n2n connect - annual report 2011 - part 1

7/31/2019 N2N Connect - Annual Report 2011 - part 1

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Corporate Sect ion01

N2N Connect Berhad Annual Report 2011

Whats inside The content o N2N Connect Annual Report 2011

CorporateSectionCorporate In ormation 02..............................................................................................................................................................Corporate Structure 03..............................................................................................................................................................Chairmans Statement 04..............................................................................................................................................................Directors Pro le 09..............................................................................................................................................................

Event Highlights 12..............................................................................................................................................................Corporate Governance Statement 14..............................................................................................................................................................Statement on Internal Control 19..............................................................................................................................................................

Audit Committee Report 20..............................................................................................................................................................Additional Compliance In ormation 25

FinancialSectionDirectors Report 28..............................................................................................................................................................Statement by Directors 32..............................................................................................................................................................Statutory Declaration 32..............................................................................................................................................................Independent Auditors Report to the Members 33..............................................................................................................................................................Statements o Financial Position 35..............................................................................................................................................................Statements o Comprehensive Income 36..............................................................................................................................................................

Statements o Changes in Equity 37..............................................................................................................................................................Consolidated Statement o Cash Flows 39..............................................................................................................................................................Statement o Cash Flows 41..............................................................................................................................................................Notes to the Financial Statements 43..............................................................................................................................................................Analysis o Shareholdings 84..............................................................................................................................................................Notice o Annual General Meeting 86..............................................................................................................................................................

Proxy Form


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02Corporate Sect ion


Corporate In ormationDIRECTORSIzlan bin Izhab(Independent Non-Executive Chairman)

Tiang Boon Hwa(Managing Director)

Lai Su Ping(Non-Independent Executive Director)

COMPANY SECRETARIESHo Mun Yee

(MAICSA 0877877)

Tam Fong Ying(MAICSA 7007857)

REGISTERED OFFICE3rd Floor17, Jalan Ipoh Kecil50350 Kuala Lumpur Telephone no.: 603 4044 3235Fax no.: 603 4041 3959E-mail: [email protected]

HEAD OFFICEWisma N2NLevel 9, Tower 2Avenue 3, Bangsar SouthNo. 8, Jalan Kerinchi59200 Kuala Lumpur

Telephone no.: 603 2241 1818Website: www.n2nconnect.com

Chua Tiong Hoong(Non-Independent Executive Director)

Cho Wai Loon(Independent Non-Executive Director)

Tan Boon Leng(Independent Non-Executive Director)

AUDITORSMorison Anuarul Azizan Chew

(AF 001977)Chartered Accountants18, Jalan 1/64O Jalan Kolam Air/Jalan Ipoh51200 Kuala Lumpur Telephone no.: 603 4048 2888

REGISTRARSymphony Share Registrars Sdn Bhd(378993-D)Level 6, Symphony HousePusat Dagangan Dana 1,Jalan PJU 1A/46,47301 Petaling Jaya, Selangor Telephone no. : 603 7841 8000Fax : 603 7841 8008

PRINCIPAL BANKERSMalayan Banking BerhadAmBank (M) Berhad

STOCK EXCHANGE LISTINGACE Market of Bursa Malaysia Securities BerhadStock Name: N2NStock Code : 0108


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Corporate StructureN2N

GLOBALSOLUTIONS

SDN BHD(N2NGS)

N2NCONNECTBERHAD

(N2N)

N2NCONNECTPTE LTD(N2NS)

NGNCONNECTION

SDN BHD(NGN)

100%

100%100%


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ChairmansStatementDear Shareholders,

On behal o the Board o Directorso N2N Connect Berhad (N2N orCompany), it is my pleasure to presentthe Annual Report and Audited FinancialStatements o N2N and its subsidiaries(Group) or the inancial year ended 31December 2011 (Year 2011).

The year under review was one duringwhich the Group improved its inancialper ormance signi icantly and gainedmomentum in its e orts to emerge asthe leading local and regional InnovativeApplication Service Provider or thee-Commerce and m-Commerce segmentso the Financial Industry.


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FINANCIAL PERFORMANCE HIGHLIGHTS

Year 2011 was a period during which the Groupocused on building capabilities in Direct Market

Access (DMA) and Market Message Trans erProtocol (MMTP) with various exchanges globally,and delivery o value-added services whilecontinuing to improve internal operational andinancial e iciencies.

