ANNUAL REPORT 2020

The financial year under review has been an exceptional year for the Group, especially with the global onset of the COVID-19 pandemic. In the financial year under review, the Group has exceeded its performance milestones with a remarkable increase in revenue.

DIRECTORS’ PROFILE

TAN SRI DATO’ LIM KUANG SIA

MOHAMED SHAFEII BIN ABDUL GAFFOOR

LEE CHOO HOCK

HOH KIM HYAN

LIM LENG BUNG

TAN KONG CHANG

LIM SIAU TIAN

LIM SIAU HING

LIM OOI CHOW

KEY SENIOR MANAGEMENT

DR. OR TAN TENG

PUAN SRI DATIN CHOW CHENG MOEY

LEE HON CHEE

TEOH HOCK HEAN

CHAN YEE CHONG

TUNG YONG FONG

HENG BONG KIN

HANS PETER ROHR

TAN ENG TECK

JOYCE YOONG NYUK FONG

LISA WONG HOI PING

Sustainability is central to Kossan Rubber Industries Bhd's ("KOSSAN" or the "Group") business and is driven by our focus on business stability with long-term sustainable growth. Our core business units are gloves and technical rubber products ("TRP"), both of which are primarily located in Malaysia.

SUSTAINABILITY STATEMENT

ENVIRONMENTAL PROTECTION One of KOSSAN's areas over the years has been reducing the impact of its production activities on the environment. Assessment – the outcome of the training is assessed through classroom lectures, on-the-job mentor observations and a final project to apply the knowledge gained to solving real workplace problems.

CORPORATE GOVERNANCE OVERVIEW STATEMENT

Board Leadership

Roles and Responsibilities of the Board
Chairman
Chairman and Chief Executive Officer
Qualified and competent Company Secretary
Supply of Information

Demarcation of Responsibilities 1 Board Charter
Business Conduct and Corporate Culture

Kossan Code of Ethics and Conduct (“KCEC”)

Board’s objectivity

Composition of the Board
Independent Directors
Policy on Tenure of Independent Non-Executive Directors
Board and Senior Management
Gender Diversity
Appointment of New Directors
Nominating Committee

Overall Board Effectiveness 1 Annual evaluation
Level and Composition of Remuneration 1 Remuneration Policy

Remuneration Committee

Effective and Independent Audit Committee 1 Composition of the AC

Chairman of the Audit Committee and Chairman of the Board The Chairman of the AC is not the Chairman of the Board
Financial literacy of AC Members
Appointment of AC Member being a Former Key Audit Partner
Independence of External Auditor

RISK MANAGEMENT AND INTERNAL CONTROL FRAMEWORK

Risk Management and Internal Control
Effective Governance, Risk Management and Internal Control Framework 1 Internal Audit Function
Communication between Company and Stakeholders
Shareholders Participation at General Meetings

Mohamed Shafeii Bin Abdul Gaffoor, also an Independent Non-Executive Director is the Chairman of the Board. Directors are required by the Companies Act 2016 ("the Act") to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Group and the Company at the end of the financial year. and of the results and cash flow of the Group and the Company for the financial year.

STATEMENT OF RESPONSIBILITY BY DIRECTORS

Assessing and monitoring the effectiveness of the Group's risk management and internal control system; Providing assurance to the board that the risk management and internal control system functions adequately and effectively;

STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

Assessing and monitoring the risk management framework in accordance with the Group's business objectives and risk appetite;. The Group Managing Director (“GMD”) plays a key role in communicating the Board's expectations for the risk management and internal control system to management.

