RAK 2020 Annual Report & Review

Annual Report2 July 2020RAKInformation Technology

Rakon Limited
Annual Report 2020

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Table of Contents
Directors’ Statement .................................................................................................................................... 3
Statement of Comprehensive Income .......................................................................................................... 4
Statement of Changes in Equity ................................................................................................................... 5
Balance Sheet ............................................................................................................................................... 6
Statement of Cash Flows .............................................................................................................................. 7
Notes to the Financial Statements ............................................................................................................... 9
Independent Auditor’s Report ................................................................................................................... 44
Shareholder Information ............................................................................................................................ 51
Corporate Governance Report ................................................................................................................... 55
Directory ..................................................................................................................................................... 64

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Directors’ Statement
The Directors are responsible for ensuring that the financial statements fairly present the financial position of the Group as at 31 March 2020
(FY2020) and the financial performance and cash flows for the year ended on that date.
The Directors consider that the financial statements of the Group have been prepared using appropriate accounting policies, consistently applied
and supported by reasonable judgements and estimates, and that all relevant financial reporting and accounting standards have been followed.
The Directors believe that proper accounting records have been kept, which enable, with reasonable accuracy, the determination of the financial
position of the Company and the Group and facilitate compliance of the financial statements with the Financial Markets Conduct Act 2013.
The Directors consider they have taken adequate steps to safeguard the assets of the Company and the Group and to prevent and detect fraud and
other irregularities.
The Directors present the financial statements, set out in pages 4 – 43, of Rakon Limited and subsidiaries for the year ended 31 March 2020.
The Board of Directors of Rakon Limited authorised these financial statements for issue on 29 June 2020.

On behalf of the Directors

___________________________ _______________________________
BR Irvine BJ Robinson
Chair CEO, Managing Director

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Statement of Comprehensive Income
For the year ended 31 March 2020

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

20202019
Note $000s$000s
Continuing operations
Revenue5118,980113,985
Cost of sales(66,947)(62,317)
Gross profit52,03351,668
Other operating income728121
Operating expenses6(48,081)(47,338)
Other (losses)/gains – net8(438)718
Operating profit3,5425,169
Finance income9837
Finance costs9(1,063)(571)
Share of net profits of associates and joint venture16797839
Profit before income tax3,2845,474
Income tax credit/(expense)21696(2,110)
Net profit for the year attributable to equity holders of the Company3,9803,364
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Decrease in fair value cash flow hedges(7,247)(1,812)
Cost of hedging 57031
Exchange differences on translation of foreign operations4,1401,329
Income tax relating to components of other comprehensive income2,029507
Items that will not be reclassified subsequently to profit or loss
Changes in fair value of equity investments at fair value through other comprehensive income –
Thinxtra
(1,632)(454)
Other comprehensive income for the year, net of tax (2,140)(399)
Total comprehensive income for the year attributable to equity holders of the Company1,8402,965
Earnings per share attributable to the equity holders of the CompanyCentsCents
Basic earnings per share231.8 1.5
Diluted earnings per share231.8 1.5

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Statement of Changes in Equity
For the year ended 31 March 2020

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

Share c api tal
Retained
e arni ngsOther reservesTotal equity
Note$000s$000s$000s$000s
Balance at 31 March 2018
181,024 (73,219) (20,754) 87,051
Net profit after tax for the year
- 3,364 - 3,364
Currency translation differences
24 - - 1,329 1,329
Cash flow hedges, net of tax
24 - - (1,274) (1,274)
Changes in fair value of equity investments at fair value through other
comprehensive income – Thinxtra
24 - - (4 54 ) (4 54 )
Total comprehensive income for the year
- 3,364 (399) 2,965
Balance at 31 March 2019
181,024 (69,855) (21,153) 90,016
Net profit after tax for the year
- 3,980 - 3,980
Currency translation differences
24 - - 4,140 4,140
Cash flow hedges, net of tax
24 - - (4,648) (4,648)
Changes in fair value of equity investments at fair value through other
comprehensive income – Thinxtra
24 - - (1,632) (1,632)
Total comprehensive income for the year
- 3,980 (2,140) 1,840
Balance at 31 March 2020
181,024 (65,875) (23,293) 91,856

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Balance Sheet
As at 31 March 2020

The accompanying notes form an integral part of these financial statements.
20202019
Note$000s$000s
Asse ts
Current assets
Cash and cash equivalents105,0864,719
Trade and other receivables1142,37938,220
Derivative financial instruments 2527307
Financial asset at fair value through profit or loss25219
Inventories1237,62439,310
Current income tax asset889561
Tot al c urre nt asse ts86,00783,136
Non-current assets
Derivative financial instruments 25-258
Financial asset at fair value through other comprehensive income – Thinxtra172,9184,549
Trade and other receivables112,7022,267
Property, plant and equipment1318,92419,394
Right-of-use assets159,730-
Intangible assets149,0039,149
Investment in associates1611,71410,399
Deferred tax asset219,2467,352
Total non-current assets64,23753,368
Total asse t s150,244136,504
Liabilities
Current liabilities
Bank overdraft1812,84811,501
Borrowings18145474
Trade and other payables1922,25226,398
Lease liabilities152,741-
Deferred consideration on acquisition – Rakon India-1,885
Derivative financial instruments255,040945
Provisions20714471
Deferred income – government wage subsidy112,000-
Total current liabilities45,74041,674
Non-current liabilities
Derivative financial instruments 252,840343
Borrowings18-412
Lease liabilities156,704-
Provisions202,9182,990
Deferred tax liabilities211861,069
Total non-current liabilities12,6484,814
Total liabilities58,38846,488
Ne t asse ts91,85690,016
Equity
Share capital22181,024181,024
Other reserves24(23,293)(21,153)
Accumulated losses(65,875)(69,855)
Total equity91,85690,016

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Statement of Cash Flows
For the year ended 31 March 2020

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

20202019
Note$000s$000s
Operating activities
Cash provided from
Receipts from customers116,396114,974
R&D grants received1,5571,894
Other income received3658
117,989116,926
Cash was applied to
Payment to suppliers and others(58,364)(71,695)
Payment to employees(48,860)(46,286)
Interest paid(918)(459)
Income tax paid(446)(254)
(108,588)(118,694)
Net cash flow from operating activities9,401(1,768)
Investing activities
Cash was provi de d from
Sale of property, plant and equipment4482
4482
Cash was applied to
Purchase of property, plant and equipment(3,753)(6,188)
Purchase of intangibles(774)(720)
Purchase of shares in Centum Rakon India Private Limited(2,148)(5,848)
(6,675)(12,756)
Net cash flow from investing activities(6,631)(12,674)
Financing activities
Cash was applied to
Lease liabilities payments(3,078)-
Finance lease payments-(24)
Cash was applied to financing activities(3,078)(24)
Net cash flow from financing activities(3,078)(2 4 )
Net decrease in cash and cash equivalents(308)(14,466)
Effects of exchange rate changes on cash and cash equivalents(672)144
Cash and cash equivalents at the beginning of the year(6,782)7,540
Cash and cash equivalents at the end of the year10(7,762)(6,782)

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Statement of Cash Flows
For the year ended 31 March 2020

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

31 March31 March
20202019
Note$000s$000s
Reconciliation of net profit to net cash flows from operating activities
Reported net profit after tax3,9803,364
Adjustments for
Depreciation and amortisation expense68,8235,802
Increase in allowance for expected credit loss4475
Interest expenses164-
Provisions provided415342
Movement in foreign currency1,608439
Deferred revenue – Siward technology licence agreement-(101)
Share of net profits of associates and joint venture16(797)(839)
Deferred tax movement21(919)231
Gain on disposal of property, plant and equipment-(82)
9,2986,267
Change in operating assets and liabilities
Increase in trade and other receivables(4,594)(5,007)
Increase/(decrease) in provisions171(246)
Decrease/(increase) in inventories3,020(9,145)
(Decrease)/increase in trade and other payables(2,146)2,781
(Decrease)/increase in tax provisions(328)218
Total impact of changes in working capital items(3,877)(11,399)
Net cash flow from operating activities9,401(1,768)

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Notes to the Financial Statements
1. General information ...................................................................................................................... 10
2. Impact of Covid-19 ......................................................................................................................... 10
3. Statement of accounting policies .................................................................................................. 11
4. Segment information ..................................................................................................................... 12
5. Revenue ......................................................................................................................................... 14
6. Expenditure included in net profit ................................................................................................. 15
7. Other operating income ................................................................................................................ 17
8. Other (losses)/gains – net .............................................................................................................. 17
9. Net finance (costs)/income ........................................................................................................... 17
10. Cash and cash equivalents ............................................................................................................. 17
11. Trade and other receivables .......................................................................................................... 18
12. Inventories ..................................................................................................................................... 19
13. Property, plant and equipment ..................................................................................................... 20
14. Intangible assets ............................................................................................................................ 21
15. Leases............................................................................................................................................. 24
16. Interest in associates and joint venture ........................................................................................ 26
17. Investment in Thinxtra – financial asset at fair value through other comprehensive income ..... 28
18. Borrowings ..................................................................................................................................... 29
19. Trade and other payables .............................................................................................................. 30
20. Provisions for other liabilities and charges .................................................................................... 31
21. Taxation ......................................................................................................................................... 31
22. Share capital .................................................................................................................................. 33
23. Earnings per share ......................................................................................................................... 33
24. Other reserves ............................................................................................................................... 34
25. Derivative financial instruments .................................................................................................... 34
26. Financial risk management ............................................................................................................ 36
27. Share based payments ................................................................................................................... 41
28. Principal subsidiaries ..................................................................................................................... 41
29. Commitments ................................................................................................................................ 42
30. Related party information ............................................................................................................. 43
31. Contingencies ................................................................................................................................ 43
32. Subsequent events ........................................................................................................................ 43

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1. General information
Rakon Limited (‘the Company’) and its subsidiaries (‘the Group’) are a global technology company that design and manufacture leading frequency
control solutions for a wide range of applications. Rakon has leading market positions in the supply of crystal oscillators to the telecommunications,
global positioning and space & defence markets. The Company is a limited liability company incorporated and domiciled in New Zealand, and its
registered office is at 8 Sylvia Park Road, Mt Wellington, Auckland.
The financial statements of the Group have been presented in New Zealand dollars and has been rounded to the nearest thousands unless otherwise
indicated.
2. Impact of Covid-19
Covid-19 has had a negative short-term impact to the Group with the New Zealand and Indian operations severely restricted for periods of time. In
the medium to longer term Covid-19 is not expected to have a material adverse effect on the Group. The telecommunications segment is a major
part of the Group’s operations and Covid-19 has increased the reliance on remote communications, reliable telecommunications infrastructure and
higher network capacities. At this stage the Group has not seen a material negative change in demand for its products due to Covid-19 including
those used in non-telecommunications segments (i.e. global positioning, space and defence). Further, the Group has not seen a material negative
impact on its customers or suppliers.
The effect of Covid-19 to date on specific areas of the business is explained below.
a. Manufacturing operations
In the period from late March 2020 to the end of April 2020 operations were significantly affected due to severe government imposed closures of
manufacturing operations in New Zealand and India. Both the New Zealand and Indian manufacturing operations were able to resume during April
2020. The New Zealand operation is now back to normal manufacturing capacity with the Indian operations expected to achieve this by the end of
June 2020. The French manufacturing operations were able to continue operating through the period. Non-manufacturing activities were not
significantly impacted with most staff working remotely. Reduced global airfreight capacity made movement of materials difficult for a period,
however movement of materials is no longer an issue.
b. Customers
No material adverse impact has been observed to date in respect of Rakon’s customers. Aging of receivables and cash collections continues to be
within normal ranges and no requests to defer payments have been received to date. The business is not aware of any key customers being in
financial distress due to Covid-19 and no changes to terms have been made as a result of Covid-19. These factors were taken into account in the
assessment of the expected credit loss provision (note 11).
c. Mitigation actions
A number of actions were taken to mitigate the initial effects on the business, these include;
 Ceasing or deferring expenditure (including capital expenditure, incentive payments, temporary rent reductions)
 Applying salary reductions across a large part of the employee base for a period of nine weeks from April 2020
 Reducing directors’ fees by 50% for the quarter beginning April 2020
 Accessing government support where eligible and appropriate to enable the retaining of staff for as long as possible. This was through
initiatives such as wage subsidies, funded furlough’s and through access to longer-term state backed funding in France. The New Zealand
wage subsidy applied for in March 2020 is included in trade and other receivables (note 11) and deferred income – government wage
subsidy for equivalent amounts. The grants from the governments are recognised where there is reasonable assurance that the grant will
be received and the Group will comply with all attached conditions. These are recorded in the Statement of Comprehensive Income over
the period necessary to match them with the costs that they are intended to compensate. No wage subsidies have been recognised in the
current Statement of Comprehensive Income.
d. Going concern assessment
As part of the response to Covid-19, the company undertook detailed planning and forecasting of the business covering a number of scenarios and
took into consideration the current and expected future effects of Covid-19 on the Group. Examples of scenarios modelled include; an extended
period of closure for the New Zealand and Indian manufacturing operations; Group revenue being lower than forecast; higher than expected growth
in inventory. The assessment showed the ‘base case’ or ‘most likely’ outcome was that cash flow and net debt forecasts would be within bank
facility limits and covenants. Further, most downside scenarios modelled could be accommodated apart from a scenario where a second outbreak
was to occur and the New Zealand and Indian manufacturing operations were closed for two months. No new information or developments have
become evident up to the date of signing of these financial statements that would materially adversely impact the base case forecast.
The Directors concluded that these financial statements are prepared on a going concern basis, taking into account the above and acknowledge the
uncertainties around forecasting earnings in the Covid-19 environment. The Directors note that such uncertainties do not represent material
uncertainties related to going concern.

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e. Impairment of assets
Covid-19 is not expected to have a fundamental negative impact in the medium to long term on Rakon’s customers, suppliers or Rakon’s value
proposition. Covid-19 has increased the reliance on remote communications, reliable telecommunications infrastructure and higher network
capacities. The forecasts used to underpin the asset impairment assessments (notes 13 and 14) include the negative short-term impacts of Covid-
19.
f. Inventory (note 12)
The Group has not seen a material negative change in demand for its products due to Covid-19. Accordingly, Covid-19 is not expected to adversely
impact the carrying value of inventory.
g. Derivatives and hedging (note 25)
Derivatives used for hedging are potentially affected by Covid-19 where the forecast hedged items or counterparty credit risks are materially
impacted. The Group’s forecasts for exposures which are hedged are not significantly impacted by Covid-19. The impact of Covid-19 on
counterparty credit risk is also assessed and not considered material.
3. Statement of accounting policies
a. Basis of preparation and measurement base
The Company is registered under the Companies Act 1993 and is a FMC reporting entity under Part 7 of the Financial Markets Conduct Act 2013.
The financial statements of the Group have been prepared in accordance with the requirements of Part 7 of the Financial Markets Conduct Act
2013 and the NZX (Main Board) Listing Rules.
These consolidated financial statements for the year ended 31 March 2020 have been prepared in accordance with New Zealand Generally Accepted
Accounting Practice (NZ GAAP). They comply with New Zealand equivalents to International Financial Reporting Standards (NZ IFRS), other New
Zealand accounting standards and authoritative notices that are applicable to entities that apply NZ IFRS. The consolidated financial statements
also comply with International Financial Reporting Standards (IFRS). The Group is a Tier 1 for-profit entity.
The financial statements have been prepared on a historical cost basis, with the exception of derivative financial instruments and equity
instruments, which are measured at fair value.
b. Basis of consolidation
The financial statements of the subsidiaries are included in the Company’s financial statements from the date on which control commences until
the date on which control ceases, refer note 28 for further information on subsidiaries. All material intercompany transactions, balances and
unrealised gains on transactions between the subsidiaries are eliminated on consolidation. Interests in associates and joint ventures are accounted
for using equity method, refer note 16.
c. Critical accounting estimates and judgements
The preparation of financial statements in accordance with NZ IFRS requires management to make judgements, estimates and assumptions that
affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and assumptions that involved
a higher degree of judgement or complexity, or are significant to financial statements are listed below and disclosed within the specified notes:
 Calculation of inventory obsolescence (note 12)
 Estimated useful life of product development assets (note 14)
 Impairment of assets (note 14)
 Calculations of right-of-use assets and lease liability (note 15)
 Thinxtra valuation (note 17)
 Estimation of year end income tax and deferred tax (note 21)
 Estimation of contingent liabilities (note 31)
d. Significant accounting policies and new accounting standards
Accounting policies are disclosed within each of the applicable notes to the financial statements. The principal accounting policies applied in the
preparation of these financial statements have been consistently applied except for the new accounting standard, NZ IFRS 16 Leases that replaces
the requirements in NZ IAS 17 Leases. The Group adopted NZ IFRS 16 Leases from 1 April 2019 and have elected to apply it retrospectively with the
cumulative effect of initially applying the standard recognised at the date of initial application. Under this method the Group has not restated
comparatives for this reporting period, refer note 15.
Following adoption of NZ IFRS 16 Leases, the disclosed lease liabilities and right-of-use assets in the interim financial statements of the Group for
the period ended 30 September 2019 have been restated to reflect an error in the lease payments of Rakon India Private Limited. The revised lease
liabilities and right-of-use assets at 30 September 2019 is $9,978,000 and $10,204,000 respectively, an increase of $1,297,000 and $1,287,000. The

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impact of this change on the reported interest on the lease liabilities and depreciation on the right-of-use assets for the period ended 30 September
2019 was not material.
The Group has also reviewed the NZ IFRIC 23 Uncertainty over Income Tax Treatment and has concluded that there is no impact of this on the
financial statements.
e. New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that are not mandatory for 31 March 2020 reporting periods and have
not been early adopted by the Group. These standards are not expected to have a material impact on the Group.
f. Foreign currency translation
Functional and presentation currency
The financial statements of each entity in the Group are measured using the currency of primary economic environment in which the entity operates
(‘the functional currency’). The consolidated financial statements are presented in New Zealand dollars, (‘the presentation currency’), which is the
functional currency of the parent.
Transactions and balances
Foreign currency transactions are translated into the relevant functional currency at the exchange rates at the dates of the transactions. Monetary
assets and liabilities denominated in foreign currencies at the balance date are translated to functional currency at the foreign exchange rate at
that date. Foreign exchange differences arising on translation are recognised in the Statement of Comprehensive Income, within other (losses)/gains
– net, except when deferred in other comprehensive income (OCI) as qualifying cash flow hedges. Non-monetary assets and liabilities that are
measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets
and liabilities denominated in foreign currencies that are stated at fair value are translated at foreign exchange rates at the dates the fair value was
determined.
The assets and liabilities of all of the Group companies (none of which has a currency of a hyper-inflationary economy) that have a functional
currency that differs from the presentation currency, including goodwill and fair value adjustments arising on consolidation, are translated to New
Zealand dollars at foreign exchange rates, at the balance date. The revenues and expenses of these foreign operations are translated to New Zealand
dollars, at rates approximating to the foreign exchange rates at the dates of the transactions. Exchange differences arising from the translation of
foreign operations are recognised in the foreign currency translation reserve, refer note 23.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and are
translated at the foreign exchange rates at the balance date.
4. Segment information
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief
operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as
the Managing Director, Sales and Marketing Director, Chief Operating Officer and Chief Financial Officer.
The chief operating decision maker also assess the performance of the operating segments based on a non-GAAP measure of ‘Underlying EBITDA’
defined as:
‘Earnings before interest, tax, depreciation, amortisation, impairment, employee share schemes, non-controlling interests, adjustments for
associate’s and joint venture’s share of interest, tax & depreciation, loss on disposal of assets and other cash and non-cash items (Underlying
EBITDA)’.
Underlying EBITDA is a non-GAAP measure that has not been presented in accordance with GAAP. The Directors present Underlying EBITDA as a
useful non-GAAP measure to investors, in order to understand the underlying operating performance of the Group and each operating segment,
before the adjustment of specific cash and non-cash items and before cash impacts relating to the capital structure and tax position. Underlying
EBITDA is considered by the Directors to be the closest measure of how each operating segment within the Group is performing. Management uses
the non-GAAP measure of Underlying EBITDA internally, to assess the underlying operating performance of the Group and each operating segment.
Underlying EBITDA as non-GAAP financial information has been extracted from the financial statements for the year. Except for Underlying EBITDA,
other information provided to the chief operating decision maker is measured in a manner consistent with GAAP.