Revenue or the year increased 38.6% to RM20.7million as eBrokerConnect TM business grew 4.3% toRM10.35 million while revenue rom the provisiono managed network services jumped 113.4% toRM10.22 million, re lecting increasing customeracceptance o our one-stop service solutions. Ourloss o RM1.47 million or Year 2011 has beenreduced sharply rom a loss o RM6.50 million a yearearlier, re lecting the intensive e orts to improveinternal e iciencies while growing the top line.In particular, I draw shareholders attention to theper ormance o the inal October-December 2011quarter (4Q 2011) when we recorded a pro ito RM0.44 million on revenue o RM5.82 million, aconsiderable improvement rom RM0.13 million andRM4.24 million, respectively, a year earl ier.

The Group continues to grow revenue locally bymigrating existing clients in Malaysia who have yetto join the new trading plat orm, and by winningnew clients. Our e orts to improve our value

proposition have resulted in our distinction o beingthe only one local provider in the industry currentlyto provide a complete replacement or the BrokerFront End system, which will reach the end o its li ecycle in 2012.

In Singapore, our eBrokerConnect TM system has beencerti ied and in con ormance with the SingaporeExchange (SGX) Reach, the worlds astest tradingengine in SGXs e orts to secure its position as the

Asian Gateway. As an ongoing con ormance exercise,the Group pledged to provide our innovativeservices and on the mark with world-class tradingtechnologies.

INDUSTRY TREND AND DEVELOPMENT

Market Overview

Malaysian In ormation Technology (IT) spendingis expected to grow to US$5.2 billion in 2012, romUS$4.9 billion in 2011. Business Monitor Internationalorecasts 9% overall growth in Malaysian IT sp ending

in 2011. Demand is expected to stay resilient overall,even as economic growth moderates. IT- riendlybudget measures boosted the upturn in 2011 andthere was also a boost rom previously delayedcomputer hardware tenders.

There will be increas ingly attract ive oppor tuni ties inthe IT services area as the government implementsmeasures to make Malaysia a regional serviceshub. The government has a number o initiativeswith avourable implications or demand or ITproducts and services, including cloud computingor small and medium-sized enterprises (SME) and

computers or education p rogrammes.

The IT market overall has s trong growth undamen talsand key sectors will include government, telecoms

and inance, including Islamic banking. The NationalBroadband Initiative has the potential to boostdemand across all IT market segments.

Industry Developments

In October 2011, the Multimedia DevelopmentCorporation (MDeC) announced it was allocatingRM1.8 million to help SMEs to use cloud-computing. The unds will be provided in the orm


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ChairmansStatemento disbursements and bene its or independentso tware vendors (ISVs) to develop cloud solutionsor SMEs. The MDeC has also set aside RM2.25 million

to deploy cloud so tware and services developed by

ISVs.

Malaysias 2011 budget contained a number o measures to boost the IT industry and help stimulateIn ormation, Communication and Technology(ICT) adoption in the country. Key measuresincluded a two-year extension on import tax andsales tax exemption on broadband equipment,and the establishment o the MY Creative Contentprogramme to encourage the development o localcontent. The tax exemption should stimulate the

purchase o various types o connectivity devices,including notebook Personal Computers.

(Source: Malaysia Information Technology Report Q12012)

RESEARCH AND DEVELOPMENT (R&D)

The Group continues i ts main ocus on its R&D e or tsas it believes R&D will remain a critical actor orN2N to maintain its competitive edge and remain aleader in the constantly evolving inancial industry.

As the Group caters primarily to stockbrokingcompanies and banks outsourcing e-businesslocally and regionally, actors such as data security,accuracy, capacity, dependability, and speed arecritical to the marketability o the Groups services.As such, the Groups R&D scope is to strengthenthe per ormance o its existing e-commercesegment while developing and enhancing newapplications and services, particularly its inancial

suite, GlobalConnect and TraderConnect whichincorporates a power ul technical analysis toolkitand innovative trading capabilities to deliver state-o -the-art desktop trading management system.

Besides investing about 10% to 15 % o its revenue onR&D, the Company will continue to invest in trainingand development skills or the employees in its R&Dteam and continue to encourage the developmento resh innovative concepts.