Core Values

TERMS OF REFERENCE OF THE AUDIT COMMITTEE

Composition
Authority
Responsibility
Functions and Duties

The chairman of the audit committee is an independent non-executive director and not the chairman of the board of directors. The functions and duties of the audit committee include reviewing and reporting to the board on the following: i) appointment and re-appointment or resignation of external auditors; ii) the scope of the audit; and. iii) assessment of suitability, objectivity and independence of external auditors. i) adequacy of scope of work, qualifications and resources, and authorization to perform tasks; ii) approves the internal audit plan and evaluates the audit process and results; and (iii) ensure that the work of internal audit is effective and independent of management. i) ensuring the adequacy and effectiveness of functions; and (ii) review feature reports. i) review financial reporting and possible changes in accounting policies; ii) review financial reporting issues and significant management judgments; and (iii) review significant and unusual transactions and ensure their efficient handling.

REPORT OF THE AUDIT COMMITTEE

Meeting and Minutes
COMPOSITION AND ATTENDANCE AT MEETINGS
ACTIVITIES
COST OF INTERNAL AUDIT
REPORT TO THE EXCHANGE

The Group's external auditors attended three (3) of the meetings, while the internal internal auditors attended four (4) of the meetings. The following activities were carried out by the Audit Committee in the reporting year: a) review the quarterly and annual financial statements of the Company/Group before submitting them to the Board of Directors for consideration and approval;

DIRECTORS’ REPORT

These are the directors of the Company's subsidiaries who have served in the financial year up to the date of this report. No options have been granted to any person to take up unissued shares in the Company during the financial year.

STATEMENTS OF FINANCIAL POSITION

STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

CONSOLIDATED STATEMENT OF CHANGES IN EqUITY

STATEMENT OF CHANGES IN EqUITY

STATEMENTS OF CASH FLOWS

BASIS OF PREPARATION (a) Statement of compliance

Amendments to IFRS 9, Financial Instruments, IFRS 139, Financial Instruments: Recognition and Measurement, IFRS 7, Financial Instruments: Disclosure, IFRS 4, Insurance Contracts and IFRS 16, Leases – Interest Rate Amendment MFRS 21, Reform of stage 2 Leases – Lease concessions related to Covid-19 beyond 30 June 2021 IFRS, interpretations and amendments effective for annual periods beginning on or after 1 January 2022. Amendments to IFRS 1 First-time Adoption of Malaysian Standards of Financial Reporting (Annual Improvements in MFRS 2018−2020).

NOTES TO THE FINANCIAL STATEMENTS

BASIS OF PREPARATION (CONT’D) (a) Statement of compliance (Cont’d)

MFRSs, interpretations and amendments effective for annual periods beginning on or after a date not yet confirmed. The first application of the above accounting standards and changes is not expected to have any significant financial impact on the group's and the Company's accounts for the current period and previous periods. The Group early adopted the amendment to MFRS 116, Property, plant and equipment − Proceeds before intended use, issued in June 2020, which is effective for annual periods beginning on or after 1 January 2022 in relation to the test costs and the net proceeds from the test. of its asset during its construction before its intended use.

BASIS OF PREPARATION (CONT’D)

SIGNIFICANT ACCOUNTING POLICIES

SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

All financial assets that are not measured at amortized cost or fair value through other comprehensive income as described above are measured at fair value through profit or loss. Financial assets categorized as fair value through profit or loss are subsequently measured at their fair value. Other financial liabilities that are not categorized as fair value through profit or loss are subsequently measured at amortized cost using the effective interest method.

SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (c) Financial instruments (Cont’d)

The Group excludes variable lease payments related to future performance or use of the underlying asset from the lease liability. The right-of-use asset is then depreciated on a straight-line basis from the effective date to the end of the right-of-use asset's useful life or the end of the lease term, whichever occurs first. In addition, the right-of-use asset is periodically reduced by any impairment losses and adjusted for certain remeasurements of the lease liability.

SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (g) Intangible assets (Cont’d)

The Group and the Company recognize loss provisions for expected credit losses on financial assets measured at amortized cost or fair value through other comprehensive income and contract assets. An impairment loss relating to financial assets measured at amortized cost is recognized in profit or loss and the carrying amount of the asset is reduced through the use of an allowance account. Dividend income is recognized in profit or loss on the date when the Group's or the Company's right to receive payment is established, which in the case of quoted securities is the ex-dividend date.