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Segment results
Information related to each reportable segment is set out below.

1
Includes Rakon Limited’s 40% share of investment in Chengdu Timemaker Crystal Technology Co. Limited and Shenzhen Taixiang Wafer Co. Limited,
refer note 16.
2
On 2 May 2018, the Group acquired remaining 51% of the issued shares it did not own in Centum Rakon India Private Limited (‘CRI’), a previously
held joint venture which provides products and services to the frequency control industry. Subsequent to acquisition, the name of the investment
was changed to Rakon India Private Limited. Rakon India contract manufactures telecommunications products that are sold by Rakon France.
3
Includes investments in subsidiaries, Rakon Financial Services Limited, Rakon UK Holdings Limited, Rakon Investment HK Limited, and Rakon HK
Limited.
4
The measure of assets has been disclosed for each reportable segment as it is regularly provided to the chief operating decision maker and excludes
intercompany balances eliminated on consolidation.
5
The measure of liabilities has been disclosed for each reportable segment as it is regularly provided to the chief operating decision maker and
excludes intercompany balances eliminated on consolidation.

NZUKFranc eIndi a
2
China –
T' make r
1
Ot he r
3
Total
$000s$000s$000s$000s$000s$000s$000s
Sales to external customers70,382-45,7642,834--118,980
Inter-segment sales499--21,923-(117)22,305
Segment revenue70,881-45,76424,757-(117)141,285
Underlying EBITDA9,6341,813(1,690)3,1692,214(353)14,787
Depreciation and amortisation3,9726482,2361,838-1298,823
Income tax credit/(expense)1,012(186)31--(161)696
Total assets
4
71,0213,13036,36425,34111,7142,674150,244
Investment in associates----11,714-11,714
Additions of property, plant, equipment and
intangibles
2,587480635920--4,622
Total liabilities
5
36,1311,38512,4267,544-90258,388
31 March 2020
NZUKFranc eIndi a
2
Ch ina –
T' make r
1
Ot he r
3
Total
$000s$000s$000s$000s$000s$000s$000s
Sales to external customers64,376-45,0584,551--113,985
Inter-segment sales285-3323,092-(323)23,087
Segment revenue64,661-45,09127,643-(323)137,072
Underlying EBITDA 7,8571,691(1,312)2,6052,13629313,270
Depreciation and amortisation2,4265151,7751,099-(13)5,802
Income tax credit/(expense)(858)(214)31(420)-(649)(2,110)
Total assets
4
65,7662,14132,12923,08510,3992,984136,504
Investment in associates----10,399-10,399
Additions of property, plant, equipment and
intangibles
3,1914821,3951,986--7,054
Total liabilities
5
27,3735919,7987,49746876146,488
31 March 2019

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b. Reconciliation of Underlying EBITDA to net profit for the year

5. Revenue
The Group generally recognises revenue when the performance obligations are satisfied by transferring control of products to the customer based
on the specified contract price. Typically, control transfers to the customer at the same time as the legal title of the products are passed to the
customer. This is usually on delivery of the products. The transaction price includes all amounts that the Group expects to be entitled to net of any
sales taxes.
Long-term contracts – space and defence segment in France
The Group has long-term contracts in the space and defence segment in France. For these contracts, the revenue is recognised over time as the
Group’s performance creates an asset, which does not have an alternative use to the Group, and the Group has an enforceable right to be paid for
work completed to date. The Group uses the percentage-of-completion to determine the appropriate amount to recognise in a given period. The
stage of completion is measured by reference to the contract costs incurred up to the end of the reporting period as a percentage of total estimated
costs for each contract.
Revenue from contracts with customers
Timing of revenue recognition

The performance obligation of the products and services transferred over time which were in progress at 31 March 2019 were completed during
the year.
Revenue analysis
The Group predominately operates in one segment, its primary business being the design, manufacture, marketing and the sale of frequency control
solutions. There is one main revenue stream, which is the sale of manufactured finished products.
Market segment
The Group’s products are used in the telecommunications, global positioning and space & defence markets.

20202019
Continuing operations$000s$000s
Underlying EBITDA14,78713,270
Depreciation and amortisation(8,823)(5,802)
Finance costs – net(1,055)(534)
Adjustment for associates and joint venture share of interest, tax and depreciation(1,447)(1,120)
Loss on asset sales/disposal(11)(6)
Other non-cash items(167)(334)
Pr ofi t b e fore i nc ome tax3,2845,474
Income tax credit/(expense)696(2,110)
Net profit for the year3,9803,364
20202019
$000s$000s
Products transferred at a point in time116,032110,837
Products and services transferred over time2,9483,148
118,980113,985
20202019
$000s$000s
Telecommunications65,16753,599
Global Positioning18,91520,498
Space and Defence28,23031,583
Other6,6688,305
Total revenue by market segment118,980113,985

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Geographical segment
The Group’s trading revenue is derived in the following regions. Revenue is allocated based on the country in which the customer is located.

6. Expenditure included in net profit
Additional information in respect of expenses included in the Statement of Comprehensive Income is as follows.
Operating expenses by function

Breakdown of significant expenses by nature

20202019
$000s$000s
As i a60,47453,799
Nort h Ame ri ca26,95925,793
Europe29,07331,671
Others2,4742,722
Total revenue by region118,980113,985
Assets and liabilities related to contracts with customers
20202019
$000s$000s
Total current contract assets9502,788
Total current contract liabilities(392)(929)
5581,859
20202019
$000s$000s
Revenue recognised in relation to contract liabilities
Revenue recognised that was included in the contract liability balance at the beginning of the period9291,916
Asset recognised for costs to fulfil a contract
Assets recognised from costs incurred to fulfill a contract446792
20202019
$000s$000s
Selling and marketing9,5859,809
Research and development13,88811,029
General and administration24,60826,500
Total operating expenses48,08147,338
20202019
$000s$000s
Employee benefit expenses
Wages and salaries45,25343,872
Contributions to defined plans666644
Increase in liability for French retirement indemnity plan (note 20)220265
Increase in liability for long service leave (note 20)17965
Total employee benefit expenses
46,31844,846
Depreciation (note 13)3,9253,765
Amortisation (note 14)2,2002,037
Depreciation on right-of-use assets (note 15)2,698-
Rental expense-2,613
Donations614

16
16

1
The fee relates to the annual audit of the local territory financial statements .
2
Other audit related services comprise other non-assurance services undertaken by PwC in their capacity as auditor. Other audit related services in
2019 comprise an agreed upon procedures engagement in relation to proxy vote scrutineering.
3
Other assurance services comprise provision of treasury related financial markets risk analysis and commentary.
Employee benefits expenses
Employee entitlements to salaries, wages and annual leave to be settled within 12 months of balance date represent present obligations resulting
from employees’ services provided up to the balance date. These are calculated at undiscounted amounts based on remuneration rates that the
Group expects to pay.
Superannuation schemes
The Group’s New Zealand and overseas operations participate in their respective government superannuation schemes, whereby the Group is
required to pay fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund
does not have sufficient assets to pay all employees the benefits relating to the employee service in the current and prior periods. The Group has
no further payment obligations once the contributions have been paid. The contributions are recognised as an employee benefit expense when
they are due.
Rental expenses
In the current year, the Group has adopted NZ IFRS 16 Leases which has changed the classification of rental expenses, refer note 15. Rental payments
exclusive of GST/VAT previously classified as rental expenses are now recorded to reduce the lease liabilities. Depreciation on right-of-use assets
are recorded to reflect the use of leases. Related finance cost is also recorded in the Statement of Comprehensive Income.
Research and development
Expenditure on research activities has been undertaken with the prospect of gaining new scientific or technical knowledge and understanding. Any
research and development taxation credits and government grant funding for research and development are recognised when eligibility criteria
have been met and there is a reasonable assurance that tax credits and the grants will be received.
20202019
$000s$000s
Research and development grants/credits
Research and development government grant(961)(847)
Research and development tax credit(1,196)(997)
Total research and development grants/credits(2,157)(1,844)
Fees to the auditors
Audit and review of financial statements
PwC New Zealand 374 369
PwC India35 21
PwC China50 48
PwC France96 110
PwC UK41 26
BDO Limited (Hong Kong)
1
16 12
T S Tay Public Accounting Corporation ( Singapore)
1
9 7
Morison (Mauritius)
1
5 5
Total audit and review fees626 598
Assurance and audit related services
Performed by PwC New Zealand
Annual Shareholders' Meeting procedures
2
-8
Performed by PwC France
Certification of expenditure on R&D activities5 -
Total assurance and audit related services5 8
Other services
Performed by PwC New Zealand
Government R&D credits reviews-14
Other services
3
26 26
Performed by PwC India
Research and development expenses review2 -
Tot al othe r se rvi c e s fe e s28 40
Total fees paid to auditors659 646

17
17

Grants and tax credits from government are recognised at their fair value. The research and development grants and tax credits are recognised in
trade and other receivables (note 11), and in the Statement of Comprehensive Income over the period necessary to match them with the costs that
they are intended to compensate.
7. Other operating income

Prior year – Investment by Siward Crystal Technology Company Limited (‘Siward’) and attribution of proceeds
Siward is a Taiwan based crystal manufacturer, which is listed on the Taiwan Stock Exchange. In February 2017, Siward paid US$10m cash in return
for 38,016,681 fully paid ordinary shares in Rakon and rights arising from a technology license agreement. Siward took up one appointment on
Rakon’s Board. At 31 March 2019, the transfer under the technology licence agreement was fully completed and the residual revenue of $0.1m
recognised.
8. Other (losses)/gains – net

1
Includes realised and unrealised (losses)/gains arising from accounts receivable and accounts payable.
9. Net finance (costs)/income
Interest income is recognised in the Statement of Comprehensive Income as it accrues, using the effective interest method.

Overdraft interest rate
The average interest rate was as follows. Additional information on borrowings is in note 18.
 ASB facility in New Zealand 6.53% (2019: 5.15%)
 SBI facility in India 10.55% (2019: 9.95%)
10. Cash and cash equivalents
Cash and cash equivalents comprise of cash balances, call deposits, and other short-term highly liquid investments with original maturities of three
months or less, that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value and bank
overdrafts. Bank overdrafts are shown separately from borrowings on the balance sheet.
20202019
$000s$000s
Other income2820
Income from technology license agreement with Siward-101
Total other operating income28121
20202019
$000s$000s
Gain/(loss) on disposal of property, plant, equipment, and intangible33(82)
Foreign exchange (losses)/gains – net
Forward foreign exchange contracts
Held for trading(29)46
Revaluation of foreign denominated monetary assets and liabilities
1
(442)754
Total foreign exchange (losses)/gains – net(471)800
Total other (losses)/gains – net(438)718
20202019
$000s$000s
Finance income
Interest income837
Finance costs
Interest expense on bank borrowings(899)(459)
Interest on deferred consideration on acquisition – Rakon India (53)(100)
Unwinding of lease make good provision discount(16 )(1 2)
Interest on lease liabilities(95 )-
Total finance costs(1,063)(571)
Net finance costs(1,055)(534)

18

18

11. Trade and other receivables
Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method,
less provision for impairment.
Trade receivables are customers whom the Group has been able to validate acceptable credit quality. These are amounts due for goods sold or
services performed in the ordinary course of business and are non-interest bearing. They are generally due for settlement within 30 to 120 days.
Trade and other receivables balances

1
Other receivables includes research and development related tax credits and government grants, and Covid-19 government wage subsidies
($2.0m), refer note 2. A corresponding deferred income for the government wage subsidy of $2.0m was also recorded.
The Group has established credit policies under which each new customer is analysed individually for credit-worthiness before payment and delivery
terms and conditions are agreed. The Group’s review includes trade references and external ratings, where appropriate and in some cases bank
references. Purchase limits are established for each customer, which represents the maximum open amount; these limits are reviewed periodically.
Customers that fail to meet the Group’s benchmark credit-worthiness may transact with the Group only on a prepayment basis.
The trade receivables balances included $6,700,000 (2019: $6,500,000) representing 19.7% (2019: 25.1%) due from the Group’s three largest
customers. The balances due from these customers are current and are considered a low credit risk to the Group.
The maximum exposure to credit risk at balance date is the carrying value of each class of receivable mentioned above. The Group does not hold
any collateral as security.
Allowance for expected credit loss
Impairment losses on trade receivables are presented as net impairment losses within operating profit. Trade receivables are written off when
considered to have become uncollectable. Subsequent recoveries of amounts previously written off are credited against the same line item.
The Group applies NZ IFRS 9 Financial Instruments simplified approach to measure the expected credit loss provision that uses a lifetime expected
loss allowance for all trade receivables and contract assets. This provision was based on the historical credit losses, and adjusted to reflect the
current and forward-looking information on factors affecting the ability of the customers to settle the receivables. The forward looking assumptions
also included recent customer aging profile, which remained unchanged to pre-Covid-19.
Information on how Covid-19 impacts the Group is disclosed in note 2.

20202019
$000s$000s
Cash at bank and on hand5,0864,719
Cash, cash equivalents and bank overdrafts include the following for the purposes of the Statement of Cash
Flows
Cash and cash equivalents5,0864,719
Bank overdrafts (note 18)(12,848)(11,501)
Total cash and cash equivalents(7,762)(6,782)
20202019
$000s$000s
Trade receivables35,08333,960
Less: allowance for expected credit loss(763)(816)
Net trade receivables34,32033,144
Prepayments9871,448
GST/VAT re ce i va bl e1,4061,913
Receivables from related parties (note 30)201349
Other receivables
1
8,1673,633
Total trade and other receivables45,08140,487
Less non-current other receivables
1
2,7022,267
Current trade and other receivables42,37938,220

19

19

The loss allowance was determined as follows.

The reconciliation of the loss allowance is as follows.

12. Inventories
Inventories are stated at the lower of cost (weighted average cost) or net realisable value. Costs comprise direct materials, direct labour and
appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Net
realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
Inventory classification and balances

b. Obsolescence
An inventory obsolescence provision of $8,713,000 (2019: $5,132,000) is included in the inventory figures above. During the year, consumption of
slow moving inventory was lower than previously anticipated. As a result, obsolescence provisions were increased against specific slow moving and
aged categories of inventory. The carrying value of other inventory items were also reviewed in detail with adjustments to provisions made on an
item-by-item basis.
Significant judgements made in determining the provision include:
 Aging of inventory
 Forecast revenue and likely consumption of inventory
 Historical revenue and actual consumption of inventory
 Specific identification of inventory items for which the net realisable value is deemed lower than cost
The Group has not seen a material negative change in demand for its products due to Covid-19. Accordingly, Covid-19 is not expected to adversely
impact the carrying value of inventory.
During the year inventory of $1,437,000 (2019: $1,168,000) was scrapped.
Current
More than 30
days past due
30 days to 180
days past due
More than
18 0 days past
due Total
$000s$000s$000s$000s$000s
A s at 3 1 M arc h 2 0 2 0
Gross ca rrying amount of trade receivables 29,2724,3381,13433935,083
Expected loss rate 1.3%2.6%16.9%20.0%
Allowance for the expected credit loss39011319268763
A s at 3 1 M arc h 2 0 1 9
Gross ca rrying amount of trade receivables 28,0334,60061471333,960
Expected loss rate 1.6%2.6%16.9%20.0%
Allowance for the expected credit loss449120104143816
20202019
$000s$000s
Allowance for expected credit loss as at 1 April 201981664
Increase in allowance recognised in profit or loss during the year4475
Unused amount reversed(77 )-
Foreign exchange difference2065
Acquisition of subsidiaries-212
Allowance for expected credit loss as at 31 March 2020763816
20202019
$000s$000s
Raw materials13,04215,895
Work in progress19,01617,667
Finished goods5,5665,748
Total inventories37,62439,310

20

20

13. Property, plant and equipment
Items of property, plant and equipment are stated at cost, less accumulated depreciation and impairment losses.
Cost
The cost of purchased property, plant and equipment is the value of the consideration given to acquire the assets and the value of other directly
attributable costs, which have been incurred in bringing the assets to the location and condition necessary for their intended service. Where parts
of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant or equipment.
The Group recognises in the carrying amount of an item of property, plant or equipment the cost of replacing part of such an item when that cost
is incurred, only when it is probable that the future economic benefits embodied with the item will flow to the Group and the cost of the item can
be measured reliably. All other costs are recognised in the Statement of Comprehensive Income as an expense when incurred.
b. Depreciation methods and useful lives
Depreciation of property, plant and equipment, other than freehold land, is calculated on a straight-line basis to expense the cost of the assets to
their expected residual values over their useful lives as follows:

Land
Nil
Buildings
15 – 20 years
Leasehold improvements
3 – 25 years
Plant and equipment
1 – 20 years
Computer ha rdwa re
1 – 10 years
Furniture and fittings
2 – 20 years
Assets under construction
Nil
Land and
buildings
Leasehold
improve -
ments
Plant and
equipment
Computer
hardwareOt he r
Asse ts unde r
constructionTotal
$000s$000s$000s$000s$000s$000s$000s
As at 1 April 2018
Cost 4,8877,45080,7255,0402,4802,975103,557
Accumulated depreciation & impairment
(4,358)(5,734)(73,282)(4,662)(2,014)(26)(90,076)
Net book value5291,7167,4433784662,94913,481
Year ended 31 March 2019
Opening net book value 5291,7167,4433784662,94913,481
Foreign exchange differences(4)(35)(54)(12)(21)(40)(166)
Additions-5522,414728562,4676,217
Additions on acquisition -983,540479283,749
Disposals--(667)(29)(5)(76)(777)
Depreciation charge-(470)(2,940)(292)(63)-(3,765)
Depreciation reversal on disposals--62728--655
Transfers-414643207(1,084)-
Closing net book amounts5252,27511,0068255194,24419,394

21
21

The assets’ residual values and useful lives are reviewed and adjusted if appropriate, at each balance date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within ‘other (losses)/ gains
– net’ in the Statement of Comprehensive Income.
14. Intangible assets
Software assets and capitalised costs of developing systems are recorded as intangible assets and amortised unless they are directly related to a
specific item of hardware, and in that case are recorded as property, plant and equipment.

