships will give it access to new markets and customers, as well as enhance and/or complement the existing business of the Group. Broaden products portfolio to other rubber-based, non-glove products The Group is looking to leverage on its expertise in manufacturing rubber gloves, wide distribution network and large customer base to broaden its product portfolio into other similar rubber-based, non-glove products. For example, the Group has built a condom factory which started operations in July 2018 with one production line and has an annual production capacity of 0.1 billion condoms. 74
84. In addition , the Group completed the acquisition of Duramedical which is involved in the manufacture and sale of rubber dental dams, exercise bands and other rubber products. Duramedical currently operates two production lines and has an annual production capacity of 36 million pieces. 4.5 Product The Group produces high quality gloves at an efficient cost and offers a wide and diverse product range, fulfilling demand in both the healthcare and non-healthcare segments. The Group also serves a growing network of over 2,000 customers across 195 countries. The Group manufactures various types of gloves which primarily comprise natural rubber latex powdered gloves, natural rubber latex powder-free gloves and nitrile gloves. Depending on the manufacturing process and the raw materials used, the Group produces natural rubber and nitrile examination gloves of various qualities and comfort levels to meet customer demand over a spectrum of price points. The Group’s extensive product range includes gloves of various materials, colours and scents to appeal to different needs and preferences. A significant percentage of the Group’s gloves are marketed under third party labels where the Group is engaged as an OEM supplier. The gloves manufactured and sold under the “Top Glove”, “Great Glove”, “TG Medical”, “Maxitex”, “Nugard”, “Fusione” and “Finessis” brand names constitute approximately 6% of the Group’s total sales for FYE2019 while the remaining gloves products are manufactured for third party labels. Certain of the Group’s factories are accredited with ISO 9001 and ISO 13485 certifications, and the Group manufactures its products strictly according to the Good Manufacturing Practices standards. Product mix The Group’s product mix may be broadly categorised into as follows: The Group’s product mix is aligned with global market demand. For example, the Group’s natural rubber gloves cater for emerging markets while its nitrile gloves cater to developed markets. The sales volume of the Group’s latex powdered gloves, latex powder-free gloves, nitrile gloves, surgical gloves and other glove products as a percentage of total sales volume in FYE2017, FYE2018, FYE2019 and the first quarter of FYE2020 (“1QFYE2020”) is set out below: 75
85. 4 .6 Manufacturing facilities and utilisation rates Manufacturing facilities The majority of the Group’s factories are also strategically located less than 10 kilometres from the largest seaport in Malaysia, Port Klang. The port, with its modern facilities and direct call arrangements with major ports around the world is capable of ensuring timely deliveries. The Group continues to pursue capacity expansion by building new optimised facilities that feature faster, more efficient and technologically-advanced production lines. The Group currently has expansion plans to construct the manufacturing facilities as mentioned above (please refer to section 4.4). These expansion plans are funded by internally generated funds and borrowing set aside by the Group for the purposes of capital expenditure. Upon completion of the expansion plans, the Group’s existing 687 production lines are expected to increase to 861 production lines totalling an annual production capacity of 91.4 billion gloves by the end of 2021. Utilisation rates The approximate annual production capacity and utilisation rates of the Group’s manufacturing facilities on a consolidated basis for FYE2017, FYE2018, FYE2019 and 1QFYE2020 are set out below. Annual production capacity (billion pieces) Utilisation rate (%) FYE2017 51.9 FYE2018 60.5 FYE2019 64.0 1QFYE2020 64.0 80 88 87 84 76
86. 4 .7 Sales and marketing The Group’s overall sales and marketing activities are conducted by its sales and marketing team comprising approximately 180 staff globally. The sales and marketing department is primarily responsible for developing the Group’s businesses by acquiring new customers as well as maintaining existing customer relationships through better service support and the provision of after-sales services to customers, thereby increasing the Group’s domestic and global market share. The Group has established sales offices in Malaysia, the U.S., Germany, Brazil, Thailand and the PRC to support its sales and marketing activities. In connection with the Group’s expansion plans, the Group intends to establish a distribution office in Vietnam to anchor its presence in the country. The Group constantly seeks to develop and strengthen its customer base. To cultivate potential clients, the Group set up a committed team of technical, production and quality assurance personnel and organises site visits to better understand its customers’ requirements. The Group is also able to generate sales leads through referrals from customers, suppliers and business associates. It maintains its profile by being actively involved in industry-related events and participating in relevant international trade exhibitions, where the Group’s sales team showcases products and conducts directed marketing pitches to existing and prospective customers. This allows the Group to maintain contact with existing customers and provide them with updates on new products, as well as to promote products to potential buyers who may prefer to examine and test actual products before placing their orders. Through attending these events and exhibitions, the Group continually expands its business contacts, which in turn enables it to grow its business and further entrench the Group’s position in the industry. The Group seeks to seize opportunities by monitoring market trends closely. For example, the Group has noted robust growth in demand for nitrile gloves from developed countries where demand is consistently high and usage is expanding to the non-medical sectors, while demand for natural rubber gloves from emerging markets continues to rise steadily. Sales and marketing efforts are generally undertaken by the Group’s distribution platform and are targeted at intermediary distributors. The Group aims to provide value-added services and a tailored product offering for customers by seeking to understand customers’ specific requirements and industry trends, and to provide customers with updates on the latest development of the Group’s products. The Group also develops customised products for existing and potential customers in accordance with their specific requirements. The Group utilises its own website http://www.topglove.com for the promotion of its products and services. This provides an avenue for customers to look through the Group’s range of products, review the frequently asked questions section, download product-specific brochures for detailed specifications and contact the Group directly through its online enquiry portals for their needs. 77
87. 4 .8 Major customers and major suppliers Major customers The Group has a geographically diverse customer base of over 2,000 customers globally. Its main customers comprise distributors across 195 countries. The business of the Group is not materially dependent on any customer and the Group believes that it has no concentration risk affecting its business. Only one of the Group’s customers, part of a multi-national healthcare services company based in North America, contributed 6.2% of the Group’s annual sales in FYE2017 while all the remaining customers individually contributed to less than 5.0% of the Group’s annual sales. There was no single customer that contributed to 5.0% or more of the Group’s annual sales in FYE2018 and FYE2019. The geographical breakdown of the Group’s sales volume (by quantity sold) for 1QFYE2020 is depicted below: Major suppliers The Group has approximately 4,200 suppliers supplying a variety of products and services to the Group. Its main suppliers are in respect of the raw materials which are required for the Group’s business, such as natural rubber latex, nitrile latex, chemicals and packaging materials. The Group is generally not dependent on any one major supplier. The Group purchases from suppliers who are able to offer it the best terms in terms of pricing, reliability and quality of materials and service. The Group generally does not enter into long-term or exclusive contracts with suppliers as this allows it greater flexibility in terms of pricing, quality of materials and service and ensures that the Group is less susceptible to concentration risks. 78
88. 4 .9 Key financial highlights of the Group The following table presents a summary of the audited financial information for the 1QFYE2020, FYE2019, FYE2018 and FYE2017:Unaudited 1QFYE2020 31.11.2019 RM’000 Audited Audited Audited FYE FYE FYE 31.8.2019 31.8.2018(*) 31.8.2017(*) RM’000 RM’000 RM’000 1,209,100 4,801,139 4,220,742 Turnover…………………….. Earning before interest, 196,838 depreciation & taxation……. 687,493 694,002 125,452 423,588 522,800 Profit before taxation.……… 13,695 56,042 Taxation…………………….. 89,594 111,757 367,546 Profit after tax………………. 433,206 Profit attributable to owners 111,426 of the parent………………… 364,678 428,830 Net (borrowings) / cash……. (2,222,323) (2,167,627) (1,854,023) 2,582,087 2,554,141 2,398,396 Total equity / net asset…….. 3,409,176 489,255 393,402 54,514 338,888 339,023 70,584 2,072,791 Note: * Figures have been restated. For the audited financial statements of the Kafalah Provider for FYE2019, please refer to Appendix I of the Information Memorandum. For the unaudited financial statements of the Kafalah Provider for 1QFYE2020, please refer to Appendix II of the Information Memorandum. THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 79
89. SECTION 5 .0 INVESTMENT CONSIDERATIONS The purchase or subscription of the Sukuk Wakalah may involve substantial risk and is suitable only for investors who have the knowledge and experience in financial and business matters necessary to enable them to evaluate the risks and merits of an investment in the Sukuk Wakalah. The following is a summary of certain risk factors associated with an investment in the Sukuk Wakalah. This Section does not purport to be comprehensive, exhaustive or complete and is not intended to substitute or replace an independent assessment of the risk factors that may be associated with an investment in the Sukuk Wakalah. There may be additional risk factors, which are not disclosed below, which are not presently known to the Group or which the Group currently deem to be less significant, which may materially and adversely affect the Group’s business, financial condition, operating results and prospects in the future. Each investor should carefully conduct his or her independent evaluation of such risks. Investors should also note that each issuance under the Perpetual Sukuk Programme will carry different risks and all potential investors are strongly encouraged to evaluate each issuance of the Sukuk Wakalah under the Perpetual Sukuk Programme on its own merit. 5.1 Risks relating to the Group 5.1.1 Shortages in raw materials or fluctuations in raw material prices The primary raw materials used in the Group’s production facilities are natural rubber and nitrile which accounted for 45% of the Group’s total cost of sales in FYE2019. The Group purchases its raw materials mainly from external suppliers, with the exception of the majority of its natural rubber requirements which are processed in-house through two latex processing plants located in Thailand. The market prices of raw materials may fluctuate due to, among other reasons, changes in global supply and demand conditions. Nitrile, the main raw material used in the production of the Group’s nitrile examination gloves, is a petroleum based product. Any increase in petroleum prices may result in the increase in nitrile prices and consequently, an increase in the Group’s production costs. Any increase in the cost of natural rubber may also lead to an increase in the Group’s production costs. Factors that may affect the cost of natural rubber include supply and demand as well as weather conditions and seasonality. The price of crude oil may also have an indirect impact on the cost of natural rubber as an increase in the price of crude oil may increase demand for natural rubber as opposed to synthetic rubber. Although the Group has historically been able to raise the selling prices of its products to cope with the increase cost, the rife competition has resulted in the Group being unable to fully pass the additional cost onto the customers and still having to absorb a portion of it and there can be no assurance that it will be able to continue to pass fluctuations in costs to customers in the future either on a timely basis or at all. If the Group is unable to pass on cost increases to customers and it is unsuccessful in alternatively managing its exposure to the effects of natural rubber and nitrile price fluctuations, the Group’s financial condition, results of operations and/or prospects could be materially and adversely affected. Although the Group has not encountered any shortage of raw materials in the past, any sudden shortage of supply or reduction of allocation of raw materials from its suppliers, or any increase in raw material prices may result in the Group 80
90. having to pay a higher cost for these raw materials which may adversely affect its results of operations . In the event that the Group is unable to find a comparable source of supply at similar rates or pass on increases in the costs of such raw materials to its customers on a timely basis, the profit margins of its products may be adversely affected. 5.1.2 Foreign exchange risks The Group is exposed to risks related to exchange rate fluctuations, particularly with respect to the U.S. dollar, Euro and Yen. While the Group’s operating expenses and purchases are denominated mainly in Ringgit, Baht, RMB and Australia dollar, its revenues are primarily denominated in U.S. dollars as its sales are principally in markets outside Malaysia. To the extent that the Group’s sales, purchases and operating costs are not naturally matched in the same currency and there are timing differences between invoicing and collections/payment, it will be exposed to any adverse fluctuations of the various currencies against Ringgit, Baht, RMB and Australia dollar. While there are hedging instruments available to reduce the Group’s exposure to exchange rate fluctuations, the cost of such hedging instruments may fluctuate significantly over time and can outweigh the potential benefit from the reduced currency volatility. The Group has entered into certain hedging transactions to reduce its exposure to foreign currency exchange risks, and in particular against the U.S. dollars, which may affect the Group in any of the following ways:     the party owing money in the hedging transaction may default on its obligation to pay; the credit quality of the party owing money on the hedge may be downgraded to such an extent that it impairs the Group’s ability to sell or assign its side of the hedging transaction; the value of the derivatives used for hedging may be adjusted from time to time in accordance with accounting rules to reflect changes in fair value. Such changes, although unrealised, would reduce the Group’s net asset value if it is due to downward adjustments; and other risks or transaction costs may be incurred, which may reduce the Group’s overall returns. As such, the availability and effectiveness of these hedging instruments may be limited and the Group may not be able to hedge its exposure successfully, or at all. 5.1.3 Competition risks The Group faces competition from local and foreign glove manufacturing companies, particularly in the nitrile glove segment, as major industry players continue to expand their production capacity. The success of the Group depends on its ability to maintain its existing customers, generate customer patronage and nurture loyalty mainly by consistently offering top quality products and services at competitive prices on a timely basis. In the event that the Group is unable to do so, it may be unable to compete successfully against competitors and may not be able to maintain or grow its market share. Accordingly, the Group’s financial condition and operating results may be adversely affected. While the Group benefits from economies of scale and high barriers to entry to the rubber glove 81
91. manufacturing industry , key factors affecting its competitiveness include price, product quality, brand recognition, distribution reach and operating history. 5.1.4 Non-compliance with building laws and business licence requirement The Group has not obtained the Certificate of Fitness for Occupation (“CF”) and/or Certificate of Completion and Compliance (“CCC”) (as applicable) for 14 out of more than 100 properties, including lands, owned by the Group, comprising 10 factories, one warehouse factory, two hostels and one office and multi-purpose hall (collectively, the “Affected Properties”) in Malaysia as it has yet to fulfill certain of the requisite conditions, such as submission and approval of building plans. Pending the issuances of such CF or CCC for the Affected Properties, business licences for certain factories cannot be applied for. While the Group is currently carrying out business operations at the Affected Properties, the relevant local authorities may not allow the Group to continue to occupy and operate at such Affected Properties which do not have such occupancy certificates and/or operational licences. Although no enforcement action has been taken against the Group as at the date of this Information Memorandum and the Group has undertaken mitigating measures such as liaising with the relevant authorities on a regular basis and continue to apply for the CF and CCC for the Affected Properties, however the Group cannot provide any assurance that the relevant local authorities will not impose fines and/or penalties on it for the foregoing non-compliances. In the event of such enforcement actions, the Group’s reputation, business, financial condition, results of operations and/or prospects may be adversely affected. Whilst the Group believes that alternative premises can be found to accommodate its workers living at the two hostels and for office and multi-purpose hall usage with minimal impact to the Group, in the event any or all of the factories for which CF or CCC have not been obtained (the “Affected Factories”) are ordered to cease production, the Group may be required to utilise spare capacity in the other factories of the Group to accommodate the production shortfall from the cessation of the Affected Factories. Any cessation of operations at the Affected Factories may adversely affect the Group’s business, financial condition, results of operations and/or prospects. 5.1.5 Governmental regulations and licensing requirements The Group holds various licences and permits issued by various government authorities and regulatory agencies in the countries in which it operates, and such licences and permits are essential for the conduct of its business. These licences and permits are generally subject to a variety of conditions which are either stipulated in the licences and permits themselves or under the particular legislation and/or regulations. The continuation of these licences and permits may be subject to periodic examinations and/or random inspections by the relevant authorities to ensure that the Group’s premises comply with all relevant regulations of the issuing authority. Any breach or material non-compliance with the regulations of the issuing authorities may result in suspension, withdrawal or termination of the relevant licences and permits, financial penalties or cessation of the Group’s operations. In the ordinary course of business, the Group is required to undertake the renewal of various licences and permits, and the renewal processes may inadvertently be delayed due to administrative lag. The Group cannot guarantee that, upon the 82
92. expiration of any of its licences and permits , it will be able to renew all necessary licences and permits in the future in a timely manner or at all or that the Group will not be subject to suspension, withdrawal or termination of its licences and permits. Any failure to secure renewal, or any loss, of a required licence or permit, would materially and adversely affect the Group’s business, financial condition, results of operations and/or prospects. The Group is also in the process of applying for certain regulatory licences, approvals and permits for new business premises and there is no assurance that the Group will be able to obtain such licences, approvals and permits in a timely manner or at all. Certain of the Group’s business operations may already have commenced and/or been operating for an extended period of time without the requisite licences, approvals and permits. Please see paragraph 5.1.4 above for more information. Even if the Group is able to obtain such licences, approvals and permits, there is no assurance that the relevant authorities would not hold it responsible for previous breaches as a result of operating without the relevant licences, approvals and permits and the Group may be subject to various sanctions including monetary penalties which could materially and adversely affect its business, financial condition, results of operations and/or prospects. 5.1.6 Product safety and quality-related risks Product safety and quality are critical to the Group’s business and the Group relies heavily on quality control systems to ensure the safety and quality of its products. While the Group believes that its quality control systems function properly and that product inspection checks are conducted regularly prior to them being delivered to customers, the Group cannot provide any assurance that failures in its quality control systems will not occur in the future. Such failures may occur due to technical malfunctions, including of the equipment used to manufacture gloves, or through negligence or misconduct occurring during the production or operating process which results in product contamination. The Group’s safety and quality inspection systems may not always be able to detect any such contamination or quality-related issues. Contamination and quality-related issues may also result from residues introduced during the storage, handling and transportation phases. Contamination risks are even greater for specialised surgical gloves which are required to be 100% sterile as they will be used in operating theatres during complex surgical procedures. Any such contamination or quality-related issues could cause the Group to suffer monetary losses through product liability claims or penalties assessed by government agencies or result in damage to its reputation, which would in turn materially and adversely affect the Group’s business, financial condition, results of operations and/or prospects. Although the Group’s gloves are required to comply with stringent quality assurance procedures, as well as to comply with international standards and requirements, there remains a possibility that the gloves manufactured or distributed may contain chemical substances, including latex protein and/or other substances that are sensitive to certain users. Although the Group has not faced any material complaints on safety or quality-related issues in the past, customers who use its products may develop allergic or other adverse reactions despite its safety and quality controls and testing. If customers and users of the Group’s products suffer any damage, injury, illness or other adverse reactions as a result of using its products, the Group may face an inherent risk of exposure to product liability actions and legal claims, and revocation of its product quality standard 83
93. accreditation . While the Group has not faced such events in the past, in the case that such events do occur, it may have to compensate such persons or expend significant amounts on litigation. Further, in the event the Group’s products are found to be unfit for their intended purpose, non-compliance with industry requirements or contain material defects, the Group may face product liability claims from customers. Whilst there have been no past incidences of quality control systems failures which had materially affected the Group, there can be no assurance that such incidents would not occur in the future. In the event of such incidents, the Group may have to spend a significant amount of time and resources to defend itself in the event that legal proceedings are instituted against it, with or without merit. Such claims, if decided unfavourably against the Group, may have an adverse impact on the Group’s business, financial condition and results of operation. The Group’s products are exposed to government health regulations in each of the jurisdictions in which it operates, and is particularly exposed to any regulatory ban on certain glove products or certain materials used to manufacture the glove products. If certain glove products or certain materials are banned, for example, the banning of powdered rubber latex medical gloves in the U.S., there is no assurance that the Group can increase its other productions to meet any drastic change in demand in a timely manner. While the banning of powdered rubber latex medical gloves in the U.S. will not materially affect the Group’s capital expenditures and production capacities or capabilities, and may have a limited impact on its export sales to the U.S. (as most of the Group’s glove exports to the U.S. are of the nitrile and non-powdered natural rubber latex variety), there is no assurance that other developed markets and/or developing markets will not impose a similar ban on the use of powdered rubber latex medical gloves. In the event that such ban is implemented in other developed markets and/or in developing markets, the Group’s export sales to these markets may be affected and any resultant decrease in or loss of sales of the affected products may have a material adverse financial effect on the Group’s business, financial condition, results of operations and/or prospects. 5.1.7 Environment regulations The Group’s manufacturing operations are located in Malaysia, Thailand, the PRC and in the near future, Vietnam. The Group is subject to the relevant environmental laws and regulations in these countries and any other jurisdictions in which it may operate in the future. These laws and regulations in the jurisdictions in which the Group operates require it to adopt measures to effectively control and properly dispose of waste gases, waste water, industrial waste, dust and other environmental waste materials. Due to the scale of the Group’s operations, it is inevitable that a large quantity of waste and emissions is produced, some of which require appropriate disposal. Although the Group has installed and adopted measures to control the disposal of waste gases, waste water and other environmental waste materials and to reduce the environmental impact of the discharged waste, there is no assurance that these measures may be sufficient now or in the future. In the event that environmental laws, regulations or government policies are amended and more stringent requirements are imposed on the Group, it may incur corresponding increased costs and expenses and need to allocate additional resources to comply with such requirements. 84
94. While the Group has not encountered any material instances of environmental non-compliance in the past , any failure by it to comply with environmental laws and regulations may lead to claims, liabilities or the suspension of its operations, and thereby materially adversely affect the Group’s business, financial condition, results of operations and/or prospects. 5.1.8 Dependency on foreign labour The glove manufacturing industry requires manual labour in certain areas which do not involve automated processes, such as quality control and packing. The Group relies on foreign labour, particularly in Malaysia, in its manufacturing process and such labour represents approximately 73% of the Group’s total number of workers in the 1QFYE2020. Any changes in the labour law or policies of the foreign workers’ countries of origin or any restrictions in the jurisdictions the Group operates in may affect the supply of foreign labour and cause disruptions to its business operations and impact its financial performance. For example, implementation by the Malaysia government of a policy requiring the employers to bear the cost of levy payments for foreign workers and revision of minimum monthly wage for foreign workers in Malaysia from RM1,000 for Peninsular Malaysia and RM920 for East Malaysia to RM1,100 since January 2019 or with effective from 1 February 2020, RM1,200 for major cities may have an indirect impact on the Group’s production costs and given the relatively large workforce under the employment of the Group, earnings may be affected unless the effects of such measures can be mitigated by improved automation, computerisation and R&D improvement initiatives. In addition, any increase in competition for foreign workers may also increase labour costs. In the event that the number of foreign workers that the Group can employ is reduced and/or the Group has to turn to a costlier source of labour, its financial performance may be adversely affected. The Malaysian government has frozen recruitment of foreign workers for various sectors and recruitment of foreign workers in Malaysia is currently limited to only approved sectors, which are the manufacturing, plantation, construction, agriculture, and certain types of services sectors. In addition, the Ministry of Home Affairs (“MHA”) has imposed specific requirements for the recruitment of foreign workers, such as countries of origin and gender of workers for certain sectors. There is no assurance that such policies will not be amended or restricted in any way, and that in the event such policies are amended, the Group will be able to comply with the new policies. As applications for recruitment of foreign workers in Malaysia are subject to approval procedures, there is no assurance that the Group will be able to continue to employ sufficient numbers of foreign workers to meet its operational requirements. In particular, in the event that the MHA restricts the number of foreign workers which the Group can recruit, or the Group’s applications for recruitment of foreign workers are continuously rejected, the business, financial condition, results of operations and/or prospects of the Group may be adversely affected. 85
95. 5 .1.9 Risks associated with technological changes and advancements in materials technology The Group’s business is susceptible to changes in technology. With the advancement of technology and continual R&D in the production process for the manufacturing industry, new manufacturing techniques for the Group’s products may be developed. There is no assurance that potential competitors may not in the future adopt newer and cheaper alternatives to replace the raw materials used in the production of the Group’s products. This may result in lower production costs per unit. There can be no assurance that potential competitors may not in the future launch new products. Whilst the Group invests substantially in R&D, in the event that it is unable to adapt its production processes with newer and more efficient manufacturing techniques and/or price its products competitively against other glove manufacturers, the Group may lose its market share and its business, financial condition, results of operations and/or prospects may be adversely affected. 5.1.10 Credit risks The Group may extend credit terms to customers ranging from 30 days to 90 days on a case-by-case basis depending on, amongst others, their creditworthiness and the length of the customer relationship. The Group has a policy that where its customers who wish to trade on credit terms shall be subject to credit verification procedures and receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant. Whilst the Group has not in the past experienced any significant credit issues with key customers, there is no assurance that its trade receivables can be collected fully or within a reasonable period of time and failure to do so could adversely affect the Group’s cash flow and financial performance. The Group also receives payments upfront in cash from some of its customers. In the event that the Group is not able to collect payments from its customers, its business, financial condition, results of operations and/or prospects may be adversely affected. 5.1.11 Dependency on key personnel The Group’s continued success is dependent on its ability to retain the services of key management and executives who are crucial to the successful implementation of the Group’s business strategy in the near to medium term. The goodwill and strong networks that the Group’s experienced management team has developed with various customers over the past years are important to the further development of its business. The in-depth knowledge, relevant experience and commitment of the Group’s key executives are instrumental to its development and growth. As such, any loss of any key personnel without qualified and timely replacements and the inability to attract, train and retain qualified replacements will have an adverse impact on the Group’s operations. The Group’s founder and Executive Chairman, Tan Sri Dr. Lim Wee Chai, has been the main contributor to the Group’s success and provides strategic leadership and vision for the Group. The continued success and growth of the Group is dependent on its ability to retain his service, and the loss of Tan Sri Dr. Lim Wee Chai’s service as Executive Chairman may adversely affect the Group’s business, financial condition, results of operations and/or prospects. 86
96. 5 .1.12 Natural disasters, terrorist attacks, armed conflicts and other events beyond its control The Group may face disruptions in its latex processing plants and glove production facilities due to unforeseen external factors such as natural disasters, acts of God, fire, flooding, civil commotion, shortage of water, insufficient electricity supply and other calamities or events beyond its control. This would result in longer lead-time for production and delayed delivery to customers. Failure to meet customers’ expectations and make deliveries as required by the Group’s agreements with customers could damage its reputation and/or expose the Group to legal claims and may, as a result, lead to loss of business and affect the Group’s ability to attract new business. In such events, the business, financial condition, results of operations and/or prospects of the Group may be adversely affected. In addition, terrorist attacks, armed conflicts, increased hostilities and other acts of violence or war around the world may adversely affect the regional and global financial markets. The occurrence of any of these events may result in a loss of business confidence, which could potentially lead to an economic recession and have an adverse effect on the Group’s business, results of operations and financial condition. There can be no guarantee that social and civil disturbances will not occur in the future in any of the jurisdiction in which the Group operates and on a wider scale, or that any such disturbances will not, directly or indirectly, materially and adversely affect the Group’s business, financial condition, results of operations and/or prospects. 5.1.13 Insurance coverage The Group’s insurance coverage may not adequately protect it from the key risks associated with its business. The Group maintains various insurance policies covering, amongst others, product liability, its stock-in-trade (including raw materials, semi-finished and finished gloves, dipping lines and equipment), as well as its buildings and extensions. The Group also insures its principal assets against risk of physical loss or damage caused by accident, fire, civil disorder and/or natural disasters. There is however, no assurance that the Group will be able to continue to maintain its existing insurance coverage or obtain insurance policies on economically viable terms or acceptable premiums. During the course of the Group’s operations, it may face various claims and disputes against liabilities that are not insured adequately, or at all, or liabilities that cannot be insured. There can be no assurance that the Group’s existing insurance policies will be sufficient to cover all potential losses or risks associated with its business and operations. In the event that the Group’s insurance coverage is insufficient to indemnify it against all possible liabilities or losses arising from its business operations, the Group’s business, financial condition, results of operations and/or prospects may be adversely affected. 5.1.14 Negative publicity Negative publicity associated with the Group or any of its officers or employees may affect the market perception of the Group and have an adverse effect on the Group’s growth prospects, business operations and financial performance. Examples of these include publication of industry findings, research reports or health concerns in relation to the products sold by the Group, the working 87
97. conditions of the foreign labour of the Group or the Group ’s involvement in disputes with its stakeholders, litigation or other investigations. Reports in publications and journals relating to issues such as latex protein allergy may have a negative effect on the Group’s image. The publication of reports asserting or alleging that gloves in general (even if not sold by the Group) may cause allergies or adverse reactions may have a negative effect on the Group’s sales regardless of whether such reports are substantiated scientifically or whether the harmful effects are restricted to only products sold by other companies. The Group could be adversely affected if customers lose confidence in the safety and quality of its products. These concerns could cause customers to avoid purchasing certain products from the Group, or to seek alternative sources of supply for their needs, even if the basis for the concern is not valid and/or is outside of the Group’s control. Adverse public perceptions created as such, whether or not valid, could discourage customers from buying the Group’s products and any lost confidence on the part of its customers may be difficult and costly to re-establish. Any product contamination involving competitors could also impact the reputation of the industry as a whole and have a negative effect on the Group’s business. Any complaints or product liability claims by customers may also affect public perception of the Group’s brands and products. In the event that the Group is required to compensate customers, its business, financial condition, results of operations and/or prospects may be adversely affected. From time to time, the Group is, and in the future may continue to be, involved in disputes with various parties in the course of its business including with customers, suppliers, employees and ex-employees. Such disputes may involve various matters such as business disputes, employment matters and regulatory compliance. These disputes may lead to legal or other proceedings and may result in costs, negative publicity, and the diversion of resources and management’s attention from its business. Claims and complaints that assert some form of wrongdoing may further result in negative publicity, lawsuits, or investigations by the regulators. Responding to lawsuits and/or negative publicity arising from any of the above circumstances can divert the time and effort of the Group’s management from its business. Any negative impact on the Group’s reputation arising from the above circumstances could materially and adversely affect its business, financial condition, results of operations and prospects. 5.1.15 Growth strategy The Group plans to pursue a growth strategy that includes expanding its factory production capacities and further investing in automated production lines. The Group’s growth strategies include organic growth through the construction of new facilities as well as increasing its manufacturing and production capacities and expanding its distribution capabilities as well as inorganic growth through strategic new business acquisitions. In addition, the Group is looking to leverage its expertise in manufacturing rubber gloves, its wide distribution network and its large customer base to broaden its product portfolio to other rubber-based, nongloves products such as condoms and rubber dental dams. 88
98. Risks relating to the Group ’s growth strategy include the following:       it may face competition to obtain building and occupational approvals for expansion opportunities; it may face increased costs, supply difficulties and competition in obtaining raw materials; it may not be able to hire and retain skilled employees (including engineers, laboratory technicians, researchers and chemists) necessary for its expanded operations or may have to pay higher wages for these employees than expected; unforeseen circumstances and problems relating to its expansion projects may distract the Group’s management from focusing on existing operations; diversification into non-gloves products may be less synergistic than initially expected and the Group may face increased costs; and difficulties in realising the benefits of any acquisitions. The Group can provide no assurance that it will be able to identify, acquire, or profitably manage its expanded businesses without incurring substantial costs, or that it will not face delays or other operational or financial difficulties in doing so. 5.1.16 New product risk The success of new products introduced by the Group is not assured. Finessis gloves have only been introduced into the surgical glove market in 2016. Although the product was developed over the course of five years and has been subject to numerous testing and has received regulatory approvals in several jurisdictions, there is limited track record of Finessis gloves in the market. As such, as with any new product, its long-term market acceptance cannot be guaranteed. If the Finessis gloves fail to yield the anticipated level of economic benefits, the financial performance of the Group may be affected. 5.1.17 Domestic, regional or global economic changes Any prolonged downturn in general economic conditions would present risks for the Group’s business, such as a potential slowdown in its sales to customers. For example, the debt crises in the Eurozone (namely in Greece, Portugal, Spain, Ireland and Italy) and in Turkey, and the potential impact of these crises on the rest of Europe and the world. The global financial markets had also experienced volatility as a result of the downgrade of U.S. sovereign debt and concerns over the debt crises in the Eurozone. The U.S. federal government has since undertaken a roll back of its quantitative easing programmes, and in 2018, had increased rates four times. With the recent trade war between U.S. and the PRC, it is difficult to predict the extent to which global markets are affected by these conditions and the extent and nature of such effects on the Group’s business, financial condition, results of operations and/or prospects. Further, there can be no assurance that measures implemented by governments around the world to stabilise the credit and capital markets will improve market confidence and the overall credit environment and economy. Any adverse economic developments in the markets that the Group operates in or that have an indirect impact on the demand for its products and could have material and adverse effects on the Group’s business, financial condition, results of operations and/or prospects. In addition, the general lack of available credit and lack of 89