RIGHT-OF-USE ASSETS

RIGHT-OF-USE ASSETS (CONT’D)

Extension options
Significant judgements and assumptions in relation to lease
Borrowing costs

INVESTMENT PROPERTIES

INVESTMENT PROPERTIES (CONT’D)

Operating lease payments receivable
Fair value information

GOODWILL ON CONSOLIDATION

Impairment testing for cash-generating units containing goodwill

INTANGIBLE ASSETS

Impairment loss

INVESTMENTS IN SUBSIDIARIES

INVESTMENTS IN SUBSIDIARIES (CONT’D)

There are no non-controlling interests that are material to the Group for the year ended 31 December 2020. The Group recognized a decrease in non-controlling interests of RM3,880,105 and an increase in capital reserve of RM380,105.

INVESTMENT IN JOINT VENTURE

OTHER INVESTMENTS

DEFERRED TAX ASSETS/(LIABILITIES)

DEFERRED TAX ASSETS/(LIABILITIES) (CONT’D)

TRADE AND OTHER RECEIVABLES

The trade amount due from related parties are subject to normal trade terms
The non-trade amount due from holding company in 2019 was unsecured, subject to interest at 2.6%
The key assumptions for the estimation of recoverability of trade receivables include the following

INVENTORIES

CONTRACT ASSETS/(LIABILITIES)

CASH AND CASH EQUIVALENTS

CAPITAL AND RESERVES

LOANS AND BORROWINGS

LOANS AND BORROWINGS (CONT’D)

TRADE AND OTHER PAYABLES

DERIVATIVE FINANCIAL ASSETS/(LIABILITIES)

REVENUE

FINANCE COSTS

KEY MANAGEMENT PERSONNEL COMPENSATION The key management personnel compensation are as follows

TAX EXPENSE

PROFIT/(LOSS) FOR THE YEAR

PROFIT/(LOSS) FOR THE YEAR (CONT’D)

EARNINGS PER ORDINARY SHARE

DIVIDENDS

OPERATING SEGMENTS

OPERATING SEGMENTS (CONT’D)

FINANCIAL INSTRUMENTS

Categories of financial instruments

FINANCIAL INSTRUMENTS (CONT’D)

Categories of financial instruments (Cont’d)
Net gains and losses arising from financial instruments
Financial risk management
Credit risk
Credit risk (Cont’d)
Credit risk (Cont’d) Financial guarantees
Liquidity risk
Market risk

Currency risk

Market risk (Cont’d)

Currency risk (Cont’d)

Market risk (Cont’d) .2 Interest rate risk

Interest rate risk (Cont’d) Interest rate risk sensitivity analysis

Fair value information (Cont’d) Level 2 fair value

At the end of the reporting period, the maximum exposure to credit risk is represented by their accounting values in the statement of financial position. At the end of the reporting period, there was no indication that loans and advances to subsidiaries are not recoverable. Therefore, a change in interest rates at the end of the reporting period would not affect profit or loss.

CAPITAL MANAGEMENT

The fair value of currency forward contracts is estimated by discounting the difference between the contractual forward price and the current forward rate for the remaining life of the contract using a risk-free interest rate (based on government bonds). There has been no transfer between level 1 and level 2 fair values in the financial year (2019: no transfer in both directions). The fair value, which is calculated for information purposes, is calculated from the present value of future installment and interest cash flows discounted with the market interest rate at the end of the accounting period.

CAPITAL AND OTHER COMMITMENTS

CONTINGENT LIABILITY

RELATED PARTIES

RELATED PARTIES (CONT’D)

No provision is made for impairment losses in respect of the related outstanding balances at year end, and no impairment loss has been recognized during the year.