Land and
buildings
Leasehold
improve -
ments
Plant and
equipment
Computer
hardwareOt he r
Asse ts unde r
constructionTotal
$000s$000s$000s$000s$000s$000s$000s
As at 31 March 2019
Cost 4,8838,47986,6015,7512,5964,270112,580
Accumulated depreciation & impairment
(4,358)(6,204)(75,595)(4,926)(2,077)(26)(93,186)
Net book value5252,27511,0068255194,24419,394
Year ended 31 March 2020
Opening net book value 5252,27511,0068255194,24419,394
Foreign exchange differences141139288343722661
Additions101371,985321311,3043,788
Disposals--(82)(146)(10)(49)(287)
Depreciation charge(57)(463)(2,992)(346)(67)-(3,925)
Depreciation reversal on disposals--711461-218
Transfers8114361729-(1,500)-
Transfers to Intangible assets-----(925)(925)
Closing net book amounts1,4302,13110,8938635113,09618,924
At 31 March 2020
Cost 5,8458,79889,4095,9892,6543,122115,817
Accumulated depreciation & impairment
(4,415)(6,667)(78,516)(5,126)(2,143)(26)(96,893)
Net book value1,4302,13110,8938635113,09618,924
GoodwillPatentsSoftware
Product
development
Asse ts unde r
constructionTotal
$000s$000s$000s$000s$000s$000s
As at 1 April 2018
Cost 1,8462,9468,61010,2643,67227,338
Accumulated amortisation & impairment(1,846)(2,442)(8,175)(5,760)-(18,223)
Net book value-5044354,5043,6729,115
Year ended 31 March 2019
Opening net book value -5044354,5043,6729,115
Foreign exchange differences-(2)(6)(2 5 )(4)(3 7 )
Additions1,294-734473172,131
Disposals--(25)(102)(20)(147)
Amortisation charge--(325)(1,712)-(2,037)
Amortisa tion reversal on disposa ls--22102-124
Transfers--1173,248(3,365)-
Closing net book amounts1,2945022916,4626009,149

22

22

Cost
Identifiable intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and impairment losses. Subsequent
expenditure on intangible assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates.
All other expenditure is expensed as incurred.
Product development
Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new or substantially
improved products and processes, is capitalised if the product or process is technically and commercially feasible and the Group has sufficient
resources to complete development. Other development expenditure is recognised in the Statement of Comprehensive Income as an expense as
incurred.
Total capitalised development costs are $6.1m (2019: $6.8m) made up of product development assets and assets under construction. During the
year, specific product development projects and projects in progress were reviewed for recoverability based on the expected cash flows to be
generated by the projects including the impact of Covid-19. The expected cash flows supported the carrying values and no impairment was
recorded.
The Group estimates the useful life of the new product development assets based on the judgement of the technical advancements of such assets
and experiences with similar assets. The actual useful life may be shorter or longer depending on technical innovations and competitor actions.
Covid-19 is not expected to have a material adverse impact on the recoverability of product development assets as most are related to the growing
telecommunications segment. Further information on how Covid-19 impacts the Group is in note 2.
Amortisation and useful lives
Amortisation is charged to the Statement of Comprehensive Income on a straight-line basis over the estimated useful lives as follows:

Impairment tests for goodwill and the cash generating units (CGUs)
Goodwill is attributed to business units acquired through business combination. The business units are also determined to be the CGUs of the
Group. Goodwill is tested annually for impairment or more frequently if there is an impairment indicator.
The current balance of goodwill was generated when on 2 May 2018, the Group acquired the remaining 51% of the issued shares it did not own in
CRI, a previously held joint venture. Subsequent to acquisition, the name of the investment was changed to Rakon India Private Limited.
GoodwillPatentsSoftware
Product
development
Asse ts unde r
constructionTotal
$000s$000s$000s$000s$000s$000s
As at 31 March 2019
Cost 3,1402,9448,76913,83260029,285
Accumulated amortisation & impairment(1,846)(2,442)(8,478)(7,370)-(20,136)
Net book value1,2945022916,4626009,149
Year ended 31 March 2020
Opening net book value 1,2945022916,4626009,149
Foreign exchange differences-33727213325
Additions --265355214834
Disposals--(8)(5)(2 8 )(4 1 )
Amortisation charge--(398)(1,802)-(2,200)
Amortisa tion reversal on disposa ls--83-11
Transfers--437361(798)-
Transfers from property, plant & equipment----925925
Closing net book amounts1,2945356025,6469269,003
At 31 March 2020
Cost 3,1402,9779,47014,81592631,328
Accumulated amortisation & impairment(1,846)(2,442)(8,868)(9,169)-(22,325)
Net book value1,2945356025,6469269,003
Goodwill
Nil
Patents
20 years
So ft wa re
2 –1 0 ye a rs
Product development
5 –1 0 ye a rs
Assets under construction
Nil

23
23

The carrying amounts of Group’s other non-financial assets are reviewed at each balance date to determine whether there is any indication of
impairment.
If an indicator of impairment exists, the asset’s or CGU’s recoverable amount is estimated being the higher of an asset’s fair value less costs to sell
and the asset’s value in use. An impairment loss is recognised whenever the carrying amount of an asset or its CGU exceeds its recoverable amount.
Impairment losses are recognised in the Statement of Comprehensive Income.
Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to CGUs and then, to
reduce the carrying amount of the other assets in the unit on a pro rata basis.
An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been
determined, net of depreciation or amortisation, if no impairment loss had been recognised. Accumulated impairment losses on goodwill are not
reversed.
Key assumptions for impairment test
The Group concluded at 31 March 2020 that indicators of impairment existed. In making this assessment management and the Directors considered
factors including the current profitability of the Group, the market capitalisation value of the Company in comparison to the Group's net asset value
and the impact of Covid-19 on the Group’s operations (note 2). As a result, the Group has estimated the recoverable amount of its CGUs on a value-
in-use basis and determined that there is no impairment.
The value-in-use are based on Board approved cash flow forecasts covering a five-year period. Covid-19 negatively impacts the near term forecasts
used for the value-in-use calculations. This is predominantly due to the New Zealand and India manufacturing operations being severely restricted
for a limited period in March/April 2020. Further information on how Covid-19 impacts the Group is in note 2.
Key assumptions used in ‘value in use’ calculations
CGU Assumption Range 5 Year CAGR
New Zealand Annual sales growth rate
1
3% to 12% 5.4%
Gross margin %
2
49% to 55% n/a
France Annual sales growth rate
1
2% to 33% 11.4%
Gross margin %
2
26% to 36% n/a
India Annual sales growth rate
1
9% to 29% 17.9%
Gross margin %
2
21% to 31% n/a
China Annual net profit growth rate
3
3% to 25% 9.2%
Free cash flow
3
44% 207.6%

Free cash flow is used in the above tables as the China assets are held through Rakon’s investment in associates.
1
Sales growth – Management have forecasted sales to grow over the period of the cash flow projection, due to a combination of factors including
industry forecasts for the key market segments in which Rakon operates, future product innovation and estimations of its own share of the market
reflective of the quality of its product range and technology advantages. Management have forecast a future increase in revenues for the NZ, France
and India CGUs specifically as a result of its product positioning which is expected to meet the future increased technology specification that will
be demanded in the telecommunications segment.
2
Gross margin – Management forecasted gross margin based on past performance and its expectations of market development also taking into
account gradual decline in average selling prices. Anticipated industry trends, product innovations, manufacturing efficiency and raw material cost
improvements have also been factored into these gross margin assumptions.
3
China, net profit – Management forecasted net profit based on a combination of factors including industry forecasts for the key market segments,
future product innovation and estimations of its own share of the market reflective of the quality of its product range and technology advantages.
These assumptions have been used for the analysis of each CGU within the business segment.
Significant estimate: impact of reasonably possible changes in key assumptions
New Zealand CGU
The recoverable amount is estimated to be $65.9m (2019: $47.6m). This exceeds the carrying amount of the CGU at balance date by $16.4m (2019:
$5.7m). If the sales volumes used in the value-in-use calculation had been 5.0% lower than management’s estimates, the Group would have
recognised an impairment against the carrying amount of net assets of $2.7m. If the gross margin percentage used in the value-in-use calculation
had been 2.0% lower than management’s estimates, the Group would have recognised an impairment against the carrying amount of net assets of
$5.2m. If the pre-tax discount rate applied to the cash flow projections was 16.0% instead of 12.3%, the recoverable amount of the CGU would
equal its carrying amount.
France CGU
The recoverable amount is estimated to be $48.2m (2019: $21.9m). This exceeds the carrying amount of the CGU at balance date by $21.7m (2019:
$2.8m). If the sales used in the value-in-use calculation had been 6.5% lower than management’s estimates, the Group would have recognised an
impairment against the carrying amount of net assets of $1.9m. If the gross margin percentage used in the value-in-use calculation had been 2.0%
lower than management’s estimates, the Group would have recognised an impairment against the carrying amount of net assets of $0.8m. If the
pre-tax discount rate applied to the cash flow projections was 13.9% instead of 10.3%, the recoverable amount of the CGU would equal its carrying
amount.

24

24

India CGU
The recoverable amount is estimated to be $21.0m (2019: $17.1m). This exceeds the carrying amount of the CGU at balance date by $2.1m (2019:
$1.7m). If the sales used in the value-in-use calculation had been 3.0% lower than management’s estimates, no impairment would result. If the
gross margin percentage used in the value-in-use calculation had been 3.0% lower than management’s estimates, the Group would have recognised
an impairment against the carrying amount of net assets of $1.3m. If the pre-tax discount rate applied to the cash flow projections was 24.3%
instead of 22.7%, the recoverable amount of the CGU would equal its carrying amount.
China CGU
The recoverable amount is estimated to be $12.0m (2019: $9.9m). This exceeds the carrying amount of the CGU at balance date by $0.3m (2019:
$2.8m). If free cash flow was 10.0% lower than management’s estimates, the Group would have recognised an impairment against the carrying
amount of net assets of $1.4m. If the pre-tax discount rate applied to the cash flow projections was 22.0% instead of 15.8%, the recoverable amount
of the CGU would equal its carrying amount.
Growth Rates and Discount Rates
The discount rates used are pre-tax and reflect specific risks relating to the relevant segments. Cash flows beyond the five-year period are
extrapolated using the estimated growth rates stated below. The growth rates are consistent with the industries in those relevant territories.

15. Leases
The Group leases various properties, equipment and cars. Lease terms are negotiated on an individual basis and contain a wide range of different
terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes.
Until 31 March 2019, leases of property, plant and equipment were classified as either finance or operating leases, refer note 29.
The Group has adopted NZ IFRS 16 Leases retrospectively from 1 April 2019, and recognised leases as a right-of-use asset and a corresponding lease
liability for the period in which the leased asset is available for use to the Group. The Group has not restated comparatives for the 31 March 2019
reporting period, as permitted under the specific transitional provisions in the standard. The reclassifications and the adjustments arising from the
new leasing rules are therefore recognised in the opening balance sheet on 1 April 2019.
Adjustments recognised on adoption of NZ IFRS 16 Leases
On adoption of NZ IFRS 16 Leases, the Group recognised lease liability in relation to leases that had previously been classified as operating leases
under the principles of NZ IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using
the estimated incremental borrowing rate as at 1 April 2019, and which ranged between 4.3% and 10.0%. The incremental borrowing rate is based
where possible on the third party financing rate as the starting point and adjusted for any changes in conditions of financing. If not, the Group uses
the build-up approach that starts with a risk free interest rate, adjusted for the credit risk for leases and for any specific lease conditions. The lease
payments to be made under reasonably certain extension options are also included in the measurement of the liability. In determining the lease
term, the management considers all facts that creates an economic incentive to exercise the extension option. Where it is reasonably certain that
the lease will not be extended, the extension is not included in the lease term for calculation. Extension options for manufacturing plants and offices
are included in the lease liability. The Group has chosen the option to measure the right-of-use asset at an amount equal to the lease liability,
adjusted by the amount of any prepaid or accrued lease payments recognised immediately before the date of initial application.
Subsequent to initial measurement, lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are
reduced for lease payments made. The future variable increases in the leases are not factored in the calculation. When the leases are reviewed and
such changes are effected, the lease liability will be reassessed and adjusted against the right-of-use asset. Right-of-use assets are amortised on a
straight-line basis over the remaining term of the lease or over the remaining economic life of the asset.

Summary at 1 April 2019

2020201920202019
New Zealand1.90%1.90%12.30%13.60%
United Kingdom2.50%2.50%9.40%12.10%
Fra nce1.32%1.30%10.30%13.50%
India3.50%3.50%22.70%27.10%
China2.50%2.50%15.80%14.80%
Growth rateDiscount rate (pre-tax)
2019
$000s
Operating lease commitments as at 31 March 201910,382
Discounted using the Group's borrowing rate at the date of initial application10,213
Finance lease liabilities recognised as at 31 March 2019812
Adjustments as a result of a different treatment of extension options290
Lease liability recognised as at 1 April 201911,315

25

25

Recognition of lease liability

Recognition of right-of-use assets

Movements in right-of-use assets during the year

During the year, interest expense on lease liabilities was $95,000 (note 9), and depreciation expense of $2,698,000 on right-of-use assets.
Changes due to adoption of NZ IFRS 16 Leases
The change in accounting policy affected the following items in the balance sheet on 1 April 2019:

 Right-of-use assets: increase by $11,175,000
 Prepayments: decrease by $672,000
 Borrowings: decrease by $812,000
 Lease liabilities: increase by $11,315,000
The Underlying EBITDA, segment assets and segment liabilities for 31 March 2020 increased as a result of the change in accounting policy which
are detailed below.

In applying NZ IFRS 16 Leases for the first time, the Group has used the following practical expedients permitted by the standard:
 the use of a single discount rate to a portfolio of leases with reasonably similar characteristics
 reliance on previous assessments on whether leases are onerous
 the exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application
 the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease
At 1 April 20192020
$000s$000s
Represented by
Current lease liabilies2,8562,741
Non-current lease liabilities8,4596,704
Total lease liabilities11,3159,445
At 1 April 20192020
$000s$000s
Properties9,9358,843
Equipment928669
Motor vehicle312218
Total right-of-use asse ts11,1759,730
PropertiesEquipment Motor vehicleTotal
$000s$000s$000s$000s
Cost
At 1 April 2019
9,93592831211,175
Additions
64114067848
Foreign exchange differences
4352716478
At 31 March 2020
11,0111,09539512,501
Accumulated depreciation
Charge for current year
2,1114151722,698
Foreign exchange differences
5711573
At 31 March 2020
2,1684261772,771
Carrying amount as at 31 March 20208,8436692189,730
$000s$000s$000s
NZ1,6495,1424,891
UK155798776
Fra nce6322,7132,723
India442845827
Othe r182232228
3,0609,7309,445
Segme nt
liabilities
Underlying
EBITDA Impact
Segment
asse ts

26

26

The Group has also elected not to reassess whether a contract is, or contains a lease at the date of initial application. Instead, for contracts entered
into before the transition date, the Group relied on its assessment made applying NZ IAS 17 Leases and NZ IFRIC 4 Determining whether an
Arrangement Contains a Lease.
16. Interest in associates and joint venture
Associates are entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and
50% of the voting rights. Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost.
Joint arrangements are classified as either joint operations or joint ventures. Classification depends on the contractual rights and obligations of
each investor, rather than the legal structure of the joint arrangement. The Group’s joint venture is accounted for using the equity method.
Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to recognise the Group’s share of
the post-acquisition profits or losses of the investee in the Statement of Comprehensive Income. Dividends received or receivable from associates
and joint ventures are recognised as a reduction in the carrying amount of the investment. When the Group’s share of losses in an equity-accounted
investment equals or exceeds its interest in the entity, including any other unsecured long-term receivables, the Group does not recognise further
losses, unless it has incurred obligations or made payments on behalf of the other entity. Unrealised gains on transactions between the Group and
its associates and joint ventures are eliminated to the extent of the Group’s interest in these entities. Unrealised losses are also eliminated unless
the transaction provides evidence of an impairment of the asset transferred. Accounting policies of equity accounted investees have been changed
where necessary to ensure consistency with the policies adopted by the Group.
The carrying amounts of the investments are reviewed at each balance date to determine whether there is any indication of impairment. If any
such indication exists, the asset’s recoverable amount is estimated being the higher of an asset’s fair value less costs to sell and the asset’s value in
use. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognised
in the Statement of Comprehensive Income. Set out below are the associates and joint venture of the Group. The entities listed below have share
capital consisting solely of ordinary shares, which are held directly by the Group. The country of incorporation or registration is also their principal
place of business, and the proportion of ownership interest is the same as the proportion of voting rights held.
Breakdown of interest in associates and joint venture

1
The Group has a 40% interest in two related companies: Chengdu Timemaker Crystal Technology Co. Limited and Shenzhen Taixiang Wafer Co.
Limited, which provide products and services to the frequency control products industry.
2
On 2 May 2018, the Group assumed full ownership of Centum Rakon India Private Limited (CRI) by acquiring the remaining 51% interest of shares
and subsequently changed the name to Rakon India Private Limited. Prior to the acquisition, CRI was a joint venture.
3
Due to loss of significant influence, on 1 June 2018, the Group has reclassified the investment in Thinxtra Pty Limited (Thinxtra), as a financial asset
at fair value through other comprehensive income (FVOCI), refer note 17.
Timemaker Group
The Timemaker Group is the world’s largest quartz wafer manufacturer and a key supplier to Rakon. The tables below provides summarised financial
information for the Timemaker Group. The information disclosed reflects the amounts presented in the financial statements of the relevant
associates and not the Group’s share of those amounts. They have been amended to reflect adjustments made by the entity when using the equity
method, including fair value adjustments and modifications for differences in accounting policy. The total Timemaker Group is an aggregate of
Chengdu Timemaker Crystal Technology Co. Limited and Shenzhen Taixiang Wafer Co. Limited.
Covid-19 has not materially impacted the Timemaker Group with the business continuing to operate uninterrupted through the March/April 2020
period. Minor impacts were noted including difficulty recruiting staff and logistics issues due to supply chain interruptions.
Nat ure of Measurement2020201920202019
20202019relationshipmethod$000s$000s$000s$000s
Chengdu Timemaker Crystal
Technology Co. Ltd
1
China40%40%Associate
Equity
method
11,2599,974
Shenzhen Taixiang Wafer Co. Ltd
1
China40%40%Associate
Equity
method
455425
Total Ti me make r Grou p
11,71410,3997971,050
Thinxtra Pty Limited
3
Australia0%0%Associate
Equity
method
- - - (2 8 7 )
11,71410,399797763
Centum Rakon India Private Ltd
2
India0%0%Joint venture
Equity
method
- - - 7 6
11,71410,399797839
Total carrying amount of equity accounted associates and joint venture
Equity accounted
(l oss)/ profit
Country of
incorporation
% of ownership
int e re st
Total c arr yi ng amount of assoc i ate s
Net investment
Name of e nti t y

27
27

202020192020201920202019
$000s$000s$000s$000s$000s$000s
Summarised Balance Sheet
Current assets
Cash & cash equivalents3,5672,904323,5702,906
Other current assets26,89017,7861,2121,13528,10218,921
Total current assets30,45720,6901,2151,13731,67221,827
Non-current assets26,17825,097--26,17825,097
Current liabilities
Financial liabilities (excluding trade payables)13,45611,371--13,45611,371
Other current liabilities13,1198,923787313,1978,996
Total current liabilities26,57520,294787326,65320,367
Non-current liabilities
Other non-current liabilities1,912558--1,912558
Total non-current liabilities1,912558--1,912558
Net asse ts28,14824,9351,1371,06429,28525,999
Total Time make r Group
Chengdu Timemaker Crystal
Technology Co. Ltd
Shenzhen Taixiang Wafer Co.
Ltd
202020192020201920202019
$000s$000s$000s$000s$000s$000s
Summarised Statement of Comprehensive Income
Revenue27,50928,260--27,50928,260
Depreciation and amortisation(2,661)(3,071)--(2,661)(3,071)
Interest expenses(491)(576)--(491)(576)
Profit for the period1,9882,625--1,9882,625
Total Ti me make r Group
Chengdu Timemake r Crystal
Technology Co. Ltd
Shenzhen Taixiang Wafer Co.
Ltd
202020192020201920202019
$000s$000s$000s$000s$000s$000s
Reconciliation of net assets to carrying amount
Rakon's share i n %
40%40%
40%
40%40%40%
Rakon's share of associates' and joint venture's
net assets
11,2599,97445542511,71410,399
Carrying amount
11,2599,97445542511,71410,399
Movement in carrying amount
Opening net assets 1 April10,3999,350
Equity accounted profit7971,050
Foreign exchange movement518(1 )
Carrying amount11,71410,399
Chengdu Timemaker Crystal
Technology Co. Ltd
Shenzhen Taixiang Wafer Co.
LtdTotal Time make r Group

28

28

Other joint venture and associate
On 2 May 2018, the Group assumed full ownership of CRI and subsequently changed the name to Rakon India Private Limited.
On 1 June 2018 due to loss of significant influence, the Group has reclassified the investment in Thinxtra, as a financial asset at FVOCI, refer note
17.