99. confidence in the financial markets associated with any market downturn could adversely affect the Group ’s access to capital as well as its suppliers’ and customers’ access to capital, which in turn could adversely affect the Group’s ability to fund working capital requirements and capital expenditures. 5.1.18 Political, economic and social conditions The Group’s business, prospects, financial condition and/or results of operations may be adversely affected by political and social developments that are beyond its control in Malaysia, Thailand, the PRC and Vietnam (when the factory in Vietnam is completed). Such political and social uncertainties include, but are not limited to, the risks of frequent changes in government and government policy, internal conflict, nationalism, expropriation, methods of taxation and tax policy, unemployment trends and other matters that influence continued and stable business operations and customer confidence and spending. Adverse developments in any of the jurisdictions in which the Group operates may include, but are not limited to, changes in political leadership, nationalisation, price and capital controls, sudden restrictive changes to government policies, introduction of new taxes on goods and services and introduction of new laws, as well as demonstrations, riots, coups and war. These may result in the nullification of contracts and/or prohibit the Group from continuing its business operations. The Group operates in jurisdictions which have in the past experienced incidents of political and ethnic disturbances, including rioting, military coups and terrorist attacks. There is no assurance that civil disturbances and political instability will not occur in the future. If these were to occur, such disturbances could lead to further political and economic instability as well as loss of confidence in investment in those countries and materially and adversely affect the Group’s business, prospects, financial condition and/or results of operations. In addition, government intervention and significant changes in policies in the countries the Group operates in, including inflation, wage and price controls, capital controls, interest rates controls and limitations on imports or exports, may adversely affect the Group’s business, financial condition, results of operations and/or prospects. 5.1.19 Difficulties in realising the benefits for business acquisitions The Group continually evaluates potential acquisition opportunities and prior to completing any acquisition, it identifies expected synergies, potential cost savings and growth opportunities but, due to legal, regulatory and business limitations, the Group may not have access to all necessary information and, as a result, will face the operational and financial risks inherent in such acquisitions. The integration process may be complex, costly and time-consuming. The potential difficulties of integrating the operations of an acquired business and realising the Group’s expectations for an acquisition, including the benefits that may be realised, include, among other things:   failure to implement the business plan for the combined businesses; delays or difficulties in completing the integration of acquired companies or assets which may be caused by issues with the integration of the combined workforce, overlapping job functions and redundant business units and loss of customers or accounts or suppliers, which may disrupt the operations of the Group; 90
100.             higher than expected costs, lower than expected cost savings and/or a need to allocate resources to manage unexpected operating difficulties; unanticipated issues in integrating logistics, information, communications and other systems and back office functions; unanticipated changes in applicable laws and regulations; unanticipated changes in the combined business due to potential divestitures or other requirements imposed by antitrust regulators; failure to maintain the continuity or assimilation of operations or employees, and specifically the senior management team of businesses acquired; retaining key customers, suppliers and employees; retaining and obtaining required regulatory approvals, licences and permits; operating risks inherent in the acquired business and existing business; diversion of the attention and resources of management; assumption of liabilities not identified in due diligence; the impact on the Group’s or an acquired business’ internal controls and compliance with the requirements; and other unanticipated issues, expenses and liabilities. For example, on 4 April 2018, the Group completed the Aspion Acquisition. The Group has initiated legal proceedings against various parties, including the vendor of Aspion and the directors of the vendor for, inter alia, fraudulent misrepresentation made to induce TG Corp and Top Care Sdn Bhd (“Top Care”) to enter into a sale and purchase agreement to purchase Aspion at RM1.37 billion. In light of the current legal proceedings, there is no assurance that the vendor will continue to fulfil its obligations under the terms of the Aspion Acquisition, including the guarantee to reimburse the Group up to RM100 million in the event that there is any shortfall in the agreed target core Profit After Tax of Aspion in the FYE2018 and FYE2019. Any further disputes may result in additional legal proceedings in future. Costs, time and management resources would have to be diverted towards pursuing such claims should they arise. Accordingly, there is no assurance that the Group can derive all the expected benefits from the Aspion Acquisition due to the reasons above. 5.1.20 Exposure to impairment risk in relation to acquisitions Any impairment on the carrying amount of the intangible assets (such as goodwill arising from the Aspion Acquisition) as a result of impairment tests may materially affect the Group’s financial performance. In FYE2018 and FYE2019, the Group has passed the goodwill impairment test and therefore there is no impairment on goodwill arising from Aspion Acquisition. However, goodwill is subject to impairment test annually. To mitigate such risk, the Group is closely monitoring the financial performance of the Aspion Group and implement appropriate strategies as and when needed to ensure that the Aspion Group achieves its financial targets. 5.2 Risk relating to the Sukuk Wakalah 5.2.1 Limited remedies for non-payment under the Sukuk Wakalah The Sukuk Wakalah do not provide for any events which would ordinarily under other securities issues, trigger the acceleration of the securities. There are only two (2) Enforcement Events prescribed under the terms of the Sukuk Wakalah as follows:- 91
101. (i) where a final and effective order is made or an effective resolution is passed by the respective shareholders for the liquidation, winding-up or dissolution of the Issuer or the Kafalah Provider, provided that a stay on such order has not been granted by the relevant court of competent jurisdiction within thirty (30) days from the date of such order; or (ii) the Issuer fails to pay (a) any amount in respect of the Exercise Price and/or the Deferred Sale Price as a result of a Redemption Event and/or (b) any amount in respect of the Sukuk Wakalah whether in respect of the due and payable Expected Periodic Distribution Amount or part thereof and/or any Arrears of Deferred Periodic Distribution, and such failure to pay under items (a) and/or (b) continues for a period of seven (7) business days or more (for this purpose, such payment of Expected Periodic Distribution Amount or part thereof and Arrears of Deferred Periodic Distribution will not be due if the Issuer has elected to defer such Expected Periodic Distribution Amount or part thereof) AND the Kafalah Provider fails to pay any amount due under the Subordinated Guarantee in relation to such failure on the part of the Issuer to pay under items (a) and/or (b) and such failure continues for a period of seven (7) business days or more. Upon the occurrence of an Enforcement Event under item (i) above, the Sukuk Trustee may at its discretion, and shall if so directed by an extraordinary resolution of the Sukukholders, declare that an Enforcement Event has occurred and that all amounts outstanding under the Sukuk Wakalah together with any outstanding Expected Periodic Distribution Amount or part thereof and any Arrears of Deferred Periodic Distribution are immediately due and payable by the Issuer. Upon the occurrence of an Enforcement Event under item (ii) above, the Sukuk Trustee may at its discretion, and shall if so directed by an extraordinary resolution of the Sukukholders, declare that an Enforcement Event has occurred and:(a) institute winding-up proceedings against the Issuer or Kafalah Provider as the case may be; and/or (b) prove in the winding-up of the Issuer or the Kafalah Provider (as the case may be) and/or claim in the liquidation of the Issuer or the Kafalah Provider (as the case may be) for such payment as it may think fit to enforce the Issuer’s or the Kafalah Provider’s payment obligations in respect of monies that are due and payable and remaining unpaid, under or arising from the Sukuk Wakalah and the Subordinated Guarantee (as the case may be). Unless and until the Sukuk Trustee has declared an Enforcement Event under item (ii) above, the Sukuk Trustee shall have no right of enforcement under the Subordinated Guarantee to claim for the Kafalah Provider’s payment obligations in respect of monies that are due and payable and remaining unpaid, under or arising from the Subordinated Guarantee (notwithstanding any breach of any other covenants or representation under the Transaction Documents). Without prejudice to the above, the Sukuk Trustee may at its discretion or shall, if directed to do so by an extraordinary resolution of the Sukukholders, without further notice institute such proceedings against the Issuer or the Kafalah Provider (as the case may be), as it may think fit to enforce any term or condition (other than the term or condition relating to the payment obligation of the Issuer or the 92
102. Kafalah Provider in relation to Enforcement Event under item (ii), which shall be enforced in accordance with the enforcement method above) binding on the Issuer under the Sukuk Wakalah, or the Kafalah Provider under the Subordinated Guarantee, the Trust Deed, and in no event shall the Issuer or the Kafalah Provider, by virtue of the institution of any such proceedings, be obliged to pay any sum or sums, in cash or otherwise, sooner than the same would otherwise have been payable by them unless the Sukuk Trustee has declared that an Enforcement Event under item (i) has occurred notwithstanding any breach of any other covenants or representation under the Transaction Documents. No acceleration of payments is allowed under the terms and conditions of the Sukuk Wakalah save for an Enforcement Event under item (i) above. 5.2.2 Deferral of Expected Periodic Distribution Amount The Issuer may, at its sole discretion, elect to defer part or all of the Expected Periodic Distribution Amount by giving not more than fifteen (15) nor less than five (5) business days before the relevant Periodic Distribution Date, a notice in writing to the Facility Agent and the Sukuk Trustee (for an on behalf of the Sukukholders) provided that no Issuer’s Compulsory Periodic Distribution Payment Event AND no Kafalah Provider’s Compulsory Periodic Distribution Payment Event has occurred. Issuer’s Compulsory Periodic Distribution Payment Event If, during the six (6) month period ending on the day before the relevant scheduled Periodic Distribution Date, either or both of the following have occurred: (i) a dividend, distribution or other payment (save and except for advances by the Issuer to the Kafalah Provider Group which source of fund is from the issuance proceeds of the Sukuk Wakalah) has been declared or paid by the Issuer in respect of any of the Issuer’s Junior Obligations or Parity Obligations (except on a pro-rata basis with the Sukuk Wakalah); and (ii) the Issuer’s Junior Obligations or Parity Obligations (except on a pro-rata basis with the Sukuk Wakalah) have been purchased, redeemed, reduced, cancelled, bought-back or acquired by the Issuer. Kafalah Provider’s Compulsory Periodic Distribution Payment Event If, during the six (6) month period ending on the day before the relevant scheduled Periodic Distribution Date, either or both of the following have occurred:(i) a dividend, distribution or other payment has been declared or paid by the Kafalah Provider in respect of any of the Kafalah Provider’s Junior Obligations or Parity Obligations (except on a pro-rata basis with the Sukuk Wakalah); and (ii) the Kafalah Provider’s Junior Obligations or Parity Obligations (except on a pro-rata basis with the Sukuk Wakalah) have been purchased, redeemed, reduced, cancelled, bought-back or acquired by the Kafalah Provider. The deferred Expected Periodic Distribution Amount which is otherwise scheduled to be paid on a Periodic Distribution Date is payable to the Sukukholders on the next Periodic Distribution Date following the deferral of the Expected Periodic 93
103. Distribution Amount . However, the Issuer may at its sole discretion, elect to further defer any outstanding Arrears of Deferred Periodic Distribution by complying with the foregoing notice requirement. Accordingly, there is a risk that the Sukukholders may not receive any Expected Periodic Distribution Amount on the Sukuk Wakalah on the relevant periodic distribution dates or at all, as the Issuer has the sole discretion to decide whether or not to defer the Expected Periodic Distribution Amount to the Sukukholders. Further, any deferral of the Expected Periodic Distribution Amount will likely have an adverse effect on the market value of the Sukuk Wakalah. 5.2.3 Sukuk Wakalah may be subject to optional redemption by the Issuer The Sukuk Wakalah may be redeemed in whole (but not in part) at the option of the Issuer (but not the Sukukholders) upon the occurrence of any Redemption Events at the relevant redemption price. The Sukuk Wakalah redeemed by the Issuer shall be cancelled and may not be reissued or resold. Save for the above or upon declaration of the occurrence of item (i) of the Enforcement Event set out in Section 5.2.1 above, the Issuer is under no obligation to redeem the Sukuk Wakalah at any other time. 5.2.4 The Issuer’s and the Kafalah Provider’s ability to meet its obligations under the Sukuk Wakalah and the Subordinated Guarantee As the Issuer, which is a special purpose vehicle set up to raise funds for the Group, does not carry out any business operation and does not generate income, the ability of the Issuer to meet its obligations under the Sukuk Wakalah will depend upon the Kafalah Provider Group’s operating cashflows. The Sukuk Wakalah and the Subordinated Guarantee will not be the obligations or responsibilities of any person other than the Issuer and Kafalah Provider respectively and shall not be the obligations or responsibilities of the JLAs/JLMs, the Sukuk Trustee, the Facility Agent or any subsidiary or affiliate thereof. 5.2.5 Suitability of investments The Sukuk Wakalah may not be a suitable investment for all investors. Each potential investor in the Sukuk Wakalah must determine the suitability of that investment in light of its own circumstances. Each potential investor should: (i) have sufficient knowledge and experience to make a meaningful evaluation of the Sukuk Wakalah, the merits and risks of investing in the Sukuk Wakalah and the information contained in this Information Memorandum; (ii) have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Sukuk Wakalah and the impact the Sukuk Wakalah will have on its overall investment portfolio; (iii) have sufficient financial resources and liquidity to bear all of the risks of an investment in the Sukuk Wakalah, including where the currency of payment is different from the potential investor's currency; 94
104. 5 .2.6 (iv) understand thoroughly the terms of the Sukuk Wakalah and be familiar with the behaviour of any relevant indices and financial markets; and (v) be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic and other factors that may affect its investment and its ability to bear the applicable risks. There are no terms in the Sukuk Wakalah and the Subordinated Guarantee that limit the Issuer’s and the Kafalah Provider’s ability to incur additional indebtedness There are no restrictions on the amount or number of any other form of indebtedness that the Issuer and/or the Kafalah Provider may incur. The creation and issue of further sukuk or the incurrence of any other form of indebtedness which rank senior to or pari passu with the Sukuk Wakalah does not require the consent of the Sukukholders. The incurrence of such indebtedness may reduce the amount recoverable by the Sukukholders in the event of dissolution or winding-up of the Issuer and/or the Kafalah Provider. 5.2.7 Each issue carries different risks The purchase of the Sukuk Wakalah may involve substantial risks and is suitable only for sophisticated investors who have the knowledge and experience in financial and business matters necessary to enable them to evaluate the risks and the mitigating factors of an investment in the Sukuk Wakalah. Each issuance of the Sukuk Wakalah will carry different risks and all potential investors are strongly encouraged to evaluate the Sukuk Wakalah on its own merit before making an investment decision. Further, the Sukuk Wakalah to be issued under the Perpetual Sukuk Programme will be unsecured. There is no assurance that the terms and risks in future issuances of the Sukuk Wakalah will be similar to the terms and risks in prior issuances of the Sukuk Wakalah. 5.2.8 No prior market for the Sukuk Wakalah The Sukuk Wakalah comprise a new issue of securities for which there currently is no secondary market. There can be no assurance that such secondary market will develop or, if it does develop, that it will provide the Sukukholders with the liquidity of investments or will continue for as long as the Sukuk Wakalah are outstanding. If a market develops, the market value of the Sukuk Wakalah may fluctuate. Any sale of the Sukuk Wakalah by the Sukukholders in any secondary market which may develop, may be at a discount from the original issue price of the Sukuk Wakalah, depending on many factors, including the prevailing interest rates and the market for similar securities. 5.2.9 Market value of the Sukuk Wakalah may be subject to fluctuation Trading prices of the Sukuk Wakalah may be influenced by numerous factors, including the prevailing interest rates, the market for similar securities, the operating results and/or financial condition of the Group, political, economic, financial conditions and any other factors that can affect the capital markets and/or the industry in which the Group is operating in. Consequently, any sale of the Sukuk Wakalah may be at prices that may be higher or lower than the initial offering price. Adverse economic developments could have a material adverse effect on the market value of the Sukuk Wakalah. 95
105. 5 .2.10 Interest/Profit rate risk Sukukholders may suffer unforeseen losses due to fluctuations in interest/profit rates. Although the principle of the payment of interest is repugnant to Shariah and therefore any obligation to pay interest imposed on the Issuer is waived and rejected, the Sukuk Wakalah are similar to fixed-income securities and may therefore see their prices fluctuate due to fluctuations in interest rates. Generally, a rise in interest rates may cause a fall in bond prices. The Sukuk Wakalah may be similarly affected resulting in a capital loss for the Sukukholders. Conversely, when interest rates fall, bond prices and the prices at which the Sukuk Wakalah are traded may rise. The Sukukholders may enjoy a capital gain but the profit received may be reinvested for lower returns. 5.2.11 Change of law The Perpetual Sukuk Programme is based on Malaysian laws and regulations in effect as at the date of this Information Memorandum. No assurance can be given as to the impact of any possible judicial decision or change to Malaysian laws and regulations, or administrative practice, after the date of this Information Memorandum. 5.2.12 Credit Rating of the Perpetual Sukuk Programme Malaysian Rating Corporation Berhad has assigned an indicative rating of AAIS(cg) for the Perpetual Sukuk Programme. A rating is not a recommendation to purchase, hold or sell the Sukuk Wakalah. There is no assurance that such a rating will remain in effect for any given period of time or that such a rating will not be lowered or withdrawn if circumstances in the future so warrant. Further, such a rating is not a guarantee of repayment or that there will be no default by the Issuer or the Kafalah Provider under the Sukuk Wakalah. In the event that the rating initially assigned to the Perpetual Sukuk Programme is subsequently downgraded, suspended or withdrawn for any reason, no person or entity will be obligated to provide any additional credit enhancement with respect to the Sukuk Wakalah. Any downgrade, suspension or withdrawal of a rating may have an adverse effect on the liquidity and the market price of the Sukuk Wakalah but would not constitute an Enforcement Event by itself that warrants the Sukuk Wakalah to be immediately due and payable. 5.2.13 Shariah compliance of the Perpetual Sukuk Programme and the Sukuk Wakalah The Shariah Adviser has issued pronouncements confirming amongst others that the transaction and structure of the Perpetual Sukuk Programme are Shariah compliant. However, the interpretation and application of Shariah is a matter of opinion and debate and may be subject to differing interpretations by Shariah scholars, Shariah supervisory and advisory boards and the courts (or any arbitral tribunal). Therefore, there can be no assurance that the transaction structure or issue and trading of the Sukuk Wakalah will be deemed to be Shariah compliant by any other Shariah board or Shariah scholars. None of the Issuer, the JLAs/JLMs or the Sukuk Trustee makes any representation as to the Shariah compliance of the Sukuk Wakalah and potential investors are reminded that, as with any Shariah views, differences in opinion are possible. Potential investors should obtain their own independent Shariah advice as to the compliance of the structure and the issue and trading of the Sukuk Wakalah with Shariah principles, if required. 96
106. 5 .3 Forward-looking statements Certain statements in this Information Memorandum are based on historical information, which may not be reflective of the future results, and others are forward-looking in nature, which are subject to uncertainties and contingencies. All forward-looking statements are based on forecasts and assumptions made by the Group and although believed to be reasonable, are subject to known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to differ materially from the future results, performance or achievements expressed or implied in such forward-looking statements. Such factors include, inter alia, the risk factors as set out in this section. In light of these and other uncertainties, the inclusion of forward-looking statements in this Information Memorandum should not be regarded as a representation or warranty by the Issuer that the plans and objectives of the Group will be achieved. THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 97
107. SECTION 6 .0 INDUSTRY OVERVIEW AND FUTURE PROSPECTS The information below is included for information purposes only and has not been independently verified by the Issuer, JLAs or JLMs. All data and information below have been obtained from publicly available official sources of Malaysia. Neither the Issuer, any one of the JLAs or JLMs nor any other party will be held responsible for any information contained herein. 6.1 Overview of the Malaysian economy The Malaysian economy grew by 4.4% in the third quarter of 2019 Growth in the Malaysian economy moderated to 4.4% in the third quarter of 2019 (2Q 2019: 4.9%), primarily attributed to lower growth in key sectors and a decline in the mining and construction activities. On the demand side, most domestic demand components and net exports registered slower growth momentum. On a quarter-on-quarter seasonally-adjusted basis, the economy grew by 0.9% (2Q 2019: 1.0%). Domestic demand continued to anchor growth, albeit at a slower momentum Domestic demand growth moderated to 3.5% (2Q 2019: 4.6%), with private sector expenditure remaining the key contributor to growth. Private consumption grew by 7.0% (2Q 2019: 7.8%), as household spending normalised towards its long-term trend. This partly reflected strong base effects from the tax holiday spending last year. Nevertheless, spending remained supported by continued income and employment growth, as well as selected Government measures. Public consumption spending increased by 1.0% (2Q 2019: 0.3%). While emolument growth remained positive, expenditure on supplied and services continued to decline, albeit at a slower pace. This is in line with the Government’s commitment to expenditure optimisation. Gross fixed capital formation (GFCF) contracted by 3.7% (2Q 2019: -0.6%), on account of slower growth in private sector capital expenditure and a larger contraction in public section investment. By type of assets, investment in structures contracted by 2.4% (2Q 2019: +1.2%), while investment in machinery and equipment declined further to -7.4% (2Q 2019: -4.2%). However, investment in other types of assets improved to 3.6% (2Q 2019: 1.0%) due mainly to higher research and development (R&D) spending. Private investment growth expanded marginally by 0.3% (2Q 2019: 1.8%), weighed down by lower capital spending across major economic sectors. Investment continued to be affected by heightened uncertainty surrounding external conditions and continued weakness in the broad property segment. Public investment remained in contraction (-14.1%; 2Q 2019: -9.0%), reflecting lower capital spending by both Federal Government and public corporations. 98
108. Services and manufacturing sectors continued to support growth The services sector grew by 5 .9% in the third quarter of 2019 (2Q 2019: 6.1%). Most key subsectors moderated. In the wholesale and retail subsector, the stronger expansion in wholesale was offset by lower growth in the retail and motor vehicles segments. Growth in the transport and storage subsector was also lower amid weaker trade activity, while the finance and insurance subsector was weighed down by slower financing activity despite higher fee-based income. Meanwhile, the information and communication subsector grew at a moderate pace, reflecting slower demand for date communication services. Growth in the manufacturing sector moderated to 3.6% (2Q 2019: 4.3%) due to the slower growth in the E&E and consumer-related industries. In the E&E cluster, the production of electronics-related products was affected by the ongoing weakness in global demand. The slower growth in the consumer-related industries was attributable to the lower growth in crude and refined palm oil production. Transport equipment category registered lower growth due to the high base during the tax holiday period last year. The agriculture sector grew by 3.7% (2Q 2019: 4.2%), as the pace of recovery in oil palm output slowed while forestry and logging activities contracted further. These factors outweighed the improvement in rubber and livestock production. Meanwhile, the mining sector contracted by 4.3% (2Q 2019: +2.9%), due mainly to maintenance works that affected oil production. This partially offset the ongoing output recovery in natural gas. The construction sector contracted by 1.5% (2Q 2019: +0.5%). The main contributor was the larger contraction in the non-residential subsector amid the continued oversupply of commercial properties. In the residential subsector, activities declined further amid high number of unsold residential properties. The civil engineering subsector’s growth moderated following the near-completion of large petrochemical and highway projects. Growth in the special trade subsector was also lower reflecting fewer early works activities from large projects that were already at mid-stages of completion. Supportive labour market conditions Labour market conditions remained supportive of growth during the quarter. The unemployment rate was stable at 3.3% (2Q 2019: 3.3%), as employment gains matched the expansion of the labour force. Employment growth was also sustained at 2.1% (2Q 2019: 2.1%). Private sector wage growth moderated to 3.8% (2Q 2019: 4.2%). This was supported mainly by services wage growth, which was relatively sustained (4.1%; 2Q 2019: 4.4%), particularly in the food and beverages (6.0%, 2Q 2019: 5.8%); and information and communication sub-sectors (3.5%, 2Q 2019: 3.6%). Growth of manufacturing wages was more moderate (3.2%, 2Q 2019: 3.9%). Lower wage growth was observed largely in export-oriented industries, particularly in the E&E (4.1%; 2Q 2019: 5.1%) and petrochemical clusters (2.2%; 2Q 2019: 3.1%). 99
109. Growth of the Malaysian economy to remain sustained in 2019 and 2020 The Malaysian economy continued to expand in the third quarter , bringing the overall performance of the first three quarters to 4.6%. The pace of growth is expected to be sustained for the remainder of the year and going into 2020. Household spending will remain the key driver of growth, supported by continued employment and income growth. Private investment growth is projected to remain modest, supported partly by realisation of approved projects. Public investment will be a smaller drag to growth, following planned higher capital spending mainly in the transportation segment. On the external front, support from net exports will likely moderate, as imports are expected to grow faster than exports, in line with the projected improvement in the investment activity. The balance of risks to growth remains tilted to the downside, arising from protracted trade tensions, uncertainties in the global economic and financial conditions, as well as weakness in commodity-related sectors. Headline inflation in 2020 is projected to average higher but remain modest The annual average headline inflation is expected to be low in 2019. For the remainder of the year, headline inflation will reflect the downward contribution from the lapse in the SST impact and domestic fuel prices as fuel price ceilings remain in place until the end of 2019. Moving into 2020, headline inflation is projected to average higher but remain modest. This reflects the lapse in the impact of consumption tax policy changes, the lifting of the fuel price ceilings amid the relatively subdued outlook on global oil prices, and policy measures in place to contain food prices. The trajectory of headline inflation will, however, be dependent on global oil and commodity price developments. Underlying inflation is expected to remain stable, supported by the continued expansion in economic activity and the absence of strong demand pressures. (Source: Bank Negara Malaysia Quarterly Bulletin (Third Quarter 2019), Bank Negara Malaysia) Outlook for the Malaysian economy The prospect of the Malaysian economy remains robust amid increasing uncertainties in the external environment. Real gross domestic product is expected to grow by 4.7% in 2019 and 4.8% in 2020. The growth is underpinned by resilient domestic demand, particularly household spending following stable labour market and low inflation. Meanwhile, private investment is expected to grow at a slower pace in 2019 and gain traction in 2020 following the resumption of infrastructure projects coupled with ongoing capital spending in the services and manufacturing sectors. Favourite private sector expenditure activity will offset the impact of lower public expenditure in 2019. However, economic growth is expected to rebound in 2020 with improvement in public corporations’ capital outlays. On the supply side, the services and manufacturing sectors will continue to be the main contributors to economic growth. The services sector, driven by the activities of the wholesale and retail trade, information and communications, as well as finance and insurance sub-sectors, is projected to remain firm backed by robust household spending. The manufacturing sector is expected to grow at a slower 100
110. pace in 2019 due to electrical and electronics downcycle and is anticipated to pick up in 2020 , supported by better semiconductor outlook, especially during the second half of the year. Petroleum, chemical, rubber and plastic products subsector is expected to grow 3.4% supported by continued demand for rubber gloves following Ebola outbreak in Africa and rising healthcare awareness worldwide. The agriculture sector is projected to expand following higher production of crude palm oil and natural rubber, while the mining sector is expected to increase supported by higher production of natural gas. Similarly, the construction sector is anticipated to improve attributed to activities in civil engineering. In 2019, exports are expected to expand moderately in line with the slowdown in global economic and trade performance. However, the forecast for 2020 shows a gradual pick up attributed to the projected recovery in global trade activities. The current account surplus in 2019 is projected to widen following the increase in the net exports of goods and services. In 2020, the current account surplus is expected to narrow underpinned by rising imports coupled with widening deficits in services and income accounts. (Source: Economic Outlook 2020, the Ministry of Finance Malaysia) 6.2 Overview of the glove industry Glove industry segmentation and outlook Glove industry can be segmented into two different groups, either by application or by material of gloves. By application, it can be for medical and non-medical use. Medical segment refers to gloves used in hospitals and health clinics by physicians, surgeons, dentists, doctors and other medical practitioners where these gloves are used a protective barrier that prevents the transmission of organisms and bloodborne pathogens to users. It can be further segmented into examination and surgical gloves. Non-medical segment refers to gloves used outside of the medical segments. It can be further segmented into industrial gloves, automotive gloves, food industry gloves, retail gloves, and critical environment gloves. By material of gloves, it can be natural rubber, nitrile, polyisoprene, polychloroprene, poly vinyl chloride (PVC), polyethylene and thermoplastic elastomer. According to the MARGMA, the rubber glove industry is expected to grow by approximately 8% to 10% annually in the next few years. Demand for nitrile glove is expected to be driven by developed countries that have higher healthcare standard and healthcare expenditure while demand for natural rubber glove continues to be driven by emerging countries due to lower price, comfort, environmentally friendly and biodegradable. Healthcare expenditure In 2015, North America and Europe regions spent heavily in the healthcare sector, accounting for approximately 90% of global total healthcare expenditure by financing scheme. In 2015, healthcare expenditure as a percentage of gross domestic product (GDP) stood at 13.6% for North America and 8.9% for Europe while the emerging economies in Asia Pacific and Latin America recorded strong growth in healthcare expenditure to GDP rate in 2010 to 2015 from 4.1% to 4.8% and from 6.4% to 6.8% respectively. 101
111. According to the Centers of Medicare & Medicaid Services (CMS) projections, the global average health expenditure growth is forecast to register a compounded annual growth rate (CAGR) of approximately 5.5% per annum between 2017 and 2026 surpassing the global average GDP growth rate of 4.5% per annum over the same period. The rapid growth of healthcare expenditure is expected to be mainly driven by the demographic structure (growing population in emerging markets, aging population in developed countries), rise in healthcare prices and increase in personal disposable income enabling patients to allocate more budget towards healthcare expenditures including primary care. The Europe region is expected to see a revival in healthcare spend in tandem with the economic recovery during the forecast period. Emerging regions such as Asia Pacific, Africa, Latin America and the Caribbean are likely to begin enhancing their healthcare systems by increasing accessibility of healthcare services such as establishing national insurance schemes. The rising awareness and positive developments in healthcare industry such as rising healthcare expenditure, development on national health insurance schemes and encouragement of private sector participation in the healthcare industry are likely to spur demand for medical gloves. Increasing standards in the healthcare industry North America and European regions have the highest healthcare expenditure, and comprise of developed countries such as the U.S., the United Kingdom and Ireland which have imposed regulations on glove wearing when treating a patient, signalling higher healthcare standards in these countries. For example, the US Pharmacopeial (USP) published the USP800 in February 2016 which stated two pairs of medical gloves are required for handling and administering antineoplastic hazardous drugs with the aim to enhance safeness among patient and workers. The USP800 has become official on 1 December 2019. Increasing glove consumption in emerging countries The growth of the global glove industry is expected to be mainly driven by higher demand in the emerging countries that are witnessing an increase of glove consumption per capita. The glove consumption per capita for Philippines, PRC and Indonesia has been growing at CAGR of 18%, 18% and 26% respectively between 2013 and 2017. For comparison, the glove consumption by capita increased at a CAGR of 6.0%, 3.7% and 8.3%, in the U.S., the United Kingdom and Japan respectively between 2013 and 2017. Such increase is driven by, amongst others, rising GDP per capita and a growing middle class population, enabling households to allocate higher budgets for their healthcare expenses, as well as higher healthcare expenditures due to the enhancement of public and private healthcare systems and infrastructure. (Source: Frost & Sullivan report prepared for TG Corp in year 2018) THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 102
112. SECTION 7 .0 7.1 OTHER MATERIAL INFORMATION Material litigation As at LPD, the Board of the Issuer and the Kafalah Provider have confirmed that save for those as disclosed below, neither the Issuer, the Kafalah Provider nor its Material Subsidiaries are engaged in any material litigation, claims or arbitration either as plaintiff or defendant, and the Board is not aware of any proceedings pending or threatened against the Issuer, the Kafalah Provider and/or its subsidiaries or of any facts likely to give rise to any proceedings which may materially and adversely affect the financial position or business of the Group. TG Corp and its wholly-owned subsidiary, Top Care have taken the following legal proceedings: (i) writ action in the High Court of Malaya at Kuala Lumpur (“KL High Court”), against Low Chin Guan (“Low”), Wong Chin Toh (“Wong”), ACPL Sdn Bhd (“ACPL”) and Kwek Siew Leng (“Kwek”) (collectively, the “Defendants”) (“Writ Action”); (ii) arbitration proceedings at the Singapore International Arbitration Centre, against Adventa Capital Pte. Ltd. (“Adventa Capital”) (“Singapore Arbitration”). The Writ Action and the Singapore Arbitration pertain to the sale and purchase agreement entered into by TG Corp and Top Care on 12 January 2018 for Top Care’s purchase of all issued shares in Aspion from Adventa Capital for RM1.37 billion (“SPA”). The claim is RM640,470,000 as damages suffered by reason of the fraudulent misrepresentations made by Adventa Capital, Wong and Low to induce TG Corp and Top Care to enter into the SPA at RM1.37 billion as well as conspiracy by Adventa Capital, Wong, Low and Kwek to defraud TG Corp and Top Care. ACPL is named by reason of it having received RM72.3 million out of the RM1.37 billion purchase price. TG Corp and Top Care have elected to affirm the SPA and claim for damages. In the Writ Action, Low counterclaims against TG Corp, Top Care, Aspion and several individuals for, inter alia, losses suffered by him as a result of his removal from the management of Aspion and harassment or intimidation; whereas Wong counterclaims against TG Corp, Top Care and Aspion for, inter alia, losses suffered by him as a result of inconvenience, harassment and costs by reason of freezing order proceedings. The KL High Court has fixed trial dates for the Writ Action in March 2020 to October 2020. In the Singapore Arbitration, Adventa Capital is counterclaiming against TG Corp and Top Care for, inter alia, the following:(a) losses suffered by Adventa Capital as a result of TG Corp’s and Top Care’s breach of the SPA by, amongst others, filing proceedings against Adventa Capital, instead of giving Adventa Capital a notice of breach under the SPA; and (b) losses suffered by Adventa Capital as a result of Low’s removal from the management of Aspion. 103
113. Hearing date for Singapore Arbitration is fixed in 2021 . In aid of the Writ Action and Singapore Arbitration, TG Corp and Top Care had applied for Mareva Injunction as stated below: (a) Mareva Injunction applications were filed in the KL High Court against Adventa Capital, Low, Wong and ACPL to restrain them from disposing their assets up to RM640,470,000. The Mareva applications were heard from 29 to 31 October 2018 and 2 November 2018. Having heard the parties, the learned Judicial Commissioner (“JC”) found that the plaintiffs have made a good arguable case on fraudulent misrepresentation and that there is a risk of dissipation of assets by the defendants if the Mareva Injunction is not granted. However, the learned JC was of the opinion that there is no causal link between the damages sought by the plaintiffs and the fraudulent misrepresentation. Thus, the applications were dismissed. The learned JC however granted an Erinford Injunction upon the terms of the Ad Interim Injunction dated 27 August 2018 with injuncted sum of RM219.7 million against Adventa Capital, Low and Wong and the sum of RM72.3 million against ACPL Sdn Bhd pending the plaintiffs’ appeals to the Court of Appeal against the dismissal of the applications (“Appeals”). The Appeals were called for hearing at the Court of Appeal on 1 August 2019 but were adjourned. During the case management on 24 October 2019, the Court of Appeal has fixed new hearing date for the Appeals on 25 March 2020. The Erinford Injunction remains in force until the disposal of the Appeals. (b) A Mareva Injunction application was filed in the Singapore High Court to restrain Adventa Capital from disposing its assets worldwide (save for Malaysia) up to the value of RM714,862,759. The Singapore High Court granted the Singapore Mareva Injunction. On 13 July 2018, Adventa Capital filed an application to set aside the Mareva Order and the application was heard by the Singapore High Court from 14 to 16 May 2019. On 10 June 2019, the Singapore High Court set aside the Mareva Order but granted an Erinford injunction up to the value of RM714,862,759 on the same terms as the Mareva Order, provided that TG Corp and Top Care make an application for a Mareva injunction to the arbitral tribunal (in SIAC Arbitration No. 171 of 2018) within two weeks, upon which the Erinford injunction will remain in force until there is a determination or order by the arbitral tribunal. TG Corp and Top Care have on 23 June 2019 filed the aforesaid application at arbitral tribunal. The aforesaid application was heard by the arbitral tribunal on 21 to 23 November 2019 and the arbitral tribunal will advise the decision date in due course. The Writ Action and the Singapore Arbitration are on-going. Solicitors are of the view that TG Corp and Top Care have a more than even chance of success in their claims. In the event that TG Corp and Top Care do not succeed in the claims under the Writ Action, Singapore Arbitration and fail to obtain the Mareva Injunctions, TG Corp and Top Care would be exposed to costs and damages for the Writ Action, Singapore Arbitration and the Mareva Injunctions that may be awarded to the defendants. 104