FUTURE PROSPECTS

As the countrys leading online trading service

provider with DMA capabilities, we are in a uniqueposition to capitalise on distinctive trends in theprovision o technology solutions or the securitiesindustry. A con luence o actors has opened upsigni icant opportunities or N2N at a time when ourtechnological capabilities and business model havematured.

Many o the current trading plat orms used bystockbrokers in the region are due or replacement. These rep lacement programmes are comin g at a t imewhen brokers want to have more streamlined cross-border trades, both broker-assisted or pure internettrading, simpli ied risk management and access toundamental data and tools to acilitate decision-

making. O equal signi icance is the growing trendor the stock exchanges themselves to reduce their

role as the provider o technological plat ormsso that they can ocus on their core unctions asregulator and promoter o the capital market.

Against this backdrop, we have re ined our solutionsand stepped up our marketing to securities houses


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and even to some exchanges. The larger securitieshouses headquartered in Malaysia are themselvesexpanding in the region and require standardisedront and back-end systems which we can provide.

The Group will continue to expand its opera tions inMalaysia, Singapore and Indonesia and to urtherpenetrate overseas markets such as Philippines,Hong Kong and Thailand.

Having turned the corner in inancial per ormance,our ocus over the next two to three years is to takeadvantage o this changing landscape to o er oursolutions as the standard-bearer or the securitiesindustry. In so doing, we will enhance shareholdervalue. The Board remains con ident that, with a

proven global strategy, continued strong executionand urther di erentiation in products and services,the Group will deliver pro itable growth in thecoming year.

ACKNOWLEDGEMENT

On behal o the Independent Non-ExecutiveDirectors, I would like to thank the ExecutiveDirectors, the senior management team and all theN2N sta or all their hard work, dedication andinvaluable assistance to the Companys standing aspioneers and to the Group as a whol e.

I am also grate ul or the ongoing support o ourcustomers. Many o our customer relationshipshave strengthened over the recent years with ourresponsibilities extending to include new solutionsthat ultimately help their business expand bothlocally and regionally.

I would also like to thank our shareholders or theircontinued support and con idence to our business.

Izlan bin Izhab

Chairman


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1 2 3 4 5 6

Board o

Directors

1. Tan Boon LengIndependent Non-Executive Director

2. Tiang Boon HwaManaging Director

3. Chua Tiong HoongNon-Independent Executive Director

4. Izlan bin IzhabIndependent Non-Executive Chairman

5. Lai Su PingNon-Independent Executive Director

6. Cho Wai Loon Independent Non-Executive Director


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Directors Profle

Izlan bin Izhab66 years o age, Malaysian

Independent Non-Executive Chairman

Tiang Boon Hwa49 years o age, SingaporeanManaging Director

Izlan bin Izhab was rst appointed to the Board o the Company on 22August 2005. He holds a Bachelor o Laws degree rom the University o London, UK and attended the Advanced Management Program at theUniversity o Hawaii, USA. He occasionally lectures on Malaysian securitieslaw, companies law and corporate governance or various public and privatesector consultancy and training organizations. He was the Executive Vice-President o Corporate and Legal A airs o Bursa Malaysia Berhad rom 1985until his retirement in 2000. He was also serving as Company Secretary orKompleks Kewangan Malaysia Berhad rom 1975 to 1978, be ore becomingthe Company Secretary or Permodalan Nasional Berhad rom 1978 to 1984.He began his career by serving as an Assistant Legal O cer or Majlis AmanahRakyat in 1973.

He is currently a Director o BOX-PAK (Malaysia) Berhad, CIMB Aviva AssuranceBerhad, CIMB Aviva Taka ul Berhad, K&N Kenanga Holdings Berhad, MalaysiaAirports Holdings Berhad and OSK-UOB Investment Management Berhad( ormerly known as OSK-UOB Unit Trust Management Berhad). He is alsoa member o the Board o Governors o Research Institute o InvestmentAnalysts and Bursa Malaysia Berhads Appeals Committee.

He also sits as the Chairman o the Option Committee and as a member o theAudit Committee, Nomination Committee and Remuneration Committee.

He has no amily relationship with any other directors or major shareholderso the Company. There is no confict o interest with the Company. Within thelast 10 years, he has not been convicted or any o ences, other than tra co ences, i any. He does not hold any shares in N2N.