17. Investment in Thinxtra – financial asset at fair value through other comprehensive income
Subsequent to losing significant influence in Thinxtra and ceasing equity accounting of the investment on 1 June 2018, the Group elected to
present changes in fair value of its investment in other comprehensive income. Refer note 26 for accounting policy.
Thinxtra
Thinxtra is an 'Internet of Things' (IoT) business that started in 2016. Thinxtra's focus is on establishing an IoT network in Australia, New Zealand
and Hong Kong and providing products, services and solutions enabling connectivity of devices to the network. Thinxtra’s business model is based
on subscription for access to the network, platform solutions and the sale of IoT products. Further information is available at www.thinxtra.com.
Rakon was one of the founding members of Thinxtra in 2016 and has a 7.1% ownership interest at 31 March 2020 (March 2019: 17.8%). This is
calculated on a fully diluted basis including the exercise of existing options.
Valuation of the investment in Thinxtra at 31 March 2020
It is recognised that there is a high level of volatility and judgement required in valuing Thinxtra given its early stage of business; the new and
developing IoT market and ecosystem in which it operates; the volatility in prices achieved by historic capital raises, it being a private company
investment not actively traded; and the track record of the Company in achieving its forecast performance.
The Directors have used a range of valuation techniques as it was considered that one single valuation method would not provide an appropriate
result. Accordingly, the Directors have assigned a probability based weighting based on the available information and Directors’ judgement. The
Directors recognise there is a high risk the valuation will change significantly over time and have chosen to adopt this consistent overall methodology
for the valuations reported at 31 March 2019 and 31 March 2020.
For the year ended 31 March 2020, the Directors recognise that a valuation of $4.4m achieved where a higher weighting is given to the discounted
cash flow method, reflects more closely the likelihood that Thinxtra will execute its plans including an eventual listing. However, the Directors also
recognise that relevant accounting standards require more weighting to be applied to observable inputs, in this case, the average price achieved
for the A$9m capital raise in February 2020 of A$2.29 per share. Therefore the final valuation of $2.9m was adopted resulting from a higher
weighting given to the A$9m capital raise price.
In forming the Directors’ judgement, the Directors have taken into consideration whether there is an active market in Thinxtra as indicated by the
recent capital raise and concluded that there is not. However the Directors have concluded that the weighting that should be attributed to the
capital raise should be higher than in the previous year, maximising the use of relevant observable inputs and minimising the use of unobservable
inputs. If there is an active market, the fair value would be considered to be the recent share issue price as the investment would be treated as a
Level 1 investment under the fair value hierarchy (refer to scenarios below).
The Directors reviewed all the available information to date including Thinxtra’s audited financial statements, current capital raise activity and other
shareholder communications including the impact of Covid-19. The impact of Covid-19 includes the short-term deferment of forecast revenue and
a delay to the original IPO timeline. This is not expected to materially change the future realisation of Rakon’s investment.
Valuation methodology and key inputs
In undertaking the fair value assessment, given the range of potential outcomes, it was considered that one single valuation method would not
provide an appropriate result. Accordingly, the Directors have used a range of valuation techniques which provide different scenario outcomes.
These outcomes have then been assigned a probability based on the available information and Directors’ judgement. The methodology, key inputs
and overall outcome is summarised as follows:

2020201920202019
$000s$000s$000s$000s
Movement in carrying amount
Opening net assets 1 April-2,876-5,290
Equity accounted gain/(loss)-76-(287)
Foreign exchange movement-42--
De-recognition of joint venture and associate-(2,994)-(5,003)
Net carrying amount ----
Centum Rakon India Private LtdThinxtra Pty Ltd
Valuation TechniqueWeighting Assigned
A: Discounted cash flow (discount rate 15%)30%
B: February 2020 capital raise of A$9m at A$2.29 per share70%

29

29

The valuation was based on Rakon having a 7.1% shareholding which assumed all existing share options were exercised and all shares were issued
under the capital raise offer that was open.
The resultant valuation of A$3.64 is adopted in the 31 March 2020 financial statements (2019: A$5.82).
Sensitivities on key inputs
The Directors recognise that the valuation outcomes under each technique are dependent on assumptions used. The following table provides an
analysis of the impact on the final valuation where key assumptions are changed as described in b) to c) below:

Sensitivities on probability weightings assigned
The Directors recognise that the final valuation is dependent on weightings assigned to each scenario/valuation technique combination. The
following table provides an analysis of the impact on the final valuation where the weightings are changed.
To provide an indication about the reliability of the inputs used in
determining fair value, the Directors classified the fair valuation of
Thinxtra investment as a level 3 investment. Instruments are classified
as level 3 only if one or more of the significant inputs for the valuation
is not based on observable market data.
18. Borrowings
The Group is reliant on its bank facilities and equity as the principal sources of capital management. The ability of the Group to remain in compliance
with its banking covenants has been considered by the Directors in the adoption of the going concern assumption during the preparation of these
financial statements.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months
after balance date.
Line of credits
The Group maintains following line of credits.
Current year
ASB
At 31 March 2020 a $15.2m combined trade facility and a $3.3m overdraft facility was in place.
On 26 May 2020 the facilities with ASB were extended. The Company has agreed to reduce the combined trade facility of $15.2m as follows:
 Up to 29 June 2020: $13.2m
 From 30 June 2020 to 30 September 2020: $11.2m
 From 1 October 2020 to 31 December 2020: $7.7m
 From 1 January 2021: $5.7m
Facilities are secured by a general security deed over all the present and future assets and undertakings of the Group. The Group has agreed to
certain capital requirements, restrictions on dividend distributions and capital expenditure. The financial covenants include net tangible assets to
total tangible assets, net debt to Underlying EBITDA and Underlying EBITDA to interest. Interest is based on wholesale market interest rates, bank
margin and applicable line fee. The Company was in compliance with all required financial covenants during the year.
State Bank of India
Rakon India has an existing facility with State Bank of India including ₹150m (NZ$3.2m) which can be used for cash based working capital
requirements.
Prior year
On 30 November 2018 the facilities with ASB were restructured and increased. At 31 March 2019 a $15.5m overdraft facility was in place. Interest
was payable at the ASB Corporate Indicator Rate plus applicable margin. The increase to the previous facility was due to additional working capital
required for growth in the telecommunications business supplied out of India and New Zealand. This overdraft was drawn for the purchase of Rakon
India.

ScenarioAssumptions changesValuation NZ$m change
a) Base case valuationbase case2. 9
b) Discounted cash flowCash flow is 50% lower than forecast2.1(0.8)
c) Discounted cash flowDiscount rate is 1% higher (ie 16%)2.7(0.2)
Valuation Technique
Base case
Alternate
case A
Alternate
case B
Disc ounted c ash flow30%70%0%
Last A$9m capital raise70%30%100%
100%100%100%
Valuation NZ$m2.94.41.8
change in valn NZ$m+1.4-1.1

30

30

Borrowings balance

The Group has adopted NZ IFRS 16 Leases from 1 April 2019, refer note 15 for information on lease obligations.
The exposure of the Group’s bank borrowings to interest rate changes and the contractual re-pricing dates at the balance dates are as follows.

Borrowings costs
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised. Other borrowing
costs are expensed in the period in which they incur, refer note 9.
Net debt reconciliation

On adoption of NZ IFRS 16 Leases, the Group recognised lease liabilities. Refer note 15 for more information.
19. Trade and other payables
Trade and other payables represent liabilities for goods and services provided to the Group prior to the end of the financial period, which are
unpaid. These are unsecured and are usually paid within 60 days of recognition. They are recognised initially at their fair value and subsequently
measured at amortised cost using the effective interest method.

20202019
$000s$000s
Current
Obligations under finance lease-405
Other borrowings14569
Ba nk ove rdra ft s12,84811,501
Current borrowings12,99311,975
Non-current
Obligations under finance lease-412
Non-current borrowings-412
20202019
$000s$000s
6 months or less12,84811,501
Total bank borrowings including overdraft12,84811,501
Other asse t
Cash/ bank
overdraftBorrowings Lease liabiltiesTotal
$000s$000s$000s$000s
Bal anc e as at 1 A pri l 20 1 87,540(9 8 )-7,442
Ca s h fl o ws(14,466)24-(14,442)
Acquisitions-(812)-(812)
Foreign exchange changes144--144
Balance as at 31 March 2019(6,782)(886)-(7,668)
Ca s h fl o ws(308)-3,0782,770
Acquisitions-(71)(688)(759)
Impact from NZ IFRS 16 Leases adoption-812(11,315)(10,503)
Foreign exchange changes(672)-(425)(1,097)
Interest on lease liabilties--(95)(95 )
Balance as at 31 March 2020(7,762)(145)(9,445)(17,352)
Liabilities from financing activities
20202019
$000s$000s
Trade payables8,88213,439
Amounts due to related parties (note 31)628468
Employee entitlements9,3308,908
Accrued expenses3,4123,583
Total trade and other payables22,25226,398

31

31

20. Provisions for other liabilities and charges
A provision is recognised when the Group has a present legal or constructive obligation as a result of a past event and it is probable that an outflow
of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future
cash flows at a pre-tax rate that reflects current market assessments of the time value of money and where appropriate, the risks specific to the
liability.

Retirement provision
The Group’s net obligation in respect of the French retirement indemnity plan is the amount of future benefit that employees have earned in return
for their service in the current and prior periods. The obligation is calculated using the projected unit credit method and is discounted to its present
value and the fair value of any related assets is deducted. The French retirement indemnity plan entitles permanent French employees to a lump
sum on retirement. The payment is dependent on an employee’s final salary and the number of years of service rendered.
French employees are entitled to a retirement payout once they have met specific criteria. This is a one off payment based on service time at
retirement date. A provision has been created to recognise this cost taking in consideration the time served, probability of attainment and discount
rates. An actuarial valuation was performed at 31 March 2020.
Long service leave
The Group’s net obligation in respect of long service leave is the amount of future benefit that employees have earned in return for their service in
the current and prior periods. The obligation is calculated using the projected unit credit method and is discounted to its present value.
New Zealand employees are entitled to long service leave after the completion of 10 years’ of continuous service, in the form of special holidays
and allowance. A provision has been created to recognise this cost, taking into consideration the time served, probability of attainment and discount
rates.
Lease make good
The Company is required to restore the leased premises at Mt Wellington, Auckland, New Zealand and Bengaluru, India to their original condition
at the end of the respective lease terms. A provision is recognised for the present value of the estimated expenditure required to remove any
leasehold improvements. These costs have been capitalised as part of the cost of leasehold improvements and are amortised over the lease terms.
21. Taxation
The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the worldwide provision for income
taxes and recognition of deferred tax. There are many transactions and calculations for which the ultimate tax determination is uncertain during
the ordinary course of business. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such
differences will affect the income tax and deferred tax provisions in the period in which such determination is made.

Retirement
provision
Long service
l e ave
Restructure
provision
Lease make
good
Total
$000s$000s$000s$000s$000s
At 31 March 20182,1464704396403,695
Charged to the Statement of Comprehensive Income
Additional provisions recognised26565--330
Unwinding of discount
---
1212
Used during the yea r-(72)(439)-(511)
Foreign exchange
(80 )--15(65 )
At 31 March 20192,331463-6673,461
Charged to the Statement of Comprehensive Income
Additional provisions recognised220179--399
Unwinding of discount---1616
Unused amount reversed(231)(2 0)--(251)
Used during the year(154)(104)--(258)
Foreign exchange265--265
At 31 March 20202,431518-6833,632
Represented by
Current portion382332--714
Non-current portion2,049186-6832,918
Total provisions for other liabilities and charges2,431518-6833,632

32

32

Income tax expense
Income tax on the net profit for the year comprises current and deferred tax. Income tax is recognised in the Statement of Comprehensive Income,
with the exception of other items that relate to other comprehensive income, in which case it is recognised in OCI.

The weighted average applicable tax rate was 21% (2019: -39%).
Deferred tax
Deferred taxes arising from temporary differences and unused tax losses are summarised.

1
Includes deferred tax arising from financial instruments (cash flow hedges) and inventory provisioning.
At balance date Rakon Limited had total tax losses of $19,171,000 (2019: $26,743,000) of which $8,908,000 (2019: $8,908,000) are recognised in
deferred income tax assets. Accordingly, $10,263,000 (2019: $17,835,000) of tax losses have not been recognised in deferred income tax assets.
Rakon Limited’s tax losses have no expiry date. During the year Rakon Limited recognised tax losses of $7,895,000 (2019: $1,712,000) which were
not previously recognised in deferred income tax assets. These were fully utilised against current year taxable income. Deferred income tax assets
are recognised for tax losses to the extent that the related tax benefit is expected to be realised through future taxable profits.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and current tax liabilities and when
the deferred income taxes relate to the same taxation authority.

20202019
$000s$000s
Current tax(223)(1,879)
Deferred tax expense919(231)
Income tax credit/(expense)696(2,110)
20202019
Reconciliation of income tax expense $000s$000s
Profit before tax 3,2845,474
Tax calculated at domestic tax rates applicable to profits in the respective countries(580)(1,540)
Expenses not deductible95(276)
Non-taxable income182684
Expenses deductible for tax purposes-34
Prior year adjustment10946
Associate and joint venture results reported net of tax12695
Movement in deferred tax subsquent to business combination-(427)
Recognition and utilisation of previously unrecognised tax losses2,210347
Tax losses for which no deferred income tax asset was recognised(1,446)(1,073)
Income tax credit/(expense)696(2,110)
Property,
plant &
equipment
Empl oye e
benefitsOthe r
1
Future income
tax benefitTotal
$000s$000s$000s$000s$000s
At 31 March 2018
485022,4812,6315,662
(Charged)/credited to profit or loss
(321)149(138)79(231)
Losses transferred to subsidiaries---(209)(209)
Acquisition of subsidiaries--568-568
Charged to equity--496-496
Foreign exchange difference--(3)-(3)
At 31 March 2019(2 73 )6513,4042,5016,283
(Charged)/credited to profit or loss
(149)1098474919
Losses transferred to subsidiaries
---(73 )(73 )
Charged to equity--1,807-1,807
Foreign exchange difference--124-124
At 31 March 2020(4 22 )6616,3192,5029,060
20202019
$000s$000s
Defer r ed ta x a s s ets
9,2467,352
Deferred tax l iabil ities
(186)(1,069)
Net deferred tax asset9,0606,283

33

33

Imputation balances

22. Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds.
At 31 March 2020 the total number of ordinary shares, including treasury shares, is 229,055,272 shares (2019: 229,055,272) made up as follows:
 226,961,983 are fully paid shares (2019: 226,961,983)
 321,972 unpaid ordinary shares were on issue and held in trust on behalf of participants in the Rakon Share Plan (2019: 321,972)
 1,771,317 unpaid ordinary shares were held by Rakon ESOP Trustee Limited for future allocation to participants (2019: 1,771,317)
At 31 March 2020, the share capital remained unchanged at $181,024,000.
23. Earnings per share
Basic
Basic earnings per share is calculated by dividing the profit or loss attributable to equity holders of the Group, by the weighted average number of
ordinary shares on issue during the year.

Diluted
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all
dilutive potential ordinary shares.
At 31 March 2020, the Group did not have any dilutive options or potential dilutive ordinary shares that could be converted into ordinary shares
(2019: nil). The diluted earnings per share and basic earnings per share were same.

20202019
$000s$000s
Imputation credit available for use in subsequent periods11,20411,203
20202019
$000s$000s
Weighted average number of ordinary shares on issue (note 22)226,962226,962
Continuing operations
Earnings attributable to equity holders of the Group ($000s)3,9803,364
Basic earnings per share (cents per share)1.81.5

34

34

24. Other reserves

Foreign currency translation
Recognises exchange differences arising on translation of the foreign controlled entities, as described in note 3. The cumulative amount is
reclassified to the Statement of Comprehensive Income when the investment is disposed.
Hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of hedging instruments and cost of hedging used
in cash flow hedges pending subsequent recognition in the Statement of Comprehensive Income or directly included in the initial cost or other
carrying amount of a non-financial asset or non-financial liability.
Share option
The share-based payments reserve is used to recognise:
 the grant date fair value of options issued to employees but not exercised
 the grant date fair value of shares issued to employees
 the grant date fair value of deferred shares granted to employees but not yet vested
Other comprehensive income revaluation
The Group has elected to recognise the change in fair value of investment in Thinxtra in other comprehensive income, refer note 17.
25. Derivative financial instruments
The Group is exposed to certain risks relating to its ongoing business operations. To mitigate the risks the Group uses derivative financial instruments
such as cross-currency swaps and interest rates swaps. These instruments are held for risk and asset management purposes only and not for the
purpose of speculation. The Group’s risk management strategy and how it is applied to manage risk is explained further in note 26.

Fore ign
currency
translation
reserve
He dging
reserve
Share option
reserve
Othe r
comprehensive
income
re val uati onTotal
$000s$000s$000s$000s$000s
At 31 March 2018(24,712)8943,064-(20,754)
Cash flow hedges
Fair value gains/(losses) in year-(1,221)--(1,221)
Cost of hedge-31--31
Changes in fair value of equity investments at fair value through
other comprehensive income – Thinxtra
---(454)(454)
Tax on fair value losses -342--342
Tra ns fers to revenue-(591)--(591)
Income ta x on transfers to revenue-165--165
Subsidiaries1,330---1,330
Associates and joint venture(1)---(1)
At 31 March 2019(23,383)(380)3,064(454)(21,153)
Cash flow hedges
Fair value gains/(losses) in year-(4,818)--(4,818)
Cost of hedge-570--570
Changes in fair value of equity investments at fair value through
other comprehensive income – Thinxtra
---(1,632)(1,632)
Tax on fair value losses -1,349--1,349
Tra ns fers to revenue-(2,429)--(2,429)
Income ta x on transfers to revenue-680--680
Subsidiaries3,967---3,967
Associates and joint venture173---173
At 31 March 2020(19,243)(5,028)3,064(2,086)(23,293)

35

35

Derivatives and hedge accounting
Where all relevant criteria are met, hedge accounting is applied to the derivatives to remove the mismatch between the hedging instrument and
hedged item. When the Group designates certain derivatives to be part of a hedging relationship, and they meet the criteria for hedge accounting,
the hedges are classified as cash flow hedges.
At the inception of hedge relationship, hedging documentation is prepared to document the economic relationship between hedging instruments
and hedged items with the Group’s risk management objective and strategy for undertaking of hedge transactions. The Group documents its
assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are effective in
offsetting changes in cash flows of hedged items. The effective portion of changes in the fair value of cash flow hedges is recognised (including
related tax impacts) through OCI in the cash flow hedge reserve in equity, refer note 23. The balance of the cash flow hedge reserve in relation to
each particular hedge is transferred to the Statement of Comprehensive Income in the period when the hedged item affects Statement of
Comprehensive Income. Hedge accounting is discontinued when a hedging instrument expires or is sold or terminated, or when a hedge no longer
meets the criteria for hedge accounting. The cumulative gain or loss existing in equity at that time remains in equity and is recognised when the
forecast transaction is ultimately recognised in the Statement of Comprehensive Income. When a forecast transaction is no longer expected to
occur, the cumulative gain or loss that was reported in equity is immediately transferred to the Statement of Comprehensive Income.
The Group designates only the intrinsic value of option as the hedging instrument. These are recognised in the cash flow hedge reserve within
equity. The changes in time value of the options that related to the hedged item are recognised within OCI in the cost of hedging reserve with
equity.
The gain or loss relating to the effective portion of the interest rate swaps hedging variable rate borrowings, is recognised in Statement of
Comprehensive Income within finance cost at the same time as the interest expense on the hedged borrowings.
For hedges of foreign currency purchases, the Group enters into hedge relationships where the critical terms of the hedging instrument match
exactly with the terms of the hedged item. The Group therefore performs a qualitative assessment of effectiveness. In hedges of foreign currency
purchases, ineffectiveness may arise if the timing of the forecast transaction changes from what was originally estimated, or if there are changes in
the credit risk of the derivative counterparty. Any infectiveness assessed during the year was recognised to the foreign exchange (losses)/gains —
net in the Statement of Comprehensive Income.
Information on how Covid-19 impact the Group’s derivative is in note 2.
The following table sets out the notional amount of derivative instruments.