SIGNIFICANT EVENT DURING THE FINANCIAL YEAR

SUBSEQUENT EVENT AFTER THE FINANCIAL YEAR END

In the opinion of the directors, the financial statements on pages 56 to 137 have been prepared in accordance with the 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 to give. view of the financial position of the Group and the Company as at 31 December 2020 and of their financial performance and cash flows for the financial year ending at that time.

STATEMENT BY DIRECTORS

STATUTORY DECLARATION

Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Financial Statements section of our auditor's report. Key audit matters are those matters which, in our professional judgment, were most significant in our audit of the financial statements of the Group and of the Company for the current year. These matters were addressed in the context of our audit of the financial statements of the Group and of the Company as a whole, and in forming our opinion thereon, and we do not express a separate opinion on these matters.

INDEPENDENT AUDITORS’ REPORT

We have determined that there are no key audit matters in the audit of the Company's statutory annual accounts that need to be communicated in our audit report. The other information includes the information included in the annual report, but does not include the annual accounts of the Group and the Company and our auditor's report thereon. Our opinion on the annual accounts of the Group and the Company does not relate to the annual report and we do not formulate any assurance conclusions on this matter.

LIST OF PROPERTIES

The audit fees paid by the company and the group to the external auditors were RM59,400 and RM471,480 respectively. The non-audit fees paid or to be paid by the Company and the Group to the external auditors or companies affiliated with the external audit firm were RM44,200 and RM164,295 respectively. There were no significant differences between the result for the financial year and the unaudited results previously published by the company.

ADDITIONAL COMPLIANCE INFORMATION

The Company and its subsidiaries had no material contracts in which directors' and major shareholders' interests either still existed at the end of the financial year or, if they did not exist, entered into since the end of the previous financial year. None of the Directors, other than those disclosed in the Directors' profile, have any family relationships with other Directors and/or major shareholders of the Company or have any personal interest in any business arrangements in which the Company is involved.

STATISTICS ON SHAREHOLDINGS

SHAREHOLDERS

P. MORGAN SECURITIES PLC

17 DB (MALAYSIA) PENAMA (TEMPATAN) INDIVIDU BERHAD DEUTSCHE TRUSTEES MALAYSIA BERHAD UNTUK EASTSPRING INVESTMENTSSMALL-CAP FUND.

SHAREHOLDERS (CONT’D)

NOTICE IS HEREBY GIVEN THAT the 41st (41st) Annual General Meeting (“General Meeting”) of the Company will be held entirely virtually for the purpose of considering and, if appropriate, adopting with or without amendment the resolutions set out in this summons: . To receive the audited annual accounts for the financial year ended 31 December 2020 together with the board's and auditors' reports thereon. To re-appoint KPMG PLT as auditors for the company for the following year and.

NOTICE OF ANNUAL GENERAL MEETING

Receiving of the Audited Financial Statements
Proxy Form
Ordinary Resolution 1: Non-Executive Directors’ (“NED”) Remuneration
Ordinary Resolutions 2 to 4: Re-election of Directors who retire in accordance with Article 86 of the Company’s Constitution
Ordinary Resolution 5: Appointment of Auditors
Explanatory Notes on Special Business

AND FURTHER THAT the directors of the company or any of them are and are/. Ordinary resolutions 2 to 4: Re-election of board members who retire in accordance with § 86 of the company's articles of association. This is a renewal of the general mandate for issuing new ordinary shares in the company, which was approved at the last general meeting.

PROXY FORM

To register, participate and vote remotely via RPV devices, follow the procedures listed in the administrative details. Only members whose names are listed in the register of investors on 20/05/2021 have the right to participate and vote at the general meeting or to appoint proxy(s) who will participate and vote on their behalf through the RPV. ii). A member who has the right to participate and vote at the general meeting remotely via RPV has the right to appoint proxy(s) to participate virtually and vote remotely on his behalf.