Tiang Boon Hwa is one o the Companys ounders and was rst appointedto the Board o the Company on 24 August 2000. He obtained his Diploma inComputer Studies rom City and Guilds o London Institute, UK in 1982. Hismain responsibilities include management o the Groups overall business,technology and nancial matters. He started his career as a programmer withSGV Goh Tan Pte Ltd, a Singapore accounting cum so tware house and waspromoted to senior consultant at the age o 25. In 1988, he le t SGV Goh TanPte Ltd and headed the regional audit division (IT audit) o Citibank N.A SouthAsia, based in Singapore and was subsequently awarded the Best IT Auditoror Asia Paci c Region in 1989. He joined Computer Associates Pte Ltd in 1990as an account manager and quickly rose to become the managing directoror Computer Associates Pte Ltds subsidiary in Malaysia in 1992. Later, he

joined i2 Technologies Pte Ltd in 1996 as a regional director to set presencein several Asian countries. In 1998, he joined Exact So tware Asia Sdn Bhd tostart up the Asia Development Centre. Having gained wide exposure in bothin ormation technology and business operations, he began his entrepreneurpursuit by starting N2N, in year 2000 together with several riends.

Currently, he sits as a member o the Remuneration Committee and OptionCommittee. He does not hold any directorships on the Board o other publiclisted companies in Malaysia.

He is a substantial shareholder o the Company and the husband o Lai SuPing, the non-independent executive director and substantial shareholder o the Company. There is no confict o interest with the Company. Within the

last 10 years, he has not been convicted or any o ences, other than tra co ences, i any. Please re er to page 85 o this Annual Report or his securitiesholding.


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h d l

Lai Su Ping41 years o age, Malaysian

Non-Independent Executive Director

Chua Tiong Hoong41 years o age, Malaysian

Non-Independent Executive Director

Lai Su Ping is one o the Companys ounders and currently an ExecutiveDirector o marketing and corporate events. She was rst appointed to ourBoard on 10 August 2000. She obtained her Diploma in Marketing rom theChartered Institute o Marketing, UK in 1991. She is primarily responsible orthe corporate events and public relations o our Company. She started hercareer in 1988 as a marketing executive or Yvonex Sdn Bhd and later she joined Kumpulan Jetson Berhad as a project executive specialising in eventsand exhibition organisation. In 1994, she joined Computer Associates (M)

Sdn Bhd as a channel manager where she was instrumental in establishing acustomer service team as well as setting up channel sales via the appointmento product distributors.

She does not hold any directorships on the Board o other public listedcompanies in Malaysia.

She is a substantial shareholder o the Company and the wi e o Tiang BoonHwa, the managing director and substantial shareholder o the Company. There is no confict o interest with the Company. Within the last 10 years,she has not been convicted or any o ences, other than tra c o ences, i any. Please re er to page 85 o this Annual Report or her securities holding.

Chua Tiong Hoong is one o the Companys ounders and currently anExecutive Director o business development. He was rst appointed to theBoard o the Company on 10 August 2000. He graduated with a Bachelor o Science in Computer Science (Double Major in Mathematics and Computing)degree rom the University o Adelaide (Australia) in 1992. His mainresponsibility includes managing the day-to-day operations ocusing onproject implementation and technical operations o our Group. He startedhis career as a network engineer at Applied Business System Sdn Bhd in 1993.He was later responsible or project development and also managing thecompanys helpdesk. In 1994, he joined MicroForest Systems (M) Sdn Bhd asa project manager to spearhead the implementation o resource planning,point-o -sales and back-end systems or retail and manu acturing industries.He also supported the multilevel marketing and chemical manu acturingsystem. From 1997 to 2000, he was with Exact So tware Asia Sdn Bhd asan assistant manager responsible or system development, specialising inEnterprise Resources Planning System. He ounded N2N together with theounder members in 2000.

He does not hold any directorships on the Board o other public listedcompanies in Malaysia.

He has no amily relationship with any other directors or major shareholderso the Company. There is no confict o interest with the Company. Within thelast 10 years, he has not been convicted or any o ences, other than tra co ences, i any. Please re er to page 85 o this Annual Report or his securitiesholding.

Directors

n2n connect - annual report 2011 - part 1

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