Trading derivatives are classified as a current asset or liability. The full fair value of a hedging derivative is classified as a non-current asset or liability
if the remaining maturity of the hedged item is more than 12 months, or as a current asset or liability if the maturity of the hedged item is less than
12 months.
Forward foreign exchange contracts
The hedged highly probable forecast transactions denominated in foreign currency are expected to occur at various dates during the next 24
months. Gains and losses recognised in the hedging reserve in equity on forward foreign exchange contracts will be recognised in the Statement of
Comprehensive Income, in the period or periods during which the hedged forecast transaction affects the Statement of Comprehensive Income.
Interest rate swap contracts
The Group enters into interest rate swaps that have similar critical terms as the hedged item, such as reference rate, reset dates, payment dates,
maturities and notional amount. The Group does not hedge 100% of its loans, therefore the hedged item is identified as a proportion of the
outstanding loans up to the notional amount of the swaps. As all critical terms matched during the year, the economic relationship was 100%
effective.
Hedge ineffectiveness for interest rate swaps is assessed using the same principles as for hedges of foreign currency purchases. It may occur due
to the credit value/debit value adjustment on the interest rate swaps which is not matched by the loan, and differences in critical terms between
the interest rate swaps and loans.
There was no ineffectiveness during 2020 in relation to the interest rate swaps (2019: nil).
2020202020192019
AssetsLiabilitiesAssetsLiabilities
$000s$000s$000s$000s
Interest rate swaps – cash flow hedge-24-100
Forward foreign exchange contracts – cash flow hedges26,178274837
Forward foreign exchange collar option – cash flow hedges25649291256
Total derivative financial instruments276,8515651,193
Less: non-current forward foreign exchange – cash flow hedges-2,840258343
Current - derivative financial instruments274,011307850
Financial asset at fair value through profit or loss21,0291995
Total - derivative financial instruments
295,040326945

36

36

At balance date, one interest rate swap was in place with $3m of borrowings fixed at 4.17%, expiring June 2020. The interest rate swap, with a fair
value of -$24,000 (2019: -$100,000), is exposed to fair value movements if interest rates change. During the year, $3,000 (2019: $45,000) net was
charged to the Statement of Comprehensive Income.
The following table summarises Group’s current hedging instruments.

26. Financial risk management
The Group’s activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk.
The Board has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Board has established
the Audit and Risk Committee, which together with the Board, is responsible for developing and monitoring the Group’s risk management policies.
The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls
and to monitor risk adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and
the Group’s activities.
The Group’s risk management is predominantly controlled at head office in New Zealand (Group treasury) under policies approved by the Board.
Group treasury identifies, evaluates and hedges financial risks in close co-operation with the Group’s operating units. The Board provides written
principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, and credit risk,
use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.
The impact of Covid-19 on financial risks was reviewed and analysis is outlined under each risk category.

Financial instruments—fair values and risk management
Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group becomes a party to the contractual provisions
of the instrument. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been
transferred and the Group has transferred substantially all risks and rewards of ownership.
Fair value estimates
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement, or for disclosure purposes.
The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. The Group uses a variety
of methods and makes assumptions that are based on market conditions existing at each balance date. Techniques, such as estimated discounted
cash flows, are used to determine fair value for financial instruments. The fair value of forward exchange contracts and collar options is determined
using forward exchange market rates at the balance date.
Fore ign
currency
options
Fore ign
currency
forwards
Interest
rate swaps
Fore ign
currency
options
Fore ign
currency
forwards
Interest
rate swaps
Notional amount ($'000s)23,42036,3143,00032,94042,4213,000
Maturity date
Apr-20 to
Ma y-2 1
Ap r-2 0 t o
Fe b-22
J un -2 0
Ma y-1 9 t o
Se p-20
Ap r-1 9 t o
Oct-20
J un -2 0
Hedge ra tio
1:11:11:11:11:11:1
Change in intrinsic value of outstanding hedging instruments (879)(31 )
Weighted average strike rate on outstanding options
GBP/USD
-1.34
NZD/USD
0.660.69
Weighted average contract rate on forwards
NZD/USD
0.660.74
GBP/USD
1.291.33
EUR/USD
1.141.14
INR/USD
73.7871.56
20202019
RiskExposure arising fromMeasurementManagement
Market risk-foreign exchangeCash flow forecasting Foreign currency forwards and
Sensitivity analysis foreign currency options
Market risk-interest rateBank overdraft at variable ratesSensitivity analysisInterest rate swaps
Credit riskAging analysisCredit limits
Credit ratings
Liquidity riskBorrowings and other liabilitiesRolling cash flow forecasts
Recognised financial assets and
liabilities not denominated in
currency units
Cash and cash equivalents, trade
receivables, derivative financial
instruments
Availability of committed credit
lines and borrowing facilities

37
37

The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. The fair value
of financial liabilities for disclosure purposes, is estimated by discounting the future contractual cash flows at the current market interest rate that
is available to the Group for similar financial instruments.
Classification of financial assets
The Group classifies its financial assets in the following categories:
 Financial asset at fair value through profit or loss (FVPL)
 Financial assets at fair value through other comprehensive income (FVOCI)
 Derivative financial instruments
 Other financial assets at amortised cost.
The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial
assets at initial recognition and re-evaluates this designation at each reporting date with the exception of financial assets at FVOCI.
Financial assets at fair value through profit or loss (FVPL)
This category has two subcategories: financial assets held for trading and those designated at FVPL on initial recognition. For accounting purposes,
derivatives are categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if they
are either held for trading or are expected to be realised within 12 months of the balance date.
Financial assets at FVPL are carried at fair value. Realised and unrealised gains and losses arising from changes in the fair value of the ‘financial
assets at fair value through profit or loss’ category are included in the Statement of Comprehensive Income, in the period in which they arise.
The Group establishes fair value by using valuation techniques. These include reference to the fair values of recent arm’s length transactions,
involving the same instruments or other instruments that are substantially the same and discounted cash flow analysis.
The Group assesses at each balance date whether there is objective evidence that a financial asset or group of financial assets is impaired.
Classification of financial assets at fair value through other comprehensive income (FVOCI)
On disposal of these equity investments, any related balance within the FVOCI reserve is reclassified to retained earnings. Equity securities which
are not held for trading, and which the Group has irrevocably elected at initial recognition to recognise in this category. These are strategic
investments and the Group considers this classification to be more relevant.
Other financial assets at amortised cost
Receivables and other financial assets are classified as subsequently measured at amortised cost on the basis of both the Group’s business model
for managing the financial assets and the contractual cash flow characteristics of the financial asset. If collection of the amounts is expected in one
year or less they are classified as current assets.
Other financial assets at amortised cost include loans to related parties and trade and other receivables.
Derivative financial instruments
In accordance with its wider risk management, it is the Group’s strategy to apply cash flow hedge accounting to keep its foreign currency revaluation
fluctuations within its established limits, refer note 25. Applying cash flow hedge accounting enables the Group to reduce the cash flow fluctuations
arising from foreign exchange risk on an instrument or Group of instruments, or to hedge mismatches. A cash flow hedge is a hedge of the exposure
to variability in cash flows that is attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast
transaction that could affect profit or loss.

38

38

Following table shows the carrying amounts and fair values of financial assets and financial liabilities.

Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations
and arises principally from the Group’s receivables from customers.
Trade and other receivables
The Group has financial assets of trade receivables from sales of inventory that are subject to the expected credit loss model. The Group has
established credit policies, and applies the NZ IFRS 9 Financial Instruments simplified approach to measuring expected credit losses which uses a
lifetime expected loss allowance for all trade receivables, refer note 11.
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the Group’s
customer base, including the default risk of the industry and country, in which customers operate, has less influence.
Due to Covid-19, no material adverse impact has been observed to date in respect of Rakon’s customers, refer note 2.
Cash and cash equivalents
While cash and cash equivalents are also subject to the impairment requirements of NZ IFRS 9 Financial Instruments, the identified impairment loss
was immaterial.
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at 31 March is set out
below.

The maximum exposure to credit risk for trade receivables at 31 March by currency of denomination is set out under the liquidity risk.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity
is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions,
without incurring unacceptable losses or risking damage to the Group’s reputation.
20202019
$000s$000s
Current financial assets
Derivative financi al instruments – cash flow hedgesFVOCI27565
Derivative financi al instruments – held for tradingFVPL219
Trade and other receivabl esAmortised cost45,08140,487
Cash and cash equi valentsAmortised cost5,0864,719
Non-current financial asset
Financi al asset at fair val ue through other comprehensive income – ThinxtraFVOCI2,9184,549
Derivative financi al instruments – cash flow hedgesFVOCI-258
Trade and other receivabl esAmortised cost2,7022,267
Current financial liabilities
Derivative financi al instruments – cash flow hedgesFVOCI4,011850
Derivative financi al instruments – held for tradingFVPL1,02995
Bank overdraftAmortised cost12,84811,501
Trade and other payablesAmortised cost22,25226,398
N on-current financial liabilities
Derivative financi al instruments – cash flow hedgesFVOCI2,840343
Measurement
cate gor y
Carrying amount
20202019
$000s$000s
Financial assets at fair value through profit or loss (note 25)219
Financial asset at fair value through other comprehensive income – Thinxtra (note 17)2,9184,549
Tra de a nd other receivables (note 11)45,08140,487
Cash and cash equivalents (note 10)5,0864,719
Forward exchange contracts and collar options used for hedging (note 25)27565
Total exposure to credit risk53,11450,339
Carrying amount

39

39

Typically, the Group ensures that it has sufficient cash on demand to meet expected operational expenses for a period of 60 days, including the
servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural
disasters. The historical and potential future impact of Covid-19 has been incorporated into detailed forecasts of cash and facility requirements.
Further information on the impact of Covid-19 on the business is in note 2.
The Directors forecast that the Group will trade at levels appropriate to manage its working capital requirements and have considered the
achievability of the assumptions underlying those forecasts, including forecast sales and positioning the business for the future. Forecasts indicate
that the Group will meet its net cash requirements and that there is sufficient headroom to allow for downward sensitivities, should the actual
revenue and margin levels be lower than forecast. For further information on going concern, refer note 2.
The following table shows the contractual undiscounted cash flow maturities of financial liabilities, including interest payments and excluding the
impact of netting agreements.

Further information on bank overdraft interest rate is in note 18.
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices, will affect the Group’s income
or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within
acceptable parameters, whilst optimising the return on risk.
The Group enters into derivatives in the ordinary course of business and also incurs financial liabilities, in order to manage market risks. All such
transactions are carried out within the guidelines set by the Board and Audit and Risk Committee. Generally, the Group seeks to apply hedge
accounting in order to manage volatility in the Statement of Comprehensive Income. Further information on the impact of Covid-19 on the business
is in note 2.
Currency risk
The Group is exposed to currency risk on sales and purchases that are denominated in a currency other than the respective functional currencies
of the Group’s entities, primarily New Zealand Dollars (NZD), Sterling (GBP), the Euro (EUR) and Indian Rupees (INR). The currencies in which these
sales and purchases transactions are primarily denominated are US Dollars (USD), Japanese Yen (JPY), INR, NZD, GBP and EUR. The Group uses
foreign currency forward exchange contracts and collar options to hedge its currency risk.
Exposure to currency risk
The table below summarises the foreign exchange exposure on the net monetary assets of the Group against its respective functional currency,
expressed in NZD.

31 March 2020
Carrying
amount
6 months or
l e ss6 – 12 months1 – 2 years2 – 5 years5 – 10 years
$000s$000s$000s$000s$000s$000s
Financial liabilities
Derivatives (note 25)7,880(2,734)(2,320)(1,946)(880)-
Trade and other payables (note 19)22,252(22,252)----
Bank overdraft (note 18)12,848(13,305)----
Lease liabilities (note 15)9,445(1,396)(1,345)(2,236)(3,550)(918)
Total financial liabilities52,425(39,687)(3,665)(4,182)(4,430)(918)
31 March 2019
Carrying
amount
6 months or
l e ss6 – 12 months1 – 2 years2 – 5 years5 – 10 years
$000s$000s$000s$000s$000s$000s
Financial liabilities
Derivatives (note 25)1,288(750)(343)(195)--
Trade and other payables (note 19)26,398(26,398)----
Bank overdraft (note 18)11,501(11,797)----
Finance leases (note 18)817(405)(412)---
Total financial liabilities
40,004(39,350)(755)(1 9 5 )--
USDEURGBPJPY
$000s$000s$000s$000s
31 March 202015,7493,603(1,297)(1,164)
31 March 201917,397(1,533)(460)(5,751)

40
40

The following significant exchange rates applied during the year.

Sensitivity analysis
Underlying exposures
A 10% weakening of the NZD against the following currencies at 31 March would have increased (decreased) equity and profit or loss by the amounts
shown below. Based on historical movements, a 10% increase or decrease in the NZD is considered to be a reasonable estimate. This analysis
assumes that all other variables, in particular interest rates remain constant. The analysis was performed on the same basis for 2019.

A 10% strengthening of the NZD against the above currencies at 31 March would have had the equal but opposite effect on the above currencies
to the amount shown above, on the basis that all other variables remain constant.
Forward foreign exchange contracts
A 10% weakening of the purchased currencies below against the forward foreign exchange contracts outstanding at 31 March, would have increased
(decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain
constant. The analysis is performed on the same basis for 2019.

Interest rate risk
Under the Group’s Treasury Management Policy, a minimum of 50% of term debt is required to be on fixed interest rates. The Group adopts a policy
to manage its exposure to interest rates by considering fixed interest rate swap agreements.
Profile
At 31 March the interest rate profile of the Group’s interest bearing financial instruments.

NZD2020201920202019
USD0.64540.67680.60230.6806
EUR0.58160.58870.54040.6044
GBP0.50860.51880.48330.5154
JPY
70.239275.112764.960075.1800
A ve rage rateReporting date rate
1 0 % we ake ni ng
EquityProfi t or lossEquityProfi t or loss
$000s$000s$000s$000s
USD
1,7501,7501,9331,933
EUR
400400(170)(170)
GBP
(144)(144)(51 )(51 )
JPY
(129)(129)(639)(639)
INR--134134
20202019
Fair value Equity Profit or lossFair value Equity Profit or loss
$000s$000s$000s$000s$000s$000s
Forward foreign exchange contracts - Cash flow hedge
Net buy NZD s ell USD
8,013(8,013)-5,811(5,811)-
Forward foreign exchange contracts - held for trading
Net buy EUR sell USD
(4 7 )(6 3 )(6 3 )(2 8 )231231
Net buy GBP sell USD
(7 0 )(9 6 )(9 6 )20277277
Net buy NZD s ell USD
(862)(1,761)(1,761)119(496)(496)
Net buy INR s ell USD
895454---
20202019
20202019
V ari abl e rate i nstrume nts
$000s$000s
Financial assets (note 10)
5,0864,719
Financial liabilities
(12,848)(11,501)
Net variable rate instruments
(7,762)(6,782)
Fixed rate instruments
Financial liabilities
(164)(176)
Net fixed rate instruments
(164)(176)

41
41

Sensitivity analysis
An increase of 100 basis points in interest rates at 31 March would have increased (decreased) equity and profit or loss by the amounts shown
below. This analysis assumes that all other variables, in particular foreign exchange rates, remain constant. The analysis for 2020 was performed
on the same basis as 2019.

A decrease of 100 basis points in interest rates at 31 March would have the opposite impact to what is shown above.
27. Share based payments
The Group’s management awards qualifying employees’ bonuses, in the form of share options and conditional rights to redeemable ordinary shares,
from time to time, on a discretionary basis. These are subject to vesting conditions and their fair value is recognised as an employee benefit expense
with a corresponding increase in other reserve equity over the vesting period. The fair value determined at grant date excludes the impact of any
non-market vesting conditions, such as the requirement to remain in employment with the Group. Non-market vesting conditions are included in
the assumptions about the number of options that are expected to vest and the number of redeemable ordinary shares that are expected to
transfer. At each balance date the estimate of the number of options expected to vest and the number of redeemable ordinary shares expected to
transfer is revised and the impact of any change in this estimate is recognised in the Statement of Comprehensive Income with a corresponding
entry to equity. The proceeds received net of any directly attributable transaction costs are credited to share capital when the options are exercised,
or the conditional rights to redeemable ordinary shares are transferred.
Rakon Share Plan
In March 2006, Rakon Limited established a share plan to enable selected employees of Rakon Limited to acquire shares in the Company through
the plan trustee, Rakon ESOP Trustee Limited.
Under the terms of the share plan, 2,759 ordinary shares were issued at deemed market value at that time to Rakon ESOP Trustee Limited to hold
on behalf of the participating employees. Following a share split on 13 April 2006, the resulting number of shares under this plan was 859,137. All
shares issued to Rakon ESOP Trustee Limited have been allocated. The shares rank equally in all respects with all other ordinary shares issued by
the Company. The outstanding loan balance provided by Rakon Limited to participating employees in respect of these shares totals $195,000 (2019:
$195,000). Loans are provided on an interest free basis and the employee may repay all or part of the loan at any time. No repayments were due
at 31 March 2020 (2019: nil). The Trust Deed makes provision for the Company to require repayment of the loans in certain circumstances.
As at 31 March 2020, 321,972 (31 March 2019: 321,972) shares were allocated to participants but held by Rakon ESOP Trustee Limited.
Shares issued under the share plan are held on trust by Rakon ESOP Trustee Limited. A participant may request the trustee to transfer the relevant
shares to him or her, provided their loan has been repaid in full.
The Company may remove and appoint trustees at any time. The Directors and shareholders of Rakon ESOP Trustee Limited are Keith Oliver and
Bruce Irvine.
Shares held by the share plan represent approximately 0.14% of the Company's total shares on issue as at balance date (2019: 0.14%).
28. Principal subsidiaries
Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
Business combinations are accounted for using the acquisition method. The consideration transferred in a business combination shall be measured
at fair value, which shall be calculated as the following: the total of the acquisition date fair values of the assets transferred by the Group, the
liabilities incurred by the Group to former owners, the equity issued by the Group and the amount of any non-controlling interest in the acquiree
either at fair value or at the proportional share of the acquiree’s identifiable net assets. Acquisition related costs are expensed as incurred.
All material transactions between subsidiaries or between the parent company and subsidiaries are eliminated on consolidation. Accounting policies
of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
When the Group ceases to have control, any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the
change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for
the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in OCI in respect of that entity
are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in OCI
are reclassified to profit or loss.
Equity Profit or lossEquityProfit or loss
$000s$000s$000s$000s
Variable rate instruments(7 8 )(78 )(68 )(68 )
Fixed rate instruments(2)(2 )7676
20192020

42

42

Rakon ESOP Trustee Limited and Rakon PPS Trustee Limited are classified as in-substance subsidiaries and are consolidated into the Group financial
statements.
29. Commitments
Capital commitments
Capital expenditure contracted for at the balance date but not incurred is $366,000 (2019: $194,000).
Operating and finance leases
During 2019, the Group was the lessee. Leases where the lessor retains substantially all the risk and rewards of ownership were classified as
operating leases. Payments made under operating leases (net of any incentives received from the lessor) were charged to the Statement of
Comprehensive Income on a straight line basis over the period of the lease.
2019 leases pre-adoption of NZ IFRS 16 Leases
From 1 April 2019, the Group has adopted NZ IFRS16 Leases and has recognised right-of-use assets and its corresponding lease liabilities, refer note
15.