114. 7 .2 Related party transactions As at LPD, the Board of the Issuer and the Kafalah Provider have confirmed that the Issuer, the Kafalah Provider and its Material Subsidiaries have not entered into any related party transactions outside the ordinary course of business save and except those which have been disclosed in the audited financial statements for the FYE2019 of the Kafalah Provider (attached herein as Appendix I) and (ii) announced on Bursa Malaysia and is made available thereto. 7.3 Contingent liabilities and capital commitments As at LPD, there are no contingent liabilities and capital commitments incurred or known to be incurred by the Group which upon being enforceable, may have a material impact on the financial condition of the Group save and except for those which have been (i) disclosed in the audited financial statements for the FYE2019 of the Kafalah Provider (attached herein as Appendix I) and (ii) announced on Bursa Malaysia and is made available thereto. 7.4 Potential Conflict of Interests None. THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 105
115. APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE KAFALAH PROVIDER FOR THE FYE2019
116. Top Glove Corporation Bhd . 199801018294 (474423-X) (Incorporated in Malaysia) Directors' Report and Audited Financial Statements 31 August 2019
117. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) Contents Pages Directors' report 1 - 11 Statement by directors 12 Statutory declaration 12 Independent auditors' report 13 - 19 Statements of profit or loss 20 Statements of comprehensive income 21 Statements of financial position 22 - 24 Statements of changes in equity 25 - 29 Statements of cash flows 30 - 33 Notes to the financial statements 34 - 157
118. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) Directors' report The directors have pleasure in presenting their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 August 2019. Principal activities The principal activities of the Company are investment holding and provision of management services. The principal activities and other information of the subsidiaries are described in Note 19 to the financial statements. There have been no significant changes in the nature of these principal activities during the financial year. Results Profit net of tax Profit attributable to: Owners of the parent Non-controlling interests Group RM'000 Company RM'000 367,546 209,218 364,678 2,868 367,546 209,218 209,218 There were no material transfers to or from reserves or provisions during the financial year other than as disclosed in the financial statements. In the opinion of the directors, the results of the operations of the Group and of the Company during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature. 1
119. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) Dividends The amount of dividends paid by the Company since 31 August 2018 were as follows: RM'000 In respect of the financial year ended 31 August 2019: First tax exempt interim single tier dividend of 3.5 sen per share on 2,559,230,000 ordinary shares, declared on 18 June 2019 and paid on 16 July 2019 89,566 In respect of the financial year ended 31 August 2018: Final tax exempt single tier dividend of 5 sen per share on 2,556,440,000 ordinary shares, declared on 12 November 2018 and paid on 25 January 2019 127,827 217,393 Further details on dividends recognised during the financial year are disclosed in Note 44. A single tier final dividend in respect of the financial year ended 31 August 2019, of 4 sen per share on 2,559,814,000 ordinary shares amounting to RM102,393,000 had been declared on 26 September 2019. The final dividend will be paid on 23 December 2019. The financial statements for the current financial year do not reflect this proposed dividend. Such dividend will be accounted for in equity as an appropriation of retained earnings in the financial year ending 31 August 2020. Directors The names of the directors of the Company in office since the beginning of the financial year to the date of this report are: Tan Sri Dr Lim Wee Chai* Tan Sri Rainer Althoff Dato' Lee Kim Meow* Puan Sri Tong Siew Bee* Lim Hooi Sin* Lim Cheong Guan* Dato' Lim Han Boon Datuk Noripah Binti Kamso Sharmila Sekarajasekaran Tay Seong Chee, Simon Datuk Dr. Norma Mansor 2
120. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) Directors (cont'd.) The names of the directors of the Company in office since the beginning of the financial year to the date of this report are (cont'd.): Azrina Binti Arshad (Appointed on 8 January 2019) Tan Sri Dato' Seri Utama Arshad bin Ayub (Retired on 8 January 2019) *These directors are also directors of the Company's subsidiaries. The names of the directors of the Company's subsidiaries in office since the beginning of the financial year to the date of this report, not including those directors listed above are: Dato' IR Haji Ahmad Bin Hassan Dr. Navindra A/L Nageswaran Dr. Pongsak Kerdvonbundit Choh Ai Ying Chookiad Usaha Ho Chee Meng Edmund Ho Kim Nam Lam Yat Hing Leong Chew Mun Lew Sin Chiang Liew Say Keong Lim Jin Feng Masato Katayama Max Som Chai A/L Putian Ng Wee Chong Ng Yong Lin Oh Teik Chye Phattaraporn Fueangthong Puon Tuck Seng Ravi A/L Supramaniam Saw Eng Kooi Seah Chong Shew See So Kim Huat Siow Chun Min Svami Utama Batang Taris Tan Chee Hoong Tan Puay Choo Thomas Petermoeller Wilawan Sakulsongboonsiri 3
121. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) Directors (cont'd.) The names of the directors of the Company's subsidiaries in office since the beginning of the financial year to the date of this report, not including those directors listed above are (cont'd.): Wong Chong Ban Marcelo Nastromagario (Appointed on 7 January 2019) Tio Thiam Boon (Appointed on 25 January 2019) Lee Shin Hwai (Appointed on 28 March 2019) Lim Hwa Chuan (Appointed on 6 May 2019) Faisal Bin Abd Rahman (Appointed on 16 May 2019) Galuh Faradisa (Appointed on 2 July 2019) Law Eng Lim (Appointed on 2 July 2019) Hue Kon Fah (Resigned on 1 March 2019) Hoong Hsuch Ling (Resigned on 2 April 2019) Victor Daniel Angenscheidt Baridon (Resigned on 5 June 2019) Zhu Bai He (Deregistration of Beijing Adventa Health Supplies Co. Ltd. on 16 January 2019) Directors' benefits Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement to which the Company was a party, whereby the directors might acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate, other than those arising from the share options granted under the employee share options scheme ("ESOS") and the employee share grant plan ("ESGP"). Since the end of the previous financial year, no director has received or become entitled to receive a benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by the directors or the fixed salary of a full-time employee of the Company as shown below) by reason of a contract made by the Company or a related corporation with a 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, except as disclosed in the Note 37 to the financial statements. The directors' benefits are as follows: Salaries and other emoluments Fees Defined contribution plan Social security contributions Share option granted under ESOS Share option granted under ESGP Benefits-in-kind 4 Group RM'000 Company RM'000 9,492 1,287 769 10 964 145 197 12,864 3,488 1,238 332 1 589 98 60 5,806
122. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) Directors' benefits (cont'd.) * The Company maintains a liability insurance for directors of the Group. The total amount of sum insured for the directors of the Group for the financial year amounted to RM5,000,000 whilst the total amount of premium paid was RM9,700. Directors' interests According to the register of directors' shareholdings, the interests of directors in office at the end of the financial year in shares and options over shares in the Company during the financial year were as follows: <------------------------- Number of ordinary shares -------------------------> At At 1.9.2018 Adjustment # Acquired Sold 31.8.2019 Tan Sri Dr Lim Wee Chai - direct - indirect Puan Sri Tong Siew Bee - direct - indirect Dato' Lee Kim Meow - direct - indirect Lim Hooi Sin - direct - indirect Lim Cheong Guan - direct Tan Sri Rainer Althoff - direct Dato' Lim Han Boon - direct Sharmila Sekarajasekaran - direct - indirect Datuk Dr. Norma Mansor - direct - indirect # 369,914,776 87,221,608 369,914,776 87,221,608 1,221,000 55,600,000 55,000,000 - 686,050,552 230,043,216 3,615,196 453,521,188 3,615,196 453,521,188 56,821,000 55,000,000 7,230,392 908,863,376 486,800 20,000 486,800 20,000 8,600 - - 982,200 40,000 19,281,824 437,837,560 19,281,824 437,837,560 600,000 56,221,000 55,000,000 39,163,648 876,896,120 148,800 148,800 - - 297,600 - - 1,500 - 1,500 - - 50,000 - 50,000 5,000,000 - 5,000,000 - 10,000 200,000 - 10,010,000 200,000 - - 4,000 - 4,000 The number of ordinary shares has been adjusted to reflect the bonus issue of 1 for 1 existing ordinary shares which was completed on 26 October 2018. Further details are disclosed in Note 32 of the financial statements. 5
123. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) Directors' interests (cont'd.) According to the register of directors' shareholdings, the interests of directors in office at the end of the financial year in shares and options over shares in the Company during the financial year were as follows (cont'd.): <---------------- Number of options over ordinary shares ----------------> At At 1.9.2018 Adjustment # Granted Exercised 31.8.2019 Tan Sri Dr Lim Wee Chai Puan Sri Tong Siew Bee Dato' Lee Kim Meow Lim Hooi Sin Lim Cheong Guan Tan Sri Dr Lim Wee Chai Dato' Lee Kim Meow 185,000 9,100 61,000 24,600 54,400 185,000 9,100 61,000 24,600 54,400 1,023,400 55,400 315,000 606,500 413,100 - 1,393,400 73,600 437,000 655,700 521,900 <-------- Number of ordinary shares granted through ESGP --------> during the financial year At At 1.9.2018 Adjustment # Granted Exercised 31.8.2019 21,000 21,000 8,600 8,600 - Tan Sri Dr Lim Wee Chai, Puan Sri Tong Siew Bee and Lim Hooi Sin by virtue of their interest in shares of the Company are also deemed interested in shares of all the subsidiaries to the extent the Company has an interest. None of the other directors in office at the end of the financial year had any interest in shares in the Company or its related corporations during the financial year. # The number of ordinary shares has been adjusted to reflect the bonus issue of 1 for 1 existing ordinary shares which was completed on 26 October 2018. Further details are disclosed in Note 32 of the financial statements. Issue of shares During the financial year, the Company increased its issued and paid-up ordinary share capital from RM787,709,000 to RM788,326,000 by way of: (i) issuance of 131,100 ordinary shares pursuant to the Company's ESOS at an option price between RM4.90 to RM5.06 per ordinary share; and 6
124. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) Issue of shares (cont'd.) During the financial year, the Company increased its issued and paid-up ordinary share capital from RM787,709,000 to RM788,326,000 by way of (cont'd.): (ii) the issuance of 1,280,229,124 ordinary shares through a bonus issue on the basis of one new ordinary share for every one existing ordinary share held in the Company, by way of nil consideration. The new ordinary shares issued during the financial year ranked pari passu in all respects with the existing ordinary shares of the Company. Employee share options scheme ("ESOS") At an Extraordinary General Meeting held on 9 January 2018, shareholders approved the ESOS for the granting of non-transferable options that are settled by physical delivery of the ordinary shares of the Company, to the eligible employees and executive directors respectively of the Company and its subsidiaries. The committee administering the ESOS comprise two executive directors, Tan Sri Dr Lim Wee Chai and Lim Cheong Guan; four independent non-executive directors, Dato' Lim Han Boon, Datuk Noripah Binti Kamso, Sharmila Sekarajasekaran and Datuk Dr. Norma Mansor and one management staff Lim Jin Feng. The salient features and other terms of the ESOS are disclosed in Note 36(i) to the financial statements. During the financial year, the Company granted 25,570,000 share options under ESOS. These options will expire on 31 May 2028 and are exercisable if the employee has not served a notice of resignation or receive a notice of termination from the date of grant and certain conditions as detailed in Note 36(i) to the financial statements are met. Details of the options exercised to subscribe for ordinary shares of the Company pursuant to the ESOS as at 31 August 2019 are as follows: Expiry date 31 May 2028 31 May 2028 Exercise price RM Number of options '000 5.06 4.90 125.1 6.0 131.1 Details of share options granted to directors are disclosed in the section on Directors' interests in this report. 7
125. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) Employee share grant plan ("ESGP") At an Extraordinary General Meeting held on 6 January 2016, shareholders approved ESGP for the eligible employees and executive directors of the Company and its subsidiaries. The committee administering the ESGP comprise two executive directors, Tan Sri Dr Lim Wee Chai and Lim Cheong Guan; four independent non-executive directors, Dato' Lim Han Boon, Datuk Noripah Binti Kamso, Sharmila Sekarajasekaran and Datuk Dr. Norma Mansor and one management staff Lim Jin Feng. The salient features and other terms of the ESGP are disclosed in Note 36(ii) to the financial statements. During the financial year, the Company granted 584,000 share grant under ESGP amounted to RM2,716,000 to eligible employees and executive directors. Details of shares granted to directors are disclosed in the section on Directors' interests in this report. Treasury shares During the financial year : (i) the Company resold 2,781,700 of its treasury shares to the open market at the average price of RM5.03 per share. The total proceeds from the sale of treasury shares net off transaction costs was RM13,936,000. The excess of the proceeds and the cost of the treasury shares which amounted to RM7,719,000 was recognised in equity. (ii) the Company transferred 584,000 treasury shares to eligible employees under employee share grant plan at average market price of RM4.65 per share. The total transferred treasury shares were RM2,716,000. The difference between the transferred treasury shares and the cost of the treasury shares amounted to RM1,389,000 was recognised in equity. As at 31 August 2019, the Company held as treasury shares a total of 775,600 of its 2,560,589,000 issued ordinary shares. Such treasury shares are held at a carrying amount of RM1,781,000 and further relevant details are disclosed in Note 33 to the financial statements. 8
126. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) Other statutory information (a) Before the statements of comprehensive income and statements of financial position of the Group and of the Company were made out, the directors took reasonable steps: (i) to ascertain that proper action 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 which were unlikely to realise their values as shown in the accounting records in the ordinary course of business had been written down to an amount which they might be expected so to realise. (b) At the date of this report, the directors are not aware of any circumstances which would render: (i) the amount written off for bad debts or the amount of the provision for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent; and (ii) the values attributed to the current assets in the financial statements of the Group and of the Company misleading. (c) At the date of this report, the directors are not aware of any circumstances which have arisen which would render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate. (d) At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or financial statements of the Group and of the Company which would render any amount stated in the financial statements misleading. (e) At the date of this report, there does not exist: (i) any charge on the assets of the Group or of the Company which has arisen since the end of the financial year which secures the liabilities of any other person; or (ii) any contingent liability of the Group or of the Company which has arisen since the end of the financial year. (f) In the opinion of the directors: (i) no contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which will or may affect the ability of the Group or of the Company to meet their obligations when they fall due; and 9
127. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) Other statutory information (cont'd.) (f) In the opinion of the directors (cont'd.): (ii) no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of the operations of the Group or of the Company for the financial year in which this report is made. Significant events In addition to the significant events disclosed elsewhere in this report, other significant events are disclosed in Note 19 to the financial statements. Subsequent events Details of subsequent events are disclosed in Note 47 to the financial statements. 10
128. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) Auditors The auditors, Ernst & Young, have expressed their willingness to continue in office. Auditors' remuneration is as follows: Ernst & Young Other auditors Group RM'000 Company RM'000 317 708 1,025 80 80 To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of the terms of its audit engagement against claims by third parties arising from the audit for an unspecified amount. No payment has been made to indemnify Ernst & Young for the financial year ended 31 August 2019. Signed on behalf of the Board in accordance with a resolution of the directors dated 31 October 2019. Dato' Lee Kim Meow Dato' Lim Han Boon 11
129. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) Statement by directors Pursuant to Section 251(2) of the Companies Act 2016 We, Dato' Lee Kim Meow and Dato' Lim Han Boon, being two of the directors of Top Glove Corporation Bhd., do hereby state that, in the opinion of the directors, the accompanying financial statements set out on pages 20 to 157 are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 31 August 2019 and of their financial performance and cash flows for the year then ended. Signed on behalf of the Board in accordance with a resolution of the directors dated 31 October 2019. Dato' Lee Kim Meow Dato' Lim Han Boon Statutory declaration Pursuant to Section 251(1)(b) of the Companies Act 2016 I, Dato' Lee Kim Meow, being the director primarily responsible for the financial management of Top Glove Corporation Bhd., do solemnly and sincerely declare that the accompanying financial statements set out on pages 20 to 157 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, Dato' Lee Kim Meow at Shah Alam on 31 October 2019 Dato' Lee Kim Meow Before me, Sirendar Singh Commissioner for Oaths 12
130. 199801018294 (474423-X) Independent auditors’ report to the members of Top Glove Corporation Bhd. (Incorporated in Malaysia) Report on the audit of the financial statements Opinion We have audited the financial statements of Top Glove Corporation Bhd., which comprise the statements of financial position as at 31 August 2019 of the Group and of the Company, and statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out on pages 20 to 157. 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 August 2019, and of their financial performance and their cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia. Basis for opinion We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. 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 audit 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 (“ByLaws”) and the International Code of Ethics for Professional Accountants (including International Independence Standards) (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the Group and of the Company for the current year. We have determined that there are no key audit matters to communicate in our report on the financial statements of the Company. The key audit matters for the audit of the financial statements of the Group are described below. These matters were addressed in the context of our audit of the financial statements of the Group as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. 13
131. 199801018294 (474423-X) Independent auditors’ report to the members of Top Glove Corporation Bhd. (cont'd.) (Incorporated in Malaysia) Key audit matters (cont'd.) We have fulfilled the responsibilities described in the Auditors’ responsibilities for the audit of the financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis of our audit opinion on the accompanying financial statements. Review of costing of inventories (Refer to Note 4.16, 7.2(a) and Note 24 to the financial statements) As at 31 August 2019, the Group held RM630 million of inventories which represented 11% of total assets of the Group. Total cost of inventories charged to the consolidated income statement for the year ended 31 August 2019 amounted to RM3,917 million, accounting for 90% of total expenditure of the Group. Inventories are carried at the lower of cost and net realisable value. The cost of production comprises the cost of purchase of raw materials, labour costs, plus conversion costs such as variable and fixed overhead costs. Significant estimates are involved in determining the basis of allocating the costs of production to the products produced by the Group. The Group relies heavily on the SAP system to ensure that the costs of raw materials, labour costs and overhead costs are correctly allocated to the respective products. Due to the significant estimation involved in the valuation of inventories, we considered this a key area of audit focus. Our audit procedures included, amongst others, the following: a) Obtained an understanding of the Group’s current inventories valuation policy, production processes and the types of costs included in the valuation of inventories. b) Evaluated the general and logical access controls surrounding the data input process to the SAP system by involving our IT audit professionals. c) Obtained an understanding of and tested the internal controls over the SAP system in respect of the materials consumed and the allocation of costs of raw materials, labour costs, and overhead costs to the respective products. d) Obtained an understanding of management’s process for computing standard costing and reviewed the computation of standard costing of inventory. We also observed management’s procedures for updating the standard costing into the SAP system. 14
132. 199801018294 (474423-X) Independent auditors’ report to the members of Top Glove Corporation Bhd. (cont'd.) (Incorporated in Malaysia) Key audit matters (cont'd.) Annual impairment test of goodwill arising from the acquisition of Aspion Sdn. Bhd. ("Aspion") (Refer to Note 4.1, 7.2(b) and Note 23 to the financial statements) As at 31 August 2019, the Group recorded a goodwill of RM1,174 million arising from the acquisition of Aspion, which represented 21% of the Group’s total assets. The goodwill amount has been allocated to cash generating unit (“CGU”) for impairment testing purposes. The Group estimated the recoverable amount of the CGU to which the goodwill is allocated based on valuein-use (“VIU”). Given its magnitude and the significant judgement involved in the annual impairment test, we consider this impairment test to be an area of audit focus. Specifically, we focus on the evaluation of the assumptions on the amount and timing of cash flows which are based on internal (e.g. budgets) and external market data (e.g. country specific interest rates and inflation percentages), and determination of an appropriate discount rate for Aspion. Our audit procedures performed, amongst others are as follows: a) Evaluated management’s key assumptions used in the cash flows projection, focusing on projected revenue, profit margins and growth rates, taking into consideration the current and expected future economic conditions. We compared the projected revenue to the past trends and compared expected growth rates to relevant market expectations. b) Together with EY valuation specialists, we evaluated the discount rate used to determine the present value of the cash flows and assessed whether the rate used reflect the current market assessment of the time value of money and the risk specific to the asset is the return that the investors would require if they were to choose an investment that would generate cash flows of amounts, timing and risk profile equivalent to those that the entity expects to derive from the asset. c) Assessed the sensitivity of the cash flows to changes in the key inputs to understand the impact that reasonable alternative assumptions would have on the overall carrying value. d) Evaluated the adequacy of the Group’s disclosures in the financial statements concerning those key assumptions to which the outcome of the impairment test is most sensitive. 15
133. 199801018294 (474423-X) Independent auditors’ report to the members of Top Glove Corporation Bhd. (cont'd.) (Incorporated in Malaysia) Information other than the financial statements and auditors’ report thereon The directors of the Company are responsible for the other information. The other information comprises the 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. Responsibilities of the directors for the financial statements The directors of the Company are responsible for the preparation of financial statements of the Group and of the Company that give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia. The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of financial statements of the Group and of the Company that are free from material misstatement, whether due to fraud or error. In preparing the financial statements of the Group and of the Company, the directors are responsible for assessing the Group’s and the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so. 16
134. 199801018294 (474423-X) Independent auditors’ report to the members of Top Glove Corporation Bhd. (cont'd.) (Incorporated in Malaysia) Auditors’ responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements of the Group and of the Company as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements of the Group and of the Company, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and of the Company’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. • Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s or the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements of the Group and of the Company or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group or the Company to cease to continue as a going concern. 17
135. 199801018294 (474423-X) Independent auditors’ report to the members of Top Glove Corporation Bhd. (cont'd.) (Incorporated in Malaysia) Auditors’ responsibilities for the audit of the financial statements (cont'd.) We also: (cont'd.) • Evaluate the overall presentation, structure and content of the financial statements of the Group and of the Company, including the disclosures, and whether the financial statements of the Group and of the Company represent the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial statements of the Group. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial statements of the Group and of the Company for the current year and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on other legal and regulatory requirements In accordance with the requirements of the Companies Act 2016 in Malaysia, we report that the subsidiaries of which we have not acted as auditors are disclosed in Note 19 to the financial statements. 18
136. 199801018294 (474423-X) Independent auditors’ report to the members of Top Glove Corporation Bhd. (cont'd.) (Incorporated in Malaysia) 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. Ernst & Young AF: 0039 Chartered Accountants Ng Kim Ling No. 03236/04/2020 J Chartered Accountant Kuala Lumpur, Malaysia 31 October 2019 19
137. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) Statements of profit or loss For the financial year ended 31 August 2019 Group 2019 Note RM'000 Revenue Cost of sales Gross profit Other items of income Interest income Other income 8 9 10 Other items of expense Distribution and selling costs Administrative and general expenses Finance costs Share of results of an associate Profit before tax Income tax expense Profit net of tax 11 14 Profit attributable to: Owners of the parent Non-controlling interests 4,801,139 (3,917,144) 883,995 Company 2019 2018 2018 (Restated) RM'000 RM'000 RM'000 4,220,742 (3,378,374) 842,368 220,964 220,964 243,942 243,942 41 2,064 217 - - - 10,611 38,552 12,235 39,998 (133,357) (111,472) (293,938) (79,601) (229,725) (36,772) (13,847) - (10,400) - (2,674) 423,588 (56,042) 367,546 6,168 522,800 (89,594) 433,206 209,222 (4) 209,218 233,759 233,759 364,678 2,868 367,546 428,830 4,376 433,206 209,218 209,218 233,759 233,759 14.27 14.21 16.89 16.89 Earnings per share attributable to owners of the parent (sen): - Basic - Diluted 15 15 The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 20
138. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) Statements of comprehensive income For the financial year ended 31 August 2019 Group 2019 RM'000 Profit net of tax Other comprehensive loss: To be reclassified to profit or loss in subsequent periods: Net movement on debt instrument at fair value through other comprehensive income Cash flow hedge (Note 34) Foreign currency translation differences of foreign operations Other comprehensive loss for the year, net of tax Total comprehensive income for the year Total comprehensive income attributable to: Owners of the parent Non-controlling interests 2018 (Restated) RM'000 Company 2019 2018 RM'000 RM'000 209,218 233,759 367,546 433,206 3,247 (38,787) (2,465) (41,504) - - 17,423 (18,700) - - (18,117) (62,669) - - 349,429 370,537 209,218 233,759 345,444 3,985 349,429 366,500 4,037 370,537 209,218 209,218 233,759 233,759 The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 21
139. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) Statements of financial position (Group) As at 31 August 2019 Note 2019 RM'000 2018 (Restated) RM'000 As at 1.9.2017 (Restated) RM'000 Assets Non-current assets Property, plant and equipment Land use rights Investment property Investment in an associate Deferred tax assets Investment securities Intangible assets Current assets Inventories Trade and other receivables Other current assets Tax recoverable Investment securities Derivative financial instruments Cash and bank balances 16 17 18 20 21 22 23 2,480,026 178,495 163,900 11,853 58,472 392 1,256,376 4,149,514 2,104,762 127,029 163,900 14,527 19,271 392 1,260,041 3,689,922 1,498,486 40,457 162,000 8,359 14,681 392 22,805 1,747,180 24 25 26 629,896 592,217 63,511 87,285 165,782 1,538,691 5,688,205 505,862 637,309 105,346 193,714 165,197 1,607,428 5,297,350 315,775 419,349 51,258 17,351 206,910 645 240,068 1,251,356 2,998,536 1,041,325 492,414 55,610 789 1,653 1,591,791 882,575 500,151 59,248 8,741 856 1,451,571 314,644 418,802 62,292 795,738 155,857 455,618 22 27 28 Total assets Equity and liabilities Current liabilities Loans and borrowings Trade and other payables Contract liabilities Income tax payable Derivative financial instruments 29 30 31 27 (53,100) Net current (liabilities)/assets 22
140. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) Statements of financial position (Group) As at 31 August 2019 (cont'd.) 2018 (Restated) RM'000 As at 1.9.2017 (Restated) RM'000 1,379,369 159,714 3,190 1,542,273 1,330,359 116,305 719 1,447,383 61,750 68,257 130,007 Total liabilities 3,134,064 2,898,954 925,745 Net assets 2,554,141 2,398,396 2,072,791 Non-controlling interests Total equity 788,326 (1,781) (1,553) 1,751,963 2,536,955 17,186 2,554,141 787,709 (9,325) 6,663 1,597,999 2,383,046 15,350 2,398,396 636,644 (9,739) 62,499 1,374,186 2,063,590 9,201 2,072,791 Total equity and liabilities 5,688,205 5,297,350 2,998,536 Note 2019 RM'000 Non-current liabilities Loans and borrowings Deferred tax liabilities Provisions 29 21 Equity attributable to owners of the parent Share capital Treasury shares Other reserves Retained earnings 32 33 34 The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 23
141. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) Statements of financial position (Company) As at 31 August 2019 2019 RM'000 2018 RM'000 19 1,031,056 1,018,960 25 26 4,724 2,614 10 1 74 7,423 1,038,479 2,000 1,071 12 2 151 3,236 1,022,196 1,542 1,542 1,509 1,509 5,881 1,727 1,036,937 1,020,687 788,326 (1,781) 8,995 241,397 1,036,937 787,709 (9,325) 1,929 240,374 1,020,687 1,038,479 1,022,196 Note Assets Non-current asset Investment in subsidiaries Current assets Trade and other receivables Other current assets Tax recoverable Investment securities Cash and bank balances 22 28 Total assets Equity and liabilities Current liabilities Trade and other payables Total liabilities 30 Net current assets Net assets Equity attributable to owners of the Company Share capital Treasury shares Other reserves Retained earnings Total equity 32 33 34 35 Total equity and liabilities The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 24
142. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) Statements of changes in equity For the financial year ended 31 August 2019 2019 Group Opening balance at 1 September 2018 Prior year adjustment (Note 48) 1 September 2018 (Restated) Profit net of tax Other comprehensive loss Total comprehensive income Transactions with owners Issuance of ordinary shares pursuant to employee share options scheme ("ESOS") (Note 36) Share options granted under ESOS (Note 34) Issuance of shares to NCI Transfer from share option reserve (Note 32 and Note 34) Transfer to retained earnings (Note 34) Transfer to legal reserve (Note 34) Transfer to employee share grant plan ("ESGP") (Note 33) Transaction cost Equity component of exchangeable bonds Sale of treasury shares (Note 33) Dividends on NCI Dividends on ordinary shares (Note 44) Total transactions with owners Closing balance at 31 August 2019 <---------------------------------------------------------------- Attributable to owners of the parent ------------------------------------------------------------> Total equity <-------------------------------------------------------- Non-distributable -----------------------------------------------------> Distributable attributable Cash Fair Nonto owners Foreign Share flow value controlling Total of the Share Treasury exchange Legal option hedge adjustment Other Retained interests equity of parent capital shares reserve reserve reserve reserve reserve reserve earnings ("NCI") RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 2,393,768 4,628 2,398,396 367,546 (18,117) 349,429 2,378,481 4,565 2,383,046 364,678 (19,234) 345,444 787,709 787,709 (9,325) (9,325) 36,125 (786) 35,339 9,164 9,164 1,929 1,929 (41,504) (41,504) (1,163) (1,163) (38,787) (38,787) - - 16,306 16,306 - - 2,898 2,898 1,595,546 2,453 1,597,999 15,287 63 15,350 3,247 3,247 - 364,678 364,678 2,868 1,117 3,985 662 662 662 - - - - - - - - - 7,197 548 7,197 - - - - - 7,197 - - - - - 548 - - 41 - - - - - - 90 - - - - - - 924 - - - 1,595 - (1,595) (924) 51,645 924 10,088 7,066 8,995 2,084 1,433 3,028 5,926 1,389 7,719 (217,393) (210,714) 1,751,963 2,716 (86) 1,433 13,936 (2,697) (217,393) (193,684) 2,554,141 2,716 (86) 1,433 13,936 (217,393) (191,535) 2,536,955 (86) 617 788,326 1,327 6,217 7,544 (1,781) 25 (131) (80,291) (2,697) (2,149) 17,186
143. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) Statements of changes in equity For the financial year ended 31 August 2019 (cont'd.) 2018 Group Opening balance at 1 September 2017 Prior year adjustment (Note 48) 1 September 2017 (Restated) Profit net of tax, as previously stated Prior year adjustment (Note 48) As restated Other comprehensive loss, as previously stated Prior year adjustment (Note 48) Total comprehensive income <---------------------------------------------------------------- Attributable to owners of the parent ------------------------------------------------------------> Total equity <-------------------------------------------------------- Non-distributable -----------------------------------------------------> Distributable attributable Cash Fair Nonto owners Foreign Share flow value Retained controlling Total of the Share Treasury exchange Legal option hedge adjustment Other earnings interests equity of parent capital shares reserve reserve reserve reserve reserve reserve (Restated) ("NCI") RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 2,064,432 8,359 2,055,231 8,359 636,644 - (9,739) - 53,700 - 4,929 - 2,568 - - 1,302 - - 1,365,827 8,359 9,201 - 2,072,791 437,906 (4,700) 433,206 2,063,590 434,215 (5,385) 428,830 636,644 - (9,739) - 53,700 - 4,929 - 2,568 - - 1,302 - - 1,374,186 434,215 (5,385) 428,830 9,201 3,691 685 4,376 (61,710) (959) (61,544) (786) - - (17,575) (786) - - (41,504) - (2,465) - - - 370,537 366,500 - - (18,361) - - (41,504) (2,465) - 428,830 4,037 11,972 11,972 11,972 - - - - - - - - - 137,000 137,000 137,000 - - - - - - - - - 1,932 1,500 1,932 - - - - - 1,932 - - - - - 1,500 - - 2,093 - - - (2,093) - - - - - - - - - - - - (2,778) - 414 - 4,235 - - - - 478 (4,235) 561 (166) (173) Transactions with owners Issuance of ordinary shares pursuant to ESOS (Note 36) Shares issued for acquisition of a subsidiary (Note 32) Share options granted under ESOS (Note 34) Issuance of shares to NCI Transfer from share option reserve (Note 32 and Note 34) Acquisition of subsidiary companies (Note 19) Acquisition of equity interest of NCI Transfer to retained earnings (Note 34) Transfer to legal reserve (Note 34) Transfer to ESGP 6,448 (2,959) 975 (2,778) 975 26 (478) - 6,448 (181) -
144. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) Statements of changes in equity For the financial year ended 31 August 2019 (cont'd.) Group Transfer to other reserve Dividends on NCI Dividends on ordinary shares (Note 44) Total transactions with owners Closing balance at 31 August 2018 <---------------------------------------------------------------- Attributable to owners of the parent ----------------------------------------------------------> Total equity <-------------------------------------------------------- Non-distributable -----------------------------------------------------> Distributable attributable Cash Fair Nonto owners Foreign Share flow value Retained controlling Total of the Share Treasury exchange Legal option hedge adjustment Other earnings interests equity of parent capital shares reserve reserve reserve reserve reserve reserve (Restated) ("NCI") RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 (5,655) (196,145) (44,932) 2,398,396 (196,145) (47,044) 2,383,046 151,065 787,709 414 (9,325) - - 35,339 4,235 9,164 (639) 1,929 (41,504) The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 27 (1,163) 2,898 - (2,898) - 2,898 2,898 (196,145) (205,017) 1,597,999 (5,655) 2,112 15,350
145. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) Statements of changes in equity For the financial year ended 31 August 2019 <--------------- Non-distributable ---------------> Distributable Share Total Share Treasury option Retained equity capital shares reserve earnings RM'000 RM'000 RM'000 RM'000 RM'000 2019 Company Opening balance at 1 September 2018 Total comprehensive income Transactions with owners Issuance of ordinary shares pursuant to ESOS (Note 36) Share options granted under ESOS (Note 34) Transfer from share option reserve (Note 32 and Note 34) Sale of treasury shares (Note 33) Transaction cost Transfer to ESGP (Note 33) Dividends on ordinary shares (Note 44) Total transactions with owners Closing balance at 31 August 2019 1,020,687 787,709 209,218 - 662 7,197 13,936 (86) 2,716 (217,393) (192,968) 1,036,937 28 662 41 (86) 617 788,326 (9,325) - 6,217 1,327 7,544 (1,781) 1,929 240,374 - 209,218 7,197 (131) 7,066 8,995 90 7,719 1,389 (217,393) (208,195) 241,397
146. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) Statements of changes in equity For the financial year ended 31 August 2019 (cont'd.) 2018 Company <--------------- Non-distributable ---------------> Distributable Share Total Share Treasury option Retained equity capital shares reserve earnings RM'000 RM'000 RM'000 RM'000 RM'000 Opening balance at 1 September 2017 831,194 636,644 Total comprehensive income 233,759 - Transactions with owners Issuance of ordinary shares pursuant to ESOS (Note 36) Issuance of ordinary shares (Note 32) Share options granted under ESOS (Note 34) Transfer from share option reserve (Note 32 and Note 34) Transfer to retained earnings (Note 34) Transfer to ESGP (Note 33) Dividends on ordinary shares (Note 44) Total transactions with owners Closing balance at 31 August 2018 11,972 137,000 1,932 975 (196,145) (44,266) 1,020,687 11,972 137,000 2,093 151,065 787,709 (9,739) 2,568 201,721 - 233,759 - 414 414 (9,325) 1,932 (2,093) (478) (639) 1,929 The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 29 478 561 (196,145) (195,106) 240,374
147. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) Statements of cash flows For the financial year ended 31 August 2019 Group 2019 RM'000 Operating activities Profit before tax Adjustments for : Gross dividends Depreciation on property plant and equipment (Note 16) Amortisation of land use rights (Note 17) Amortisation of intangible assets (Note 23) Loss on disposal of property, plant and equipment Gain on disposal of land use rights Net (gain)/loss from fair value remeasurement on investment property (Note 18) Loss/(gain) on disposal of debt securities Property, plant and equipment written off Shares granted under ESGP Share options granted under ESOS Unrealised foreign exchange (gain)/loss Share of results of an associate Net fair value loss on derivatives Finance costs Interest income Total adjustments Operating cash flows before changes in working capital Changes in working capital Inventories Receivables Other current assets Payables Total changes in working capital Cash flows from/(used in) operations Interest paid Income taxes (paid)/refunded Net cash flows generated from/(used in) operating activities 2018 (Restated) RM'000 423,588 522,800 - - 188,817 2,417 3,681 143,613 1,519 1,533 1,965 (1,704) 904 (4,664) (619) 349 8,795 2,716 7,197 (2,552) 2,674 811 79,601 (10,611) 283,537 721 (273) 7,455 975 1,932 22,158 (6,168) 2,262 36,772 (12,235) 196,504 707,125 Company 2019 2018 RM'000 RM'000 209,222 233,759 (215,590) (239,030) - - - - 156 778 (41) (214,697) 167 (217) (239,080) 719,304 (5,475) (5,321) (124,034) 46,676 41,835 (6,024) (41,547) 665,578 (79,601) (59,786) (107,620) (93,013) (54,088) (34,663) (289,384) 429,920 (36,772) (51,924) (1,554) 33 (1,521) (6,996) (2) (1,071) (1,057) (2,128) (7,449) 4 526,191 341,224 (6,998) (7,445) 30
148. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) Statements of cash flows For the financial year ended 31 August 2019 (cont'd.) Group 2019 RM'000 Investing activities Purchase of property, plant and equipment Purchase of land use rights Purchase of intangible assets Additions to investment property Purchase of investment securities Proceeds from disposal of investment securities Proceeds from disposal of land use rights Increase in bank balances pledged with banks Interest received Dividends from subsidiaries Proceeds from disposal of property, plant and equipment Additional investment in subsidiaries Acquisition of equity interest of NCI Net cash outflow on acquisition of subsidiaries Repayment from subsidiaries Net cash flows (used in)/generated from investing activities Financing activities Proceeds from issuance of ordinary shares pursuant to ESOS Proceeds from sale of treasury shares Transaction cost Dividends paid on ordinary shares (Note 44) Dividends paid on non-controlling interests Issuance of shares to non-controlling interests Repayment of loans and borrowings Drawdown of loans and borrowings Proceeds from issuance of exchangeable bonds Net cash flows (used in)/generated from financing activities 2018 (Restated) RM'000 Company 2019 2018 RM'000 RM'000 (568,143) (55,553) (16) (393) (138,438) (458,977) (341) (2,619) (170,408) (13,701) (95,296) 247,569 3,440 179,953 9,306 13,702 - 97,877 - (1,105) 10,611 - (3,413) 12,235 - 41 215,590 217 239,030 8,565 - 9,610 (2,959) (12,096) - (51,457) - - (1,270,622) - 6,266 914 (1,698,235) 209,802 191,285 (493,463) 662 13,936 (86) 11,972 - (217,393) (2,697) (196,145) (5,655) 548 (1,162,688) 518,753 1,500 (292,402) 1,763,664 814,400 (34,565) 31 1,282,934 662 13,936 (86) (217,393) - 11,972 (196,145) - - - - - (202,881) (184,173)
149. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) Statements of cash flows For the financial year ended 31 August 2019 (cont'd.) Group 2019 RM'000 Net decrease in cash and cash equivalents Effect of changes in foreign exchange rate Cash and cash equivalents at 1 September 2018/2017 Cash and cash equivalents at 31 August 2019/2018 (Note 28) (1,837) 2,828 2018 (Restated) RM'000 Company 2019 2018 RM'000 RM'000 (74,077) (5,718) (77) - (333) - 158,724 238,519 151 484 159,715 158,724 74 151 The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 32
150. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) Statements of cash flows For the financial year ended 31 August 2019 (cont'd.) (a) Reconciliation of liabilities arising from financing activities <------------------------------------------------------- Movements -------------------------------------------------------> <------- Cash flows ------> <--------------------------------- Non-cash changes --------------------------------> 1 September Principal 2018 movement RM'000 RM'000 Equity component of exchangeable bond RM'000 Foreign exchange movement RM'000 31 August 2019 RM'000 - (1,433) 40,239 2,420,694 Acquisition Interest of subsidiary Hire cost companies purchase RM'000 RM'000 RM'000 Equity component of exchangeable bond RM'000 Foreign exchange movement RM'000 31 August 2018 RM'000 - 53,442 2,211,423 Acquisition Interest of subsidiary Hire cost companies purchase RM'000 RM'000 RM'000 Interest paid RM'000 2019 Group Loans and borrowings, excluding bank overdraft 2,211,423 170,465 1 September Principal 2017 movement RM'000 RM'000 (79,601) 79,601 Interest paid RM'000 - 2018 Group Loans and borrowings, excluding bank overdraft 376,394 1,471,262 (36,772) 36,772 310,038 287 The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 33
151. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) Notes to the financial statements For the financial year ended 31 August 2019 1. Corporate information Top Glove Corporation Bhd. ("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 and Singapore Exchange Securities Trading Limited. The principal place of business of the Company is located at Level 21, Top Glove Tower, 16, Persiaran Setia Dagang, Setia Alam, Seksyen U13, 40170 Shah Alam, Selangor. The principal activities of the Company are investment holding and provision of management services. The principal activities of the subsidiaries are described in Note 19. There have been no significant changes in the nature of the principal activities during the financial year. 2. Basis of preparation The financial statements of the Group and of the Company have been prepared in accordance with Malaysian Financial Reporting Standards ("MFRS") as issued by the Malaysian Accounting Standards Board ("MASB"), International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board and the requirements of the Companies Act 2016 in Malaysia. The financial statements have also been prepared on a historical basis, unless otherwise indicated in the accounting policies below. The financial statements are presented in Ringgit Malaysia ("RM") and all values are rounded to the nearest thousand ("RM'000") except when otherwise indicated. 34
152. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 3. Basis of consolidation The consolidated financial statements comprise the financial statements of the Company and of its subsidiaries as at 31 August 2019. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has: - Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee); Exposure, or rights, to variable returns from its involvement with the investee; and The ability to use its power over the investee to affect its returns. When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including: - The contractual arrangement with the other vote holders of the investee; Rights arising from other contractual arrangements; and The Group’s voting rights and potential voting rights. The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary. Profit or loss and each component of other comprehensive income ("OCI") are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses, unrealised gains and losses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity while any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised at fair value. 35
153. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 4. Summary of significant accounting policies 4.1 Business combinations and goodwill Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the Group elects whether it measures the noncontrolling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in administrative expenses. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. If the business combination is achieved in stages, any previously held equity interests in the acquiree are re-measured to fair value at the acquisition date with any corresponding gain or loss recognised in profit or loss. Any excess of the cost of business combination, as the case may be, over the net amount of the fair value of identifiable assets acquired and liabilities assumed is recognised as goodwill. For business combinations, provisions are made for the acquiree’s contingent liabilities existing at the date of acquisition as the Group deems that it is probable that an outflow of resources embodying economic benefits will be required to settle the obligations. Any excess in the Group's interest in the net fair value of the identifiable assets acquired and liabilities assumed over the cost of business combination is recognised immediately in profit or loss. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of MFRS 9 Financial Instruments, is measured at fair value with the changes in fair value recognised in the statements of profit or loss in accordance with MFRS 9. Other contingent consideration that is not within the scope of MFRS 9 is measured at fair value at each reporting date with changes in fair value recognised in profit or loss. 36
154. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 4. Summary of significant accounting policies (cont'd.) 4.1 Business combinations and goodwill (cont'd.) Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests, and any previous interest held, over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the re-assessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognised in profit or loss. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group's cashgenerating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Where goodwill has been allocated to a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the relative values of the disposed operation and the portion of the cash-generating unit retained. Business combinations involving entities under common control are accounted for by applying the pooling on interest method. The assets and liabilities of the combining entities are reflected at their carrying amounts reported in the consolidated financial statements of the controlling holding company. Any difference between the consideration paid and the share capital of the entity acquired is reflected within equity as merger reserve. The statement of comprehensive income reflects the results of the combining entities for the full year, irrespective of when the combination takes place. Comparatives are presented as if the entities have always been combined since the date the entities had come under common control. 37
155. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 4. Summary of significant accounting policies (cont'd.) 4.2 Transactions with non-controlling interests Non-controlling interests represent the equity in subsidiaries not attributable, directly or indirectly, to owners of the Company, and is presented separately in the consolidated statements of profit or loss, consolidated statements of comprehensive income and within equity in the consolidated statements of financial position, separately from equity attributable to owners of the Company. Changes in the Company's interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. In such circumstances, the carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the noncontrolling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the parent. 4.3 Investment in subsidiaries A subsidiary is an entity over which the Group has all the following: (i) Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee); (ii) Exposure, or rights, to variable returns from its involvement with the investee; and (iii) The ability to use its power over the investee to affect its returns. In the Company's separate financial statements, investment in subsidiaries is accounted for at cost less impairment losses. On disposal of such investment, the difference between net disposal proceeds and the carrying amount is included in profit or loss. 4.4 Investment in an associate An associate is an entity, not being a subsidiary or a joint venture, in which the Group has significant influence. An associate is equity accounted for from the date the Group obtains significant influence until the date the Group ceases to have significant influence over the associate. 38
156. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 4. Summary of significant accounting policies (cont'd.) 4.4 Investment in an associate (cont'd.) The Group's investment in an associate is accounted for using the equity method of accounting. Under the equity method, the investment in an associate is measured in the consolidated statements of financial position at cost plus post-acquisition changes in the Group's share of net assets of the associate. Goodwill relating to associate is included in the carrying amount of the investment. Any excess of the Group's share of the net fair value of the associate's identifiable assets, liabilities and contingent liabilities over the cost of the investment is excluded from the carrying amount of the investment and is instead included as income in the determination of the Group's share of the associate's profit or loss for the period in which the investment is acquired. When the Group's share of losses in an associate equals or exceeds its interest in the associate, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss on the Group's investment in its associates. The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount in profit or loss. The financial statements of the associates are prepared as of the same reporting date as the Group unless it is impracticable to do so. When the financial statements of associates used in applying the equity method are prepared as of a different reporting date from that of the Group, adjustments are made for the effects of significant transactions or events that occur between that date and the reporting date of the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group. In the Group's separate financial statements, investment in associate is stated at cost less impairment losses. On disposal of such investment, the difference between net disposal proceeds and the carrying amount is included in profit or loss. 39
157. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 4. Summary of significant accounting policies (cont'd.) 4.5 Intangible assets Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred. The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the statements of profit or loss in the expense category that is consistent with the function of the intangible assets. Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis. An intangible asset is derecognised upon disposal (i.e., at the date the recipient obtains control) or when no future economic benefits are expected from its use or disposal. Any gain or loss arising upon derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit or loss. 40
158. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 4. Summary of significant accounting policies (cont'd.) 4.5 Intangible assets (cont'd.) (a) Customer relationships The cost of customer relationships acquired in a business combination is at their fair value at the date of acquisition. Following the initial recognition, they are carried at cost less accumulated amortisation and any accumulated impairment losses. The customer relationships are amortised on a straight line basis over its estimated useful lives of eleven years and assessed for impairment whenever there is an indication that the customer relationships may be impaired. (b) Patents The Group does not recognise internally generated brands, licenses and other similar intellectual property which cannot be distinguished from the cost of developing the Group's business as a whole. The patents were purchased by the Group through upfront payments made. Acquired patents are recognised as an asset and initially measured at cost, which is the fair value of the consideration paid. After initial recognition, patents are measured at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised in profit or loss on a straight line basis over its estimated useful lives of eight years. 4.6 Current versus non-current classification Assets and liabilities in the statements of financial position are presented based on a current/non-current classification. An asset is current when it is: - Expected to be realised or intended to be sold or consumed in the normal operating cycle; Held primarily for the purpose of trading; Expected to be realised within twelve months after the reporting period; or Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. All other assets are classified as non-current. 41
159. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 4. Summary of significant accounting policies (cont'd.) 4.6 Current versus non-current classification (cont'd.) A liability is current when: - It is expected to be settled in the normal operating cycle; It is held primarily for the purpose of trading; It is due to be settled within twelve months after the reporting period; or There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. All other liabilities are classified as non-current. Deferred tax assets and liabilities are classified as non-current assets and liabilities. 4.7 Fair value measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: - In the principal market for the asset or liability; or In the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible to by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. 42
160. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 4. Summary of significant accounting policies (cont'd.) 4.7 Fair value measurement (cont'd.) A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available, are used to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. Policies and procedures are determined by senior management for both recurring fair value measurement and for non-recurring measurement. External valuers are involved for valuation of significant assets and significant liabilities. Involvement of external valuers is decided by senior management. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained. The senior management decides, after discussions with the external valuers, which valuation techniques and inputs to use for each case. At each reporting date, the senior management analyses the movements in the values of assets and liabilities which are required to be re-measured or re-assessed according to the accounting policies of the Group. For this analysis, the senior management verifies the major inputs applied in the latest valuation by agreeing the information in the valuation computation to contracts and other relevant documents. 43
161. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 4. Summary of significant accounting policies (cont'd.) 4.7 Fair value measurement (cont'd.) The senior management, in conjunction with the external valuers, also compares the changes in the fair value of each asset and liability with relevant external sources to determine whether the change is reasonable. For the purpose of fair value disclosures, classes of assets and liabilities are determined based on the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above. 4.8 Foreign currencies (a) Functional and presentation currency The Group's financial statements are presented in RM which is also the Company's functional currency. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. (b) Transactions and balances Transactions in foreign currencies are initially recorded by the Group entities at the functional currency spot rates at the date the transaction first qualifies for recognition. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates at the reporting date. Differences arising on settlement or translation of monetary items are recognised in profit or loss with the exception of monetary items that are designated as part of the hedge of the Group's net investment of a foreign operation. These are recognised in foreign exchange reserve OCI until the net investment is disposed of, at which time, the cumulative amount is reclassified to profit or loss. Tax charges and credits attributable to exchange differences on those monetary items are also recorded in OCI. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of gain or loss on change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognised in OCI or profit or loss are also recognised in OCI or profit or loss, respectively). 44
162. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 4. Summary of significant accounting policies (cont'd.) 4.8 Foreign currencies (cont'd.) (c) Group companies On consolidation, the assets and liabilities of foreign operations are translated into RM at the rate of exchange prevailing at the reporting date and their statements of comprehensive income are translated at exchange rates prevailing at the dates of the transactions. The exchange differences arising on translation for consolidation are recognised in OCI. On disposal of a foreign operation, the component of OCI relating to that particular foreign operation is recognised in profit or loss. Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operation and translated at the spot rate of exchange at the reporting date. 4.9 Revenue and other income recognition Revenue is recognised when the Group satisfies a performance obligation by transferring a promised good or service to the customer, which is when the customer obtains control of the good or service. A performance obligation may be satisfied at a point in time or over time. The amount of revenue recognised is the amount allocated to the satisfied performance obligation. (a) Sale of goods The Group is involved in manufacturing and trading of gloves. Revenue is recognised at point in time upon transfer of control of the goods to the customers. Revenue is not recognised to the extent where there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods. The amount of revenue recognised is based on the estimated transaction price, which comprises the contractual price, net of the estimated volume rebates. Based on the Group's experience with similar types of contracts, variable consideration is typically constrained and is included in the transaction only to the extent that it is a highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur when the uncertainty associated with the variable consideration is subsequently resolved. 45
163. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 4. Summary of significant accounting policies (cont'd.) 4.9 Revenue and other income recognition (cont'd.) (b) Dividend income Dividend income is recognised when the Group's and the Company's right to receive payment is established. (c) Management fees Management fees are recognised when services are rendered. (d) Interest income Interest income is recognised on an accrual basis using the effective interest method. (e) Rental income Rental income is accounted for on a straight-line basis over the lease terms. The aggregate costs of incentives provided to lessees are recognised as a reduction of rental income over the lease term on a straight-line basis. 4.10 Employee benefits (a) Short term benefits Wages, salaries, bonuses and social security contributions are recognised as an expense in the year in which the associated services are rendered by employees. Short term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences. Short term non-accumulating compensated absences such as sick leave are recognised when the absences occur. (b) Defined contribution plans Defined contribution plans are post-employment benefit plans under which the Group and the Company pay fixed contributions into separate entities or funds and will have no legal or constructive obligation to pay further contributions if any of the funds do not hold sufficient assets to pay all employee benefits relating to employee services in the current and preceding financial years. Such contributions are recognised as an expense in profit or loss as incurred. As required by law, companies in Malaysia make such contributions to the Employees Provident Fund (“EPF”). 46
164. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 4. Summary of significant accounting policies (cont'd.) 4.10 Employee benefits (cont'd.) (c) Employee share options scheme Employees of the Group and of the Company receive remuneration in the form of share options as consideration for services rendered. The cost of these equitysettled transactions with employees is measured by reference to the fair value of the options at the date on which the options are granted. This cost is recognised in profit or loss. The cumulative expense recognised at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group's and the Company's best estimate of the number of options that will ultimately vest. The charge or credit to profit or loss for a period represents the movement in cumulative expense recognised at the beginning and end of that period. No expense is recognised for options that do not ultimately vest, except for options where vesting is conditional upon a market or non-vesting condition, which are treated as vested irrespective of whether the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied. When the options are exercised, the employee share option reserve is transferred to share capital if new shares are issued. The employee share option reserve is transferred to retained earnings upon forfeiture or expiry of the share options. (d) Employee share grant plan ("ESGP") Employees of the Group and of the Company are entitled to performance based shares as consideration for services rendered. The ESGP may be settled by way of issuance or transfer of shares of the Group and of the Company or by cash at the discretion of the ESGP Committee. Trusts have been set up and are administered by an appointed trustee (“ESGP Trusts”). The trustee will be entitled from time to time, to accept advances from the Group and the Company, upon such terms and conditions as the Group and the Company and the trustee may agree to purchase the ordinary shares of the Group and of the Company (“Trust Shares”) from the open market for the ESGP Trusts. The value of the ESGP Awards granted to Eligible Employees is recognised as an employee cost. The ESGP Trusts' asset is consolidated into the Group's consolidated financial statements. Dividends received by the ESGP Trusts are eliminated against the Company's dividend payment. 47
165. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 4. Summary of significant accounting policies (cont'd.) 4.11 Taxes (a) Current income tax Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date in the countries where the Group and the Company operate and generate taxable income. Current income tax relating to items recognised directly in equity is recognised in equity and not in profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate. (b) Deferred tax Deferred tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all taxable temporary differences, except: (i) where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and (ii) in respect of taxable temporary differences associated with investments in subsidiaries and associates, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. 48
166. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 4. Summary of significant accounting policies (cont'd.) 4.11 Taxes (cont'd.) (b) Deferred tax (cont'd.) Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised, except: (i) where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and (ii) in respect of deductible temporary differences associated with investments in subsidiaries and associate, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax assets to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date. Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity. Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. 49
167. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 4. Summary of significant accounting policies (cont'd.) 4.11 Taxes (cont'd.) (c) Good and services tax ("GST") and sales and services tax ("SST") Revenue, expenses and assets are recognised net of the amount of GST and SST, except: (i) when the GST and SST incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case, the GST and SST are recognised as part of the cost of acquisition of the assets or as part of the expense item as applicable; and (ii) when receivables and payables are stated with the amount of GST and SST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables and payables respectively in the statements of financial position. The payable amount of SST to the taxation authority is included as part of payables in the statements of financial position. 4.12 Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. 4.13 Property, plant and equipment Capital work-in-progress, property, plant and equipment are stated at cost, net of accumulated depreciation and/or accumulated impairment losses, if any. Such cost includes the cost of replacing component parts of the property, plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met. 50
168. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 4. Summary of significant accounting policies (cont'd.) 4.13 Property, plant and equipment (cont'd.) When significant parts of property, plant and equipment are required to be replaced at intervals, the Group derecognises the replaced part, and recognises the new part with its own associated useful life and depreciation. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in the profit or loss as incurred. The present value of the expected cost for the decommissioning of the asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met. Freehold land has an unlimited useful life and therefore is not depreciated. Capital workin-progress are not depreciated as these assets are not available for use. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets as follows: Buildings Plant and equipment Other assets 20 to 50 years 10 to 20 years 5 to 10 years An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on derecognition of the asset is included in the profit or loss in the year the asset is derecognised. The assets' residual values, useful lives and methods of depreciation are reviewed at each financial year end and adjusted prospectively, if appropriate. 4.14 Investment property Investment property is property which is held either to earn rental income or for capital appreciation or for both. Investment property is initially measured at cost, including transaction costs. Subsequent to initial recognition, investment property is measured at fair value which reflects market conditions at the reporting date. Fair value is arrived at using the investment method that makes reference to estimated market rental values and equivalent yields. Valuation is performed by accredited independent valuer having an appropriate recognised professional qualification and recent experience in the location and category of the properties being valued. Gains or losses arising from changes in the fair values of investment property is included in profit or loss in the year in which they arise. 51
169. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 4. Summary of significant accounting policies (cont'd.) 4.14 Investment property (cont'd.) Investment property is derecognised either when it has been disposed of or when it is permanently withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in the profit or loss in the period of derecognition. Transfers are made to (or from) investment property only when there is a change in use. For a transfer from investment property to owner-occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. For a transfer from owner-occupied property to investment property, the property is accounted for in accordance with the accounting policy for property, plant and equipment set out in Note 4.13 up to the date of change in use. 4.15 Leases The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date, whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement. (a) Group as lessee Finance leases which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in profit or loss. A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term. Operating lease payments are recognised as an operating expense in the profit or loss on a straight-line basis over the lease term. Land use rights are initially measured at cost. Following initial recognition, land use rights are measured at cost less accumulated amortisation and accumulated impairment losses. The land use rights are amortised over their lease terms. Leasehold lands 50 to 100 years 52
170. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 4. Summary of significant accounting policies (cont'd.) 4.15 Leases (cont'd.) (b) Group as lessor Leases in which the Group do not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they are earned. 4.16 Inventories Inventories are stated at the lower of cost and net realisable value. Costs incurred in bringing the inventories to their present location and condition are accounted for as follows: - Raw materials, packing materials and consumables: purchase costs on a weighted average basis. - Former: purchase costs on a first in, first out basis. - Finished goods and work-in-progress: costs of direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity, excluding borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business less estimated costs of completion and the estimated costs necessary to make the sale. 4.17 Impairment of non-financial assets At each reporting date, an assessment is made as to whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the asset's recoverable amount is estimated. An asset’s recoverable amount is the higher of an asset's or cash-generating unit's ("CGU") fair value less costs of disposal and its value in use. Recoverable amount is determined for an individual asset unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. 53
171. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 4. Summary of significant accounting policies (cont'd.) 4.17 Impairment of non-financial assets (cont'd.) In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators. Impairment calculation is based on detailed budgets and forecast calculations, which are prepared separately for each CGU to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year. Impairment losses of continuing operations, including impairment on inventories, are recognised in profit or loss in expense categories consistent with the function of the impaired asset. Goodwill is tested for impairment annually at reporting date and when circumstances indicate that the carrying value may be impaired. Impairment is determined by assessing the recoverable amount of each CGU (or group of CGUs) to which the goodwill relates. When the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods. For assets other than goodwill, an assessment is made at each reporting date to determine whether there is an indication that previously recognised impairment losses no longer exist or have decreased. If such indication exists, the recoverable amount of the asset or CGU is estimated. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss. 54
172. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 4. Summary of significant accounting policies (cont'd.) 4.18 Financial instruments A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. (a) Financial assets Initial recognition and measurement Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through other comprehensive income ("OCI"), or fair value through profit or loss. The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Group's and the Company's business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Group and the Company have applied the practical expedient, the Group and the Company initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain a significant financing component or for which the Group and the Company have applied the practical expedient are measured at the transaction price determined under MFRS 15. In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are solely payments of principal and interest ("SPPI") on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level. The Group's and the Company's business model for managing financial assets refers to how they manage their financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Group and the Company commit to purchase or sell the asset. 55
173. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 4. Summary of significant accounting policies (cont'd.) 4.18 Financial instruments (cont'd.) (a) Financial assets (cont'd.) Subsequent measurement For purposes of subsequent measurement, financial assets are classified in four categories: • • • • Financial assets at amortised cost (debt instruments); Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments); Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity instruments); and Financial assets at fair value through profit or loss. The Group and the Company have no financial assets carried at fair value through OCI for equity instruments. (i) Financial assets at amortised cost (debt instruments) The Group and the Company measure financial assets at amortised cost if both of the following conditions are met: • The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; and • The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Financial assets at amortised cost are subsequently measured using the effective interest ("EIR") method and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired. The Group's and the Company's financial assets at amortised cost include cash and bank balances, trade and other receivables and other non-current financial assets. 56
174. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 4. Summary of significant accounting policies (cont'd.) 4.18 Financial instruments (cont'd.) (a) Financial assets (cont'd.) Subsequent measurement (cont'd.) (ii) Financial assets at fair value through OCI (debt instruments) The Group measures debt instruments at fair value through OCI if both of the following conditions are met: • The financial asset is held within a business model with the objective of both holding to collect contractual cash flows and selling; and • The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. For debt instruments at fair value through OCI, interest income, foreign exchange revaluation and impairment losses or reversals are recognised in the statements of profit or loss and computed in the same manner as for financial assets measured at amortised cost. The remaining fair value changes are recognised in OCI. Upon derecognition, the cumulative fair value change recognised in OCI is recycled to profit or loss. (iii) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss include financial assets held for trading, financial assets designated upon initial recognition at fair value through profit or loss, or financial assets mandatorily required to be measured at fair value. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments. Financial assets with cash flows that are not solely payments of principal and interest are classified and measured at fair value through profit or loss, irrespective of the business model. Notwithstanding the criteria for debt instruments to be classified at amortised cost or at fair value through OCI, as described above, debt instruments may be designated at fair value through profit or loss on initial recognition if doing so eliminates, or significantly reduces, an accounting mismatch. 57
175. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 4. Summary of significant accounting policies (cont'd.) 4.18 Financial instruments (cont'd.) (a) Financial assets (cont'd.) Subsequent measurement (cont'd.) (iii) Financial assets at fair value through profit or loss (cont'd.) Financial assets at fair value through profit or loss are carried in the statements of financial position at fair value with net changes in fair value recognised in the statements of profit or loss. This category includes derivative instruments which the Group had not irrevocably elected to classify at fair value through OCI. A derivative embedded in a hybrid contract, with a financial liability or nonfinancial host, is separated from the host and accounted for as a separate derivative if: the economic characteristics and risks are not closely related to the host; a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and the hybrid contract is not measured at fair value through profit or loss. Embedded derivatives are measured at fair value with changes in fair value recognised in profit or loss. Reassessment only occurs if there is either a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required or a reclassification of a financial asset out of the fair value through profit or loss category. A derivative embedded within a hybrid contract containing a financial asset host is not accounted for separately. The financial asset host together with the embedded derivative is required to be classified in its entirety as a financial asset at fair value through profit or loss. The Group has designated derivatives that do not qualify for hedge accounting and money market funds at fair value through profit or loss. 58
176. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 4. Summary of significant accounting policies (cont'd.) 4.18 Financial instruments (cont'd.) (a) Financial assets (cont'd.) Derecognition A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from the Group's and the Company's statements of financial position) when: • The rights to receive cash flows from the asset have expired; or • The Group and the Company have transferred their rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Group and the Company have transferred substantially all the risks and rewards of the asset, or (b) the Group and the Company have neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. When the Group and the Company have transferred their rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Group and the Company continue to recognise the transferred asset to the extent of its continuing involvement. In that case, the Group and the Company also recognise an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group and the Company have retained. Impairment of financial assets The Group and the Company recognise an allowance for expected credit losses ("ECLs") for all debts instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group and the Company expect to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sales of collateral held or other credit enhancements that are integral to the contractual terms. 59
177. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 4. Summary of significant accounting policies (cont'd.) 4.18 Financial instruments (cont'd.) (a) Financial assets (cont'd.) Impairment of financial assets (cont'd.) ECLs are recognise in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within next 12 months ("a 12 months ECL"). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default ("a lifetime ECL"). For trade receivables, the Group applies simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognise a loss allowance base on lifetime ECL at each reporting date. The Group has established a provision matrix that is based on historical credit experience. The Group considers forward looking factors do not have significant impact to credit risk given the nature of its industry and the amount ECLs is insensitive to changes to forecast economic conditions. For debt instruments at fair value through OCI, the Group applies the low credit risk simplification. At every reporting date, the Group evaluates whether the debt instrument is considered to have low credit risk using all reasonable and supportable information that is available without undue cost or effort. In making that evaluation, the Group reassesses the internal credit rating of the debt instrument. In addition, the Group considers that there has been a significant increase in credit risk when contractual payments are more than 30 days past due. The Group's debt instruments at fair value through OCI comprise solely of quoted bonds that are graded in the top investment category (Very Good and Good) by the Good Credit Rating Agency and, therefore, are considered to be low credit risk investments. It is the Group's policy to measure ECLs on such instruments on a 12month basis. However, when there has been a significant increase in credit risk since origination, the allowance will be based on the lifetime ECL. The Group uses the ratings from the Good Credit Rating Agency both to determine whether the debt instrument has significantly increased in credit risk and to estimate ECLs. The Group and the Company consider a financial assets to be default when internal and external information indicates that the Group and the Company are unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group and the Company. Financial assets is written off when there is no reasonable expectation of recovering the contractual cash flows. 60
178. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 4. Summary of significant accounting policies (cont'd.) 4.18 Financial instruments (cont'd.) (b) Financial liabilities Initial recognition and measurement Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. The Group and the Company's financial liabilities include trade and other payables, other current liabilities, derivative financial instruments, and loans and borrowings. Subsequent measurement The measurement of financial liabilities depends on their classification, as described below: (i) Trade and other payables These are subsequently measured at amortised cost using the EIR method. (ii) Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by MFRS 9. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognised in the statements of profit or loss. Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, and only if the criteria in MFRS 9 are satisfied. The Group has designated derivative financial instruments as financial liability at fair value through profit or loss. 61
179. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 4. Summary of significant accounting policies (cont'd.) 4.18 Financial instruments (cont'd.) (b) Financial liabilities (cont'd.) Subsequent measurement (cont'd.) The measurement of financial liabilities depends on their classification, as described below (cont'd.): (iii) Loans and borrowings This is the category most relevant to the Group. After initial recognition, interestbearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statements of profit or loss. This category generally applies to interest-bearing loans and borrowings. For more information, refer to Note 29. Derecognition A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statements of profit or loss. (c) Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount is reported in the consolidated and separate statements of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously. 62
180. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 4. Summary of significant accounting policies (cont'd.) 4.19 Derivative financial instruments and hedging activities Initial recognition and subsequent measurement The Group uses derivative financial instruments, such as forward currency contracts to hedge its foreign currency risks. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. For the purpose of hedge accounting, hedges are classified as: • Fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability or an unrecognised firm commitment; • Cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognised firm commitment; and • Hedges of a net investment in a foreign operation. At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which it wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item, the nature of the risk being hedged and how the Group will assess whether the hedging relationship meets the hedge effectiveness requirements (including the analysis of sources of hedge ineffectiveness and how the hedge ratio is determined). A hedging relationship qualifies for hedge accounting if it meets all of the following effectiveness requirements: • There is ‘an economic relationship’ between the hedged item and the hedging instrument. • The effect of credit risk does not ‘dominate the value changes’ that result from that economic relationship. • The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Group actually hedges and the quantity of the hedging instrument that the Group actually uses to hedge that quantity of hedged item. 63
181. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 4. Summary of significant accounting policies (cont'd.) 4.19 Derivative financial instruments and hedging activities (cont'd.) Initial recognition and subsequent measurement (cont'd.) Cash flow hedge The effective portion of the gain or loss on the hedging instrument is recognised in OCI in the cash flow hedge reserve, while any ineffective portion is recognised immediately in the statements of profit or loss. The cash flow hedge reserve is adjusted to the lower of the cumulative gain or loss on the hedging instrument and the cumulative change in fair value of the hedged item. The amounts accumulated in OCI are accounted for, depending on the nature of the underlying hedged transaction. If the hedged transaction subsequently results in the recognition of a non-financial item, the amount accumulated in equity is removed from the separate component of equity and included in the initial cost or other carrying amount of the hedged asset or liability. This is not a reclassification adjustment and will not be recognised in OCI for the period. This also applies where the hedged forecast transaction of a non-financial asset or non-financial liability subsequently becomes a firm commitment for which fair value hedge accounting is applied. For any other cash flow hedges, the amount accumulated in OCI is reclassified to profit or loss as a reclassification adjustment in the same period or periods during which the hedged cash flows affect profit or loss. If cash flow hedge accounting is discontinued, the amount that has been accumulated in OCI must remain in accumulated OCI if the hedged future cash flows are still expected to occur. Otherwise, the amount will be immediately reclassified to profit or loss as a reclassification adjustment. After discontinuation, once the hedged cash flow occurs, any amount remaining in accumulated OCI must be accounted for depending on the nature of the underlying transaction as described above. 4.20 Cash and bank balances Cash and bank balances in the statements of financial position comprise cash at banks and on hand and short-term deposits. For the purpose of the statements of cash flows, cash and cash equivalents consist of cash and short-term deposits with a maturity of three months or less excluding deposits pledged with banks that are not available for use. 64
182. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 4. Summary of significant accounting policies (cont'd.) 4.21 Share capital and share issue expenses An equity instrument is any contract that evidences a residual interest in the assets of the Group and the Company after deducting all of its liabilities. Ordinary shares are equity instruments and are recorded at the proceeds received, net of directly attributable incremental transaction costs. Ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the period in which they are declared. 4.22 Treasury shares Own equity instruments that are reacquired (treasury shares) are recognised at cost and deducted from equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Group's own equity instruments. Any difference between the carrying amount and the consideration, if reissued, is recognised in the retained earnings. 4.23 Cash dividend and non-cash distribution to equity holders of the Company The Company recognises a liability to make cash or non-cash distributions to equity holders of the parent when the distribution is authorised and the distribution is no longer at the discretion of the Company. A distribution is authorised when it is approved by the Board of Directors and a corresponding amount is recognised directly in equity. Non-cash distributions are measured at the fair value of the assets to be distributed with fair value re-measurement recognised directly in equity. Upon distribution of non-cash assets, any difference between the carrying amount of the liability and the carrying amount of the assets distributed is recognised in profit or loss. 4.24 Provisions Provisions are recognised when there is a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When it is expected that some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the income statements net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost. 65
183. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 4. Summary of significant accounting policies (cont'd.) 4.25 Contract liabilities A contract liability is recognised if a payment is received or a payment is due (whichever is earlier) from a customer before the Group transfers the related goods or services. Contract liabilities are recognised as revenue when the Group performs under the contract (i.e., transfers control of the related goods or services to the customer). 4.26 Contingencies A contingent liability or asset is a possible obligation or asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of uncertain future event(s) not wholly within the control of the Group and of the Company. Contingent liabilities and assets are not recognised in the statements of financial position of the Group and of the Company. 4.27 Segment reporting For management purposes, the Group is organised into operating segments based on their geographical location which are independently managed by the respective segment managers responsible for the performance of the respective segments under their charge. The segment managers report directly to the management of the Group who regularly review the segment results in order to allocate resources to the segments and to assess the segment performance. Additional disclosures on each of these segments are shown in Note 43, including the factors used to identify the reportable segments and the measurement basis of segment information. 66
184. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 5. New and amended standards The accounting policies adopted are consistent with those of the previous financial year except for the adoption of the following new/revised MFRSs and Amendments to MFRSs: Effective for annual periods beginning on or after Description MFRS 9 Financial Instruments MFRS 15 Revenue from Contracts with Customers Clarifications to MFRS 15 Revenue from Contracts with Customers Amendments to MFRS 2: Classification and Measurement of Share-based Payment Transactions Amendments to MFRS 4: Applying MFRS 9 Financial Instruments with MFRS 4 Insurance Contracts Amendments to MFRS 140: Transfers of Investment Property IC Interpretation 22: Foreign Currency Transactions and Advance Consideration Annual Improvements to MFRS Standards 2014 – 2016 Cycle 1 January 2018 1 January 2018 1 January 2018 1 January 2018 1 January 2018 1 January 2018 1 January 2018 1 January 2018 The adoption of the above standards and amendments had no material impact on the financial statements except as discussed below: MFRS 9 Financial Instruments MFRS 9 brings together all three aspects of accounting for financial instruments project: classification and measurement, impairment and hedge accounting. The Group and the Company adopted this new standard on the required effective date and did not restate the comparative information. The Group and the Company performed assessment on these three aspects of the standard. Overall, the adoption of this standard has no significant impact to the statements of financial position and retained earnings of the Group and of the Company as at 1 September 2018. (a) Classification and measurement Under MFRS 9, debt instruments are subsequently measured at fair value through profit or loss, amortised cost, or fair value through OCI. The classification is based on two criteria: the Group's and the Company's business model for managing the assets; and whether the instruments’ contractual cash flows represent ‘solely payments of principal and interest’ on the principal amount outstanding. 67
185. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 5. New and amended standards (cont'd.) The adoption of the above standards and amendments had no material impact on the financial statements except as discussed below (cont'd.): MFRS 9 Financial Instruments (cont'd.) (a) Classification and measurement (cont'd.) Trade and other receivables previously classified as loans and receivables are held to collect contractual cash flows and give rise to cash flows representing solely payments of principal and interest. These are now classified and measured as debt instruments at amortised cost. Debt securities previously held as available-for-sale with gains and losses recorded in OCI will satisfy the conditions for classification as fair value through other comprehensive income ("FVOCI"). Fair value changes on debt securities at FVOCI are presented in OCI and are subsequently transferred to profit or loss. Upon sale of debt securities at FVOCI, the cumulative gain or loss in OCI is reclassified to retained earnings. Money market funds previously measured at FVTPL will continue to be measured on the same basis under MFRS 9. Debt instruments previously measured at amortised cost meet the conditions for classification as amortised cost under MFRS 9. There is no impact on the Group's and the Company's accounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that are designated at FVTPL and modified financial liabilities, and the Group and the Company do not have any such financial liabilities. (b) Impairment The adoption of MFRS 9 has fundamentally changed the Group's accounting for impairment losses for financial assets by replacing MFRS 139's incurred loss approach with a forward looking expected credit loss ("ECL") approach. MFRS 9 requires the Group to recognise an allowance for ECLs for all debt instruments not held at fair value through profit or loss. This impairment requirement does not have a significant impact on the Group's allowance of loss. (c) Hedging The Group determined that all existing hedge relationships that are currently designated in effective hedging relationships will continue to qualify for hedge accounting under MFRS 9. The Group has chosen not to retrospectively apply MFRS 9 on transition to the hedges where the Group excluded the forward points from the hedge designation under MFRS 139. As MFRS 9 does not change the general principles of how an entity accounts for effective hedges, applying the hedging requirements of MFRS 9 does not have a significant impact on the Group’s financial statements. 68
186. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 5. New and amended standards (cont'd.) The adoption of the above standards and amendments had no material impact on the financial statements except as discussed below (cont'd.): MFRS 15 Revenue from Contracts with Customer MFRS 15 establishes a five-step model that will apply to revenue from a contract with a customer. MFRS 15 supersedes MFRS 118 Revenue , MFRS 111 Construction Contracts and the related interpretations and it applies, with limited exceptions, to all revenue arising from contracts with its customers. The Group and the Company adopted MFRS 15 using the modified retrospective method of adoption with the initial application of 1 August 2018. (a) Sales of goods The core principle of MFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods. The overall revenue recognition requirement are captured in the steps of the five-step method. The Group has assessed its sales of goods transactions to identify the performance obligation. The Group regards most of the sales transactions consist of a single performance obligation to transfer promised goods to customers as the Group views these sales transactions as having the same characteristic of bundled sales. As the sales transactions are expected to be the only performance obligation, the Group is not required to determine the allocation of the transaction price. The Group expects the revenue recognition to occur at the point in time when customers take control of the goods, generally on delivery of the goods to customers. As such, the Group concludes that there is no impact on the timing of revenue recognition for these sales. 69
187. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 6. New and amended standards and interpretations issued but not yet effective The standards and interpretations that are issued but not yet effective up to the date of issuance of the Group's and of the Company's financial statements are discussed below. The Group and the Company intend to adopt these standards, if applicable, when they become effective. Effective for annual periods beginning on or after Descriptions Amendments to MFRS 9: Prepayment Features with Negative Compensation MFRS 16 Leases Amendments to MFRS 119: Plan Amendment, Curtailment or Settlement Amendments to MFRS 128: Long-term Interests in Associates and Joint Ventures Annual Improvements to MFRSs 2015 - 2017 Cycle IC Interpretation 23: Uncertainty over Income Tax Treatments Amendments to MFRS 2: Share-based Payment Amendments to MFRS 3: Business Combinations Amendments to MFRS 6: Exploration for and Evaluation of Mineral Resources Amendments to MFRS 14: Regulatory Deferral Accounts Amendments to MFRS 101: Presentation of Financial Statements Amendments to MFRS 108: Accounting Policies, Changes in Accounting Estimates and Errors Amendments to MFRS 134: Interim Financial Reporting Amendments to MFRS 137: Provision, Contingent Liabilities and Contingent Asset Amendments to MFRS 138: Intangible Assets Amendments to IC Interpretation 12: Service Concession Agreements Amendments to IC Interpretation 19: Extinguishing Financial Liabilities with Equity Instruments Amendments to IC Interpretation 20: Stripping Costs in the Production Phase of a Surface Mine Amendments to IC Interpretation 22: Foreign Currency Transactions and Advance Consideration Amendments to IC Interpretation 132: Intangible Assets-Website Costs MFRS 17 Insurance Contracts Amendments to MFRS 10 and MFRS 128: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture 70 1 January 2019 1 January 2019 1 January 2019 1 January 2019 1 January 2019 1 January 2019 1 January 2020 1 January 2020 1 January 2020 1 January 2020 1 January 2020 1 January 2020 1 January 2020 1 January 2020 1 January 2020 1 January 2020 1 January 2020 1 January 2020 1 January 2020 1 January 2020 1 January 2021 Deferred
188. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 6. New and amended standards and interpretations issued but not yet effective (cont'd.) The directors expect that the adoption of the above standards and interpretations will have no material impact on the financial statements in the period of initial application except as discussed below: MFRS 16 Leases MFRS 16 will replace MFRS 117 Leases , IC Interpretation 4 Determining whether an Arrangement contains a Lease , IC Interpretation 115 Operating Lease-Incentives and IC Interpretation 127 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 account for all leases under a single on-balance sheet model similar to the accounting for finance leases under MFRS 117. At the commencement date of a lease, a lessee will recognise a liability to make lease payments and an asset representing the right to use the underlying asset during the lease term. Lessees will be required to recognise interest expense on the lease liability and the depreciation expense on the right-of-use asset. Lessor accounting under MFRS 16 is substantially the same as the accounting under MFRS 117. Lessors will continue to classify all leases using the same classification principle as in MFRS 117 and distinguish between two types of leases: operating and finance leases. Based on readily available information as at date of this report, the Group and the Company do not expect the application of MFRS 16 to have significant impact on the financial statements. The Group and the Company are in the midst of assessing the impact of application of this standard on the financial statements. However, this is not expected to have a significant impact on the overall results and financial positions of the Group and of the Company. Amendments to MFRS 9: Prepayment Features with Negative Compensation Under MFRS 9, a debt instrument can be measured at amortised cost or at fair value through other comprehensive income, provided that the contractual cash flows are ‘solely payments of principal and interest on the principal amount outstanding’ (the SPPI criterion) and the instrument is held within the appropriate business model for that classification. The amendments to MFRS 9 clarify that a financial asset passes the SPPI criterion regardless of an event or circumstance that causes the early termination of the contract and irrespective of which party pays or receives reasonable compensation for the early termination of the contract. The amendments should be applied retrospectively and are effective from 1 September 2019, with earlier application permitted. These amendments are not expected to have significant impact on the Group's and on the Company's financial statements. 71
189. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 6. New and amended standards and interpretations issued but not yet effective (cont'd.) The directors expect that the adoption of the above standards and interpretations will have no material impact on the financial statements in the period of initial application except as discussed below (cont'd.): IC Interpretation 23: Uncertainty over Income Tax Treatments The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of MRFS 112 Income Taxes. It does not apply to taxes or levies outside the scope of MFRS 112, nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments. The Interpretation specifically addresses the following: (i) Whether an entity considers uncertain tax treatments separately; (ii) The assumptions an entity makes about the examination of tax treatments by taxation authorities; (iii) How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits; and (iv) How an entity considers changes in facts and circumstances. The Group determines whether to consider each uncertain tax treatment separately or together with one or Group operates in a complex multinational environment, it assessed whether the Interpretation had an impact on its consolidated financial statements. Upon adoption of the Interpretation, the Group considered whether it has any uncertain tax positions, particularly those relating to transfer pricing. The Company’s and the subsidiaries’ tax filings in different jurisdictions include deductions related to transfer pricing and the taxation authorities may challenge those tax treatments. The Group determined, based on its tax compliance and transfer pricing study, that it is probable that its tax treatments (including those for the subsidiaries) will be accepted by the taxation authorities. These amendments are not expected to have significant impact on the Group's and on the Company's financial statements. 72
190. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 7. Significant accounting judgements, estimates and assumptions The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods. 7.1 Judgements made in applying accounting policies In the process of applying the Group's and the Company's accounting policies, management has not made any critical judgements, apart from those involving estimations, which could have a significant effect on the amounts recognised in the financial statements except as discussed below: Classification between investment property and property, plant and equipment The Group has developed certain criteria based on MFRS 140 in making judgement whether a property qualifies as an investment property. Investment property is a property held to earn rentals or for capital appreciation or both. Some properties comprise a portion that is held to earn rentals or for capital appreciation and another portion that is held for use in the production or supply of goods or services or for administrative purposes. If these portions could be sold separately (or leased out separately under a finance lease), the Group would account for the portions separately. If the portions could not be sold separately, the property is an investment property only if an insignificant portion is held for use in the production or supply of goods or services or for administrative purposes. Judgement is made on an individual property basis to determine whether ancillary services are so significant that a property does not qualify as investment property. The Group has determined that its property held to earn rental income or capital appreciation is investment property as only an insignificant portion of the property is used in the production or supply of goods or services or for administrative purposes and ancillary services are not significant to the property. 7.2 Estimates and assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Group based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Group. Such changes are reflected in the assumptions when they occur. 73
191. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 7. Significant accounting judgements, estimates and assumptions (cont'd.) 7.2 Estimates and assumptions (cont'd.) (a) Inventories costing In determining the costing of inventories, management’s judgement is required in determining the basis of valuation for finished goods and work-in-progress which comprise costs of raw materials, direct labour, other direct costs, and the appropriate allocation of overheads based on normal operating capacity. (b) Impairment of goodwill Goodwill is tested for impairment annually and at other times when such indicators exist. This requires an estimation of the value-in-use of the cash-generating units to which goodwill is allocated. When value in use calculations are undertaken, management must estimate future cash flows from the cash-generating unit and choose a suitable discount rate in order to calculate the present values of those cash flows. Further details of the carrying value, the key assumptions applied in the impairment assessment and sensitivity analysis to changes in the assumptions are disclosed in Note 23. 74
192. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 8. Revenue Group 2019 RM'000 2018 (Restated) RM'000 Company 2019 2018 RM'000 RM'000 3,521,154 390,050 176,745 132,793 4,220,742 - - Total revenue 4,801,139 4,220,742 5,374 215,590 220,964 220,964 4,912 239,030 243,942 243,942 Timing of revenue recognition Goods transferred at a point in time 4,801,139 4,220,742 - - Revenue from contracts with customers Geographical markets 4,086,042 Malaysia 391,385 Thailand 88,568 The People's Republic of China 235,144 Others 4,801,139 Revenue from other sources Management fees from subsidiaries Dividend income from subsidiaries Performance obligation The Group is in the business of selling of gloves and other healthcare products. The performance obligation is satisfied upon shipment of the goods and payment is generally due within 30 to 90 (2018: 30 to 90) days. The transaction price allocated to the remaining performance obligations (unsatisfied) as at 31 August 2019 are, as follows: Group Company 2019 2018 2019 2018 (Restated) RM'000 RM'000 RM'000 RM'000 Within one year 55,610 59,248 - All remaining performance obligations are expected to be recognised within one year. 75 -
193. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 9. Interest income Group 2019 RM'000 Interest income from: Financial assets at fair value through other comprehensive income Loans and receivables Financial assets at fair value through profit or loss Others 2018 (Restated) RM'000 Company 2019 2018 RM'000 RM'000 3,970 3,996 4,285 3,926 21 217 2,616 29 10,611 4,011 13 12,235 20 41 217 10. Other income Group 2019 RM'000 Realised gain on foreign exchange - realised - unrealised Net gain from fair value remeasurement on investment property (Note 18) Rental income Gain on disposal of debt securities Gain on disposal of land use rights Sales of scrap items Insurance claims Sundry income 76 2018 (Restated) RM'000 Company 2019 2018 RM'000 RM'000 2,552 4,039 - - - 619 10,461 1,704 11,842 899 10,475 38,552 9,557 273 4,664 8,868 4,996 7,601 39,998 2,064 2,064 -
194. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 11. Profit before tax The following items have been charged in arriving at profit before tax: Group 2019 RM'000 Auditors' remuneration: Company's auditors - Statutory audit - Current year - (Over)/under provision in prior years - Other services Other auditors - Statutory audit - Current year - Over provision in prior years Depreciation on property, plant and equipment (Note 16) Amortisation of land use rights (Note 17) Amortisation of intangible assets (Note 23) Direct operating expenses arising from investment property - Rental generating property Net loss on foreign exchange - realised - unrealised Net fair value loss on derivatives Employee benefits expense (Note 12) Non-executive directors' remuneration (Note 13) Operating lease - Minimum lease payment for land, building and machinery Net loss from fair value remeasurement on investment property (Note 18) Loss on disposal of property, plant and equipment Loss on disposal of debt securities Property, plant and equipment written off 77 317 (23) 572 708 (7) 2018 (Restated) RM'000 316 14 1,065 773 (2) Company 2019 2018 RM'000 80 (5) 142 RM'000 85 (7) 941 - - 188,817 2,417 3,681 143,613 1,519 1,533 - - 894 890 - - 13,186 811 589,769 22,158 2,262 495,585 2 5,150 6 4,085 1,326 839 1,071 837 5,966 2,600 88 88 - 721 - - 1,965 349 904 - - - 8,795 7,455 - -
195. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 12. Employee benefits expenses Group 2019 Wages and salaries Social security costs Pension costs - defined contribution plan Share options granted under ESOS Shares granted under ESGP Other staff related expenses Executive directors' fees RM'000 2018 (Restated) RM'000 517,460 6,087 24,961 7,197 2,716 30,935 413 589,769 442,507 5,366 17,233 1,932 975 27,071 501 495,585 Company 2019 2018 RM'000 RM'000 3,264 2 350 778 156 234 366 5,150 3,050 2 319 167 98 449 4,085 Included in employee benefits expenses of the Group and of the Company are executive directors' remuneration amounting to RM11,341,000 (2018: RM11,102,000) and RM4,675,000 (2018: RM4,121,000) respectively as further disclosed in Note 13. 13. Directors' remuneration Group Company 2019 2018 RM'000 RM'000 2019 RM'000 2018 RM'000 4,785 397 1 689 138 366 82 6,458 5,240 488 2 204 453 105 6,492 3,289 332 1 589 98 366 60 4,735 3,208 302 1 161 449 50 4,171 872 452 1,324 753 84 837 872 199 1,071 753 84 837 Directors of the Company Executive: Salaries and other emoluments Pension costs - defined contribution plan Social security contributions Share options granted under ESOS Shares granted under ESGP Fees Benefits-in-kind Non-executive: Fees Other emoluments 78
196. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 13. Directors' remuneration (cont'd.) Group Company 2019 2018 RM'000 RM'000 2019 RM'000 2018 RM'000 4,255 372 9 275 7 47 115 5,080 4,230 311 10 98 18 48 106 4,821 - - 2 2 - - 11,341 11,102 4,675 4,121 1,326 839 1,071 837 12,667 197 11,941 211 5,746 60 4,958 50 12,864 12,152 5,806 5,008 Other directors Executive: Salaries and other emoluments Pension costs - defined contribution plan Social security contributions Share options granted under ESOS Shares granted under ESGP Fees Benefits-in-kind Non-executive: Fees Analysis excluding benefits-in-kind: Total executive directors' remuneration (Note 12) Total non-executive directors' remuneration (Note 11) Total directors' remuneration (excluding benefits-in-kind) Benefits-in-kind Total directors' remuneration (including benefits-in-kind) 79
197. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 14. Income tax expense Major components of income tax expense The major components of income tax expense for the years ended 31 August 2019 and 2018 are as follows: Group Company 2019 2018 2019 2018 (Restated) RM'000 RM'000 RM'000 RM'000 Current income tax: - Malaysian income tax - Foreign tax - Real property gain tax ("RPGT") - (Over)/under provision in respect of previous years Deferred income tax (Note 21): - Relating to origination and reversal of temporary differences - (Over)/under provision in respect of previous years Income tax expense recognised in profit or loss 57,329 6,071 301 56,257 14,707 177 - - (11,867) 51,834 3,931 75,072 4 4 - 11,422 10,091 - - (7,214) 4,208 4,431 14,522 - - 56,042 89,594 4 - Reconciliation between tax expense and accounting profit The reconciliation between tax expense and the product of accounting profit multiplied by the applicable corporate tax rate for the years ended 31 August 2019 and 2018 are as follows: Group 2019 Profit before tax Tax at Malaysian statutory tax rate of 24% (2018: 24%) Adjustments: Different tax rates in other countries Effects of tax incentives claimed by foreign subsidiaries Income not subject to tax 80 Company 2019 2018 RM'000 2018 (Restated) RM'000 RM'000 RM'000 423,588 522,800 209,222 233,759 101,661 125,472 50,213 56,102 - - (656) (2,637) (4,241) (5,369) (7,886) (15,162) (52,247) (57,418)
198. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 14. Income tax expense (cont'd.) Reconciliation between tax expense and accounting profit (cont'd.) The reconciliation between tax expense and the product of accounting profit multiplied by the applicable corporate tax rate for the years ended 31 August 2019 and 2018 are as follows (cont'd.): Group 2019 RM'000 RM'000 1,998 34,477 301 (74) (23,178) 30,196 177 (27) (44,457) 2,061 - 1,314 - (446) (386) RM'000 Adjustments (cont'd.): Effect of change in RPGT Non-deductible expenses Effect of income subject to RPGT Expenses entitled for double deduction Utilisation of tax incentives Utilisation of previously unrecognised tax losses and unabsorbed capital allowance Deferred tax assets not recognised in respect of current year's tax losses and unabsorbed capital allowance Deferred tax assets recognised in respect of previously unutilised tax losses, unrecognised export allowance, reinvestment allowance and capital allowance Deferred tax assets recognised in respect of reinvestment allowance Share of results of associate (Over)/under provision of deferred tax in respect of previous years (Over)/under provision of income tax in respect of previous years Income tax expense recognised in profit or loss Company 2019 2018 2018 (Restated) RM'000 2,218 - - 2 (2,905) - - (32,210) 642 (1,480) - - (7,214) 4,431 - - (11,867) 3,931 4 - 56,042 89,594 4 - - 327 (27) Domestic income tax is calculated at the Malaysian statutory tax rate of 24% (2018: 24%) of the estimated assessable profit for the year. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions. The above reconciliation is prepared by aggregating separate reconciliations for each national jurisdiction. 81
199. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 15. Earnings per share (a) Basic Basic earnings per share is calculated by dividing profit for the year, net of tax, attributable to owners of the parent by the weighted average number of ordinary shares outstanding during the financial year, excluding treasury shares held by the Company. 2019 Profit net of tax attributable to owners of the parent (RM'000) 364,678 428,830 Weighted average number of ordinary shares in issue ('000) 2,555,009 2,539,260 14.27 16.89 Basic earnings per share (sen) (b) 2018 (Restated) Diluted Diluted earnings per share is calculated by dividing profit for the year, net of tax, attributable to owners of the parent (after adjusting for interest on the exchangeable bonds) by the weighted average number of ordinary shares outstanding during the financial year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. 2019 2018 (Restated) Profit net of tax attributable to owners of the parent (RM'000) Net interest savings from assumed exchange of Guaranteed Exchangeable Bonds at inception (RM'000) Adjusted profit net of tax attributable to owners of the parent (RM'000) 364,678 428,830 16,992 - 381,670 428,830 Weighted average number of ordinary shares in issue ('000) Effect of dilution from: Share options ('000) Exchangeable bonds ('000) Adjusted weighted average number of ordinary shares in issue and issuable ('000) 2,555,009 2,539,260 386 131,215 6 - 2,686,610 2,539,266 14.21 16.89 Diluted earnings per share (sen) The weighted average number of ordinary shares issued as at 31 August 2019 and 2018 have been adjusted to reflect the bonus issue of 1 for 1 existing ordinary shares which was completed on 29 October 2018. Further details are disclosed in Note 32. 82
200. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 16. Property, plant and equipment Land and buildings RM'000 Plant and equipment RM'000 Capital * Other work-inassets progress RM'000 RM'000 743,258 26,215 1,228,991 166,599 140,199 28,426 - - - Total RM'000 Group Cost At 1 September 2017 Additions Transfer to investment property (Note 18) Acquisition of subsidiary companies Reclassification Written off Disposals Exchange differences At 31 August 2018/ 1 September 2018 (Restated) Additions Reclassification Written off Disposals Exchange differences At 31 August 2019 79,520 43,083 (1,784) (6,946) (4,513) 226,149 108,175 (18,930) (24,183) (8,976) 878,833 30,634 137,422 (2,344) (7,181) 8,207 1,045,571 1,677,825 220,546 121,583 (38,514) (58,265) 21,476 1,944,651 83 243,436 238,024 2,355,884 459,264 (2) (2) 8,314 1,906 3,626 (154,884) (1,361) (12) (2,525) (348) (504) (207) 315,889 (22,087) (34,002) (14,200) 176,175 327,913 3,060,746 47,370 269,593 568,143 29,678 (288,683) (1,684) (1) (42,543) (2,891) (2) (68,339) 1,358 668 31,709 250,006 309,488 3,549,716
201. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 16. Property, plant and equipment (cont'd.) Land and buildings RM'000 Plant and equipment RM'000 Capital * Other work-inassets progress RM'000 RM'000 76,660 699,965 80,773 - 857,398 11,506 (2) (312) (323) (849) 113,354 (11) (13,159) (21,606) (5,745) 18,753 13 (1,161) (1,559) (313) - 143,613 (14,632) (23,488) (6,907) 86,680 772,798 96,506 - 955,984 12,485 (5,709) (738) (636) 1,395 93,477 152,482 (31,805) (54,632) 14,082 852,925 23,850 5,709 (1,205) (2,541) 969 123,288 - 188,817 (33,748) (57,809) 16,446 1,069,690 Total RM'000 Group Accumulated depreciation At 1 September 2017 Depreciation charge for the year (Note 11) Reclassification Written off Disposals Exchange differences At 31 August 2018/ 1 September 2018 (Restated) Depreciation charge for the year (Note 11) Reclassification Written off Disposals Exchange differences At 31 August 2019 Net carrying amount At 31 August 2018 (Restated) 792,153 905,027 79,669 327,913 2,104,762 At 31 August 2019 952,094 1,091,726 126,718 309,488 2,480,026 * Other assets comprise motor vehicles, computer and software system, office equipment, signage, small value of assets, fire extinguisher, furniture and equipment. 84
202. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 16. Property, plant and equipment (cont'd.) Land and buildings Freehold land Buildings RM'000 RM'000 Total RM'000 Group Cost At 1 September 2017 Additions Acquisition of subsidiary companies Reclassification Written off Disposals Exchange differences At 31 August 2018/1 September 2018 (Restated) Additions Reclassification Written off Disposals Exchange differences At 31 August 2019 356,111 1,667 1,443 68 (848) 358,441 1,461 74,429 (27) (1,080) 2,242 435,466 387,147 743,258 24,548 26,215 78,077 79,520 43,015 43,083 (1,784) (1,784) (6,946) (6,946) (3,665) (4,513) 520,392 878,833 29,173 30,634 62,993 137,422 (2,317) (2,344) (6,101) (7,181) 5,965 8,207 610,105 1,045,571 Accumulated depreciation At 1 September 2017 Depreciation charge for the year Reclassification Written off Disposals Exchange differences At 31 August 2018/1 September 2018 (Restated) Depreciation charge for the year Reclassification Written off Disposals Exchange differences At 31 August 2019 - 76,660 11,506 (2) (312) (323) (849) 86,680 12,485 (5,709) (738) (636) 1,395 93,477 76,660 11,506 (2) (312) (323) (849) 86,680 12,485 (5,709) (738) (636) 1,395 93,477 Net carrying amount At 31 August 2018 (Restated) 358,441 433,712 792,153 At 31 August 2019 435,466 516,628 952,094 85
203. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 16. Property, plant and equipment (cont'd.) (a) During the financial year, the Group acquired property, plant and equipment at aggregate cost of RM568,143,000 (2018: RM459,264,000) of which nil (2018: RM287,000) was acquired by means of finance lease. (b) Property, plant and equipment of a subsidiary with the following net carrying amount is pledged to a bank for banking facility granted to the subsidiary as disclosed in Note 29. 2019 RM'000 Freehold land Buildings Plant and equipment Motor vehicles Capital work-in-progress - 2018 (Restated) RM'000 1,080 76,003 70,726 122 1,980 149,911 (c) Property, plant and equipment of subsidiaries with the following net carrying amount is under finance lease arrangements as disclosed in Note 29. 2019 RM'000 Plant and equipment Motor vehicles 504 279 783 86 2018 (Restated) RM'000 755 1,225 1,980
204. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 17. Land use rights Group 2019 RM'000 2018 (Restated) RM'000 Cost At 1 September 2018/2017 Additions Acquisition of subsidiary companies Disposals Exchange differences At 31 August 2019/2018 132,855 55,553 (1,762) 68 186,714 45,092 341 92,693 (4,923) (348) 132,855 5,826 2,417 (26) 2 8,219 4,635 1,519 (281) (47) 5,826 Accumulated amortisation At 1 September 2018/2017 Amortisation for the year (Note 11) Disposals Exchange differences At 31 August 2019/2018 Net carrying amount Amount to be amortised: Not later than one year Later than one year but not later than five years Later than five years 178,495 127,029 3,430 10,869 164,196 178,495 2,522 10,088 114,419 127,029 The net carrying amounts of land use rights pledged as securities for loans and borrowings as disclosed in Note 29 amounted to nil (2018: RM58,079,000). 87
205. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 18. Investment property Group Fair value of investment property (Note 39) 2019 RM'000 2018 RM'000 163,900 163,900 Freehold land and building 2019 2018 RM'000 RM'000 Group Fair value At 1 September 2018/2017 Additions from subsequent expenditure Transfer from property, plant and equipment (Note 16) Adjustment on overaccrual of cost in prior year Net gain/(loss) from fair value remeasurement (Note 10 and Note 11) At 31 August 2019/2018 163,900 393 (1,012) 619 163,900 162,000 2,619 2 (721) 163,900 The fair value of the investment property was based on a valuation by an accredited independent qualified valuer. Valuation was based on current prices in an active market for certain properties and where appropriate, the investment method reflecting receipt of contractual rentals, expected future market rentals, current market yields, void periods, maintenance requirements and approximate capitalisation rates were used. The following table shows the valuation technique used in the determination of fair value within Level 3, as well as the significant unobservable inputs used in the valuation model. Significant unobservable inputs Valuation technique Land and building 2019 2018 RM4.50 to RM5.50 RM4.70 to RM5.50 Term yield rate 6.5% 6.5% Occupancy rate 87.0% 85.0% Long term vacancy rate 10.0% 10.0% Reversionary yield rate 7.0% 7.0% Estimated rental value per square feet per month Investment method 88 Range
206. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 18. Investment property (cont'd.) Using the discounted cash flows method, fair value is estimated using assumptions regarding the benefits and liabilities of ownership over the asset's life including an exit or terminal value. This method involves the projection of a series of cash flows on a real property interest. To this projected cash flow series, a market-derived discount rate is applied to establish the present value of the income stream associated with the asset. The exit yield is normally separately determined and differs from the discount rate. The duration of the cash flows and the specific timing of inflows and outflows are determined by events such as rent reviews, lease renewal and related re-letting, redevelopment, or refurbishment. The appropriate duration is typically driven by market behaviour that is a characteristic of the class of real property. Periodic cash flow is typically estimated as gross income less vacancy, non-recoverable expenses, collection losses, lease incentives, maintenance costs, agent and commission costs and other operating and management expenses. The series of periodic net operating income, along with an estimate of the terminal value anticipated at the end of the projection period, is then discounted. Significant increase/(decrease) in estimated rental value in isolation would result in a significantly higher/(lower) fair value of the property. Significant increases/(decreases) in the long term vacancy rate and yield rates in isolation would result in a significantly lower/(higher) fair value. Generally, a change in the assumption made for the estimated rental value is accompanied by a directionally similar change in the rent growth per annum and discount rate (and exit yield), and an opposite change in the long term vacancy rate. 19. Investment in subsidiaries Company 2019 2018 RM'000 RM'000 Unquoted shares, at cost: - In Malaysia Less: Accumulated impairment losses 1,032,173 (4,845) 1,027,328 3,728 1,031,056 - Outside Malaysia (a) 1,020,077 (4,845) 1,015,232 3,728 1,018,960 Acquisition of additional equity interest in subsidiaries (i) Top Care Sdn. Bhd. On 30 August 2019, Top Care Sdn. Bhd., a wholly-owned subsidiary of the Company had increased its share capital from RM142,207,000 to RM151,653,000. 89
207. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 19. Investment in subsidiaries (cont'd.) (a) Acquisition of additional equity interest in subsidiaries (cont'd) (ii) Top Feel Sdn. Bhd. On 30 August 2019, Top Feel Sdn. Bhd., a wholly-owned subsidiary of the Company had increased its share capital from RM1 to RM2,650,000. Details of the subsidiaries are as follows: Name Country of incorporation/ Proportion of principal place ownership interest (%) of business 2019 2018 Principal activities Held by the Company: Top Glove Sdn. Bhd.* Malaysia 100 100 Manufacturing and trading of gloves TG Medical Sdn. Bhd.# Malaysia 100 100 Manufacturing and trading of gloves Great Glove (Malaysia) Sdn. Bhd. (Formerly known as Great Glove Sdn. Bhd.)# Malaysia 100 100 Provision of management services Top Glove Engineering Sdn. Bhd.# Malaysia 100 100 Property investment United States of America 100 100 Trading of gloves Top Quality Glove Sdn. Bhd.* Malaysia 100 100 Manufacturing and trading of gloves Top Care Sdn. Bhd.* Malaysia 100 100 Investment holding GMP Medicare Sdn. Bhd.* Malaysia 100 100 Manufacturing and trading of gloves Eastern Press Sdn. Bhd.# Malaysia 100 100 Printer and stationery TG Medical (U.S.A.), Inc.# 90
208. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 19. Investment in subsidiaries (cont'd.) Name Country of incorporation/ Proportion of principal place ownership interest (%) of business 2019 2018 Principal activities Held by the Company (cont'd.): Top Feel Sdn. Bhd.# Malaysia 100 100 Manufacture and sale of condoms and rubber related products Top Glove Labuan Ltd.# Malaysia 100 100 Investment holding Top Glove Global Sdn. Bhd.# Malaysia 100 100 Provision of management services Great Glove (Thailand) Co. Ltd.# Thailand 74 74 Manufacturing and trading of gloves Top Glove Medical (Thailand) Co. Ltd.# Thailand 100 100 Manufacturing and trading of gloves Top Glove Technology (Thailand) Co. Ltd.# Thailand 100 100 Producing and selling concentrate latex B Tech Industry Co. Ltd.# Thailand 100 100 Producing and selling concentrate latex Top Quality Gloves (Thailand) Co. Ltd.# Thailand 100 100 Dormant Germany 97.5 97.5 Trading of gloves Great Glove (Xinghua) Co. Ltd.# The People's Republic of China 100 100 Manufacturing and trading of gloves TG Medical Suzhou Co. Ltd.# The People's Republic of China 100 100 Trading of gloves Held through Top Glove Sdn. Bhd.: Top Glove Europe GmbH # 91
209. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 19. Investment in subsidiaries (cont'd.) Name Country of incorporation/ Proportion of principal place ownership interest (%) of business 2019 2018 Principal activities Held through Top Glove Sdn. Bhd. (cont'd.): Top Glove International Sdn. Bhd.# Malaysia 100 100 Research and development on gloves and rubber goods Top Glove Properties Sdn. Bhd.# Malaysia 100 100 Property investment Singapore/ Malaysia 100 100 Investment holding The British Virgin Islands/ Malaysia 100 100 Investment holding Flexitech Sdn. Bhd.* Malaysia 100 100 Manufacturing and trading of gloves TG Porcelain Sdn. Bhd.# Malaysia 100 100 Manufacturing of formers TGGD Medical Clinic Sdn. Bhd.# Malaysia 75 75 Providing of clinical and specialist medical services TG FMT Sdn. Bhd.* Malaysia 70 70 Manufacturing and trading of chemicals Top Glove Chemicals Sdn. Bhd.# Malaysia 100 100 Manufacturing of chemicals and chemical compounds Top Glove Vietnam Company Limited# Vietnam 100 - Manufacturing of vinyl gloves and other product Medi-Flex Pte. Ltd. ("Medi-Flex")# BestStar Enterprise Ltd.* 92
210. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 19. Investment in subsidiaries (cont'd.) Name Country of incorporation/ Proportion of principal place ownership interest (%) of business 2019 2018 Principal activities Held through Top Glove Sdn. Bhd. (cont'd.): Top Catheter Sdn. Bhd. (Formerly known as Champion March Sdn. Bhd.)# Malaysia 100 - Manufacturing and trading of healthcare products Top Synthetic Rubber Sdn. Bhd.# Malaysia 100 - Manufacturing and trading of chemical products Top Healthy Fitness Sdn. Bhd.# Malaysia 100 100 TG Raytech Sdn. Bhd.# Malaysia 95 - TG Medical (Xinghua) Co. Ltd.# The People's Republic of China 100 100 Trading of gloves TG Medical (Putian) Co. Ltd.# The People's Republic of China 100 100 Trading of gloves Best Advance Resources Limited# Malaysia 100 100 Investment holding Green Resources Limited# Malaysia 100 100 Investment holding Held through TG Medical Sdn. Bhd.: Fitness centre Providing innovative healthcare related products and service solutions Held through Great Glove (Xinghua) Co. Ltd: Held through Top Care Sdn. Bhd.: 93
211. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 19. Investment in subsidiaries (cont'd.) Name Country of incorporation/ Proportion of principal place ownership interest (%) of business 2019 2018 Principal activities Held through Top Care Sdn. Bhd. (cont'd.): Malaysia 100 100 Investment holding Malaysia 85 85 Manufacturing of rubber dental dams and exercise bands Indonesia 100 100 Investment holding Indonesia 95 95 Plantation of rubber trees Indonesia 57 - Adventa Health Sdn. Bhd.# Malaysia 100 100 Distribution of medical gloves and other hospital related products Terang Nusa (Malaysia) Sdn. Bhd.# Malaysia 100 100 Manufacturing and distribution of surgical and medical examination gloves Aspion Sdn. Bhd.# Held through Top Feel Sdn. Bhd.: Duramedical Sdn. Bhd.# Held through Best Advance: PT. Topglove Indonesia#^ Held through PT Top Glove: PT. Agro Pratama Sejahtera# Held through PT Agro Pratama Sejahtera: PT. Top Green Forestry#Ω Plantation Held through Aspion: 94
212. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 19. Investment in subsidiaries (cont'd.) Name Country of incorporation/ Proportion of principal place ownership interest (%) of business 2019 2018 Principal activities Held through Aspion (cont'd.): Cytotec (M) Sdn. Bhd.# Malaysia 100 100 Generation and supply of energy and electricity using biomass technology Purnabina Sdn. Bhd.#^^ Malaysia 97.2 97.2 Manufacturing and distribution of medical gloves Sentienx Sdn. Bhd.# Malaysia 100 100 Manufacturing and distribution of medical and protection gloves Terang Nusa Sdn. Bhd.# Malaysia 100 100 Dormant Ulma International GmbH# Germany 100 100 Distribution of medical gloves and other hospital related products Suizze Health Ltd# Hong Kong/ Malaysia 100 100 Investment holding The People's Republic of China - 100 Distribution of medical products and medical devices 100 100 Held through Adventa Health Sdn. Bhd.: Beijing Adventa Health Supplies Co. Ltd.# Held through Suizze Health Limited: Kevenoll Do Brasil Produtos Medicos Hospitalares LTDA**^^^ Brazil 95 Distribution of medical products and medical devices
213. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 19. Investment in subsidiaries (cont'd.) * ** # ^ Audited by Ernst & Young, Malaysia Audited by member firms of Ernst & Young Global in the respective countries Audited by firms other than Ernst & Young The total equity interests held by the Group is 100% and it is held by the following subsidiaries: 2019 2018 Best Advance Resources Limited 99.9% 99.9% (i) 0.1% 0.1% (ii) Green Resources Limited ^^ The total equity interests held by the Group is 97.2% and it is held by the following subsidiaries: 2019 2018 Aspion Sdn Bhd 95.2% (i) 95.2% 2.0% (ii) Terang Nusa (Malaysia) Sdn. Bhd. 2.0% ^^^ The total equity interests held by the Group is 100% and it is held by the following subsidiaries: 2019 2018 Aspion Sdn Bhd 0.1% (i) 99.9% (ii) Suizze Health Ltd 100.0% Ω The total equity interests held by the Group is 57% and it is held by the following subsidiaries: 2019 2018 60.0% PT. Agro Pratama Sejahtera Changes in group structure (a) Incorporation of Top Glove Vietnam Company Limited. (“Top Glove Vietnam”) On 19 December 2018, the Company, through its wholly-owned subsidiary, Top Glove Sdn. Bhd., incorporated Top Glove Vietnam under the enterprise registration certificate granted by the Department of Planning and Investment of Binh Duong Province with charter capital of VND136,698 million only. (b) Incorporation of Top Synthetic Rubber Sdn. Bhd. (“Top SR”) On 25 January 2019, the Company, through its wholly-owned subsidiary, Top Glove Sdn. Bhd., incorporated Top SR in Malaysia under the Companies Act 2016 with an issued and paid up capital of RM1.00 comprising 1 ordinary share. Top Glove Sdn. Bhd. owns the entire issued and paid-up share capital of Top SR upon which, Top SR becomes 100% subsubsidiary of the Company. 96
214. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 19. Investment in subsidiaries (cont'd.) Changes in group structure (cont'd.) (c) Incorporation of TG Raytech Sdn. Bhd. ("TG Raytech") On 16 May 2019, the Company, through its wholly-owned subsidiary, TG Medical Sdn. Bhd., incorporated TG Raytech in Malaysia under the Companies Act 2016 with an issued and paid up capital of RM1,000.00 comprising 1,000 ordinary shares. TG Medical Sdn. Bhd. owns 950 shares in TG Raytech, representing 95% of the issued and paid-up share capital of TG Raytech upon which, TG Raytech becomes a 95% sub-subsidiary of the Company. (d) Incorporation of PT. Top Green Forestry ("PT TGF") On 4 July 2019, the Company, through its 95% owned subsidiary, PT. Agro Pratama Sejahtera ("PT Agro"), had set up a company, namely PT TGF, under the Laws of the Republic of Indonesia. PT Agro holds 60% shares in the issued and paid up capital of PT TGF, which comprising 1,500 shares with total nominal value of Rp.1,500,000,000. Accordingly, PT TGF becomes a 57% sub-subsidiary of the Company. (e) Acquisition of the entire issued and paid-up share capital of Top Catheter Sdn. Bhd. (formerly known as Champion March Sdn. Bhd.) ("Top Catheter") On 15 May 2019, Top Glove Sdn. Bhd., a wholly-owned subsidiary of the Company had acquired the entire issued and paid-up share capital of Top Catheter comprising 1 ordinary share for a cash consideration of RM1.00. Accordingly, Top Catheter has become a whollyowned subsidiary of Top Glove Sdn. Bhd.. The acquisition is not expected to have material effects on the financial position of the Group. (f) Deregistration of Beijing Adventa Health Supplies Co. Ltd. ("Beijing Adventa") On 16 January 2019, the Company through its wholly owned subsidiary, Adventa Health Sdn. Bhd. received approval from State Administration for Industry and Commerce of the People's Republic of China to deregister its wholly-owned subsidiary, Beijing Adventa. Upon deregistration, Beijing Adventa ceased to be subsidiary of the Company at the end of the financial year. 97
215. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 19. Investment in subsidiaries (cont'd.) Changes in group structure (cont'd.) (g) Prior year acquisitions (i) Acquisition of Eastern Press Sdn. Bhd. (“EP”) On 5 January 2018, the Company had acquired 5,000,000 ordinary shares representing 100% of the equity interest in EP for a cash consideration of RM46,250,000, resulting in the Company became the holding company of EP. The acquired subsidiary had contributed the following results to the Group from the date of acquisition to 31 August 2018: 2018 RM'000 Revenue Profit for the year 48,145 1,262 The fair values of the identifiable assets and liabilities of EP as at the date of acquisition were: Carrying Fair value amount RM'000 RM'000 Property, plant and equipment Land use rights Inventories Trade and other receivables Tax recoverable Cash and bank balances 32,912 17,100 7,956 20,201 81 79 78,329 33,993 9,887 7,956 20,201 81 79 72,197 Trade and other payables Loans and borrowings Provision for retirement benefits Deferred tax liabilities Net identifiable assets 18,553 29,153 656 5,314 53,676 24,653 18,553 29,153 656 3,842 52,204 19,993 Group's interest in the fair value of net identifiable assets Total cost of acquisition Goodwill on acquisition (Note 23) 24,653 46,250 21,597 98
216. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 19. Investment in subsidiaries (cont'd.) Changes in group structure (cont'd.) (g) Prior year acquisitions (cont'd.) (i) Acquisition of Eastern Press Sdn. Bhd. (“EP”) (cont'd.) In the previous financial year, the purchase price allocation for this acquisition was still incomplete as the Company was finalising its identification and measurement of all intangible assets and its allocated goodwill. The Company has up to 12 months to complete such allocation. Accordingly, on a provisional basis, the Company had recognised goodwill of RM21.6 million relating to the acquisition. The purchase price allocation for this acquisition is completed during the year with no changes to the provisional goodwill and no other intangible assets are recognised. The effect of the acquisition on cash flows was as follows: 2018 RM'000 Consideration settled in cash Cash and cash equivalents of subsidiary acquired Net cash outflow on the acquisition (ii) 46,250 (79) 46,171 Acquisition of Aspion Sdn. Bhd. (“Aspion”) On 4 April 2018, Top Care Sdn. Bhd. ("TCSB"), a wholly-owned subsidiary of the Company had acquired 270,850,119 ordinary shares representing the entire equity interest in Aspion for a purchase consideration of RM1,370 million. Accordingly, Aspion has become a wholly-owned subsidiary of TCSB. Part of the purchase consideration amounting to RM1,233 million is settled in cash while the balance of RM137 million is through issuance of 20,505,000 new ordinary shares in the Company at an issue price of about RM6.6813 each ("Consideration Shares"). The Consideration Shares is listed and quoted on the Main Market of Bursa Securities with effect from 9.00 a.m. on 5 April 2018. The acquired subsidiary had contributed the following results to the Group from the date of acquisition to 31 August 2018: 2018 (Restated) RM'000 Revenue Profit for the year 240,489 2,828 99
217. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 19. Investment in subsidiaries (cont'd.) Changes in group structure (cont'd.) (g) Prior year acquisitions (cont'd.) (ii) Acquisition of Aspion Sdn. Bhd. (“Aspion”) (cont'd.) The fair values of the identifiable assets and liabilities of Aspion as at the date of acquisition were: Carrying Fair value amount (Restated) (Restated) RM'000 RM'000 Property, plant and equipment Land use rights Intangible asset Deferred tax assets Inventories Trade and other receivables Derivative financial instruments Cash and bank balances 280,760 75,281 40,477 10,134 74,378 118,443 764 11,709 611,946 238,166 49,358 10,134 74,378 118,443 764 11,709 502,952 Trade and other payables Loans and borrowings Income tax payable Deferred tax liabilities 94,056 279,274 3,057 33,726 410,113 201,833 94,056 279,274 3,057 7,568 383,955 118,997 Net identifiable assets Net identifiable assets Less: Non-controlling interests Group's interest in the fair value of net identifiable assets Total purchase consideration Goodwill on acquisition (Note 23) 100 201,833 (6,193) 195,640 1,370,000 1,174,360
218. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 19. Investment in subsidiaries (cont'd.) (g) Prior year acquisitions (cont'd.) (ii) Acquisition of Aspion Sdn. Bhd. (“Aspion”) (cont'd.) 2018 RM'000 The purchase consideration was satisfied by: a) Cash consideration b) Issuance of 20,505,000 Consideration Shares 1,233,000 137,000 1,370,000 In the previous financial year, the purchase price allocation for this acquisition was still incomplete as the Company was finalising its identification and measurement of all intangible assets and its allocated goodwill. The Company has up to 12 months to complete such allocation. Accordingly, on a provisional basis, the Company had recognised goodwill of RM1,258 million relating to the acquisition. The purchase price allocation for this acquisition is completed during the year with corresponding reduction in goodwill of RM84 million, resulting in RM1,174 million of total goodwill arising on the acquisition. Intangible asset relating to customer relationship of RM40 million are recognised. The effect of the acquisition on cash flows was as follows: 2018 (Restated) RM'000 Consideration settled in cash Cash and cash equivalents of subsidiary acquired Net cash outflow on the acquisition (iii) 1,233,000 (11,709) 1,221,291 Acquisition of Duramedical Sdn. Bhd. (“Duramedical”) On 14 May 2018, Top Feel Sdn. Bhd. ("Top Feel"), a wholly-owned subsidiary of the Company had acquired 212,500 ordinary shares representing 85% of the equity interest in Duramedical for a cash consideration of RM3,778,000. Accordingly, Duramedical has become a subsidiary of Top Feel. The acquired subsidiary had contributed the following results to the Group from the date of acquisition to 31 August 2018: 2018 RM'000 Revenue Profit for the year 727 61 101
219. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 19. Investment in subsidiaries (cont'd.) (g) Prior year acquisitions (cont'd.) (iii) Acquisition of Duramedical Sdn. Bhd. (“Duramedical”) (cont'd.) The fair values of the identifiable assets and liabilities of Duramedical as at the date of acquisition were: Fair value Carrying (Restated) amount RM'000 RM'000 Property, plant and equipment Land use rights Inventories Trade and other receivables Tax recoverable Cash and bank balances 2,217 312 133 90 32 618 3,402 2,217 312 133 90 32 618 3,402 Trade and other payables Loans and borrowings Deferred tax liabilities Net identifiable assets 63 1,611 30 1,704 1,698 63 1,611 30 1,704 1,698 Net identifiable assets Less: Non-controlling interests Group's interest in the fair value of net identifiable assets Total purchase consideration Goodwill on acquisition (Note 23) 1,698 (255) 1,443 3,778 2,335 In the previous financial year, the purchase price allocation for this acquisition was still incomplete as the Company was finalising its identification and measurement of all intangible assets and its allocated goodwill. The Company has up to 12 months to complete such allocation. Accordingly, on a provisional basis, the Company had recognised goodwill of RM1.9 million relating to the acquisition. The purchase price allocation for this acquisition is completed during the year with corresponding increase in goodwill of RM0.4 million, resulting in RM2.3 million of total goodwill arising on the acquisition. No other intangible assets are recognised. 102
220. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 19. Investment in subsidiaries (cont'd.) (g) Prior year acquisitions (cont'd.) (iii) Acquisition of Duramedical Sdn. Bhd. (“Duramedical”) (cont'd.) The effect of the acquisition on cash flows was as follows: Dormant 2018 Property Dormant RM'000 Consideration settled in cash Cash and cash equivalents of subsidiary acquired Net cash outflow on the acquisition (h) 3,778 (618) 3,160 Non-controlling interests Summarised financial information for non-controlling interests has not been disclosed as the carrying amount of the non-controlling interests in the consolidated statements of financial position is immaterial to the Group. 20. Investment in an associate Group 2019 Dormant 2018 Property (Restated) RM'000 RM'000 Unquoted shares at cost Share of post-acquisition reserves 12,204 (351) 11,853 12,204 2,323 14,527 Details of the associate are as follows: Name Proportion of Country of ownership interest (%) incorporation 2019 2018 Principal activities Property Dormant / principal place of business Held through Top Glove Sdn. Bhd. Value Add Sdn. Bhd.# # Malaysia Audited by firms other than Ernst & Young 103 27 27 Investment holding
221. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 20. Investment in an associate (cont'd.) The financial year end of the above associate is non-coterminous with the Group. For the purpose of applying the equity method of accounting, the latest available financial information has been used and appropriate adjustments have been made for the effects of significant transactions between the dates of the latest available financial information and financial years ended 31 August 2019 and 2018. The summarised financial information of the associate, not adjusted for the proportion of ownership interest held by the Group, is as follows: Group 2019 Property 2018 Dormant (Restated) RM'000 RM'000 Assets and liabilities Non-current assets Current assets Total assets 260,011 4,067 264,078 262,714 1,442 264,156 Non-current liabilities Current liabilities Total liabilities (197,869) (22,308) (220,177) (190,154) (20,200) (210,354) Net assets 43,901 53,802 Results Revenue (Loss)/profit for the year 11,658 (9,901) 15,029 22,845 Reconciliation of the summarised financial information presented above to the carrying amount of the Group’s interest in an associate: Group 2019 2018 (Restated) RM'000 RM'000 Net assets of the associate as at 1 September 2018/2017 (Loss)/profit for the year Net assets of the associate as at 31 August 2019/2018 Group's share of net assets 104 53,802 (9,901) 43,901 11,853 30,957 22,845 53,802 14,527
222. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 21. Deferred tax (assets)/liabilities Deferred income tax as at 31 August 2019 and 2018 relates to the following: Deferred tax liabilities Property, plant and equipment RM'000 Deferred tax assets assets Unabsorbed export allowance, business losses, capital and reinvestment Others allowances RM'000 RM'000 Total RM'000 Group At 1 September 2017 Recognised in profit or loss As previously stated Prior year adjustment (Note 48) As restated Acquisition of subsidiary companies As previously stated Prior year adjustment (Note 48) As restated Exchange difference As restated At 31 August 2018/1 September 2018 Recognised in profit or loss Exchange difference At 31 August 2019 105 67,291 21,657 (35,372) 53,576 19,736 3,395 23,131 (3,497) (8,476) (11,973) 3,391 3,391 19,630 (5,081) 14,549 21,733 21,733 44,864 112,155 38,683 150,838 7,203 7,203 (27) (4,797) 16,860 (4,374) 26 12,512 3,391 (31,981) (30,127) (62,108) 7,203 21,733 28,936 (27) 43,458 97,034 4,182 26 101,242
223. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 21. Deferred tax (assets)/liabilities (cont'd.) The unabsorbed capital allowances and other deductible temporary differences of the Group are available indefinitely for offsetting against future taxable profits of the respective entities within the Group, subject to no substantial change in shareholdings of those entities under the Income Tax Act, 1967 and guidelines issued by the tax authority. On the other hand, effective from year of assessment 2019 as announced in the annual budget 2019, the unutilised tax losses of the Group as at 31 August 2019 and thereafter will only be available for carry forward for a period of 7 consecutive years. Upon expiry of the 7 years, the unutilised losses will be disregarded. The unutilised tax losses, unabsorbed capital allowances and other deductible temporary differences applicable to foreign incorporated subsidiaries are pre-determined by and subject to the tax legislation of the respective countries. Presented after appropriate offsetting as follows: Group 2019 2018 (Restated) RM'000 RM'000 Deferred tax assets Deferred tax liabilities (58,472) 159,714 101,242 (19,271) 116,305 97,034 Deferred tax assets have not been recognised by the Group and the Company in respect of the following items: Group Unutilised tax losses Unabsorbed capital allowances 2019 RM'000 2018 RM'000 11,960 642 12,602 3,877 1,341 5,218 Company 2019 2018 RM'000 RM'000 1,560 1,560 1,675 1,675 Deferred tax assets have not been recognised by the Group and the Company in respect of these items as it is not probable that taxable profits of the Company and its subsidiaries would be available against which deductible temporary differences could be utilised. 106
224. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 22. Investment securities Group Company 2019 2018 RM'000 RM'000 2019 RM'000 2018 RM'000 83,221 106,019 - - 4,064 87,285 87,695 193,714 1 1 2 2 392 87,677 392 194,106 1 2 Current Financial assets at fair value through other comprehensive income - Debt securities (quoted outside Malaysia) Financial assets at fair value through profit or loss - Money market funds (quoted in Malaysia) Non-current Financial assets at fair value through profit or loss - Unquoted investments - golf club membership Total investment securities Debt securities of the Group amounting to RM83,221,000 (2018: RM106,019,000) were pledged to banks for credit facilities granted to the Group as disclosed in Note 29. 107
225. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 23. Intangible assets Customer Goodwill Relationship RM'000 RM'000 Patent RM'000 Total RM'000 Group Cost At 1 September 2017 Arising from acquisition of subsidiaries (Note 19) At 31 August 2018/ 1 September 2018 (Restated) Addition At 31 August 2019 22,805 - - 22,805 1,198,292 40,477 - 1,238,769 1,221,097 1,221,097 40,477 40,477 16 16 1,261,574 16 1,261,590 - 1,533 - 1,533 - 1,533 3,680 5,213 1 1 1,533 3,681 5,214 At 31 August 2018 (Restated) 1,221,097 38,944 - 1,260,041 At 31 August 2019 1,221,097 35,264 15 1,256,376 Accumulated amortisation At 1 September 2017 Amortisation during the year (Note 11) At 31 August 2018/ 1 September 2018 (Restated) Amortisation during the year (Note 11) At 31 August 2019 Net carrying amount 108
226. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 23. Intangible assets (cont'd.) Goodwill has been allocated to Cash Generating Units ("CGUs") identified as follows: Group 2019 2018 (Restated) RM'000 RM'000 Top Glove Medical (Thailand) Co. Ltd. B Tech Industry Co. Ltd. GMP Medicare Sdn. Bhd. Eastern Press Sdn. Bhd. (Note 19(g)(i)) Aspion Sdn. Bhd. (Note 19(g)(ii)) Duramedical Sdn. Bhd. (Note 19(g)(iii)) 2,946 14,789 5,070 21,597 1,174,360 2,335 1,221,097 2,946 14,789 5,070 21,597 1,174,360 2,335 1,221,097 Key assumptions used in value-in-use calculations The recoverable amount of a CGU is determined based on value-in-use calculations using cash flow projections based on financial budgets approved by management covering a five years period. The following describes each key assumption on which management has based its cash flow projections to undertake impairment testing of goodwill and customer relationship: (i) Growth rate for the 5 years projection is determined based on the management's estimate on the industry trends and past performances of the segments, thereafter terminal growth rate is assumed to be from 0% to 2.5% (2018: 0%). (ii) A post-tax discount rate of 9.50% (2018: 7.41%) was applied in determining the recoverable amount of the unit. The discount rate was estimated based on a weighted average cost of capital of the Company. The Group is of the opinion that any reasonably possible change in the above key assumptions would not materially cause the recoverable amount of the CGU's to be lower than its carrying amount, other than the goodwill of Aspion as disclosed below. Sensitivity to changes in key assumptions The sensitivity test indicated that changes in the discount rate used in the value-in-use calculation of Aspion Sdn. Bhd. will result in the recoverable amount to equal to the corresponding carrying amounts of the goodwill and related assets, assuming no change in other variables, is as follows: Increase in discount rate 0.5% 109
227. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 24. Inventories Group 2019 Cost Raw materials Consumables and hardware Work-in-progress Finished goods Net realisable value Raw materials Work-in-progress Finished goods RM'000 2018 (Restated) RM'000 158,104 42,557 132,666 283,130 616,457 126,610 31,766 76,973 254,931 490,280 3,360 4,727 5,352 629,896 2,905 9,805 2,872 505,862 During the year, the amount of inventories recognised as an expense of the Group amounted to RM3,917 million (2018: RM3,378 million). 25. Trade and other receivables Group 2019 Company 2019 2018 2018 (Restated) RM'000 RM'000 RM'000 565,579 (2,809) 562,770 621,765 (3,707) 618,058 - - Total trade and other receivables 15,436 14,011 29,447 592,217 10,289 8,962 19,251 637,309 4,705 19 4,724 4,724 1,992 8 2,000 2,000 Total trade and other receivables Add: Cash and bank balances (Note 28) Financial assets at amortised cost 592,217 165,782 757,999 637,309 165,197 802,506 4,724 74 4,798 2,000 151 2,151 RM'000 Trade receivables Third parties Less: Allowance for expected credit loss Trade receivables, net Other receivables Amounts due from subsidiaries Sundry receivables Refundable deposits 110
228. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 25. Trade and other receivables (cont'd.) (a) Trade receivables Trade receivables are non-interest bearing and are generally on 30 to 90 days (2018: 30 to 90 days) terms. Other credit terms are assessed and approved on a case-by-case basis. They are recognised at their original invoice amounts which represent their fair values on initial recognition. Ageing analysis of trade receivables The ageing analysis of the Group’s trade receivables is as follows: Group 2019 2018 (Restated) RM'000 RM'000 Neither past due nor impaired 1 to 30 days past due not impaired 31 to 60 days past due not impaired 61 to 90 days past due not impaired 91 to 120 days past due not impaired More than 121 days past due not impaired Impaired 509,593 42,168 3,474 2,237 104 5,194 53,177 2,809 565,579 516,226 72,512 10,913 5,427 7,868 5,112 101,832 3,707 621,765 Receivables that are neither past due nor impaired Trade and other receivables that are neither past due nor impaired are creditworthy debtors with good payment records and are mostly regular customers that have been transacting with the Group. None of the Group's trade receivables that are neither past due nor impaired have been renegotiated during the financial year. Receivables that are past due but not impaired The Group has trade receivables amounting to RM53,177,000 (2018: RM101,832,000) that are past due at the reporting date but not impaired. These receivables are unsecured in nature. 111
229. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 25. Trade and other receivables (cont'd.) (a) Trade receivables (cont'd.) Receivables that are impaired The Group's trade receivables that are impaired at the reporting date and the movement of the allowance accounts used to record the impairment are as follows: Group 2019 2018 (Restated) RM'000 RM'000 Trade receivables-nominal amounts Less: Allowance for expected credit loss 2,809 (2,809) - 3,707 (3,707) - Movements in the allowance accounts: Group 2019 RM'000 At 1 September 2018/2017 Written off Acquisition of subsidiary company Allowance for expected credit loss during the year Reversal of allowance for expected credit loss during the year At 31 August 2019/2018 3,707 453 (1,351) 2,809 2018 (Restated) RM'000 975 (975) 3,707 3,707 Trade receivables that are individually determined to be impaired at the reporting date relate to a debtor that is in significant financial difficulty and has defaulted on payment. This receivable is not secured by any collateral or credit enhancements. (b) Related party balances Amounts due from subsidiaries are unsecured, non-interest bearing and are repayable on demand except for an amount of RM2,085,209 (2018: nil) which bears interest at 4% per annum (2018: nil). 112
230. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 26. Other current assets Group 2019 RM'000 Prepaid operating expenses Goods and service tax refundable Advances to suppliers for raw materials Advances to suppliers for property, plant and equipment 2018 (Restated) RM'000 Company 2019 2018 RM'000 RM'000 35,249 18,435 7,769 27,664 52,613 1,852 2,614 - 1,024 47 - 2,058 63,511 23,217 105,346 2,614 1,071 27. Derivative financial instruments Group 2019 RM'000 Contract/ Notional Fair value Amount Liabilities Forward currency contracts 440,572 (1,653) 2018 (Restated) RM'000 Contract/ Notional Fair value Amount Liabilities 366,927 (856) At 31 August 2019, the Group held forward currency contracts designated as hedges of expected future sales to customers and repayment of loan for which the Group has firm commitments. Forward currency contracts used to hedge the Group's sales are denominated in USD and EUR for which firm commitments existed at the reporting date, extending to January 2020 (2018 : January 2019). During the financial year, the Group recognised a loss of RM811,000 (2018: loss of RM2,262,000) in the profit or loss arising from changes in the fair value of the forward currency contracts. 113
231. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 28. Cash and bank balances Group 2019 RM'000 Cash on hand and at banks Deposits with licensed banks and other financial institutions Cash and bank balances Less: Deposits pledged with banks with maturity of more than 3 months Bank overdrafts Cash and cash equivalents 2018 (Restated) RM'000 Company 2019 2018 RM'000 RM'000 145,412 160,340 74 151 20,370 165,782 4,857 165,197 74 151 (6,067) 159,715 (4,962) (1,511) 158,724 74 151 Cash at banks and deposits with licensed banks and other financial institutions of the Group amounting to RM6,067,000 (2018: RM4,962,000) are pledged to banks for credit facilities granted to the Group as disclosed in Note 29. The weighted average effective interest rates and maturity days of deposits with licensed banks and other financial institutions at the reporting date were as follows: Group 2019 2018 0.88 1.48 7 days - 365 days 257 days - 365 days Weighted average effective interest rates (%) Maturity days 29. Loans and borrowings Group Maturity Current Secured: RM Bank overdrafts RM Bankers' acceptances RM Trade loan financing USD Trade loan financing USD Revolving loan RM Term loan USD Term loan USD Revolving credit Hire purchase payables (Note 38(c)) On demand 2018 2018 2018 2019 2019 2019 2019/2018 2020/2019 114 2019 RM'000 2018 RM'000 11,428 432 11,860 1,511 42,714 33,465 14,446 21,441 2,637 90,746 98,146 725 305,831
232. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 29. Loans and borrowings (cont'd.) Group Maturity Current (cont'd.) Unsecured: RM Bankers' acceptances EUR Revolving credit JPY Revolving credit RM Trade loan financing Thai Baht Promissory notes USD Revolving credit RM Revolving credit USD Syndicated term loan RM Term loan Less: Unamortised transaction costs 2019 2019 2019 2019 2019/2018 2019/2018 2019/2018 2020 2020/2019 Total current loans and borrowings Non-current Secured: Hire purchase payables (Note 38(c)) USD Revolving loan RM Term loan 2021 - 2022/2020 - 2024 2020 - 2021 2020 - 2035 Unsecured: USD Syndicated term loan Less: Unamortised transaction costs 2023 RM Term loan USD Exchangeable bonds 2023/2022 2024 Total non-current loans and borrowings Total loans and borrowings 115 2019 RM'000 14,307 160,047 92,812 6,085 71,075 499,785 49,800 130,882 5,840 (1,168) 1,029,465 1,041,325 205 205 523,528 (2,833) 520,695 18,613 839,856 1,379,164 1,379,369 2,420,694 2018 RM'000 51,357 471,754 54,000 3,125 (3,492) 576,744 882,575 1,038 35,674 13,735 50,447 1,273,325 (5,288) 1,268,037 11,875 1,279,912 1,330,359 2,212,934
233. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 29. Loans and borrowings (cont'd.) The range of interest rates at the reporting date for borrowings are as follows: Group 2019 % Nil 3.7% to 4.8% 4.0% to 5.3% 1.9% to 2.2% 3.7% to 4.6% 0.3% to 4.7% Nil 3.5% 4.4% to 4.9% 4.2% Bank overdrafts Bankers' acceptances Hire purchase payables Promissory notes Trade loan financing Revolving credit Revolving loan Syndicated term loan Term loan Exchangeable bonds 2018 % 7.5% 3.9% to 8.1% 2.5% to 5.3% 1.9% to 7.1% 3.2% to 4.6% 1.8% to 5.6% 1.9% to 2.8% 2.7% to 3.3% 3.4% to 5.5% Nil The remaining maturities of the loans and borrowings as at 31 August 2019 and 2018 are as follows: Group 2019 2018 RM'000 RM'000 On demand or within one year More than 1 year and less than 2 years More than 2 years and less than 5 years More than 5 years (a) (b) 1,041,325 135,899 1,240,702 2,768 2,420,694 882,575 789,952 534,487 5,920 2,212,934 The RM bank overdrafts, RM bankers' acceptances, hire purchase payables, USD revolving credit, USD revolving loan, RM term loan, USD term loan, RM trade loan financing and USD trade loan financing of the Group and of the Company are secured by certain assets of the Group and of the Company as follows: (i) fixed charge over certain property, plant and equipment and land use rights as disclosed in Note 16 and Note 17 respectively; (ii) USD loan at 2.7% to 3.1% p.a. was secured by charges over debt securities of the Group as disclosed in Note 22; and (iii) deposits with licensed banks and other financial institutions as disclosed in Note 28. On 1 March 2019, one of the subsidiaries, Top Glove Labuan Ltd. issued USD200 million (approximately RM814.40 million) in aggregate principal amount of 2.0% Guaranteed Exchangeable Bonds which is due in 2024 (the "Bonds"). 116
234. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 29. Loans and borrowings (cont'd.) (b) The weighted average effective interest rates at the reporting date for exchangeable bonds is 4.20% per annum. Each bond entitles its registered holder to exchange for fully paid ordinary shares of Top Glove Labuan Ltd., at an initial exchange price of RM6.204 per share at a fixed exchange rate of USD1.00 = RM4.0703. The initial exchange price is also subject to adjustments in accordance with the terms and conditions of the Bonds as set out in the trust deed dated 1 March 2019. The net proceeds from the issue of the Bonds were utilised to refinance the existing debt of the related companies and payment of fees and expenses relating to the Bonds issue. The principal features of the Bonds which mature on 1 March 2024 ("maturity date") are as follows:(i) The Bonds bear interest at the rate of 2.0% calculated semi-annually and payable on 1 March and 1 September each year. (ii) The Bonds are unconditionally and irrevocably guaranteed by the ultimate holding company, Top Glove Corporation Bhd. and are subject to negative pledge. (iii) Redemption price at 109.53%. The redemption price was determined based on the issue price, coupon rate and yield of the Bonds. (iv) Early redemption amount An amount which, for each USD1,000 principal amount of such Bonds, together with accrued but unpaid interest from the immediately preceding interest payment date and after taking into account any interest paid in respect of the Bonds in the preceding periods, represents for the bondholder on the relevant date a gross yield of 3.75% per annum calculated on a semi-annual basis. (v) Redemption at the option of issuer At any time on or after 16 March 2022, but not less than seven business days prior to the Maturity Date, in whole but not in part, at the Early Redemption Amount together with accrued but unpaid interest if the closing price of Top Glove Corporation Bhd.'s shares on Bursa Malaysia Securities Berhad for each of 20 consecutive trading days in any 30 consecutive trading day period, the last of which occurs not more than 5 trading days prior to the date upon which notice of such redemption was given, is at least 130% of the applicable Early Redemption Amount divided by the Exchange Ratio, in effect on such trading day. At any time, in whole but not in part, at the Early Redemption Amount together with accrued but unpaid interest in the event the principal amount of the Bonds outstanding is 10% or less of the aggregate principal amount originally issued. 117
235. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 29. Loans and borrowings (cont'd.) (b) The principal features of the Bonds which mature on 1 March 2024 ("maturity date") are as follows (cont'd.):(vi) Redemption at the option of bondholders Upon the occurrence of the following events, the bondholders may be entitled to exercise a right prior to the maturity date to require the Issuer to redeem all or part of the Bonds in cash: (a) On 1 March 2022, in whole or in part, at 105.50% of their principal amount together with accrued but unpaid interest. (b) Following the occurrence of a change of control, the bondholders will have the right at such holder’s option, to require the Issuer to redeem in whole but not in part such holders’ Bonds at their early redemption amount, together with accrued but unpaid interest. (c) In the event the Top Glove Corporation Bhd.'s shares cease to be listed or admitted to trading on Bursa Malaysia Securities Berhad and are not listed on an Alternative Stock Exchange or, if applicable, cease to be listed or admitted to trading on an Alternative Stock Exchange, or are suspended for a period equal to or exceeding 45 consecutive days on Bursa Malaysia Securities Berhad or an Alternative Stock Exchange, as the case may be, each bondholder shall have the right at such bondholders’ option to require the Issuer to redeem all (but not less than all) of such bondholders’ Bonds at their early redemption amount, together with accrued but unpaid interest. (vii) All Bonds which are not redeemed, exchanged, or purchased and cancelled in the manner allowed pursuant to the terms and conditions of the Bonds shall be redeemed in cash by the Issuer on the 1 March 2024 at the redemption price together with accrued but unpaid interest. 118
236. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 30. Trade and other payables Group 2019 RM'000 Trade payables Other payables Accrued operating expenses Sundry payables Total trade and other payables Total trade and other payables Add: Loans and borrowings (Note 29) Total financial liabilities carried at amortised cost (a) 2018 (Restated) RM'000 Company 2019 2018 RM'000 RM'000 280,858 276,893 - - 79,156 132,400 211,556 492,414 84,690 138,568 223,258 500,151 1,460 82 1,542 1,542 1,499 10 1,509 1,509 492,414 2,420,694 500,151 2,212,934 1,542 - 1,509 - 2,913,108 2,713,085 1,542 1,509 Trade payables These amounts are non-interest bearing. The normal trade credit term granted to the Group ranges from 30 to 90 days (2018: range from 30 to 90 days). (b) Other payables These amounts are non-interest bearing. Other payables are normally settled on an average term of 30 to 90 days (2018: range from 30 to 90 days). 31. Contract liabilities These amounts represent advances received from customers for goods purchased. Set out below is the amount of revenue recognised from: Group Amounts included in contract liabilities at the beginning of the year 119 2019 RM'000 2018 RM'000 59,248 62,292
237. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 32. Share capital Group and Company <------------2019------------> <------------2018------------> Number of Monetary Number of Monetary shares value shares value '000 RM'000 '000 RM'000 Issued and fully paid At 1 September 2018/2017 Bonus Issue Exercise of ESOS Issued for acquisition of a subsidiary Transfer from share option reserve Transaction cost At 31 August 2019/2018 1,280,229 1,280,229 131 2,560,589 787,709 662 41 (86) 788,326 1,256,299 3,425 20,505 1,280,229 636,644 11,972 137,000 2,093 787,709 On 10 October 2018, the Company obtained shareholders' approval at its Extraordinary General Meeting for a bonus issue of 1,280,229,124 new ordinary shares on the basis of 1 bonus share for every 1 existing ordinary share. The bonus issue was completed on 29 October 2018. The holders of ordinary shares (except treasury shares) are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restrictions and rank equally with regard to the Company's residual assets. The new ordinary shares issued during the year ranked pari passu in all respects with the existing ordinary shares of the Company. 33. Treasury shares This amount relates to the acquisition cost of treasury shares net of the proceeds received on their subsequent sale or issuance. The shareholders of the Company, by an ordinary resolution passed in an annual general meeting held on 8 January 2019, renewed their approval for the Company's plan to repurchase its own shares. The directors of the Company are committed in enhancing the value of the Company to its shareholders and believe that the Share Buy Back can be applied in the best interests of the Company and its shareholders. During the financial year: (i) the Company resold 2,781,700 of its treasury shares to the open market at the average price of RM5.03 per share. The total proceeds from the sale of treasury shares net off transaction costs was RM13,936,000. The excess of the proceeds and the cost of the treasury shares which amounted to RM7,719,000 was recognised in equity. 120
238. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 33. Treasury shares (cont'd.) During the financial year (cont'd.): (ii) the Company transferred 584,000 treasury shares to eligible employees under employee share grant plan at average market price of RM4.65 per share. The total transferred treasury shares were RM2,716,000. The difference between the transferred treasury shares and the cost of the treasury shares amounted to RM1,389,000 was recognised in equity. In previous financial year, the Company transferred 93,700 treasury shares to eligible employees under employee share grant plan at average market price of RM10.40 per share. The total transferred treasury shares net of transaction costs were RM975,000. The difference between the transferred treasury shares and the cost of the treasury shares amounted to RM561,000 was recognised in equity. Of the total 2,560,589,000 issued and fully paid ordinary shares as at 31 August 2019, 775,600 are held as treasury shares by the Company. As at 31 August 2019, the number of outstanding ordinary shares in issue and fully paid is therefore 2,559,813,400 ordinary shares. 121
239. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 34. Other reserves Foreign exchange reserve RM'000 Legal reserve RM'000 Share option reserve RM'000 Cash flow hedge reserve RM'000 Fair value adjustment reserve RM'000 Others reserve RM'000 Total RM'000 53,700 4,929 2,568 - 1,302 - 62,499 (17,575) (786) - 4,235 - 1,932 (2,093) (478) - (41,504) - (2,465) - 2,898 (61,544) (786) 1,932 (2,093) (478) 4,235 2,898 35,339 16,306 51,645 9,164 924 10,088 1,929 7,197 (131) 8,995 (41,504) (38,787) (80,291) (1,163) 3,247 2,084 2,898 1,595 1,433 5,926 6,663 (19,234) 7,197 (131) 1,595 924 1,433 (1,553) Group At 1 September 2017 Other comprehensive income, as previously stated Prior year adjustment Share options granted under ESOS Transfer from share option reserve Transfer to retained earnings Transfer to legal reserve Transfer to other reserve At 31 August 2018/ 1 September 2018 (Restated) Other comprehensive loss Share options granted under ESOS Transfer from share option reserve Transfer to retained earnings Transfer to legal reserve Equity component of exchangeable bonds At 31 August 2019 122
240. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 34. Other reserves (cont'd.) Share option reserve RM'000 Company 2,568 1,932 (2,093) (478) 1,929 7,197 (131) 8,995 At 31 August 2017/1 September 2017 Share options granted under ESOS Transfer from share option reserve Transfer to retained earnings At 31 August 2018/1 September 2018 Share options granted under ESOS Transfer from share option reserve At 31 August 2019 (a) Foreign exchange reserve The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign operations whose functional currencies are different from that of the Group's presentation currency. It is also used to record the exchange differences arising from monetary items which form part of the Group's net investment in foreign operations, where the monetary item is denominated in either the functional currency of the reporting entity or the foreign operation. (b) Legal reserve This represents a general reserve provided for in respect of subsidiaries incorporated in the People’s Republic of China and Thailand. Under the Wholly Foreign Owned Enterprise (“WFOE”) Law in the People's Republic of China, at least 10% of the net profit after taxation in each financial year must be credited to this reserve, until it reaches 50% of the registered paid up capital of the subsidiary. Under the Civil and Commercial Code in Thailand, a company is required to set aside a statutory reserve equal to at least 5% of its net profit each time when the company pays out a dividend, until it reaches 10% of the registered share capital of the company. (c) Share option reserve The share option reserve represents the equity-settled share options granted to employees. This reserve is made up of the cumulative value of services received from employees recorded on grant of share options. 123
241. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 34. Other reserves (cont'd.) (d) Fair value adjustment reserve Fair value adjustment reserve represents the differences arising from the conversion of bond reserves to fair value through OCI. (e) Cash flow hedge reserve The cash flow hedge reserve represents the effective portion of the cash flow hedge relationships incurred at the reporting date. 35. Retained earnings The Company may distribute dividends out of its entire retained earnings as at 31 August 2019 and 2018 under the single tier system. 36. Share based payments (i) Employee share options scheme ("ESOS") The Company's ESOS is governed by the By-Laws which was approved by the shareholders at the Extraordinary General Meeting held on 9 January 2018 and became effective on 2 August 2018. The main features of the ESOS are as follows: (a) The ESOS shall be in force for a period of ten years from the date of the receipt of the last of the requisite approvals. (b) Eligible persons are employees of the Group (including executive directors) who have been confirmed in the employment of the Group and have served for at least one year before the date of the offer. The eligibility for participation in the ESOS shall be at the discretion of the Options Committee appointed by the Board of Directors. (c) The total number of shares to be issued under the ESOS shall not exceed in aggregate 10% of the issued and paid up share capital of the Company at any point of time during the tenure of the ESOS. (d) The option price for each share shall be the 5-days weighted average market price of the underlying shares at the time the ESOS Options are granted, with either a premium or a discount of not more than ten percent (10%). 124
242. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 36. Share based payments (cont'd.) (i) Employee share options scheme ("ESOS") (cont'd.) The main features of the ESOS are as follows (cont'd.): (e) No option shall be granted for less than 100 shares to any eligible employee. (f) An option granted under the ESOS shall be capable of being exercised by the grantee by notice in writing to the Company commencing from the vest date but before the expiry on 31 May 2028. (g) All new ordinary shares issued upon exercise of the options granted under the ESOS will rank pari passu in all respect with the existing ordinary shares of the Company other than as may be specified in a resolution approving the distribution of dividends prior to their exercise dates. (h) No eligible person shall participate at any time in more than one share option scheme implemented by any company within the Group unless otherwise approved by the Options Committee. (i) The options shall not carry any right to vote at a general meeting of the Company. 125
243. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 36. Share based payments (cont'd.) (i) Employee share options scheme ("ESOS") (cont'd.) The terms of share options outstanding as at end of the financial year are as follows: Grant date Expiry date Exercise price RM <------------------------ Number of share options over the ordinary shares ----------------------> Balance prior to adjustment As at for bonus Exercised Lapsed 1.9.2018 Granted issue* '000 '000 '000 '000 '000 2019 2.8.2018 Grant date 31.5.2028 Expiry date 10.12 3,161.9 Exercise price RM Balance after adjustment for bonus issue* '000 Granted '000 6,323.8 6,323.8 14,329.3 261.8 10,978.9 25,570.0 - - Exercised '000 - 3,161.9 Lapsed '000 As at 31.8.2019 '000 2019 2.8.2018 1.2.2019 18.2.2019 30.7.2019 * 31.5.2028 31.5.2028 31.5.2028 31.5.2028 5.06 4.90 4.90 4.63 Bonus issue for one for one existing ordinary share 126 (125.1) (6.0) (131.1) (212.4) (76.7) (289.1) 5,986.3 14,246.6 261.8 10,978.9 31,473.6
244. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 36. Share based payments (cont'd.) (i) Employee share options scheme ("ESOS") (cont'd.) The terms of share options outstanding as at end of the financial year are as follows (cont'd.): Grant Date Expiry Date Exercise Price RM <------------------------ Number of share options over the ordinary shares ----------------------> As at As at 1.9.2017 Granted Exercised Lapsed 31.8.2018 '000 '000 '000 '000 '000 2018 5.9.2008 5.3.2009 5.9.2009 5.2.2010 5.3.2010 5.4.2010 6.5.2010 5.6.2010 5.7.2010 6.8.2010 5.10.2011 3.4.2013 2.8.2014 1.6.2017 2.8.2018 1.8.2018 1.8.2018 1.8.2018 1.8.2018 1.8.2018 1.8.2018 1.8.2018 1.8.2018 1.8.2018 1.8.2018 1.8.2018 1.8.2018 1.8.2018 1.8.2018 31.5.2028 1.01 1.13 1.76 2.82 2.90 3.49 3.08 3.06 3.43 3.26 2.08 2.76 2.32 5.33 10.12 2.4 2.4 55.6 12.0 1,528.0 23.2 129.2 39.0 31.6 12.8 31.0 282.2 407.5 938.4 3,495.3 127 3,166.6 3,166.6 (49.6) (12.0) (1,506.8) (23.2) (129.2) (39.0) (31.6) (12.8) (21.4) (262.6) (394.1) (938.4) (4.7) (3,425.4) (2.4) (2.4) (6.0) (21.2) (9.6) (19.6) (13.4) (74.6) 3,161.9 3,161.9
245. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 36. Share based payments (cont'd.) (i) Employee share options scheme ("ESOS") (cont'd.) Details of share options exercised during the financial year and the fair value, at exercise date, of ordinary shares issued are as follows: Fair value Number of Exercise of ordinary share price shares options RM RM '000 Exercise Date Considerations received RM'000 2019 After bonus issue September 2018 - August 2019 September 2018 - August 2019 5.06 4.90 4.30 - 6.20 4.30 - 6.20 1.76 2.82 2.90 3.49 3.08 3.06 3.43 3.26 2.08 2.76 2.32 5.33 10.12 5.50 - 11.56 5.50 - 11.56 5.50 - 11.56 5.50 - 11.56 5.50 - 11.56 5.50 - 11.56 5.50 - 11.56 5.50 - 11.56 5.50 - 11.56 5.50 - 11.56 5.50 - 11.56 5.50 - 11.56 5.50 - 11.56 125.1 6.0 131.1 633.0 29.4 662.4 49.6 12.0 1,506.8 23.2 129.2 39.0 31.6 12.8 21.4 262.6 394.1 938.4 4.7 3,425.4 87.3 33.8 4,369.6 81.0 397.9 119.3 108.4 41.7 44.5 724.8 914.3 5,001.7 47.6 11,971.9 2018 After no-par value regime September 2017 - August 2018 September 2017 - August 2018 September 2017 - August 2018 September 2017 - August 2018 September 2017 - August 2018 September 2017 - August 2018 September 2017 - August 2018 September 2017 - August 2018 September 2017 - August 2018 September 2017 - August 2018 September 2017 - August 2018 September 2017 - August 2018 September 2017 - August 2018 128
246. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 36. Share based payments (cont'd.) (i) Employee share options scheme ("ESOS") (cont'd.) Fair value of share options The fair value of share options granted during the year were estimated by using a binomial option pricing model, taking into account the terms and conditions upon which the options were granted. The fair value of share options measured at grant date and the assumptions used are as follows: Fair value of share options at the following grant dates (RM): 1 February 2019 18 February 2019 30 July 2019 Weighted average share price (RM) Weighted average exercise price (RM) Expected volatility (%) Expected life (years) Risk free interest rate (%) Expected dividend yield (%) 0.31, 0.32 0.31 0.24 4.63 - 4.99 4.63 - 4.90 29.67 - 34.92 8.84 - 9.33 3.58 - 4.07 1.62 - 1.76 The expected life of the share options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome. (ii) Employee share grant plan ("ESGP") The Company's ESGP is governed by the By-Laws which was approved by the shareholders at the Extraordinary General Meeting held on 6 January 2016 and became effective on 12 January 2016 and is administered by the ESGP Committee. Under the ESGP, Eligible Employees may be granted ESGP Awards comprising shares of the Company. The ESGP Awards, once accepted, will vest without any consideration payable, subject to vesting date(s) and/or vesting conditions as may be determined at the discretion of the ESGP Committee. The ESGP Committee may, at its discretion, decide that any vesting of the Company's shares comprised in an ESGP Awards shall be satisfied through: (a) (b) (c) (d) the issuance of new shares of the Company the transfer of existing shares of the Company settlement in cash; or a combination of any of the above 129
247. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 36. Share based payments (cont'd.) (ii) Employee share grant plan ("ESGP") (cont'd.) The main features of the ESGP are as follows: (a) The aggregate number of shares of the Company which may be awarded under the ESGP and any other schemes involving issuance of new shares of the Company to employees which are still subsisting shall not exceed 10% of the issued and paid-up share capital of the Company ("Plan Size"). (b) Eligible persons are any employee or executive director of the Group (excluding dormant subsidiaries) who fulfills the eligibility criteria. The eligibility for participation in the ESGP shall be at the discretion of the ESGP Committee appointed by the Board of Directors. (c) The number of shares comprised in each ESGP Award shall be determined at the discretion of the ESGP Committee after taking into consideration, inter alia, the performance and seniority, years of service and potential for future development of the Eligible Employee and the employee's contribution to the Group as well as such other criteria as the ESGP Committee may deem relevant. (d) The aggregate number of shares that may be allocated to any one participant shall not exceed 10% of the total number of shares to be awarded under the ESGP and any other schemes involving issuance of new shares of the Company which may be implemented from time to time by the Company. (e) The aggregate maximum allocation to the directors and senior management of the Group (excluding dormant subsidiaries) shall not be more than 75% of the Company's shares awarded under the ESGP. (f) The ESGP shall be in force for a period of ten years from the effective date of implementation which is the date the last of the requisite approvals and/or conditions have been obtained and/or complied with. (g) The shares to be allotted and issued under the ESGP will, upon allotment and issue, rank pari passu in all respects with the existing shares of the Company, save and except that they will not be entitles to any dividends, rights, allotments and/or other distributions in respect of which the entitlement date is prior to the date of allotment and issuance of the new shares. 130
248. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 37. Related party transactions (a) Sales and purchase of goods In addition to the related party information disclosed elsewhere in the financial statements, the following significant transactions between the Group and related parties took place at terms mutually agreed between the parties during the financial year: Group Gross dividends from subsidiaries Management fees from subsidiaries Purchase of raw materials from related to certain directors of Company (b) Company 2019 2018 RM'000 RM'000 2019 RM'000 2018 RM'000 - - 215,590 5,374 239,030 4,912 - 71 - - Compensation of the key management personnel The remuneration of executive directors and other key management personnel during the financial year were as follows: Group Salaries and other emoluments Pension costs - defined contribution plan Social security contributions Share options granted under ESOS Shares granted under ESGP Fees Benefits-in-kind 131 Company 2019 2018 RM'000 RM'000 2019 RM'000 2018 RM'000 9,387 10,276 3,289 3,208 824 13 896 14 332 1 302 1 1,056 145 413 199 12,037 317 37 501 230 12,271 589 98 366 60 4,735 161 449 50 4,171
249. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 38. Commitments (a) Capital commitments Group 2019 2018 RM'000 RM'000 Property, plant and equipment: 324,782 Approved and contracted for (b) 186,901 Operating lease arrangements (i) Group as lessee In addition to the land use rights disclosed in Note 17, the Group had entered into commercial leases on certain office equipment. These leases have an average tenure of between one and five years. Future minimum rentals payable under non-cancellable operating leases (excluding land use rights) at the reporting date are as follows: Group 2019 2018 (Restated) RM'000 RM'000 Future minimum rentals payments: 4,828 2,031 Not later than 1 year 2,365 1,069 Later than 1 year and not later than 2 years 1,464 1,454 Later than 2 years and not later than 5 years 8,657 4,554 (ii) Group as lessor Future minimum rentals receivable under non-cancellable operating leases at the reporting date are as follows: Group 2019 2018 RM'000 RM'000 Future minimum rentals payments: 2,170 6,079 Not later than 1 year 1,423 4,548 Later than 1 year and not later than 2 years 477 5,519 Later than 2 years and not later than 5 years 4,070 16,146 132
250. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 38. Commitments (cont'd.) (c) Hire purchase payables Group 2019 2018 RM'000 RM'000 Minimum lease payments: Not later than 1 year Later than 1 year but not later than 2 years Later than 2 years but not later than 5 years Later than 5 years Total minimum lease payments Less: Amounts representing finance charges Present value of minimum lease payments 443 176 33 652 (15) 637 774 688 373 15 1,850 (87) 1,763 Group 2019 2018 RM'000 RM'000 Present value of payments: Not later than 1 year Later than 1 year but not later than 2 years Later than 2 years but not later than 5 years Later than 5 years Present value of minimum lease payments Less: Amount due within 12 months (Note 29) Amount due after 12 months (Note 29) 432 172 33 637 (432) 205 725 663 360 15 1,763 (725) 1,038 39. Fair values (i) Determination of fair value of financial instruments Financial instruments that are not carried at fair value and whose carrying amounts are reasonable approximation of fair value The following are classes of financial instruments that are not carried at fair value and whose carrying amounts are reasonable approximation of fair value: Note Trade and other receivables Loans and borrowings (current) Loans and borrowings (non-current) Trade and other payables 25 29 29 30 133
251. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 39. Fair values (cont'd.) (i) Determination of fair value of financial instruments (cont'd.) Financial instruments that are not carried at fair value and whose carrying amounts are reasonable approximation of fair value (cont'd.) The carrying amounts of these financial assets and liabilities 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 reporting date. The fair values of loans and borrowings are estimated by discounting expected future cash flows at market incremental lending rate for similar types of lending, borrowing or leasing arrangements at the reporting date. Investment securities (current) Fair value is determined directly by reference to their published market bid price at the reporting date. Investment securities (non-current) Fair value is determined based on directors' estimates using comparable market price of similar golf club memberships. Derivatives Forward currency contracts are valued using a valuation technique with market observable inputs. The most frequently applied valuation techniques include forward pricing, using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates. Investment property The fair value of the investment property was based on a valuation by an accredited independent qualified value as disclosed in Note 18. 134
252. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 39. Fair values (cont'd.) (ii) Fair value hierarchy The following table provides the fair value measurement hierarchy of the Group's assets and liabilities as at reporting date: Quoted prices in active market (Level 1) RM'000 Significant Significant observable unobservable inputs inputs (Level 2) (Level 3) RM'000 RM'000 Total RM'000 Group As at 31 August 2019 Current Assets/(liabilities) measured at fair value Financial assets at fair value through other comprehensive income Financial assets at fair value through profit or loss Derivative financial instruments 83,221 4,064 - Non-current Assets measured at fair value Financial assets at fair value through profit or loss Investment property (Note 18) (1,653) - 83,221 - 4,064 (1,653) - - 392 163,900 392 163,900 106,019 - - 106,019 Group As at 31 August 2018 Current Assets/(liabilities) measured at fair value Financial assets at fair value through other comprehensive income Financial assets at fair value through profit or loss Derivative financial instruments 87,695 - Non-current Assets measured at fair value Financial assets at fair value through profit or loss Investment property (Note 18) 135 (856) - - 392 163,900 87,695 (856) 392 163,900
253. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 39. Fair values (cont'd.) (ii) Fair value hierarchy (cont'd.) The following table provides the fair value measurement hierarchy of the Group's assets and liabilities as at reporting date (cont'd.): Quoted prices in active market (Level 1) RM'000 Significant Significant observable unobservable inputs inputs (Level 2) (Level 3) RM'000 RM'000 Total RM'000 Company As at 31 August 2019 Current Assets measured at fair value Financial assets at fair value through profit or loss 1 - - 1 2 - - 2 Company As at 31 August 2018 Current Assets measured at fair value Financial assets at fair value through profit or loss During the reporting period ended 31 August 2019 and 2018, there were no transfers between Level 1, Level 2 and Level 3 fair value measurements. 136
254. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 40. Financial risk management objectives and policies The Group and the Company are exposed to a variety of financial risks, including market risk, credit risk, interest rate risk, liquidity risk and foreign currency risk. The Group’s senior management oversees the management of these risks and ensures that the Group’s financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Group’s policies and risk objectives. All derivative activities for risk management purposes are carried out by senior management who have the appropriate skills, experience and supervision. It is the Group’s policy that no trading in derivatives for speculative purposes may be undertaken. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below: (a) Market risk Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprise interest rate risk, foreign exchange currency risk and other price risk such as equity price risk. Financial instruments affected by market risk include loans and borrowings, cash and short term deposits, debt securities, money market funds investments and derivative financial instruments. (b) Credit risk Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on its obligations. The Group's and the Company's exposure to credit risk arises primarily from trade and other receivables. For other financial assets (including debt securities, money market funds investments, cash and bank balances and derivatives), the Group and the Company minimise credit risk by dealing exclusively with high credit rating counterparties. The Group's objective is to seek continual revenue growth while minimising losses incurred due to increased credit risk exposure. The Group trades only with recognised and creditworthy third parties. It is the Group's policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant. Exposure to credit risk At the reporting date, the Group's and the Company's maximum exposure to credit risk is represented by the carrying amount of each class of financial assets recognised in the statements of financial position. 137
255. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 40. Financial risk management objectives and policies (cont'd.) (b) Credit risk (cont'd.) Credit risk concentration profile The Group has no significant concentration of credit risk that may arise from exposure to a single debtor or to groups of debtors. Financial assets that are neither past due nor impaired Information regarding trade and other receivables that are neither past due nor impaired is disclosed in Note 25(a). Deposits with banks and other financial institutions, debt securities and derivatives that are neither past due nor impaired are placed with or entered into with reputable financial institutions or companies with high credit ratings and no history of default. Financial assets that are either past due or impaired Information regarding financial assets that are either past due or impaired is disclosed in Note 25(a). An impairment analysis is performed at each reporting date using a provision matrix to measure expected credit losses. The provision rates are based on days past due for groupings of various customer segments with similar loss patterns. The calculation reflects the probability-weighted outcome, the time value of money and reasonable and supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions. Generally, trade receivables are written-off if past due for more than one year and are not subject to enforcement activity. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note 25(a). (c) Liquidity risk Liquidity risk is the risk that the Group or the Company will encounter difficulty in meeting financial obligations due to shortage of funds. The Group's and the Company's exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. The Group's and the Company's objective is to maintain a balance between continuity of funding and flexibility through the use of stand-by credit facilities. 138
256. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 40. Financial risk management objectives and policies (cont'd.) (c) Liquidity risk (cont'd.) The table below summarises the maturity profile of the Group’s and the Company’s liabilities at the reporting date based on contractual undiscounted repayment obligations. <----------------------------- 2019 ---------------------------> On demand or within One to Over one year five years five years Total RM'000 RM'000 RM'000 RM'000 Group Financial liabilities Trade and other payables, excluding bank guarantees Derivatives Loans and borrowings Total undiscounted financial liabilities 492,414 1,653 1,064,607 1,091,072 407,255 492,414 1,653 2,562,934 1,558,674 1,091,072 407,255 3,057,001 1,542 - - 1,542 1,542 - - 1,542 Company Financial liabilities Trade and other payables excluding bank guarantees Total undiscounted financial liabilities <----------------------------- 2018 ---------------------------> (Restated) On demand or within One to Over one year five years five years Total RM'000 RM'000 RM'000 RM'000 Group Financial liabilities Trade and other payables, excluding bank guarantees Derivatives Loans and borrowings Total undiscounted financial liabilities 139 500,151 856 933,364 1,380,443 6,856 500,151 856 2,320,663 1,434,371 1,380,443 6,856 2,821,670
257. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 40. Financial risk management objectives and policies (cont'd.) (c) Liquidity risk (cont'd.) <----------------------------- 2018 ---------------------------> (Restated) On demand or within One to Over one year five years five years Total RM'000 RM'000 RM'000 RM'000 Company Financial liabilities Trade and other payables excluding bank guarantees Total undiscounted financial liabilities (d) 1,509 - - 1,509 1,509 - - 1,509 Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of the Group's and the Company’s financial instruments will fluctuate because of changes in market interest rates. The Group's exposure to interest rate risk arises primarily from its loans and borrowings. The Group manages its interest rate exposure by maintaining a mix of fixed and floating rate borrowings. The Group actively reviews its debt portfolio, taking into account the investment holding period and nature of its assets. This strategy allows it to capitalise on cheaper funding in a low interest rate environment and achieve a certain level of protection against rate hikes. Sensitivity analysis for interest rate risk At the reporting date, if interest rates had been 10 basis points lower/higher, with all other variables held constant, the Group's profit before tax would have been RM1,569,000 (2018: RM2,198,000) higher/lower, arising mainly as a result of lower/higher interest expense on floating rate loans and borrowings. The assumed movement in basis points for interest rate sensitivity analysis is based on the currently observable market environment. 140
258. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 40. Financial risk management objectives and policies (cont'd.) (e) Market price risk The Group's quoted investment securities are susceptible to market price risk arising from uncertainties about future values of the investment securities. The Group manages the market price risk through diversification and by placing limits on individual and total investment in investment securities. Reports on the investment portfolio are submitted to the Group’s senior management on a regular basis. The Board of Directors reviews and approves all investment decisions. The Group has an Investment Committee with the objectives of reviewing, advising and ensuring that the Group's investment in debt securities is consistent with the delegated authority limit approved by the Board; and cash invested is within the risk appetite of the Group. The Investment Committee established certain criteria for current and future investment in debt securities. Any investment differing from the criteria established will require the Investment Committee's approval. The Investment Committee also aims to establish an effective investment management framework for the Group. At the reporting date, the exposure to quoted investment securities at fair value was disclosed in Note 22. Sensitivity analysis for market price risk The following table demonstrates the sensitivity of the Group's debt investments to reasonably possible price movements in investments classified as available-for-sale at the reporting date: 2019 2018 RM'000 RM'000 Group Debt investments (f) - strengthened 5% (2018: 5%) - weakened 5% (2018: 5%) 4,161 (4,161) 5,301 (5,301) Foreign currency risk Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. 141
259. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 40. Financial risk management objectives and policies (cont'd.) (f) Foreign currency risk (cont'd.) The Group has transactional currency exposures mainly arising from revenue that are denominated in a currency other than the respective functional currencies of the Group entities. These functional currencies are Malaysian Ringgit ("RM"), Thailand Baht ("Baht"), Chinese Renminbi ("RMB") and Australian Dollar ("AUD"). The foreign currencies in which these transactions are denominated are mainly United States Dollars (“USD”), Euro and Japanese Yen ("JPY"). In addition, the Group has significant borrowings in USD and EURO (Note 29). Therefore, the Group is exposed to foreign currency risk. These exposures are managed, to the extent possible, by natural hedge that arise when payments for foreign currency payables are matched against receivables denominated in the same foreign currency. The net unhedged financial assets and financial liabilities of the Group companies that are not denominated in their functional currencies are as follows: Net financial (liabilities)/assets held in non-functional currency USD Euro JPY Total RM'000 RM'000 RM'000 RM'000 Functional currency of Group companies At 31 August 2019: Ringgit Malaysia Thailand Baht Chinese Renminbi Australian Dollars (221,247) 20,892 7,908 24,853 (167,594) 142 (154,430) (482) 788 (154,124) (92,809) (92,809) (468,486) 20,410 7,908 25,641 (414,527)
260. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 40. Financial risk management objectives and policies (cont'd.) (f) Foreign currency risk (cont'd.) Net financial (liabilities)/assets held in non-functional currency USD EURO JPY Total RM'000 RM'000 RM'000 RM'000 Functional currency of Group companies At 31 August 2018 (Restated): Ringgit Malaysia Thailand Baht Chinese Renminbi Australian Dollars (450,000) 35,893 20,795 23,827 (369,485) (2,446) (261) 815 (1,892) - (452,446) 35,632 20,795 24,642 (371,377) Sensitivity analysis for foreign currency risk The following table demonstrates the sensitivity of the Group’s profit net of tax to a reasonably possible change in the USD, EURO and JPY exchange rates against the respective functional currencies of the Group entities, with all other variables held constant. 2019 RM'000 USD/RM - strengthened 5% (2018: 5%) - weakened 5% (2018: 5%) USD/Baht - strengthened 5% (2018: 5%) - weakened 5% (2018: 5%) USD/RMB - strengthened 5% (2018: 5%) - weakened 5% (2018: 5%) USD/AUD - strengthened 5% (2018: 5%) - weakened 5% (2018: 5%) EURO/RM - strengthened 5% (2018: 5%) - weakened 5% (2018: 5%) EURO/Baht - strengthened 5% (2018: 5%) - weakened 5% (2018: 5%) EURO/AUD - strengthened 5% (2018: 5%) - weakened 5% (2018: 5%) JPY/RM - strengthened 5% (2018: 5%) - weakened 5% (2018: 5%) 143 (11,062) 11,062 1,045 (1,045) 395 (395) 1,243 (1,243) (7,722) 7,722 (24) 24 39 (39) (4,640) 4,640 2018 (Restated) RM'000 (22,500) 22,500 1,795 (1,795) 1,040 (1,040) 1,191 (1,191) (122) 122 (13) 13 41 (41) -
261. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 41. Financial instruments Classification of financial instruments The principal accounting policies in Note 4.18 describe how the classes of financial instruments are measured, and how income and expenses, including fair value gains and losses, are recognised. The following table analyses the financial assets and liabilities in the statements of financial position by the class of financial instrument to which they are assigned, and therefore by the measurement basis: Fair value through OCI RM'000 Fair value through profit or Amortised loss cost RM'000 RM'000 Total RM'000 Group As at 31 August 2019 Financial assets Investment securities Trade and other receivables Cash and bank balances Total financial assets Financial liabilities Loans and borrowings Trade and other payables Derivative financial instruments Total financial liabilities 83,221 83,221 4,456 4,456 592,217 165,782 757,999 87,677 592,217 165,782 845,676 - 1,653 1,653 2,420,694 492,414 2,913,108 2,420,694 492,414 1,653 2,914,761 106,019 106,019 88,087 88,087 637,309 165,197 802,506 194,106 637,309 165,197 996,612 - 856 856 2,212,934 500,151 2,713,085 2,212,934 500,151 856 2,713,941 Group As at 31 August 2018 Financial assets Investment securities Trade and other receivables Cash and bank balances Total financial assets Financial liabilities Loans and borrowings Trade and other payables Derivative financial instruments Total financial liabilities 144
262. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 41. Financial instruments (cont'd.) The following table analyses the financial assets and liabilities in the statements of financial position by the class of financial instrument to which they are assigned, and therefore by the measurement basis (cont'd.): Fair value through OCI RM'000 Fair value through profit or Amortised loss cost RM'000 RM'000 Total RM'000 Company As at 31 August 2019 Financial assets Investment securities Trade and other receivables Cash and bank balances Total financial assets - 1 1 4,724 74 4,798 1 4,724 74 4,799 Financial liabilities Other payables Total financial liabilities - - 1,542 1,542 1,542 1,542 Financial assets Investment securities Trade and other receivables Cash and bank balances Total financial assets - 2 2 2,000 151 2,151 2 2,000 151 2,153 Financial liabilities Trade and other payables Total financial liabilities - - 1,509 1,509 1,509 1,509 Company As at 31 August 2018 145
263. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 42. Capital management The primary objective of the Group's and of the Company's capital management is to ensure that they maintain a strong credit rating and healthy capital ratios in order to support their business and maximise shareholders' value. The Group and the Company manage their capital structure and make adjustments, in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Group and the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the years ended 31 August 2019 and 2018. As disclosed in Note 34(b), subsidiaries of the Group incorporated in the People's Republic of China and Thailand are required to set aside a statutory reserve fund under local regulations. This externally imposed capital requirement has been complied with by the above-mentioned subsidiaries for the financial years ended 31 August 2019 and 2018. The Group and the Company monitor capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Group and the Company include within net debt, loans and borrowings, trade and other payables, contract liabilities, less cash and cash equivalents. Capital includes equity attributable to the owners of the parent less the fair value adjustment reserve and the above-mentioned restricted statutory reserve fund. Group 2019 Note Loans and borrowings Trade and other payables Contract liabilities Less: cash and cash equivalents Net debt Equity attributable to the owners of the parent (Less)/add: - Fair value adjustment reserve - Legal reserve Total equity RM'000 2018 (Restated) RM'000 Company 2019 2018 RM'000 RM'000 29 2,420,694 2,212,934 - - 30 31 492,414 55,610 500,151 59,248 1,542 - 1,509 - 28 (159,715) 2,809,003 (158,724) (74) (151) To manage this risk, the Group works 2,613,609 1,468 1,358 2,536,955 2,383,046 1,036,937 1,020,687 (2,084) (10,088) 2,524,783 1,163 (9,164) 2,375,045 1,036,937 1,020,687 5,333,786 4,988,654 1,038,405 1,022,045 34 34 Capital and net debt 52.66% Gearing ratio 52.39% 0.14% 0.13% To In The Credit the manage Group's Group Group’s Group, risks,does this policy or financial foreign the risk, notis risk have the to currency risk of borrow Group material customers management transaction works principally exposure defaulting closely policy exposure on to market awith seeks floating are its minimised onrisk to customers normal rate ensure with basis. respect and trade that tomonitored provide transactions adequate to its investments. customer via financial arises strictly satisfaction in resources limiting respect 146
264. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 43. Segment information For management purposes, the Group is organised into business units based on their geographical areas, and has five reportable operating segments. Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss which, in certain respects as explained in the table below, is measured differently from operating profit or loss in the consolidated financial statements. Group financing (including finance costs), income taxes and share of results of associate are managed on a group basis and are not allocated to operating segments. The directors are of the opinion that all inter-segment transactions have been entered into in the normal course of business and have been established on negotiated and mutually agreed terms. The People's Republic Malaysia Thailand of China RM'000 RM'000 RM'000 The British Virgin Islands RM'000 Others Eliminations Note Consolidated RM'000 RM'000 RM'000 31 August 2019 Revenue External sales 4,086,042 Inter-segment sales 104,060 Total revenue 4,190,102 391,385 330,734 722,119 88,568 1,963 90,531 - 235,144 235,144 (436,757) (436,757) 28,082 124 309 4,083 712 (22,699) 170,429 20,039 3,355 - 1,092 477,754 26,505 (3,954) 3,686 1,872 Assets Additions to noncurrent assets* Segment assets 527,917 3,602,610 31,629 348,519 13,965 77,285 114,768 50,594 218,322 Liabilities Segment liabilities 2,817,242 119,005 13,945 11,438 239,385 22,486 2,673 - Results Interest income Depreciation and amortisation Segment profit/(loss) Other segment information Capital commitments * Other than financial instruments and deferred tax assets 147 A 10,611 (82,275) 4,801,139 4,801,139 194,915 B 423,588 1,326,701 C D 624,105 5,688,205 11,931 160,503 E 3,134,064 60,238 - 324,782
265. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 43. Segment information (cont'd.) Malaysia Thailand RM'000 RM'000 The People's Republic of China RM'000 The British Virgin Islands RM'000 Others Eliminations Note Consolidated RM'000 RM'000 RM'000 31 August 2018 (Restated) Revenue External sales 3,521,154 Inter-segment sales 66,983 Total revenue 3,588,137 390,050 354,082 744,132 176,745 2,094 178,839 - 132,793 132,793 (423,159) (423,159) 10,382 107 129 4,315 215 (2,913) 121,891 17,973 5,751 - 1,050 454,520 66,403 27,698 5,927 Assets Additions to noncurrent assets* Segment assets 2,086,686 3,339,028 16,264 333,264 5,944 89,877 113,913 681 127,429 Liabilities Segment liabilities 2,629,743 102,211 20,417 11,878 181,716 4,687 498 - Results Interest income Depreciation and amortisation Segment profit/(loss) Other segment information Capital commitments * Other than financial instruments and deferred tax assets 148 (1,144) A 12,235 (30,604) 4,220,742 4,220,742 146,665 B 522,800 1,293,839 C D 2,109,575 5,297,350 9,659 125,046 E 2,898,954 - - 186,901
266. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 43. Segment information (cont'd.) A Inter-segment revenues are eliminated on consolidation. B The following items are (deducted from)/added to segment profit to arrive at profit before tax presented in the consolidated income statement. 2019 RM'000 Share of results of an associate Finance costs (2,674) (79,601) (82,275) 2018 (Restated) RM'000 6,168 (36,772) (30,604) C Additions to non-current assets consist of: 2019 Property, plant and equipment Land use rights Investment property Intangible assets RM'000 2018 (Restated) RM'000 568,143 55,553 393 16 624,105 775,153 93,034 2,619 1,238,769 2,109,575 D The following items are added to segment assets to arrive at total assets reported in the consolidated statements of financial position: 2019 RM'000 58,472 11,853 1,256,376 1,326,701 Deferred tax assets (Note 21) Investment in an associate (Note 20) Intangible assets (Note 23) 2018 (Restated) RM'000 19,271 14,527 1,260,041 1,293,839 E The following items are added to segment liabilities to arrive at total liabilities reported in the consolidated statements of financial position: 2019 RM'000 789 159,714 160,503 Income tax payable Deferred tax liabilities (Note 21) 149 2018 (Restated) RM'000 8,741 116,305 125,046
267. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 44. Dividends Group Company 2019 2018 RM'000 RM'000 2019 RM'000 2018 RM'000 89,566 - 89,566 - 127,827 - 127,827 - - 89,454 - 89,454 217,393 106,691 196,145 217,393 106,691 196,145 Recognised during the financial year: Dividends on ordinary shares: - First tax exempt interim single tier dividend of 3.5 sen per share on 2,559,230,000 ordinary shares, and paid on 16 July 2019 - Final tax exempt single tier dividend of 5 sen per share on 2,556,440,000 ordinary shares, and paid on 25 January 2019 - First tax exempt interim single tier dividend of 7 sen per share on 1,277,926,000 ordinary shares, and paid on 17 July 2018 - Final tax exempt single tier dividend of 8.5 sen per share on 1,255,159,000 ordinary shares, and paid on 25 January 2018 Dividends received by the ESGP Trusts amounting to RM120 (2018: RM186) for the Group is eliminated against the dividend expense of the Company upon consolidation of the ESGP Trusts as disclosed in Note 4.10(d). 150
268. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 45. Financial guarantees A nominal amount of RM2,420 million (2018: RM1,874 million) relating to corporate guarantees has been provided by the Company to banks for its subsidiaries' loans and borrowings. As at reporting date, no values are ascribed on these guarantees and letter of undertaking provided by the Company to secure banking facilities described above as the directors regard the value of the credit enhancement provided by these guarantees as minimal and the probability of default, based on historical track records of the parties receiving the guarantees are remote. 46. Material litigation The Company and its wholly-owned subsidiary, Top Care Sdn Bhd ("Top Care") have taken the following legal proceedings: (i) Writ action in the Kuala Lumpur High Court, against Low Chin Guan, Wong Chin Toh, ACPL Sdn Bhd (“ACPL”) and Kwek Siew Leng (“Kwek”) (collectively, the “Defendants”) ("Writ Action"). (ii) Arbitration proceedings at the Singapore International Arbitration Centre, against Adventa Capital Pte. Ltd. (“Adventa Capital”) (“Singapore Arbitration”). The Writ Action and the Singapore Arbitration pertain to the Sale and Purchase Agreement entered into by the Company and Top Care on 12 January 2018 for Top Care’s purchase of all issued shares in Aspion Sdn Bhd from Adventa Capital for RM1.37 billion (“the SPA”). The claim is RM640,470,000 as damages suffered by reason of the fraudulent misrepresentations made by Adventa Capital, Wong and Low to induce the Company and Top Care to enter into the SPA at RM1.37 billion as well as conspiracy by Adventa Capital, Wong, Low and Kwek to defraud the Company and Top Care. ACPL is named by reason of it having received RM72.3 million out of the RM1.37 billion purchase price. The Company and Top Care have elected to affirm the SPA and claim for damages. In the Writ Action, Low counterclaims against the Company, Top Care, Aspion and several individuals for, inter alia, losses suffered by him as a result of his removal from the Management of Aspion and harassment or intimidation; whereas Wong counterclaims against the Company, Top Care and Aspion for, inter alia, losses suffered by him as a result of inconvenience, harassment and costs by reason of freezing order proceedings. The KL High Court has fixed trial dates for the Writ Action in March 2020 to October 2020. 151
269. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 46. Material litigation (cont'd.) In the Singapore Arbitration, Adventa Capital is counterclaiming against the Company and Top Care for, inter alia, the following: (i) Losses suffered by Adventa Capital as a result of the Company’s and Top Care’s breach of the SPA by Adventa Capital a notice of breach under the SPA; and (ii) Losses suffered by Adventa Capital as a result of Low’s removal from the Management of Aspion. Hearing date is yet to be fixed for Singapore Arbitration. In aid of the Writ Action and Singapore Arbitration, the Company and Top Care had applied for Mareva Injunction as stated below: (i) Mareva Injunction applications were filed in the KL High Court against Adventa Capital, Low, Wong and ACPL to restrain them from disposing their assets up to RM640,470,000. The Mareva applications were heard from 29 to 31 October 2018 and 2 November 2018. Having heard the parties, the learned Judicial Commissioner (“JC”) found that the Plaintiffs have made a good arguable case on fraudulent misrepresentation and that there is a risk of dissipation of assets by the Defendants if the Mareva Injunction is not granted. However, the learned JC was of the opinion that there is no causal link between the damages sought by the Plaintiffs and the fraudulent misrepresentation. Thus, the applications were dismissed. The learned JC however granted an Erinford Injunction upon the terms of the Ad Interim Injunction dated 27.8.2018 with injuncted sum of RM219.7 million against Adventa Capital, Low and Wong and the sum of RM72.3 million against ACPL Sdn Bhd; pending the Plaintiffs’ appeals to the Court of Appeal against the dismissal of the applications (“Appeals”). The Appeals were called for hearing at the Court of Appeal on 1 August 2019 but were adjourned. During the case management on 24 October 2019, the Court of Appeal has fixed new hearing date for the Appeals on 25 March 2020. The Erinford Injunction remains in force until the disposal of the Appeals. The Plaintiffs have been advised by their solicitors and counsel that they have a good chance at succeeding at the Appeals. 152
270. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 46. Material litigation (cont'd.) In aid of the Writ Action and Singapore Arbitration, the Company and Top Care had applied for Mareva Injunction as stated below (cont'd): (ii) A Mareva Injunction application was filed in the Singapore High Court to restrain Adventa Capital from disposing its assets worldwide (save for Malaysia) up to the value of RM714,862,759. The Singapore High Court granted the Singapore Mareva Injunction. On 13 July 2018, Adventa Capital filed an application to set aside the Mareva Order and the application was heard by the Singapore High Court from 14 to 16 May 2019. On 10 June 2019, the Singapore High Court set aside the Mareva Order but granted an Erinford injunction up to the value of RM714,862,759 on the same terms as the Mareva Order, provided that the Company and Top Care make an application for a Mareva injunction to the arbitral tribunal (in SIAC Arbitration No. 171 of 2018) within two weeks, upon which the Erinford injunction will remain in force until there is a determination or order by the arbitral tribunal. The Company and Top Care have on 23 June 2019 filed the aforesaid application at arbitral tribunal. The hearing is fixed from 21 to 23 November 2019. The Writ Action and the Singapore Arbitration are on-going. Solicitors are of the view that the Company and Top Care have a more than even chance of success in their claims. In the event that the Company and Top Care do not succeed in the claims under the Writ Action, Singapore Arbitration and fail to obtain the Injunctions, the Company and Top Care would be exposed to costs and damages for the Writ Action, Singapore Arbitration and the Mareva Injunctions that may be awarded to the Defendants. 47. Subsequent events On 18 September 2019, the Company, through its wholly-owned subsidiary, Top Glove Sdn. Bhd. ("TGSB"), incorporated TG Excellence Berhad ("TGEB") in Malaysia under the Companies Act 2016 with an issued and paid up capital of RM1.00 comprising 1 ordinary share. TGSB owned the entire issued and paid-up share capital of TGEB upon which, TEGB becomes 100% subsubsidiary of the Company. A single tier final dividend in respect of the financial year ended 31 August 2019, of 4 sen per share on 2,559,814,000 ordinary shares amounting to RM102,393,000 had been declared on 26 September 2019. The final dividend will be paid on 23 December 2019. The financial statements for the current financial year do not reflect this proposed dividend. Such dividend will be accounted for in equity as an appropriation of retained earnings in the financial year ending 31 August 2020. 153
271. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 48. Comparative figures The comparative figures have been restated to reflect the effect of: (i) Transactions of a newly acquired foreign subsidiary for the financial year ended 31 August 2018 were not recorded in the correct accounting period. (ii) Finalisation of purchase price allocation for acquisition Eastern Press Sdn. Bhd., Aspion Sdn. Bhd. and Duramedical Sdn. Bhd. (iii) Effective 31 March 2019, the Associate company of Group adopted the policy to state its investment property at fair value. Previously, investment property was stated at cost. The following comparative figures have been restated arising from the 48 (i), (ii) and (iii): As previously Adjustments Adjustments Adjustments stated 48. (i) 48. (ii) 48. (iii) RM'000 RM'000 RM'000 RM'000 Group Statements of profit or loss For the financial year ended 31 August 2018 Revenue Cost of sales Interest income Other income Distribution and selling costs Administrative and general expenses Share of results of an associate Finance costs Income tax expense As restated RM'000 4,214,482 (3,367,611) 12,256 39,752 (111,692) 6,260 (10,763) (21) 246 220 - (224,968) (1,100) (3,657) - (229,725) 1,697 (35,321) (90,689) (1,451) 217 878 4,471 - 6,168 (36,772) (89,594) Profit attributable to: Owners of the parent Non-controlling interests 434,215 3,691 (7,077) 685 (2,779) - 4,471 - 428,830 4,376 Foreign currency translation difference of foreign operations (17,741) (959) - - (18,700) Total comprehensive income attributable to: Owners of the parent Non-controlling interests 372,671 3,525 (7,863) 512 (2,779) - 4,471 - 366,500 4,037 154 - 4,220,742 - (3,378,374) 12,235 39,998 - (111,472)
272. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 48. Comparative figures (cont'd.) The following comparative figures have been restated arising from the 48 (i), (ii) and (iii) (cont'd.): As previously Adjustments Adjustments Adjustments stated 48. (i) 48. (ii) 48. (iii) RM'000 RM'000 RM'000 RM'000 Group Statements of financial position As at 1 September 2017 Investment in an associate - - - 8,359 As previously Adjustments Adjustments Adjustments stated 48. (i) 48. (ii) 48. (iii) RM'000 RM'000 RM'000 RM'000 Group Statements of financial position As at 31 August 2018 Property, plant and equipment 2,064,817 101,675 Land use rights 1,697 Investment in an associate 14,288 Deferred tax assets 1,304,496 Intangible asset 508,186 Inventories 646,179 Trade and other receivables 106,380 Other current assets 164,836 Cash and bank balances 499,685 Trade and other payables 8,680 Income tax payable 94,670 Deferred tax liabilities 4,551 Other reserves 1,595,546 Retained earnings 15,287 Non-controlling interests Statements of changes in equity As at 1 September 2017 Retained earnings 1,365,827 As at 31 August 2018 Foreign exchange reserve Other reserve Retained earnings Non-controlling interests 36,125 1,595,546 15,287 155 (458) 4,983 (21) (2,324) (8,870) (1,034) 361 466 61 (3,493) 3,616 (8,148) 135 - (432) 4,048 (8,148) 135 40,403 25,354 (44,434) 25,128 (1,504) (2,229) (72) - (354) (1,150) (2,229) (72) As restated RM'000 8,359 As restated RM'000 12,830 12,830 - 2,104,762 127,029 14,527 19,271 1,260,041 505,862 637,309 105,346 165,197 500,151 8,741 116,305 6,663 1,597,999 15,350 8,359 1,374,186 12,830 - 35,339 2,898 1,597,999 15,350
273. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 48. Comparative figures (cont'd.) The following comparative figures have been restated arising from the 48 (i), (ii) and (iii) (cont'd.): As previously Adjustments Adjustments Adjustments stated 48. (i) 48. (ii) 48. (iii) RM'000 RM'000 RM'000 RM'000 Group Statements of cash flows For the financial year ended 31 August 2018 Operating activities Profit before tax Depreciation on property plant and equipment Amortisation of land use rights (Note 17) Unrealised foreign exchange loss Share of results of an associate Finance costs Interest income Operating cash flows before changes in working capital Increase in inventories Increase in receivables Increase in other current assets Decrease in payables Cash flows from/(used in) operations Interest paid Income taxes (paid)/refunded Investing activities Interest received Net cash outflow on acquisition of subsidiaries Acquisition of equity interest of NCI 528,595 141,105 1,298 (6,609) 619 (98) (3,657) As restated RM'000 4,471 522,800 1,889 - 143,613 319 - 1,519 - 22,158 19,630 2,528 - (1,697) 35,321 (12,256) 1,451 21 - (106,584) (95,752) (1,036) 2,739 - - (107,620) (93,013) (55,122) (34,946) 1,034 283 - - (54,088) (34,663) (35,321) (52,194) (1,451) 270 - - (36,772) (51,924) (21) - - 12,235 12,256 (1,270,542) - (3,944) 985 156 (80) - (4,471) - (6,168) 36,772 (12,235) - (1,270,622) - (2,959)
274. 199801018294 (474423-X) Top Glove Corporation Bhd. (Incorporated in Malaysia) 48. Comparative figures (cont'd.) The following comparative figures have been restated arising from the 48 (i), (ii) and (iii) (cont'd.): As previously Adjustments Adjustments Adjustments stated 48. (i) 48. (ii) 48. (iii) RM'000 RM'000 RM'000 RM'000 As restated RM'000 Group Statements of cash flows For the financial year ended 31 August 2018 Financing activities Dividends paid on non-controlling interests (5,418) (237) - - (5,655) Effect of changes in foreign exchange rate (4,799) (919) - - (5,718) (2,139) - - Cash and cash equivalents at 31 August (Note 28) 160,863 158,724 49. Authorisation of financial statements for issue The financial statements for the year ended 31 August 2019 were authorised for issue in accordance with a resolution of the directors on 31 October 2019. 157
275. APPENDIX II UNAUDITED FINANCIAL STATEMENTS OF THE KAFALAH PROVIDER FOR THE 1QFYE2020
276. TOP GLOVE CORPORATION BHD . Company No.199801018294 (474423-X) The World’s Largest Manufacturer of#Gloves Website : www.topglove.com E-mail : invest@topglove.com.my CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS FOR THE FIRST QUARTER ENDED 30 NOVEMBER 2019 Current Quarter Ended 30-Nov-2019 RM’000 Revenue Operating expenses Other operating income Profit from operations Corresponding Quarter Ended 30-Nov-2018 RM’000 Current Year To Date 30-Nov-2019 RM’000 Corresponding Year To Date 30-Nov-2018 RM'000 1,209,100 (1,076,861) 9,345 141,584 1,261,965 (1,113,340) 11,167 159,792 1,209,100 (1,076,861) 9,345 141,584 1,261,965 (1,113,340) 11,167 159,792 Finance costs Share of result of associate Profit before tax (18,718) 2,586 125,452 (18,670) 757 141,879 (18,718) 2,586 125,452 (18,670) 757 141,879 Taxation Profit net of tax (13,695) 111,757 (30,208) 111,671 (13,695) 111,757 (30,208) 111,671 111,426 331 111,757 110,055 1,616 111,671 111,426 331 111,757 110,055 1,616 111,671 4.36 4.15 4.31 4.31 4.36 4.15 4.31 4.31 Profit attributable to: Owners of the parent Non-controlling interests Earnings per share attributable to owners of the parent (sen) : Basic Diluted The Condensed Consolidated Statement of Profit or Loss should be read in conjunction with the Annual Financial Report for the financial year ended 31 August 2019. 1
277. TOP GLOVE CORPORATION BHD . Company No.199801018294 (474423-X) (Incorporated in Malaysia) CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE FIRST QUARTER ENDED 30 NOVEMBER 2019 Current Quarter Ended 30-Nov-2019 RM’000 Profit net of tax Corresponding Quarter Ended 30-Nov-2018 RM’000 Current Year To Date 30-Nov-2019 RM’000 Corresponding Year To Date 30-Nov-2018 RM'000 111,757 111,671 111,757 111,671 Other comprehensive income/(loss): Items that may be reclassified subsequently to profit or loss: Net movement on debt instrument at fair value through other comprehensive income Foreign currency translation differences of foreign operations Cash flow hedge 322 (1,563) 322 (1,563) (167) 18,485 11,524 (23,380) (167) 18,485 11,524 (23,380) Other comprehensive income/(loss), net of tax 18,640 (13,419) 18,640 (13,419) 130,397 98,252 130,397 98,252 130,051 346 130,397 96,322 1,930 98,252 130,051 346 130,397 96,322 1,930 98,252 Total comprehensive income Total comprehensive income attributable to: Owners of the parent Non-controlling interests The Condensed Consolidated Statement of Comprehensive Income should be read in conjunction with the Annual Financial Report for the financial year ended 31 August 2019. 2
278. TOP GLOVE CORPORATION BHD . Company No.199801018294 (474423-X) (Incorporated in Malaysia) CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 NOVEMBER 2019 Unaudited as at 30-Nov-2019 RM’000 ASSETS Non-current assets Property, plant and equipment 2,602,821 Land use rights 177,385 Right of use assets 6,053 Investment property 163,905 Investment in an associate 14,439 Deferred tax assets 32,431 Investment securities 392 Intangible assets 1,255,456 4,252,882 Current assets Inventories 603,145 Trade and other receivables 637,463 Other current assets 73,049 Derivative financial instruments 306 Investment securities 120,321 Cash and bank balances 154,210 1,588,494 Total assets Audited as at 31-Aug-2019 RM’000 2,480,026 178,495 163,900 11,853 58,472 392 1,256,376 4,149,514 629,896 592,217 63,511 87,285 165,782 1,538,691 5,841,376 5,688,205 459,946 60,482 1,191,118 1,817 1,568 102,393 1,817,324 (228,830) 492,414 55,610 1,041,325 789 1,653 1,591,791 (53,100) Total liabilities 1,305,736 4,312 128,624 3,293 1,441,965 3,259,289 1,379,369 159,714 3,190 1,542,273 3,134,064 Net assets 2,582,087 2,554,141 Non-controlling interests Total equity 788,322 (1,781) 1,760,671 17,343 2,564,555 17,532 2,582,087 788,326 (1,781) 1,751,963 (1,553) 2,536,955 17,186 2,554,141 Total equity and liabilities 5,841,376 5,688,205 EQUITY AND LIABILITIES Current liabilities Trade and other payables Contract liabilities Loans and borrowings Lease liabilities Income tax payables Derivative financial instruments Dividend payable Net current liabilities Non-current liabilities Loans and borrowings Lease liabilities Deferred tax liabilities Provisions Equity attributable to owners of the parent Share capital Treasury shares Retained earnings Other reserves Net assets per share (RM) 1.01 1.00 The Condensed Consolidated Statement of Financial Position should be read in conjunction with the Annual Financial Report for the financial year ended 31 August 2019. 3
279. TOP GLOVE CORPORATION BHD Company No .199801018294 (474423-X) (Incorporated in Malaysia) CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY AS AT 30 NOVEMBER 2019 Total equity RM’000 Total equity attributable to owners of the parent RM’000 Share capital RM’000 Attributable to owners of the parent Non distributable Foreign Share Treasury exchange Legal option shares reserve reserve reserve RM’000 RM’000 RM’000 RM’000 Distributable Cash flow hedge reserve RM’000 Other reserve RM’000 Fair value adjustment reserve RM'000 Retained earnings RM’000 Non-controlling interests RM’000 3 months ended 30 November 2019 Opening balance at 1 September 2019 Effects of adoption of MFRS 16 (note 1) 2,554,141 (54) 2,536,955 (54) 1 September 2019 (restated) 2,554,087 2,536,901 Total comprehensive income 130,397 130,051 2,684,484 2,666,952 788,326 788,326 - (1,781) 51,645 10,088 8,995 (80,291) 5,926 2,084 - - - - - - - (1,781) 51,645 10,088 8,995 (80,291) 5,926 2,084 1,751,909 17,186 - - 18,485 - 322 111,426 346 1,863,335 17,532 - 788,326 (182) 1,751,963 17,186 (54) - (1,781) 51,463 10,088 8,995 (61,806) 5,926 2,406 - - - - - - - - - - - - - 271 - (271) - - - - - - - - - (102,393) - - - - - - 271 - (102,664) - Transactions with owners Transaction cost Transfer from retained earnings (4) - (4) - Dividend on ordinary shares (102,393) (102,393) Total transactions with owners (102,397) (102,397) Closing balance at 30 November 2019 (4) (4) - - 2,582,087 2,564,555 788,322 (1,781) 51,463 10,088 8,995 (61,806) 6,197 2,406 1,760,671 17,532 2,398,396 2,383,046 787,709 (9,325) 35,339 9,164 1,929 (41,504) 2,898 (1,163) 1,597,999 15,350 98,252 96,322 - - 11,210 - - (23,380) - (1,563) 110,055 1,930 Issuance of ordinary shares pursuant to ESOS 396 396 396 - - - - - - - - - Transfer from share option reserve - - 24 - - - (24) - - - - - Transfer to legal reserve - - - - - 72 - - - - (72) - Total transactions with owners 396 396 420 - - 72 (24) - - - (72) - 2,497,044 2,479,764 788,129 (9,325) 46,549 (64,884) 2,898 (2,726) 3 months ended 30 November 2018 Opening balance at 1 September 2018 Total comprehensive income Transactions with owners Closing balance at 30 November 2018 9,236 1,905 1,707,982 17,280 The Condensed Consolidated Statement Of Changes In Equity should be read in conjunction with the Annual Financial Report for the financial year ended 31 August 2019. 4
280. TOP GLOVE CORPORATION BHD . Company No.199801018294 (474423-X) (Incorporated in Malaysia) CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW AS AT 30 NOVEMBER 2019 Current Year To Date Ended 30-Nov-2019 RM'000 Corresponding Year To Date Ended 30-Nov-2018 RM'000 Operating activities Profit before tax Depreciation and amortisation Other adjustments Operating cash flows before changes in working capital 125,452 54,393 13,718 193,563 141,879 47,690 29,066 218,635 Changes in working capital Net changes in current assets Net changes in current liabilities Cash flows from operating activities Interest paid Income taxes paid Net cash flows generated from operating activities (29,633) (29,766) 134,164 (18,661) (17,879) 97,624 26,422 (75,730) 169,327 (18,670) (15,560) 135,097 5,887 (38,599) (185,040) 177 1,725 (215,850) 4,982 (20,347) (104,604) 7,034 3,037 (109,898) Financing activities Proceeds from issuance of shares Transaction cost Repayment of lease liabilities Drawdown of loans and borrowings Net cash flows generated from financing activities (4) (524) 107,182 106,654 396 11,731 12,127 Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at 1 September 2019 / 2018 Cash and cash equivalents at 30 November 2019 / 2018 (11,572) 165,782 154,210 37,326 158,724 196,050 Investing activities Proceeds from disposal of investment securities Purchase of investment securities Purchase of property, plant and equipment Proceeds from disposal of property, plant and equipment Interest received Net cash flows used in investing activities The Condensed Consolidated Cash Flow Statement should be read in conjunction with the Annual Financial Report for the financial year ended 31 August 2019. 5
281. TOP GLOVE CORPORATION BHD . Company No.199801018294 (474423-X) The World’s Largest Manufacturer of Gloves Website : www.topglove.com E-mail : invest@topglove.com.my NOTES TO THE INTERIM FINANCIAL STATEMENTS FOR THE FIRST QUARTER ENDED 30 NOVEMBER 2019 1. Basis of preparation The interim financial report is unaudited and has been prepared in accordance with Malaysian Financial Reporting Standard (“MFRS”) 134: Interim Financial Reporting and paragraph 9.22 of the Listing Requirements of Bursa Malaysia Securities Berhad. The interim financial report should be read in conjunction with the audited financial statements of the Group for the financial year ended 31 August 2019. The explanatory notes attached to the interim financial statements provide an explanation of events and transaction that are significant to the understanding of the changes in the financial position and performance of the Group since the financial year ended 31 August 2019. The audited financial statements of the Group for the year ended 31 August 2019 were prepared in accordance with Malaysian Financial Reporting Standards (“MFRS”). The significant accounting policies and method of computations adopted in preparation of this interim financial report are consistent with those adopted in the audited financial statements of the Company for the financial year ended 31 August 2019 except for the adoption of the following new MFRS and Issue Committee Interpretations (“IC Interpretations”): Description Amendments to MFRS 9: Prepayment Features with Negative Compensation Amendments to MFRS 119: Plan Amendment, Curtailment or Settlement Amendments to MFRS 128: Long-term Interests in Associates and Joint Ventures Annual Improvements to MFRSs 2015 - 2017 Cycle IC Interpretation 23: Uncertainty over Income Tax Treatments The adoption of the above mentioned standards did not have a material impact on the financial statements of the Group. Impact of the initial application of MFRS 16 Leases On the date of initial application, the Group applied the simplified transitional approach and did not restate comparative amounts for the period prior to first adoption. The adoption of MFRS 16 to the opening balance as at 1 September 2019 has the following impact: Right of use assets Lease liabilities Retained earnings 2. Audited 31 Aug 2019 RM’000 1,751,963 Adjustment RM’000 6,542 6,596 (54) After MFRS 16 Adoption RM’000 6,542 6,596 1,751,909 Auditors’ report The audited financial statements for the financial year ended 31 August 2019 was not subject to any qualification. 3. Seasonal or cyclical factors The operations of the Group were not affected by any seasonal or cyclical factors in view of its well diversified world markets and the nature of the Company’s products being disposable gloves. 6
282. TOP GLOVE CORPORATION BHD . Company No.199801018294 (474423-X) (Incorporated in Malaysia) NOTES TO THE INTERIM FINANCIAL STATEMENTS FOR THE FIRST QUARTER ENDED 30 NOVEMBER 2019 (CONTINUED) 4. Extraordinary and exceptional items There were no extraordinary and exceptional items of unusual nature affecting assets, liabilities, equity, net income, or cash flows in the interim financial period ended 30 November 2019. 5. Changes in estimates of amounts reported previously There were no material changes in estimates of amounts reported in prior interim periods or prior financial year that have a material effect in the current financial year to date. 6. Changes in debts and equity securities There were no issuance and repayment of debt and equity securities, share cancellations and resale of treasury shares in the current quarter and financial period ended 30 November 2019. 7. Dividends paid The Board of Directors of Top Glove has adopted a Dividend Policy to declare and pay annual dividends of 50% of its profit after tax and minority interest in respect of future financial years. Record of dividends paid: Net Dividend Financial Year per share (sen)* 2019 3.50 (interim) 2018 8.50 2017 7.25 2016 7.25 2015 5.75 2014 4.00 2013 4.00 2012 4.00 2011 2.75 2010 4.00 2009 2.75 2008 1.38 2007 1.15 2006 0.92 2005 0.67 2004 0.59 2003 0.46 2002 0.14 2001 0.20 Total Total Dividend Paid (RM’000) 89,566 217,282 181,936 181,655 143,143 99,009 99,252 99,038 68,035 98,877 65,873 32,389 27,435 21,173 14,110 12,295 9,550 2,808 4,000 1,467,426 Note: * Net dividend per share has been adjusted to reflect: a) Bonus issue of 30% in April 2002, 40% in April 2003, 40% in February 2007, 100% in July 2010, 100% in January 2016 and 100% in October 2018. b) Subdivision of shares from one ordinary share of RM1.00 to two ordinary shares of RM0.50 each which was completed in February 2005. 7
283. TOP GLOVE CORPORATION BHD . Company No.199801018294 (474423-X) (Incorporated in Malaysia) NOTES TO THE INTERIM FINANCIAL STATEMENTS FOR THE FIRST QUARTER ENDED 30 NOVEMBER 2019 (CONTINUED) 8. Segmental reporting a. Primary reporting segment – Geographical segments. The Group operates in three principal geographical areas of the world and is primarily involved in the gloves manufacturing industry. The directors are of the opinion that all intersegment transactions have been entered into in the normal course of business and have been established on negotiated and mutually agreed terms. 3 months ended 30 November 2019 Malaysia RM’000 Revenue External sales 1,039,795 Intersegment sales 64,254 Total Revenue 1,104,049 Thailand RM’000 China RM’000 Others RM’000 Eliminations RM’000 Consolidated RM’000 (146,963) (146,963) 1,209,100 1,209,100 90,665 82,527 173,192 18,744 182 18,926 59,896 59,896 132,065 (18,246) 8,776 (294) (1,626) - 2,369 (178) - 141,584 (18,718) 2,586 - - - - 2,586 125,452 Assets Segment assets Intangible assets 3,816,628 1,255,456 369,257 - 75,980 - 311,544 - 1,267,967 - 5,841,376 1,255,456 Liabilities Segment liabilities 2,945,407 147,252 13,700 22,738 130,192 3,259,289 Result Segment profit Finance cost Share of result of associate Profit before tax b. Secondary reporting segment – Business segments As the Group is principally involved in gloves manufacturing industry, segment reporting by business segment is not prepared. 9. Valuation of property, plant and equipment There was no revaluation of property, plant and equipment brought forward from the previous audited financial statements as the Group does not adopt a revaluation policy on its property, plant and equipment. 10. Material events subsequent to the end of the interim report There were no significant subsequent events after the end of the interim period to the date of this announcement, which will materially affect the earnings or income of the Group. 8
284. TOP GLOVE CORPORATION BHD . Company No.199801018294 (474423-X) (Incorporated in Malaysia) NOTES TO THE INTERIM FINANCIAL STATEMENTS FOR THE FIRST QUARTER ENDED 30 NOVEMBER 2019 (CONTINUED) 11. Changes in the composition of the Group During the quarter under review, TG Excellence Berhad, a wholly owned subsidiary had been added to the Group. There were no other significant changes in the composition of the Group, including business combination, acquisition or disposal of subsidiaries and long term investment, restructuring and discontinuing operations. 12. Contingent liabilities A nominal amount of RM2,474.9 million relating to corporate guarantees has been provided by the Company to banks for its subsidiaries’ loans and borrowings. The fair value of the corporate guarantees granted by the Company to banks in respect of loans and borrowings obtained by its subsidiaries is not material as the difference in borrowing rates charged by the banks is not significant in the absence of such guarantees. 13. Capital commitments As at the end of the reporting quarter, the Company had approved and contracted for capital expenditures amounting approximately to RM386.6 million. 9
285. TOP GLOVE CORPORATION BHD . Company No.199801018294 (474423-X) (Incorporated in Malaysia) NOTES TO THE INTERIM FINANCIAL STATEMENTS FOR THE FIRST QUARTER ENDED 30 NOVEMBER 2019 (CONTINUED) ADDITIONAL INFORMATION REQUIRED BY BURSA MALAYSIA’S LISTING REQUIREMENTS 14. Review of performance A comparison of Top Glove’s performance for the first quarter ended 30 November 2019 (“1QFY20”) with the corresponding period last financial year is as follows: 1QFY20 1QFY19 Variance RM’mil Revenue RM’mil % 1,209.1 1,262.0 (4.2%) Operating profit 141.6 159.8 (11.4%) Profit before interest and tax 142.4 157.6 (9.6%) Profit before tax 125.5 141.9 (11.6%) Profit after tax 111.8 111.7 0.1% Profit attributable to owners of the parent 111.4 110.1 1.2% The Group’s Sales Revenue for 1QFY20 came in at RM1.21 billion, easing by 4.2% compared with 1QFY19, due to lower average selling prices (ASPs) and lower average raw material prices, but Sales Volume increased by 0.2% and Profit After Tax increased by 0.1% year on year to RM111.8 million. The nitrile glove segment continued to perform very well, delivering strong Sales Volume growth of 20% and significantly higher contributions to Group Profit. Ongoing technological advancements, as well as automation and digitalisation initiatives which resulted in more efficiency and better quality control, also accounted for the improved profit. Thus, the Group was able to increase both sales and profitability. Meanwhile, increased nitrile capacity from ongoing organic expansion allowed the Group to further grow sales, cater to larger customers and capture a bigger market share in US, Western Europe and Japan. The improvements in the nitrile glove segment were offset by weaker contributions from the natural rubber and the vinyl glove segments. In addition, the price of natural rubber latex which had increased by nearly 9% compared with 1QFY19 coupled with competition, also impacted performance. Sales volume growth in the natural rubber segment was lower year on year following slower demand growth in developing countries compared with 1QFY19. However, the Group is confident that demand growth in developing countries will pick up going forward, driven by increased healthcare awareness arising from improved standards of living. Raw material prices were mixed. Average latex concentrate prices at RM4.13/kg, up 8.7% against 1QFY19, while the average nitrile latex price was USD1.06/kg, down 14.5% year on year. 10
286. TOP GLOVE CORPORATION BHD . Company No. 199801018294 (474423-X) (Incorporated in Malaysia) NOTES TO THE INTERIM FINANCIAL STATEMENTS FOR THE FIRST QUARTER ENDED 30 NOVEMBER 2019 (CONTINUED) 14. Review of performance (continued) The financial results of Top Glove since financial year 2008 are as follows: Financial year ended 31 August RM ‘mil 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 3MFY20 (unaudited) Revenue 1,377.9 1,529.1 2,079.4 2,053.9 2,314.5 2,313.2 2,275.4 2,510.5 2,888.5 3,409.2 4,220.7 4,801.1 1,209.1 EBITDA 197.8 287.5 364.7 196.7 297.7 310.6 301.8 441.7 524.7 489.3 694.0 687.5 196.9 EBITDA margin 14.4% 18.8% 17.5% 9.6% 12.9% 13.4% 13.3% 17.6% 18.2% 14.4% 16.4% 14.3% 16.3% PBT 134.6 222.0 305.0 145.5 240.7 242.2 216.3 363.5 442.2 393.4 522.8 423.6 125.5 PBT margin 9.8% 14.5% 14.7% 7.1% 10.4% 10.5% 9.5% 14.5% 15.3% 11.5% 12.4% 8.8% 10.4% Taxation 26.5 53.9 54.6 30.3 33.4 39.4 32.7 82.3 79.8 54.5 89.6 56.1 13.7 PAT 108.1 168.1 250.4 115.1 207.3 202.8 183.6 281.2 362.4 338.9 433.2 367.5 111.8 PAT margin 7.8% 11.0% 12.0% 5.6% 9.0% 8.8% 8.1% 11.2% 12.5% 9.9% 10.3% 7.7% 9.2% 11
287. TOP GLOVE CORPORATION BHD . Company No. 199801018294 (474423-X) (Incorporated in Malaysia) NOTES TO THE INTERIM FINANCIAL STATEMENTS FOR THE FIRST QUARTER ENDED 30 NOVEMBER 2019 (CONTINUED) 15. Comparison of quarterly financial results with preceding quarter Revenue 1QFY20 4QFY19 Variance RM’mil RM’mil % 1,209.1 1,189.0 1.7% Operating profit 141.6 96.6 46.6% Profit before interest and tax 142.4 91.6 55.5% Profit before tax 125.5 74.0 69.6% Profit after tax 111.8 74.0 51.1% Profit attributable to owners of the parent 111.4 74.2 50.1% The Group’s Sales Revenue for 1QFY20 was RM1.21 billion, up 1.7% quarter on quarter, with strong growth in Sales Volume (Quantity Sold) of 6% versus 4QFY19. Its profit figures were solid, with Profit Before Tax and Profit After Tax surging 69.6% to RM125.5 million and 51.1% to RM111.8 million respectively. The Group’s commendable profit was mainly attributed to strong growth in the nitrile glove segment, which saw an increase of 12% in Sales Volume versus 4QFY19. Also contributing to profit margins was the natural rubber glove segment, as the effect of the upward revision in ASPs took effect alongside the downward trend in the price of latex concentrate. In addition, Top Glove’s Thailand operations contributed positively to its good performance, while the Group continued to see recovery in its China operations, which has improved due to better ASPs for its vinyl gloves. Aspion’s positive profit position also contributed to the Group’s bottom line. In line with expectations, average latex concentrate prices continued their downward trend, falling by 11% from RM4.64/kg in 4QFY19 to RM4.13/kg in 1QFY20. Average prices for nitrile latex also decreased marginally by 1.8% from USD1.08/kg to USD1.06/kg quarter on quarter. 12
288. TOP GLOVE CORPORATION BHD . Company No.199801018294 (474423-X) (Incorporated in Malaysia) NOTES TO THE INTERIM FINANCIAL STATEMENTS FOR THE FIRST QUARTER ENDED 30 NOVEMBER 2019 (CONTINUED) 16. Commentary on prospects and targets The Group will continue pursuing expansion in order to meet the increase in global glove demand which is set to grow by 10% yearly. Its expansion plans are detailed as follows: Factories To commence production by (Calendar quarter) Country Current: 33 glove factories Glove type Number of production lines Capacity (pieces per annum) All 683 lines 70.1 billion Expansion in progress: Glove F7A Refurbishment F2B Refurbishment F5A New factory F40 New factory 1st phase F41 New factory 1st phase F8A New factory 1st phase Total new capacity in 2020 1st quarter 2020 1st quarter 2020 1st quarter 2020 2nd quarter 2020 2nd quarter 2020 4th quarter 2020 Thailand Malaysia Malaysia Malaysia Vietnam Thailand Latex Nitrile Nitrile Nitrile PVC Nitrile 4 lines 4 lines 20 lines 22 lines 20 lines 28 lines 98 lines 0.4 billion 0.7 billion 2.5 billion 2.7 billion 2.0 billion 3.5 billion 11.8 billion F40 New factory 2nd phase F42 New factory 1st phase F41 New factory 2nd phase F45 New factory 1st phase Total new capacity in 2021 1st quarter 2021 1st quarter 2021 2nd quarter 2021 4th quarter 2021 Malaysia Malaysia Vietnam Malaysia Nitrile Nitrile PVC Nitrile 16 lines 24 lines 20 lines 20 lines 80 lines 2.0 billion 3.0 billion 2.0 billion 2.5 billion 9.5 billion 178 lines 861 lines 21.3 billion 91.4 billion Total new capacity by 2021 Grand total by December 2021: 39 glove factories This will boost the Group’s total number of production lines by an additional 178 lines and production capacity by 21.3 billion gloves per annum, represent an increase of 30.4% in capacity over the next 2 years. By December 2021, Top Glove is projected to have 861 production lines and a production capacity of 91.4 billion gloves per annum. Top Glove will continue to invest in existing line refurbishment and building new technologically advanced glove factories. The Group’s newer factories will feature more automation and digitalisation initiatives, such as an Automated Guided Vehicle (AGV) transport and warehouse management system, production SCADA system, glove auto packing system, artificial intelligence vision camera system for online detection and removal of defective gloves, as well as auto compounding and chemical preparation. In addition, the Group will continue to explore M&As and JVs, while also diversifying into rubber or healthcare-related businesses. Reflecting the importance of R&D and innovation at Top Glove, plans are in progress to establish a Manufacturing and Research Centre of Excellence, the Group’s new state-of-the-art hub for R&D and product innovation embracing Industry Revolution 4.0 initiatives, based in Banting, Malaysia. In recognition of its continued good performance, Top Glove remains a component of the FBM KLCI following a recent review by the FTSE Russell in December 2019. Top Glove also garnered several prestigious local and regional HR awards in October and November 2019, which include Graduates’ Choice Award 2019: Champion (Manufacturing), Malaysia’s 100 Leading Graduate Employers 2019: Winner (Chemicals and Heavy Industries) and HR Asia’s Best Companies to Work for In Asia 2019 (Malaysian Chapter): Winner. 13
289. TOP GLOVE CORPORATION BHD . Company No.199801018294 (474423-X) (Incorporated in Malaysia) NOTES TO THE INTERIM FINANCIAL STATEMENTS FOR THE FIRST QUARTER ENDED 30 NOVEMBER 2019 (CONTINUED) 16. Commentary on prospects and targets (continued) As a socially responsible employer and industry leader, Top Glove is committed to upholding fair labour practices and complying with requirements of labour laws, while ensuring adequate measures are in place to protect the safety and well-being of its workforce. In the face of a difficult business environment, Top Glove remains upbeat in terms of outlook. Industry prospects remain promising and to ensure it is well-positioned to tap the growing glove demand, Top Glove will continue to prioritise R&D, innovation and Industry 4.0 initiatives. These will enable the company to increase quality, operational efficiency and effectiveness, while keeping customers satisfied and ultimately deliver good results in the quarters to come. 17. Variance of actual profits from forecast profits Not applicable as no profit forecast was issued. 18. Taxation Quarter Ended and Year To Date Ended 30 Nov 2019 30 Nov 2018 RM’000 RM’000 Income tax Current quarter/year Under provision Real property gain tax Deferred tax 18,515 132 11 (4,963) 13,695 24,533 5,675 30,208 The effective tax rate of the Group is lower than the statutory tax rate due to the tax incentives available to Malaysia and certain overseas subsidiaries. 19. Profit/(loss) on sales of unquoted investments and/or properties There were no sales of unquoted investments and/or properties during the current quarter and financial year to date. 20. Purchase and disposal of quoted securities Purchase of quoted securities Disposal of quoted securities Quarter Ended and Year To Date Ended 30 Nov 2019 RM’000 38,599 5,887 Other than the above, there was no other purchase or disposal of quoted securities by the Group for the current quarter and financial year to date. 21. Status of corporate proposals announced There were no corporate proposals announced which remain uncompleted during the quarter under review as at the date of this report. 14
290. TOP GLOVE CORPORATION BHD . Company No.199801018294 (474423-X) (Incorporated in Malaysia) NOTES TO THE INTERIM FINANCIAL STATEMENTS FOR THE FIRST QUARTER ENDED 30 NOVEMBER 2019 (CONTINUED) 22. Derivative financial instruments As at 30 Nov 2019 Contract/Notional Fair value Amount Assets RM’000 RM’000 Forward currency contracts 462,915 306 As at 30 Nov 2019, the Group held forward contracts designated as hedges of expected future sales to customers and repayment of loan for which the Group has firm commitments. Forward currency contracts used to hedge the Company’s sales are denominated in USD and EURO for which firm commitments existed at the reporting date, extending to April 2020. During the year to date ended 30 Nov 2019, the Group recognised a gain of RM1,958,000 arising from changes in fair value of the forward currency contracts. 23. Fair value hierarchy The Group uses the following hierarchy in determining the fair value of all financial instruments carried at fair value: Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2 – Inputs that are based on observable market data, either directly or indirectly Level 3 – Inputs that are not based on observable market data As at 30 Nov 2019, the Group held the following financial assets and liabilities that are measured at fair value: Assets measured at fair value: Debt instrument at fair value through other comprehensive income • Debt securities (quoted outside Malaysia) Financial assets at fair value through profit or loss • Money market funds (quoted in Malaysia) Derivative financial instruments • Fair value assets Level 1 RM’000 Level 2 RM’000 Total RM’000 106,378 - 106,378 13,943 - 13,943 - 306 306 15
291. TOP GLOVE CORPORATION BHD . Company No.199801018294 (474423-X) (Incorporated in Malaysia) NOTES TO THE INTERIM FINANCIAL STATEMENTS FOR THE FIRST QUARTER ENDED 30 NOVEMBER 2019 (CONTINUED) 24. Group loans and borrowings The Group loans and borrowings as at 30 Nov 2019 were as follows: As at 30 Nov 2019 Foreign Currency Denominated ’000 RM’000 Current Secured Revolving credit USD 1,525 6,359 Revolving credit EUR 46 212 Revolving loan Term loan Term loan Trade facilities Trade facilities 402 6,973 Unsecured Syndicated loan USD 31,000 129,310 Less: Transaction costs (1,137) 128,173 Bankers’ acceptance 1,875 Promissory notes THB 670,702 92,546 Revolving credit USD 153,760 639,294 Revolving credit EUR 38,624 177,409 Revolving credit JPY 2,340,770 89,183 Revolving credit 49,800 Term loan 5,865 1,184,145 Total current borrowings 1,191,118 Non-current Secured Hire purchase Revolving loan Term loan Unsecured Syndicated loan Less: Transaction costs Term loan Exchangeable bond Total non-current borrowings - USD USD 108,500 201,022 147 147 452,586 (2,559) 450,027 17,038 838,524 1,305,589 1,305,736 As at 30 Nov 2018 Foreign Currency Denominated ’000 RM’000 USD USD USD USD 23,957 5,220 21,429 677 - - THB USD 347,902 119,450 - 100,072 21,861 89,549 2,787 2,838 77,225 294,332 (3,463) (3,463) 44,280 500,257 62,500 3,750 607,324 901,656 USD 7,380 - 579 30,907 12,856 44,342 USD 310,000 1,298,280 (4,432) 1,293,848 11,250 1,305,098 1,349,440 - 16
292. TOP GLOVE CORPORATION BHD . Company No.199801018294 (474423-X) (Incorporated in Malaysia) NOTES TO THE INTERIM FINANCIAL STATEMENTS FOR THE FIRST QUARTER ENDED 30 NOVEMBER 2019 (CONTINUED) 24. Group loans and borrowings (continued) Summary USD RM THB EUR JPY As at 30 Nov 2019 RM’000 495,807 2,066,073 71,431 71,431 670,702 92,546 38,670 177,621 2,340,770 89,183 Total loans and borrowings Exchange rate RM to USD1.00 Exchange rate RM to THB1.00 Exchange rate RM to EUR1.00 Exchange rate RM to JPY1.00 25. USD RM THB As at 30 Nov 2018 RM’000 488,113 2,043,764 163,052 163,052 347,902 44,280 - 2,496,854 2,251,096 4.1713 0.1380 4.5932 0.0381 4,1880 0.1273 - Notes to the Statement of Comprehensive Income Profit for the period has been arrived at after crediting/(charging) the following items: Quarter Ended and Year To Date Ended 30 Nov 2019 RM’000 Interest income Other income including investment income Interest expenses Depreciation and amortization Foreign exchange gain Fair value gain on foreign exchange contracts 26. 1,725 7,620 (18,718) (54,393) 1,839 1,958 Material litigation Save as disclosed below, the Group is not engaged in any material litigation, claim or arbitration, either as plaintiff or defendant, which has a material effect on the financial position or business of the Group. The Board is not aware of any proceedings, pending or threatened against the Group, or of any facts likely to give rise to any proceedings which might materially and adversely affect the financial position or business of the Group. In reference to all the announcements made in relation to the below mentioned legal proceedings, the Board wishes to provide the latest update on the legal proceedings as follows: (Unless otherwise defined, the terms used herein shall have the same meaning as those defined in the Announcements in relation to the following legal proceedings.) 1. Fresh Mareva Injunction against Low Chin Guan, Wong Chin Toh and ACPL in the Writ Action and Adventa Capital Pte Ltd the KL OS2 ("the Applications") at the Kuala Lumpur High Court. 17
293. TOP GLOVE CORPORATION BHD . Company No.199801018294 (474423-X) (Incorporated in Malaysia) NOTES TO THE INTERIM FINANCIAL STATEMENTS FOR THE FIRST QUARTER ENDED 30 NOVEMBER 2019 (CONTINUED) 26. Material litigation (Continued) The Company and Top Care have obtained: (i) In the Fresh Mareva Injunction, an Erinford injunction pending the disposal of their appeal at the Court of Appeal. Pursuant to the Erinford injunction, Low Chin Guan and Wong Chin Toh are restrained up to RM219.7 million and ACPL Sdn Bhd up to the amount of RM72.3 million; (ii) In KL OS2, an Erinford injunction pending disposal of their appeal at the Court of Appeal. Pursuant to the Erinford injunction, Adventa Capital Pte Ltd is restrained up to RM219.7 million pending disposal of their appeal at the Court of Appeal. The appeals at the Court of Appeal were partially heard on 1 August 2019 and adjourned to 25 March 2020. For the Writ Action, the High Court has vacated all trial dates previously fixed and fixed new trial dates in March 2020 to October 2020. 2. Mareva Injunction at the High Court of the Republic of Singapore and subsequently at the Singapore arbitration tribunal. On 10 June 2019, the Singapore High Court has set aside the Mareva Order but granted an Erinford injunction up to RM714.9 million on the same terms as the Mareva Order. The Erinford injunction will subsist until the Company and Top Care file an application for a Mareva injunction to the arbitration tribunal by 24 June 2019, and if the Company and Top Care file such application, the Erinford injunction will remain in force until further determination or order by the arbitration tribunal. The Company and Top Care have on 23 June 2019 filed the aforesaid application at the arbitration tribunal. The application was heard from 21 to 23 November 2019 but the decision is still pending. 3. Arbitration proceedings at the Singapore International Arbitration Centre involving the Company and Top Care a against Adventa Capital ("Singapore Arbitration"). The evidentiary hearing of Arbitration proceedings has been fixed from January to June 2021. Based on available information and on legal advice, there have a more than even chance of success in this claims. 27. Dividends The Board of Directors has on 26 September 2019 declared a final single tier dividend of 4 sen per ordinary share amounting to approximately RM102.4 million for the financial year ended 31 August 2019, payable on 23 December 2019. 28. Earnings per share Quarter Ended and Year To Date Ended 30 Nov 2019 30 Nov 2018 Basic Profit net of tax attributable to owners of the parent (RM’000) Weighted average number of ordinary shares in issue (’000) Basic earnings per share (sen) Diluted Weighted average number of ordinary shares in issue (‘000) Effect of dilution from: Share options (‘000) Exchangeable bonds (‘000) Adjusted weighted average number of ordinary shares in issue and issuable (‘000) Diluted earnings per share (sen) 111,426 110,055 2,555,009 2,554,246 4.36 4.31 2,555,009 2,554,246 131,215 2,686,224 621 2,554,867 4.15 4.31 18
294. THE ISSUER TG Excellence Berhad Level 21 , Top Glove Tower 16 Persiaran Setia Dagang Setia Alam, Seksyen U13 40170 Shah Alam, Selangor THE KAFALAH PROVIDER Top Glove Corporation Berhad Level 21, Top Glove Tower 16 Persiaran Setia Dagang Setia Alam, Seksyen U13 40170 Shah Alam, Selangor JOINT LEAD ARRANGERS CIMB Investment Bank Berhad Level 13, Menara CIMB Jalan Stesen Sentral 2 Kuala Lumpur Sentral 50470 Kuala Lumpur Hong Leong Investment Bank Berhad Level 28, Menara Hong Leong No. 6, Jalan Damanlela Bukit Damansara 50490 Kuala Lumpur JOINT LEAD MANAGERS CIMB Investment Bank Berhad Level 13, Menara CIMB Jalan Stesen Sentral 2 Kuala Lumpur Sentral 50470 Kuala Lumpur Hong Leong Investment Bank Berhad Level 30, Menara Hong Leong No. 6, Jalan Damanlela Bukit Damansara 50490 Kuala Lumpur OCBC Al-Amin Bank Berhad Level 25, Wisma Lee Rubber, 1 Jalan Melaka 50100 Kuala Lumpur SUKUK TRUSTEE FACILITY AGENT Amanahraya Trustees Berhad Tingkat 14, Wisma AmanahRaya No. 2, Jalan Ampang 50508 Kuala Lumpur Hong Leong Investment Bank Berhad Level 28, Menara Hong Leong No. 6, Jalan Damanlela Bukit Damansara 50490 Kuala Lumpur SHARIAH ADVISER SOLICITORS TO THE JPAs, JLAs and JLMs CIMB Islamic Bank Berhad Level 13, Menara CIMB Jalan Stesen Sentral 2 Kuala Lumpur Sentral 50470 Kuala Lumpur Messrs Adnan Sundra & Low Level 11 Menara Olympia No. 8 Jalan Raja Chulan 50200 Kuala Lumpur