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Extracted from Annual Report 2016

Dear Shareholders,

On behalf of the Board of Directors, I have the pleasure of presenting to you the Sixth Annual Report and the Audited Financial Statements of Ideal Jacobs (Malaysia) Corporation Bhd for the financial year ended 31 December 2016.

Overview

The Group's revenue and the gross profit margin for all segments except for trading of non-core products, had improved and the Group's operating expenses had also increased in tandem for the year under reviewas compare to prior year. As a result, the profit after tax for the year under review was marginally better than prior year.

Financial Performance

The Group registered revenue of RM42.75 million (2015: RM36.76 million) and profit before tax of RM 2.77 million (2015: RM2.21 million) for the financial year ended 31 December 2016. The Group's revenue for Financial Year ("FY") 2016 had increased by 16.3% as compared to FY2015 due to increase in orders from new and existing customers.

As the result of higher revenue and well controlled production overheads coupled with flexible pricing strategies, the Group achieved a higher gross profit margin of 48.3% for the year under review (2015: 45.7%) as compared to prior year.

Other income of RM1.50 million for the year under review included interest income of RM0.25 million, government grant received of RM0.45 million and reversal of impairment on trade receivable of RM0.59 million (2015: RM2.56 million included waiver of debts by a corporate shareholder of a subsidiary of RM1.96 million, interest income of RM0.23 million, government grant received of RM0.10 million and reversal of impairment loss on trade receivable of RM0.09 million).

Although revenue for FY2016 had increased but the selling and distribution expenses was marginally lower than FY2015. This was due to lower commission paid out to 3rd party in FY2016 as the result of tightening of budget for commission payable to 3rd party. Administration expenses for FY2016 was higher as compared to FY2015. The reasons for the increased was mainly due to higher headcount coupled with salary adjustment that lead to higher payroll cost and extensive travelling activities for FY2016. Loss incurred on members' voluntary winding up and strike off of subsidiaries was the main reason for the increase in other expenses for FY2016.

As the result of improvement in revenue and gross profit margin, despite having lower other income and higher administration and other expenses, the Group managed to achieve a marginally better profit after tax for the year under review as compared to the prior year.

Operation Review

Malaysia

The proposed installation and laying of fibre optic cables for Telecommunication and Cellular Operators by our wholly owned subsidiary, Ideal Jacobs Rangkuman Sdn Bhd was called off, as the proposed collaboration with Westag Venture Sdn Bhd was unsuccessful. As a result, we had on 10 December 2015 filed an application for striking off of this subsidiary pursuant to Section 308(1) of the Companies Act, 1965 with the Companies Commission of Malaysia. The application for striking off of Ideal Jacobs Rangkuman Sdn Bhd was completed in FY2016.

After numerous unsuccessful attempts over the years to promote the photoluminescent products in the industrial health and safety related field, our 51% owned subsidiary, Lumimark Sdn Bhd, had decided to cease all business development activities for the said products. As the management is unable to foresee any immediate improvement in the photoluminescent market, we intend to keep this subsidiary docile and shall keep our options open if opportunity arises.

Singapore

Our 51% owned subsidiary in Singapore, Ideal Laminar Pte Ltd ("ILPL"), which was focusing on marketing and distributionof smart-phone components, fail to secure any major contract in 2015 and as a result, it had ceased operations in FY2015. We are in the midst of winding up this subsidiary.

China

Ideal Laminar (Suzhou) Ltd. Co., a 51% owned subsidiary in China, PRC, involved in manufacturing of smart-phone component was unable to secure any major contract in FY2015 and as a result, on 2 December 2015, it has commenced members' voluntary winding-up in accordance with the Laws in The People's Republic of China. The members' voluntary winding up process was completed in FY2016.

Xiamen and Suzhou core operations remained resilient as evidenced by the improvement in Group's revenue and profitability. We had intensified the global sales and marketing activities with the aim to develop a larger and more secured clientele base. In order to remain competitive, we continue to offer value-add services to customers which involved our participation in the early product design and development stage. Our involvement at this stage will give us the opportunity to offer fresh ideas and solutions to our customers for product improvement and improvement in the manufacturing process that will lead to overall cost saving. Meanwhile research and development activities will continue as and when customers require new products.

Future Prospects

With the existing well-diversified customer base and vast variety of products and services, the sustainability of the Group is ensured. In view of the escalating competitiveness and cost structure, the board would strive to ensure the Group achieves profitability for the year ahead albeit expecting a challenging market condition.

Corporate Governance

The Board is committed to ensuring that the Malaysian Code of Practice on Corporate Governance is adhered to in the conduct of activities of the Group. The Board's statement pertaining to the implementation of the guidelines of the Code during the year under review is contained in the Statement on Corporate Governance on pages 18 through 26 of this Annual Report.

Appreciation and Acknowledgement

I am grateful to my esteemed colleagues who have served with me on the Board for their vast experience, depth of knowledge and business acumen. It is indeed a privilege to lead, and be part of such an insightful team.

On behalf of our Board, I would like to publicly thank our management and staff for the commitment, loyalty and dedication to the Company and our future which will continue to be a joint effort for us all.

Andrew Conrad Jacobs
Executive Chairman
Kuala Lumpur
29 April 2017