Operating lease commitments – Group as lessee
The Group leases various factories, offices and warehouses under non-cancellable operating lease agreements. The leases have varying terms and
renewal rights. On renewal the terms are renegotiated.
The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

20202019
Rakon America LLCMarketing supportUSA31-Mar100100
Rakon Singapore (Pte) LimitedMarketing supportSingapore31-Mar100100
Rakon Financial Services LimitedFinancingNew Zealand31-Mar100100
Rakon International LimitedMarketing supportNew Zealand31-Mar100100
Rakon UK Holdings LimitedHolding companyUnited Kingdom31-Mar100100
Rakon UK LimitedResearch and developmentUnited Kingdom31-Mar100100
Ra kon Fra nce SAS R&D, manufacturing and sales France31-Mar100100
Rakon HK LimitedHolding companyHong Kong31-Mar5050
Rakon (Mauritius) LimitedHolding companyMauritius31-Mar100100
Rakon Investment HK Limited Holding companyHong Kong31-Mar100100
Rakon Crystal Electronic International LimitedMarketing supportChina31-Mar100100
Rakon India Pvt Limited Manufacturing, R&D and sales India31-Mar100100
Rakon ESOP Trustee LimitedShare trusteeNew Zealand31-Mar--
Rakon PPS Trustee Limited
Share trustee
New Zealand31-Mar--
% interest held by group
Name of entityPrincipal activities
Country of
incorporation
Balance
date
20202019
$000s$000s
No later than 1 year-405
Later than 1 year and no later than 5 years-412
Total minimum lease payments-817
Less amounts representing finance charges-(2 6)
Present value of minimum lease payments-791
Included in the financial statements as
Current borrowings (note 18)-405
Non-current borrowings (note 18)-412
Total finance lease included in borrowings-817
20202019
$000s$000s
No later than 1 year-2,689
Later than 1 year and no later than 5 years-6,755
Later than 5 years-938
Total non-cancellable operating leases-10,382

43
43

30. Related party information
No amounts owed by a related party have been written off or forgiven during the year. Related party transactions were transacted at arm’s length.
Following is the summary of transactions between related parties, and closing receivables and payables balances.

1
On 2 May 2018, the Group assumed full ownership of Centum Rakon India Private Limited and subsequently any purchases are treated as
intercompany transactions.
31. Contingencies
Prior to acquisition, Rakon India has received income tax and indirect taxes assessments, which had been in dispute. The Directors of Rakon India
believe the positions are likely to be upheld and accordingly no provision was made in Rakon India’s financial statements. The below summarises
the potential impacts on Rakon India’s tax balances if the assessments are upheld.
Income taxes
 2011/12 – an increase in taxable income of $1.6m (tax value $1,000,000)
 2013/14 – no increase in taxable income (tax value $580,000)
Indirect taxes
 December 2010/ August 2012 – excess input credit availed (tax value $440,000)
32. Subsequent events
On 13 June 2020 a €3.5m loan was made available to Rakon France for an initial term of 12 months with Rakon France having an option to extend
for up to a further five years at the end of the first 12 months. This loan has certain restrictions that limits it to be used for working capital/treasury
support for the French business only. Interest is payable at zero percent for the initial 12 months along with a guarantee fee of 0.25%. There are no
covenants on the loan and no additional security is required.
On 26 May 2020 the facilities with ASB have also been renewed, refer note 18.
The Directors are not aware of any other material events subsequent to the balance date 31 March 2020. In particular no information has come to
light related to Covid-19’s impact on the Group which is expected to have a material negative effect.

20202019
$000s$000s
Key management and directors' compensation
Salaries and other short-term employee benefits4,0453,767
Directors' fees360358
Total key management and directors' compensation4,4054,125
Transactions with associate and joint-venture
Purchases from associate, Chengdu Shen-Timemaker Crystal Technology Co. Limited(940)(233)
Purchases from joint venture, Centum Rakon India Private Limited
1
-(1,284)
Net transactions(940)(1,517)
Payables to Chengdu Shen-Timemaker Crystal Technology Co. Limited56232
Receivables from Rakon HK Limited163139
Transactions with Siward Crystal Technologies Co. Limited
Sa les502210
Purchases(2,218)(236)
Net transactions(1,716)(26 )
Receivables from Siward Crystal Technologies Co. Limited38210
Payables to Siward Crystal Technologies Co. Limited572236

44

PricewaterhouseCoopers, 188 Quay Street, Private Bag 92162, Auckland 1142, New Zealand
T: +64 9 355 8000, F: +64 9 355 8001, pwc.co.nz

Independent auditor’s report
To the Shareholders of Rakon Limited
We have audited the financial statements which comprise:
● the balance sheet as at 31 March 2020;
● the statement of comprehensive income for the year then ended;
● the statement of changes in equity for the year then ended;
● the statement of cash flows for the year then ended; and
● the notes to the financial statements, which include significant accounting policies.

Our opinion
In our opinion, the accompanying financial statements of Rakon Limited (the Company), including its
subsidiaries (the Group), present fairly, in all material respects, the financial position of the Group as
at 31 March 2020, its financial performance and its cash flows for the year then ended in accordance
with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS) and
International Financial Reporting Standards (IFRS).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
(NZ)) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the audit of the financial statements section of
our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised)
Code of Ethics for Assurance Practitioners (PES 1) issued by the New Zealand Auditing and Assurance
Standards Board and the International Ethics Standards Board for Accountants’ Code of Ethics for
Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
Our firm carries out other services for the Group in the areas of treasury related financial markets risk
analysis and commentary, review procedures over the confirmation of the Eligible Research and
Development Expense claimed under the Research and Development Income Tax incentive scheme in
India and certification of expenditure on Research and Development activities claimed under the
Research and Development subsidy in France. The provision of these other services has not impaired
our independence as auditor of the Group.
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 current year. These matters were addressed in the context
of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.

45

PwC 45

Key audit matter How our audit addressed the key audit
matter
Impairment risk for non-financial assets
As set out in note 14d, the Directors assess
intangible assets and other non-financial assets
annually for impairment. The Directors look
initially for indicators of impairment which
requires a level of judgement.
When the market capitalisation is lower than the
net asset value of the Group this can be an
indicator of potential impairment of non-
financial assets held by the Group. Market
capitalisation of the Group at 31 March 2020
was $36.7 million compared to the carrying
value of the net assets of $91.8 million.
Subsequent to the year end the market
capitalisation increased and was $59.5 million as
at 2 6 Ju ne 2020.
The Directors performed an assessment of
impairment on an asset class basis as well as
performing a business valuation for the Group as
a whole. The business valuation was prepared on
a value in use basis using a discounted cash flow
model. In preparing this model the Directors
took into account factors including the current
profitability of the Group and the impact of
Covid-19 on the Group’s operations. The key
assumptions in the discounted cash flow model
are included in note 14d of the financial
statements and include:
● Annual sales growth rate
● Gross margin
● Terminal growth rates
● Discount rates
The results of the Directors’ assessment,
including the impact of reasonably possible
changes in assumptions, are detailed in note
14d.

We updated our understanding of business
processes and controls applied in the assessment
of indicators of impairment of non-financial
assets and determining any impairment
required.
In considering the results of the Directors’
assessment of impairment on an asset class basis
we have considered:
● the historical recoverability of inventory
balances and whether there is any indication
of impairment;
● whether there were indicators of
impairment for intangible product
development assets, which has been
discussed in the key audit matter below;
● the recoverability of deferred tax assets;
● whether there were any specific indicators of
impairment for property, plant and
equipment assets; and
● the effects of Covid-19 on the assets’ values.
In considering the discounted cash flow model
used for the assessment of impairment of the
business as a whole our procedures included the
following:
● Obtained an understanding of the current
and forecast outlook for the business and
management’s basis for determining the key
assumptions in preparing the forecast cash
flows;
● Compared cash flow forecasts used in the
model to budgets and long-term forecasts
approved by the Board subsequent to the
year end;
● Assessed the reliability of management’s
budgeting process by understanding the
differences between the historical and
budgeted performance in previous years;

46

PwC 4

Key audit matter How our audit addressed the key audit
matter
● Evaluated the key assumptions in particular
the estimated sales growth rates and gross
margins and the potential impact of Covid-
19, by analysing the Group’s past
performance, key trends and
interrelationship of key assumptions and
benchmarking information to market data
where relevant and available;
● Engaged our valuation expert to assist us in
challenging management’s key cash flow
assumptions and to assess the terminal
growth rates, discount rates and a range of
cash flow scenarios; and
● Assessed the adequacy of disclosures in the
financial statements to ensure that they are
compliant with the requirements of NZ
IFRS.
As a result of these procedures we have no
matters to report.
Valuation of research and development costs
associated with the development of new
products
Rakon incurs costs with respect to developing
new products. This is included within the
product development and assets under
construction categories of intangible assets (note
14 of the financial statements) and amounts to
$6.1 million at 31 March 2020.
There is a risk that the costs that are being
capitalised for development may not meet the
criteria for capitalisation as an intangible asset
under NZ IFRS.
There is judgement and often uncertainty
around the potential for success of new products
as well as the technical feasibility and probable
future economic benefits associated with new
and existing projects primarily with respect to
new telecommunications infrastructure
products.
The Directors assessed the future income
generating ability of capitalised development
expenditure by referring to current demand for
the products now in production and to the
business case for future sales of products not yet
in production.

Our audit procedures included the following:
● Updated our understanding of how the costs
for research and development are captured
and, where appropriate, are approved for
capitalisation and the controls over these
processes;
● Obtained an understanding of the projects
which have been capitalised during the year
and, on a sample basis, agreed costs
incurred to supporting documentation and
approval;
● Assessed overall costs capitalised for
compliance with Group policies and the
requirements defined in NZ IFRS for
capitalisation of product development costs;
● For those products in production, where
costs were capitalised and are now being
amortised, we challenged the Directors’
assessment of the future income expected
from those products by comparing the
estimate with the level of sales currently
being achieved;

47

PwC 47

Key audit matter How our audit addressed the key audit
matter
● Challenged the Directors’ assessment of the
future income expected from new
telecommunications infrastructure products
by comparing the estimate with the level of
sales of previous generations of
telecommunications infrastructure products
and with market forecast reports.
As a result of these procedures we have no
matters to report.
Compliance with banking facilities
As at 31 March 2020 the Group’s net debt was
$7.9 million. Note 18 to the financial statements
explains that the Group’s bank funding
comprises trade and overdraft facilities with ASB
and a trade facility with the State Bank of India.
The ASB facilities were extended on 26 May
2020 and the trade facility is scheduled to
reduce over the next six months. The ASB
facilities have financial covenants requirements
attached.
In addition, subsequent to the year end, a loan
was made available to Rakon France, as
described in note 32.
We consider forecast compliance with the Group
banking facilities and the financial covenants for
the ASB facilities to be a key audit matter, given
the reduction of the facility limit over the next 6
months and the uncertainties associated with
Covid-19.
The Directors have assessed forecast compliance
with banking facilities by:
● preparing scenario forecasts (base case and
various downside scenarios) for the Group
for the next 12 months from the date of
approval of financial statements;
● assessed the restrictions on the use of the
loan made available to Rakon France;
● using the forecasts to calculate financial
covenant compliance at future covenant test
dates.
The Directors have concluded there are no
material uncertainties related to going concern
and compliance with the requirements of
banking facilities.
We have read the bank agreements and
understood the attached requirements.
We obtained the Group’s cash flow forecasts for
the next 12 months from the date of the approval
of the financial statements and performed the
following audit procedures:
● Ensured the base case cash flow forecast is
consistent with the forecast used for the
impairment assessment;
● Assessed the reasonableness of
management’s forecast scenarios and
performed sensitivities by considering
additional scenarios, taking into account the
restricted use of the bank funding in France;
● Assessed whether the Group is able to fund
the required reduction in the ASB trade
facility limit over the next six months;
● Assessed the ability of the Group to comply
with the covenant requirements by
rec alculating covenant compliance at the
measurement dates; and
● Considered the adequacy of disclosure in
notes 2d, 18 and 32 to ensure they
accurately reflect information relevant to
management's assessment of the Group’s
ability to comply with the banking facilities
over the next 12 months.
From our procedures, we have no matters to
report.

48

PwC 4

Key audit matter How our audit addressed the key
audit matter
Valuation of the investment in Thinxtra Limited
Rakon holds ordinary shares in Thinxtra Limited
(“Thinxtra”), which is a level three investment
accounted for at fair value through Other
Comprehensive Income.
We considered the valuation of the investment
in Thinxtra a key audit matter because of the
uncertainty involved in the estimation process
and the significant judgements the Directors
make in determining the fair value. Changes in
the assumptions applied as part of the
estimation process can lead to significant
movements in the fair value of the investment.
The Directors developed a valuation
methodology based on valuation techniques with
different assigned probabilities based on the
available information and Directors’ judgement,
as disclosed in note 17.
The Directors also considered sensitivity of the
key inputs in the valuation methodology by
determining other reasonably possible scenarios
and assessing the impact on the valuation of
these scenarios.
The results of the Directors’ assessment and
sensitivity analysis is detailed in note 17.

We performed the following audit procedures:
● Obtained an understanding of the valuation
methodology developed by the Directors and
the key assumptions they applied in
determining the fair value of the investment
in Thinxtra as at 31 March 2020;
● Agreed the key inputs in the valuation model
to unaudited information obtained by
management from Thinxtra;
● Considered the discounted cash flow model
approach which formed part of the
Directors’ basis of valuation. We determined
the underlying forecasts used in the model
were not sufficiently reliable due to
Thinxtra’s business being at an early stage of
development and the history of not meeting
budgeted results. Accordingly, this required
us to take a different valuation approach
based wholly on using the observable inputs
from the recent capital raise;
● Engaged our valuation expert to assist in the
valuation of the investment as at 31 March
2020. Our expert concluded that the share
price achieved in the recent capital raise
provided the best evidence of the fair value
at 31 March 2020. Using this price results in
a lower fair value than determined by the
Directors, consistent with the fair value
disclosed in alternate case B sensitivity in
note 17. The difference between the
Directors’ assessment of fair value and our
valuation, was reported to the Directors who
determined that this judgemental difference
was not material in the context of the
financial statements. This difference was
below our overall Group materiality; and
● Assessed the adequacy of disclosures in the
financial statements to ensure that this is
compliant with the requirements of NZ
IFRS.

49

PwC 4

Our audit approach
Overview

An audit is designed to obtain reasonable assurance whether the financial
statements are free from material misstatement.
Overall Group materiality: $1,189,800, which represents approximately 1%
of revenue.
In our judgement, revenue provides a more stable measure for establishing
our materiality benchmark and best reflects performance of the Group.
We have determined that there are four key audit matters:
● Impairment risk for non-financial assets
● Valuation of research and development costs associated with the
development of new products
● Compliance with banking facilities
● Valuation of the investment in Thinxtra Limited.
Materiality
The scope of our audit was influenced by our application of materiality.
Based on our professional judgement, we determined certain quantitative thresholds for materiality,
including the overall Group materiality for the financial statements as a whole as set out above. These,
together with qualitative considerations, helped us to determine the scope of our audit, the nature,
timing and extent of our audit procedures and to evaluate the effect of misstatements, both
individually and in aggregate on the financial statements as a whole.
Audit scope
We designed our audit by assessing the risks of material misstatement in the financial statements and
our application of materiality. As in all of our audits, we also addressed the risk of management
override of internal controls including among other matters, consideration of whether there was
evidence of bias that represented a risk of material misstatement due to fraud.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an
opinion on the financial statements as a whole, taking into account the structure of the Group, the
accounting processes and controls, and the industry in which the Group operates.
We conducted a full scope audit over two segments, New Zealand, including the investment in
Thinxtra, and France and limited review procedures were conducted for India. Together these
represent 100% of external revenue. We conducted specific audit procedures over certain financial
statement line items for the UK subsidiary. Limited review procedures were conducted for the
investment in Timemaker.
Information other than the financial statements and auditor’s report
The Directors are responsible for the annual report. Our opinion on the financial statements does not
cover the other information included in the annual report and we do not and will not express any form
of assurance conclusion on the other information.

50

PwC 50

In connection with our audit of the financial statements, if other information is included in the annual
report, our responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our knowledge obtained in the
audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the
other information that we obtained prior to the date of this auditor’s report, we conclude that there is a
material misstatement of this other information, we are required to report that fact. We have received
a draft of the annual report and based on the draft we have read, we have nothing to report. We will
read the final version of the annual report when it is made available to us.
Responsibilities of the Directors for the financial statements
The Directors are responsible, on behalf of the Company, for the preparation and fair presentation of
the financial statements in accordance with NZ IFRS and IFRS, and for such internal control as the
Directors determine is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’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 to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements, as a whole,
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s 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 ISAs (NZ) and ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located at the
External Reporting Board’s website at:
https://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-
report-1/

This description forms part of our auditor’s report.
Who we report to
This report is made solely to the Company’s Shareholders, as a body. Our audit work has been
undertaken so that we might state those matters which we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company’s Shareholders, as a body, for our
audit work, for this report or for the opinions we have formed.

The engagement partner on the audit resulting in this independent auditor’s report is Lisa Crooke.
For and on behalf of:

Chartered Accountants
29 June 2020
Auckland

51
51

Shareholder Information
Directors and Directors’ remuneration
The names of the current Directors of Rakon together with short biographies for each of them are set out in the 2020 Annual Review and on the
Company’s website.
Subject to approval by shareholders of the total pool for non-executive Director remuneration, non-executive Directors of Rakon receive fees
determined by the Board on the recommendation of the People Committee plus reasonable travelling, accommodation and other expenses incurred
in the course of performing their duties as Directors. Shareholders approved a total pool of $360,000 for the remuneration of non-executive
Directors of Rakon in September 2012.
The following people held office as Directors of Rakon during the year ended 31 March 2020; their independence status and the remuneration they
received during that period are set out below:
Name Category Remuneration
Bruce Robertson Irvine Independent (Chair since 7 August 2018) $120,000
Brent John Robinson
1
Executive (Managing Director) $837,332
Keith William Oliver Independent $60,000
Yin Tang Tseng Non-Executive $60,000
Roger Yao Non-Executive (alternate Director of Yin Tang Tseng) -
Lorraine Mary Witten Independent $60,000
Robert Keith Hamilton (Keith) Watson Independent $60,000

1
Employed by Rakon as Managing Director and Chief Executive Officer and receives salary and other benefits in respect of his employment.

Directors of subsidiaries
Directors of the Company’s subsidiaries do not receive any remuneration or other benefits in respect of their appointments. The remuneration and
other benefits of any such Directors (not being Directors of Rakon Limited) who are employees of the Group totalling $100,000 or more during the
year ended 31 March 2020 are included in the relevant bandings for remuneration disclosed in this Shareholder Information section of the 2020
Annual Report.
The following people held office as Directors of subsidiary companies at 31 March 2020:
Entity Director (or authorised representative where noted)
Rakon America LLC John Mundschau (authorised representative)
Rakon Singapore (Pte) Limited Brent Robinson, Darren Robinson, Damian Boon
Rakon Financial Services Limited Brent Robinson, Darren Robinson
Rakon International Limited Brent Robinson
Rakon UK Holdings Limited Brent Robinson, Darren Robinson, Sinan Altug, Philip Davies
Rakon UK Limited Brent Robinson, Darren Robinson, Sinan Altug, Philip Davies
Rakon France SAS Brent Robinson
Rakon (Mauritius) Limited
Brent Robinson, Darren Robinson, Neernaysingh Madhour, Kamalam Pillay
Rungapadiachy
Rakon Investment HK Limited Brent Robinson
Rakon Crystal Electronic International Limited Daryoush Shahidi (authorised representative)
Rakon HK Limited Brent Robinson, Darren Robinson, Zhuzhi Ye, Rongguo Chen
Rakon ESOP Trustee Limited Bruce Irvine, Keith Oliver
Rakon PPS Trustee Limited Bruce Irvine, Keith Oliver
Rakon India (Private) Limited Brent Robinson, P.M. Unnikrishnan, Arun Parasnis

52
52

Directors’ interests
As permitted by the Companies Act 1993 and the Company’s constitution, all Directors received the benefit of an indemnity from Rakon Limited
and the benefit of Directors and Officers liability insurance cover maintained by the Company.
The Company maintains an interests’ register in accordance with the Companies Act 1993 and the Financial Markets Conduct Act 2013. The
following are particulars of entries, including the date of disclosure shown in brackets, made in the Company’s interests’ register for the year ended
31 March 2020.

Bruce Robertson Irvine
 Resigned as Director of PGG Wrightson Limited (30 April 2019)
 Shareholder in Thinxtra Pty Limited (24 June 2019)
 Director of Gough Holdings which changed its name to Amyes Road and was placed in voluntary solvent liquidation (22 October 2019)

Robert Keith Hamilton Watson
 Appointed Director of Acumen Republic Limited (29 May 2019)
 Appointed member of Advisory Board Taska Electronics Limited (19 November 2019)
 Director of New Zealand Institute of Economic Research and now Chair (5 December 2019)
 Appointed Director of Taska Prosthetics Limited (3 March 2020)
 Appointed Director of 5th Element Limited (3 March 2020)

Lorraine Witten
 Appointed Chair of Correction Department Audit and Risk Committee (August 2019)

Directors’ shareholdings
Directors’ shareholdings in Rakon Limited as recorded in the interests’ register of the Company as at 31 March 2020 are set out below:
Name Category Shareholding
Brent Robinson shares held with beneficial interest 34,846,237
Bruce Irvine shares held with beneficial interest 454,278
Bruce Irvine shares held with non-beneficial interest
1
2,093,299
Bruce Irvine shares held with non-beneficial interest 289,824
Lorraine Witten shares held with beneficial interest 120,000
Keith Watson shares held with beneficial interest 100,000
Keith Oliver shares held with non-beneficial interest1 2,093,299

1
Bruce Irvine and Keith Oliver jointly hold the same parcel of 2,093,299 ordinary shares as trustees of Rakon ESOP Trustee Limited.

53
53

Employees’ remuneration
During the year ended 31 March 2020, the number of employees or former employees of Rakon Limited and its subsidiaries, not being Directors of
Rakon Limited received remuneration including the value of other benefits in excess of $100,000 in the following bands:
Remuneration
Number of
employees

Remuneration
Number of
employees
$100,000 – $110,000 17

$220,001 – $230,000 3
$110,001 – $120,000 9

$240,001 – $250,000 1
$120,001 – $130,000 15

$250,001 – $260,000 3
$130,001 – $140,000 9

$260,001 – $270,000 1
$140,001 – $150,000 10

$270,001 – $280,000 2
$150,001 – $160,000 6

$280,001 – $290,000 1
$160,001 – $170,000 5

$290,001 – $300,000 3
$170,001 – $180,000 5

$340,001 – $350,000 1
$180,001 – $190,000 2

$350,001 – $360,000 2
$190,001 – $200,000 4

$370,001 – $380,000 2
$200,001 – $210,000 2

$610,001 – $620,000 1
$210,001 – $220,000 4

$690,001 – $700,000 1

The remuneration above includes the fair value attributable to employee share schemes.

Substantial Quoted Financial Product holders
The following information is given pursuant to Section 293 of the Financial Markets Conduct Act 2013.
According to the notices given under Financial Markets Conduct Act 2013 (or its predecessor the Securities Markets Act 1988), the following persons
were substantial product holders in the Company as at 31 March 2020 in respect of the number of voting products below. As at 31 March 2020,
the Company had one share class on issue, comprising of 229,055,272 voting shares:
Name Relevant Interest Number Held %
Siward Crystal Technology Co. Limited registered holder
38,016,681
16.60
Brent John Robinson registered holder 9,915,414 4.33
Brent John Robinson registered holder and beneficial owner 24,930,823 10.88
Darren Paul Robinson registered holder 9,914,180 4.33
Darren Paul Robinson registered holder and beneficial owner 24,930,823 10.88
Michele Susan Robinson registered holder and beneficial owner 24,930,823 10.88

Spread of Quoted Financial Product holders and holdings as at 8 June 2020
Size of holding
Number of
holders % Total number held
%
1 – 99 15 0.34 887 0.00
100 – 199 51 1.14 6,653 0.00
200 – 499 197 4.41 59,402 0.03
500 – 999 264 5.91 170,579 0.07
1,000 – 1,999 659 14.76 851,568 0.37
2,000 – 4,999 1,107 24.79 3,380,578 1.48
5,000 – 9,999 643 14.40 4,161,982 1.82
10,000 – 49,999 1,143 25.60 22,633,762 9.88
50,000 – 99,999 166 3.72 11,027,645 4.81
100,000 – 499,999 177 3.96 32,963,271 14.39
500,000 – 999,999 15 0.34 10,556,267 4.61
1,000,000 – 99,999,999 28 0.63 143,242,678 62.54
Total 4,465 100.00 229,055,272 100.00

54
54

Twenty largest Quoted Financial Product holders as at 8 June 2020
Name Shareholding %
Siward Crystal Technology Co. Limited 38,016,681 16.60
Brent John Robinson, Darren Paul Robinson and Michele Susan Robinson as trustees of
Ahuareka Trust
24,930,823 10.88
Accident Compensation Corporation
1
10,973,579 4.79
Brent John Robinson 9,915,414 4.33
Darren Paul Robinson 9,914,180 4.33
Michael Walter Daniel & Nigel Geoffrey Ledgard Burton & Michael Murray Benjamin
(Wairahi A/C)
8,207,102 3.58
Etimes Group International Limited 3,697,716 1.61
F B Trustee Limited 2,709,717 1.18
Fergus David Elliott Brown 2,708,500 1.18
Iconic Investments Limited 2,608,192 1.14
Stuart Robert Kidd 2,113,000 0.92
Rakon ESOP Trustee Limited 2,093,289 0.91
Michael Murray Benjamin 2,000,000 0.87
Wo Zhou Yang 1,962,766 0.85
Craig John Thompson 1,959,829 0.85
Nicholas Theobald Sibley & Sally Gay Sibley 1,800,000 0.78
HLR Holdings Company Limited 1,584,736 0.69
BNP Paribas Nominees
1
1,551,673 0.68
Phillip Malcolm Cook 1,500,000 0.65
Forsyth Barr Custodians Limited 1,498,452 0.65

1
Held through New Zealand Central Securities Depository Limited, which is a depository that allows electronic trading of securities by members.

NZX waivers
For the purposes of Rakon’s disclosure obligation under Rule 3.7.1(g) Rakon confirms:
 that it relied on NZX Regulation (NZXR) Decision Ruling dated 11 February 2019 on NZX Listing Rule 7.1 with the effect that it did not submit
the amendments to its Governing Document to the NZX for confirmation that the NZX had no objection prior to the circulation of Rakon’s
notice of meeting to holders of Financial Products for its annual meeting held on 9 August 2019 as required under Rule 7.1.1 on the basis
that Rakon submitted a solicitor’s opinion in accordance with Rule 2.19.1 for the amendments to its Governing Document confirming
compliance with the Listing Rules. that it relied on NZX Regulation Class Waiver from NZX Listing Rules 3.5.1 and 3.5.3, dated 3 April 2020,
superseding the waiver made on 19 March 2020 permitting an extension of 30 days to the requirement that a Reporting Issuer release it
results announcement through MAP no later than 60 days after the end of the Qualifying Financial Year
 that it relied on NZX Regulation Class Waiver from Rule 3.6.1 dated 3 April 2020, superseding the waiver made on 19 March 2020 permitting
an additional two months to the date after the end of the Qualifying Financial Year by which the Reporting Issuer is required to prepare an
annual report and deliver, subject to Rule 3.6.2, the annual report to NZX by release through MAP and make the annual report available
to each Quoted Financial Product Holder in accordance with Rule 3.6.3.
There were no other NZX waivers granted or published by NZX within or relied upon in the 12 months ending 31 March 2020.

Credit rating
The Company does not currently have an external credit rating status.

Exercise of disciplinary powers
Neither the NZX nor the Financial Market Authority took any disciplinary action against the Company during the financial year
ended 31 March 2020.

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Corporate Governance Report
Introduction
The Board is committed to conducting business in the right way and maintaining the highest standards of corporate behaviour and accountability.
The Board regularly reviews Rakon’s corporate governance framework and supports best practice reporting.
In its 2019 Corporate Governance Report, the Board explained the extent to which the Rakon corporate governance framework met the
recommendations of the NZX Corporate Governance Code 1 January 2019 (‘NZX Code’) and, where applicable provided an explanation of why a
NZX Code recommendation had not been followed and the alternative practices followed in lieu of that recommendation. The Board indicated
areas that would be a focus during the year ahead.
In this 2020 Corporate Governance Report, the Board again explains the extent to which the Rakon corporate governance framework meets the
recommendations of the NZX Corporate Governance Code 1 January 2019 (‘NZX Code’) and, where applicable provides an explanation of why a
NZX Code recommendation has not been followed and the alternative practices followed in lieu of that recommendation and indicates areas that
will be a focus during the year ahead.
The information in this Corporate Governance Report is current as at 24 June 2020 and has been approved by the Board.
The key corporate governance documents referred to in this report are available on Rakon’s website at:
http://www.rakon.com/corporate/investor/ir-gov
Rakon is listed on the NZX Main Board and is subject to regulatory control and monitoring by both the NZX and the Financial Markets Authority
(‘FMA’).
Principle 1 – Code of ethical behaviour
Directors should set high standards of ethical behaviour, model this behaviour and hold management accountable for these standards
being followed throughout the organisation.
Rakon is committed to ensuring the highest ethical standards are maintained by its Directors, employees and suppliers, contractors and consultants
to the Company in all activities conducted by or in the interests of the Company.
Recommendation 1.1 The board should document minimum standards of ethical behaviour to which issuer’s directors and employees are
expected to adhere (a code of ethics).
Ethical standards and guiding principles are set out in Rakon’s Business Code of Conduct which is available on the Company’s website and was last
reviewed in May 2019. Additional guidance for Directors on the requirement to maintain high standards of honesty, integrity and ethical conduct
is provided in the Board Charter which was last reviewed in June 2020 and which is available on the Company’s website.
The Business Code of Conduct requires Directors and employees to promptly report material breaches of the Code. To support this expectation of
disclosure of breaches of the Business Code of Conduct, as well as disclosure of other wrongdoing or suspected wrongdoing, the Board has
developed a Protected Disclosure (whistle blowing) Policy which was approved by the Board in May 2019 and is available on the Company’s website.
Rakon has processes in place to enable training for all new and existing employees to ensure awareness and understanding of the Business Code of
Conduct and other Company policies. An Employee Handbook is regularly reviewed and updated and is available on an in-house portal along with
all human resources and governance policies and procedures. Rakon carries out training sessions with managers and team leaders to ensure they
are well equipped to guide and support their teams. Rakon continues to investigate new innovative and effective processes for promoting
awareness and for receiving assurance of understanding and compliance.
Recommendation 1.2 An issuer should have a financial product dealing policy which applies to directors and employees.
Rakon has a Financial Product Trading Policy to mitigate the risk of insider trading in Rakon securities by Directors and employees. A copy of this is
available on Rakon’s website. This policy was last reviewed and updated by the Board in March 2019 and was then circulated to Directors and
employees along with further guidance on the application of the policy and where it can be accessed on the internal portal. Additional trading
restrictions apply to Restricted Persons as defined in the policy, including Directors and certain employees. Details of Directors’ shareholdings as at
31 March 2020 are set out in the Shareholder Information section of the 2020 Annual Report.
Principle 2 – Board composition and performance
To ensure an effective board, there should be a balance of independence, skills, knowledge, experience and perspectives.
The Board has ultimate responsibility for the strategic direction of Rakon and oversight of the management of Rakon, with the aim of increasing
shareholder value and ensuring the obligations of the Company are met.
Recommendation 2.1 The board of an issuer should operate under a written charter which sets out the roles and responsibilities of the board.
The board charter should clearly distinguish and disclose the respective roles and responsibilities of the board and management.
The Board operates under a written charter which: sets out the structure of the Board and the procedures for the nomination, resignation and
removal of Directors; outlines the respective responsibilities and roles of the Directors and management; and identifies procedures to ensure that
the Board meets regularly, conducts its meetings in an efficient and effective manner and that each Director is fully empowered to perform his or
her duties as a Director of the Company and to fully participate in meetings of the Board.
The day-to-day management and operation of Rakon is undertaken by the executive team members and their reports under the leadership of the
Managing Director. Delegation of the day-to-day management and operation of Rakon is subject to financial controls and limitations delegated
from time to time by the Managing Director as set out in detailed Delegated Authorities Schedules. A delegation of authority policy has been
developed to record the general and specific delegations of authority made to the Managing Director and the specific powers reserved to the Board.

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In discharging their duties, Directors have direct access to and may rely upon Rakon’s senior management and external advisers. Directors have the
right, with the approval of the Chair or by resolution of the Board, to seek independent legal or financial advice at the expense of Rakon to assist
them in the proper performance of their duties.
Recommendation 2.2 Every issuer should have a procedure for the nomination and appointment of directors.
While the appointment of new Directors is the responsibility of the whole board, the People Committee Charter outlines the Committee’s particular
duties and responsibilities in relation to the selection and appointment of new Directors and succession planning.
The People Committee is responsible for identifying and recommending candidates for the role of Director, taking into account such factors as it
deems appropriate, including tenure, capability, skill sets, experience, diversity, qualifications, judgement and the ability to work with other
Directors.
The Committee recognises a skills matrix is one of the tools that can assist with identifying and assessing existing Directors’ skills and competencies
and the new skills and competencies which may be needed to meet the Company’s future governance requirements.
The number of elected Directors and the procedure for their appointment, retirement and re-election at annual meetings is set out in the
Constitution of the Company and the NZX Listing Rules. Changes to the Rakon Constitution to ensure compliance with the NZX Listing Rules were
approved by shareholders at the 2019 Annual Shareholders’ Meeting.
All Directors, including any executive Director must retire by rotation and if eligible stand for re-election at the third annual meeting or three years
after their last election, whichever is longer. Any Director appointed since the previous annual meeting must also retire and is eligible for election.
The Board supports the separation of the roles of Chair and Chief Executive Officer and the appointment of an independent Chair.
Recommendation 2.3 An issuer should enter into written agreements with each newly appointed director establishing the terms of their
appointment.
The Board has determined that new Directors receive a letter of appointment to agree the key terms and conditions of their appointment or election
as Directors of Rakon. Previously the Board relied on the general rules and practice including appointment, tenure, duties and responsibilities and
requirements outlined in relevant legislation, the NZX Listing Rules, the Company’s Constitution and the Board Charter as encompassing the key
terms and conditions and expectations of Rakon Directors.
Recommendation 2.4 Every issuer should disclose information about each director in its annual report or on its website, including a profile of
experience, length of service, independence and ownership interest and director attendance at board meetings.
Information about each Director of Rakon is available on the Rakon website and in the 2020 Annual Review, which is made available to shareholders
on the Company’s website at the same time as the 2020 Annual Report. The Company maintains an interests’ register and particulars of the entries
made in the interests’ register during the year ended 31 March 2020 in relation to Directors’ interests are disclosed in the Shareholder Information
section of the 2020 Annual Report.
Board meetings and attendance
The Board meets as often as it deems appropriate including sessions to review the performance of the business against agreed plans and to consider
the strategic direction of Rakon and Rakon’s forward-looking business plans. Video and/or phone conferences are also used as required.
The table below sets out Directors’ attendances at the Board, Audit and Risk Committee and the People Committee meetings during the year ended
31 March 2020. In total, there were twelve Board meetings, eight Audit and Risk Committee meetings and three People Committee meetings.
Board
Meetings
Audit & Risk
Committee
People
Committee
Total number of meetings held 12 8 3
Bruce Irvine 12 6 3
Keith Oliver 10 - 3
Brent Robinson 12 - -
Lorraine Witten 12 8 3
Roger Yao: Alternate Director appointment for
Yin Tang Tseng
1

12 - -
Keith Watson 12 8 -

1
Roger Yao was appointed as alternate Director by Yin Tang (Tony) Tseng, with the consent of the Board, in June 2017. He attends Rakon
Board meetings and provides support for Tony who continues to be actively engaged in the activities of the Board. Tony is the current Chair
of Siward Crystal Technology Co. Limited, a substantial shareholder (16.6%) in Rakon.

Recommendation 2.5 An issuer should have a written diversity policy which includes requirements for the board or a relevant committee of the
board to set measurable objectives for achieving diversity (which, at a minimum, should address gender diversity) and to assess annually both
the objectives and the progress in achieving them. The issuer should disclose the policy or a summary of it.
Rakon has recognised the value of diversity of thinking and skills in its recruitment practices and its management and governance and has sought
to create inclusive work environments where all of its people are valued and respected. Rakon recognises the term diversity means one or more of
a number of different characteristics and factors including but not limited to gender, ethnic background, religion, age, marital status, culture,
disability, economic background, education, language, physical appearance and sexual orientation. Rakon considers different backgrounds,
communication styles, life-skills and interpersonal skills of Directors and employees are of value in building diverse teams.

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Rakon’s Diversity and Inclusion Policy was approved by the Board in May 2019 and is available on the Company’s website. As required under that
policy, Rakon has set objectives for measuring and promoting diversity and inclusion within the Company. Progress on these objectives is required
to be monitored and assessed by the People Committee and the Board at least annually.
The Board set two key diversity and inclusion objectives for the year beginning 1 April 2019:
 Ensure effective processes to gather data recording gender and ethnicity across the whole of the company are in place and followed
 Target the provision of bias awareness training across all leadership teams.
Rakon has developed systems to support gathering data regarding gender and ethnicity in New Zealand and across the whole of the Rakon Group.
Some of Rakon’s locations do not allow compulsory data gathering for gender and ethnicity, but the information is recorded where people are
comfortable to share it. With a good level of knowledge of the gender and ethnicity of its employees Rakon is better able to plan initiatives and
programmes to foster and enhance personal and career development, health, safety and well-being and inclusiveness.
During the past 18 months, the Rakon People and Capability team has addressed bias awareness with leaders more regularly. There has been
targeted training for bias awareness to introduce the concept, in context, with individual leaders both to support Rakon’s policy of diversity and
inclusiveness in the workplace and to make sure leaders are not hindered by unconscious bias when making decisions regarding hiring and
promotions for their teams.
As at 31 March 2020, females represented 20% (FY19: 20%) of Rakon’s Directors and Officers (as defined in NZX Listing Rule 3.8.1(c)). A quantitative
breakdown of the number of male and female Directors and the number of male and female Officers as at 31 March 2020 and as at 31 March 2019
is set out in the table below. In that table the Chief Executive Officer who is the Managing Director is included as a Director, and Officers are the
direct reports of the Chief Executive Officer having key functional responsibilities.
31 March 2020 31 March 2020
Directors
Females 1 1
Males 5 5
Officers
Females 2 2
Males 7 7

Recommendation 2.6 Directors should undertake appropriate training to remain current on how best to perform their duties as directors of an
issuer.
The Company encourages all Directors to undertake appropriate training and education to build on their governance and directorship skills.
Appropriate training and education includes attending presentations on changes in governance, legal and regulatory frameworks; attending
technical and professional development courses; and attending presentations from industry experts and key Rakon advisers. Updates are provided
to the Board by management on relevant industry and Company issues. A number of Rakon’s Directors are members of the Institute of Directors.
Recommendation 2.7 The board should have a procedure to regularly assess director, board and committee performance.
The Board regularly considers individual and collective performance, together with the skill sets, training and development and succession planning
required to govern the business. A full evaluation of Board performance was undertaken during the year ended 31 March 2019. For the year ended
31 March 2020, the Chair engaged directly with each Director to discuss Board performance and evaluate individual performance referencing a
Review and Evaluation plan developed for Rakon.
The charters of the Board’s Committees also require the Committees to undertake a self-review process, including receiving feedback from the
Board as a whole and reporting to the Board on the outcome of the reviews. For the year ended 31 March 2020, Review and Evaluation checklists
prepared for each Committee were used for the review and evaluation exercise.
Recommendation 2.8 A majority of the board should be independent directors.
The Board currently comprises of six Directors: five non-executive Directors, four of whom are independent including the independent Chair, and
one executive Director who is the Managing Director and Chief Executive Officer. In order for a Director to be independent, the Board has
determined, among other things, he or she must not be an executive of Rakon and must have no disqualifying relationships. The Board provides
guidance for determining independence in its Charter and follows the guidelines in the NZX Listing Rules.
The Board recognises that from time to time it is appropriate for the Board to confer without executive Directors or other senior management
present and for there to be separate meetings of independent Directors.
Recommendation 2.9 An issuer should have an independent chair of the board. If the chair is not independent then the chair and the CEO should
be different people.
The Chair of Rakon is an independent Director. While the Board Charter does not require the chair of the Board to be an independent Director, if
the Directors appoint a fellow Director as Chair who is not independent then they are required to disclose this fact in the Company’s annual report,
along with reasons justifying such a decision. The Rakon Board Charter records the Board’s intention that the Chair and the Managing Director or
Chief Executive Officer shall not be the same person.
Principle 3 – Committees
The Board should use committees where this will enhance its effectiveness in key areas, while still retaining board responsibility.
The Board has delegated a number of its responsibilities to committees to assist in the execution of the Board’s responsibilities.

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The current committees of the Board are the Audit and Risk Committee and the People Committee (‘Committees’).
The Committees review and analyse policies and strategies, which are within their terms of reference. They examine reports, information and
proposals and, where appropriate, make recommendations to the full Board. Committees do not take action or make decisions on behalf of the
Board unless specifically mandated by prior authorisation from the Board to do so.
The Committees meet as required and have terms of reference (charters), which are approved and reviewed by the Board. Copies of the Audit and
Risk Committee Charter and the People Committee Charter are on the Rakon website and were last reviewed in March 2020.
All members of the Board receive the minutes of each Committee meeting and all Directors are entitled to attend any Committee meeting. In
pursuing its duties and responsibilities, each Committee is empowered to seek any information it requires from employees and to obtain
independent legal or other professional advice. Each Committee is required to report to the Board after each meeting of the Committee.
From time to time, special purpose committees may be formed to review and monitor specific projects with senior management.
Recommendation 3.1 An issuer’s audit committee should operate under a written charter. Membership on the committee should be majority
independent and comprise solely of non-executive directors of the issuer. The chair of the audit committee should be an independent director
and not the chair of the board.
The Audit and Risk Committee’s purpose and key objectives are to ensure oversight of all matters related to the financial accounting and reporting
of the Company, monitoring the processes undertaken by external auditors and internal audit activity, operational risk management and compliance
with all financial corporate governance requirements. Its duties and responsibilities include:
 Reviewing the consolidated financial statements and making recommendations on financial and accounting policies.
 Reviewing the performance of the external auditor and recommending to the Board their appointment and removal if required.
 Overseeing the adequacy and effectiveness of internal controls and operational risk management including insurance.

The Audit and Risk Committee’s Charter provides that the Committee must be comprised solely of Directors of Rakon, have a minimum of three
members, have a majority of independent Directors and have at least one Director with an accounting or financial background. The current member
composition of this Committee complies with these requirements.
Members of the Audit and Risk Committee as at the date of this report are Lorraine Witten (Chair), Bruce Irvine and Keith Watson. The Chair of the
Audit and Risk Committee is not the Chair of the Board.
Recommendation 3.2 Employees should only attend audit committee meetings at the invitation of the audit committee.
Management may attend meetings at the invitation of the Audit and Risk Committee and the Committee routinely has committee member-only
time with the external auditor without management present.
Recommendation 3.3 An issuer should have a remuneration committee which operates under a written charter (unless this is carried out by the
whole board). At least a majority of the remuneration committee should be independent directors. Management should only attend committee
meetings at the invitation of the remuneration committee.
The Board has combined the duties and responsibilities of a remuneration committee and a nomination committee under one committee known
as the People Committee, as reflected in the People Committee’s charter. This charter records the combined responsibilities and was last reviewed
in March 2020. The People Committee’s work plan reflects duties and responsibilities that would otherwise be covered by separate remuneration
and nomination committees.
The People Committee’s purpose and key objective is to assist the Board in establishing coherent human resources, remuneration and Director
nomination policies and practices. Its duties and responsibilities include:
 Overseeing, reviewing and making recommendations to the Board in relation to human resources strategy, management succession
planning, employee incentive schemes, remuneration arrangements for the Managing Director and senior management and Directors
and compliance with applicable human resources legislation; and
 Overseeing, reviewing and making recommendations to the Board in relation to the selection and appointment of new Directors, processes
for identifying and assessing skills and competencies, Director succession planning and effective induction and training programmes for
new and existing Directors in order that the Board is comprised of Directors who contribute to the successful management of the Rakon
Group.
The People Committee Charter requires that a majority of its membership shall be independent Directors and that the Chair shall be independent.
Currently, the Chair and all other members of the Committee are independent Directors.
Members of the People Committee as at the date of this report are Keith Oliver (Chair), Bruce Irvine, and Lorraine Witten. Management may attend
meetings at the invitation of the Committee.
Recommendation 3.4 An issuer should establish a nomination committee to recommend director appointments (unless this is carried out by the
whole board), which should operate under a written charter. At least a majority of the nomination committee should be independent directors.
As reported in respect of Recommendation 3.3 the Board has combined the responsibilities of a remuneration committee and a nomination
committee into one People Committee. This approach is sensible from an administrative and resourcing perspective and facilitates regular oversight
of both remuneration and nomination matters through the year.

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Recommendation 3.5 An issuer should consider whether it is appropriate to have any other board committees. All committees should operate
under written charters. An issuer should identify the members of each of its committees and periodically report member attendance.
The Board Charter specifically requires the Board to assess regularly whether there is a need for any further standing committees and the Board
acknowledges that any committee established should operate under a written charter. The charters of the Audit and Risk Committee and the People
Committee are available on the Rakon website and their members are identified on the Rakon website and in the Company’s annual reports along
with a record of their attendance at the Committees’ meetings.
Currently Rakon health and safety matters are the responsibility of the full Board with oversight of legislative compliance and policy by the People
Committee.
The independent Directors meet as a committee from time to time as required.
Recommendation 3.6 The board should establish appropriate protocols that set out the procedure to be followed if there is a takeover offer for
the issuers including any communications between insiders and the bidder. The board should disclose the scope of independent advisory reports
to shareholders. These protocols should include the option of establishing an independent takeover committee, and the likely composition and
implementation of an independent takeover committee.
Rakon has not developed a specific policy governing the Board’s response to a takeover situation. Current legal advice on process that should be
followed in the event of a takeover offer is readily accessible by Directors in their online Resource Centre. In the case of a takeover offer, Rakon will
form an Independent Takeover Committee to oversee disclosure and response, and engage expert legal and financial advisers to provide advice on
procedure.
Principle 4 – Reporting and disclosure
The Board should demand integrity in financial and non-financial reporting, and in the timeliness and balance of corporate disclosures.
Rakon’s Directors are committed to keeping investors and the market informed of all material information about the Company and its performance,
in a timely manner.
Recommendation 4.1 An issuer’s board should have a continuous disclosure policy.
Rakon has a Continuous Disclosure Policy to ensure that material information is identified, reported, assessed and disclosed promptly and without
delay to the market. This policy was reviewed and updated by the Board in March 2019 and circulated to Directors and employees along with
further guidance on the application of the policy. The Rakon Continuous Disclosure Policy and additional guidance is accessible to all staff on an
internal online portal.
In addition to all information required by law, Rakon also seeks to provide sufficient meaningful information to ensure stakeholders and investors
are well-informed, including financial and non-financial information.
Recommendation 4.2 An issuer should make its code of ethics, board and committee charters and the policies recommended in the NZX Code,
together with any other key governance documents available on its website.
The key corporate governance documents referred to in this Corporate Governance Report are available on Rakon’s website:
http://www.rakon.com/corporate/investor/ir-gov
Recommendation 4.3 Financial reporting should be balanced, clear and objective. An issuer should provide non-financial disclosure at least
annually, including considering environmental, economic and social sustainability factors and practices. It should explain how operational or
non-financial targets are measured. Non-financial reporting should be informative, include forward looking assessments, and align with key
strategies and metrics monitored by the board.
Financial information
Rakon’s business management teams are responsible for implementing and maintaining appropriate accounting and financial reporting principles,
policies and internal controls designed to ensure compliance with accounting standards and applicable laws and regulations.
The Board’s Audit and Risk Committee oversees the quality and integrity of external financial reporting, including the accuracy, completeness,
clarity, balance and timeliness of financial statements. It reviews Rakon’s full and half-year financial statements and makes recommendations to
the Board concerning accounting policies, areas of judgement, compliance with accounting standards, stock exchange and legal requirements, and
the results of the external audit. All matters required to be addressed, and for which the Committee has responsibility, were addressed during the
reporting period.
For the financial year ended 31 March 2020, the Directors believe that proper accounting records have been kept which enable, with reasonable
accuracy, the determination of the financial position of the Company and facilitate the compliance of the financial statements with the Financial
Markets Conduct Act 2013. The Chief Executive Officer and Chief Financial Officer have confirmed in writing to the Board that Rakon’s external
financial reports present a true and fair view of the Company’s financial position in all material aspects.
Rakon’s full and half-year financial statements are available on the Company’s website.
Non-financial information
Rakon discusses its strategic objectives and its progress towards achieving these in the Chair and Chief Executive Officer’s commentary in its reports
to shareholders.
Rakon is committed to ensuring the protection of the world's environment and natural resources. As part of this commitment, Rakon has achieved
ISO14001 certification at the following sites: Auckland ‒ New Zealand and Bangalore ‒ India.
Across its global facilities, Rakon is integrating an Environmental Management System (EMS) to deliver continuous improvement in this area.

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Details of Rakon’s commitment to the environment and human rights can be viewed on the Company’s website:
http://www.rakon.com/corporate/about/corp-policies. This includes the Company’s policy on the restriction of hazardous substances
(RoHS/RoHS2); and Rakon’s positions on Conflict Minerals and Slavery and Human Trafficking.
The Company also invests in a number of social responsibility initiatives that support employees and the communities in all the regions in which it
operates.
To date Rakon has not sought to adopt a specific reporting framework for ESG policies and practices. Rakon nevertheless continues to focus on
continuous improvement of its ESG practices and may consider more structured reporting in the future supported by targets and metrics.
Principle 5 – Remuneration
The remuneration of directors and executives should be transparent, fair and reasonable.
Oversight of policy and processes in relation to the remuneration of Directors and executives is a key responsibility of the People Committee.
Recommendation 5.1 An issuer should recommend director remuneration to shareholders for approval in a transparent manner. Actual director
remuneration should be clearly disclosed in the issuer’s annual report.
The total remuneration available for Directors is approved by shareholders. The Board determines the level of remuneration paid to Directors from
the approved collective pool. Directors also receive reimbursement for reasonable travelling, accommodation and other expenses incurred in the
course of performing their duties.
The annual fee pool limit is $360,000 and was approved by shareholders at the 2012 Annual Shareholders’ Meeting.
Any proposed increases in non-executive Directors’ fees and remuneration will be put to shareholders for approval.
If independent advice is sought by the Board, the consultants will be required to declare their independence. If the Board elects to state publicly
that it is relying on such advice in respect of its remuneration proposal, a summary of the findings will be disclosed to shareholders as part of the
approval process.
Effective from 1 April 2020 to 30 June 2020, Rakon Directors elected to reduce their fees by 50% due to the uncertainties facing the business as a
result of the global Covid-19 pandemic and the impact of actions taken by governments across the world to control the pandemic.
Recommendation 5.2 An issuer should have a remuneration policy for remuneration of directors and officers which outlines the relative
weightings of remuneration components and relevant performance criteria.
The Board has a Remuneration (Directors and Executives) Policy which was approved by the Board in May 2019. This policy recognises that investors
have a particular interest in director and executive remuneration and that the remuneration of directors and executives should be transparent, fair
and reasonable. The policy outlines the framework within which Rakon determines remuneration for its Directors and executives.
Rakon applies a fair and equitable approach to remuneration having regard to the financial position of the Company and the external environment.
The Remuneration (Directors and Executives) Policy records that Rakon and its People Committee may obtain independent advice and relevant
market data and benchmarking in New Zealand and other regions in which it operates from appropriately qualified consultants to assist in setting
remuneration for its executives, Chief Executive and Directors. External advice is sought on a regular basis to ensure remuneration is benchmarked
to the market.
Director remuneration
Board role Approved
remuneration
Chair $120,000
Non-executive Director $60,000

Details of individual Directors’ remuneration are set out in the Shareholder Information section of the 2020 Annual Report.
Executive remuneration
In general, executive remuneration comprises of a fixed base salary and an at risk short-term incentive (STI) payable annually. Some executives also
receive fringe benefits. At-risk incentives, including any STI, are payable at the Board’s discretion and by reference to targets set at the
commencement of the period, which are generally based on financial measures including Company earnings targets, progress against objectives
related to the strategic plan and business unit objectives and other personal objectives.
Recommendation 5.3 An issuer should disclose the remuneration arrangements in place for the CEO in its annual report. This should include
disclosure of the base salary, short-term incentives and long-term incentives and the performance criteria used to determine performance based
payments.
CEO remuneration
The review and approval of the Chief Executive Officer’s remuneration is the responsibility of the People Committee and the Board.
External advice is sought on the remuneration of the Chief Executive Officer and was last obtained in 2018.
The Chief Executive Officer’s remuneration comprises a fixed base salary, fringe benefits, and an at-risk STI. At-risk incentives are payable at the
Board’s discretion and by reference to targets agreed with the Chief Executive Officer based on financial measures including earnings targets,
progress against objectives related to the strategic plan and other personal objectives. The remuneration detailed below relates to payments made
to Brent Robinson in the year ended 31 March 2020 (FY2020) (excluding any STI payments earned and to be paid in the 2020 financial year). The

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breakdown of the Chief Executive Officer’s STI for FY2020 is 30% of Base Salary with performance measures linked 50% to achievement of certain
Company performance targets and linked 50% to achievement of certain personal objectives. The same breakdown was applicable to the Chief
Executive Officer’s STI for the year ended 31 March 2019 (FY2019).

Base Salary Benefits Subtotal
At Risk Incentive
Total
Remuneration
STI % STI achieved
against maximum
FY2020 $637,500 $34,456 $671,956 $165,376 86% $837,332
FY2019 $634,139 $34,064 $668,202 $147,000 77 % $815,202

Principle 6 – Risk management
Directors should have a sound understanding of the material risks faced by the issuer and how to manage them. The board should
regularly verify that the issuer has appropriate processes that identify and manage potential and material risks.
The Board has overall responsibility for the Company’s system of risk management and internal control.
Recommendation 6.1 An issuer should have a risk management framework for its business and the issuer’s board should receive and review
regular reports. An issuer should report the material risks facing the business and how these are being managed.
The Board delegates day-to-day management of risk to the Chief Executive Officer. The Audit and Risk Committee provides additional and more
specialised oversight of the Company’s risks to support the Board’s oversight. As recorded in the Audit and Risk Committee’s Charter the Board
delegates specific responsibilities to the Committee in regards to risk assurance. The Committee’s work plan and meeting schedule provide
dedicated time for review of the Company’s risk management framework, financial risks, operational risk registers and review of the Company’s
risk appetite. The Committee is required to report its findings to the full Board. The Board maintains a strategic risks register for review and updating
as required at each meeting.
In the year ended 31 March 2020, management engaged with the Audit and Risk Committee to further document Rakon’s risk management
framework and policy. Managers are required to regularly review the key risks in their areas of responsibility and to assess, rate, control, mitigate
or monitor such risks. Key risks are required to be reviewed by the executive team to assess whether appropriate risk management actions are
being taken and the key risks are presented to the Audit and Risk Committee and Board for further oversight.
Each half year the Chief Financial Officer reports to the Audit and Risk Committee about the management of risks including but not limited to fraud,
cyber security and business continuity and related risk management, including insurances.
Rakon maintains insurance policies that it considers adequate to meet its insurable risks.
Details of Rakon’s financial risk management are available in section 26 of the Notes to the Financial Statements in the 2020 Annual Report.
Recommendation 6.2 An issuer should disclose how it manages its health and safety risks and should report on its health and safety risks,
performance and management.
Health and safety matters are the responsibility of the full Board with oversight of legislative compliance and policy review by the People Committee.
The Rakon board recognises that effective management of health and safety is essential for the operation of a successful business, and its intent is
to prevent harm and promote wellbeing for employees, contractors and customers. The Board is responsible for governance and oversight of the
Company’s health and safety framework. The Board is responsible for ensuring that the systems used to identify and manage health and safety
risks, foster an effective health and safety culture, set clear expectations, are fit for purpose, and are effectively implemented, properly resourced,
regularly reviewed and continuously improved.
Rakon has a number of operational subsidiary businesses outside New Zealand in India, France and the United Kingdom, each of which is responsible
for managing its own health and safety framework. Each business prepares monthly reports which are submitted to Rakon’s General Manager
People & Capability, with a monthly report to the Board, providing up-to-date information on key performance indicators, activities and key events.
The Board receives reports of Incident Rates including Lost Time Incidents and Near Misses, analysis of each reported incident, schedules recording
the timing and performance of drills, training and audits and the Company’s Critical Risk Register. The Board is satisfied that there is a
comprehensive health and safety framework in place.
The Company’s Lost Time Injuries recorded in its New Zealand operations in the year to 31 March 2020 numbered two (FY 2019: three)
Rakon is continuing its process of reviewing its health and safety policy and practices to achieve consistency of behaviour, processes and
expectations across its global businesses.
Principle 7 – Auditors
The board should ensure the quality and independence of the external audit process.
The Board is committed to ensuring audit independence, both in fact and appearance, in order that Rakon’s external financial reporting is viewed
as being highly objective and without bias.
Recommendation 7.1 The board should establish a framework for the issuer’s relationship with its external auditors.
The Audit and Risk Committee reviews the quality and cost of the audit undertaken by the Company’s external auditor and provides a formal
channel of communication between the Board, senior management and external auditor.
As outlined in the Audit and Risk Committee Charter the Committee regularly meets with the external auditor to approve the terms of engagement,
audit partner rotation (at least every five years) and audit fee, and to review and provide feedback in respect of the annual audit plan. A
comprehensive review and formal assessment of the independence and effectiveness of the external auditor is undertaken periodically. The

62
62

Committee routinely allows time to meet with the external auditor without management present. The Audit and Risk Committee also assesses the
auditor’s independence on an annual basis.
For the financial year ended 31 March 2020, PricewaterhouseCoopers (PwC) was the external auditor for Rakon.
All audit work at Rakon is fully separated from non-audit services, to ensure that appropriate independence is maintained. Other services provided
by PwC in FY2020 were non-audit related and involved the provision of advice. These services were deemed to have no effect on the independence
or objectivity of the auditor in relation to audit work. The fees paid to PwC for audit and non-audit work are identified at section 6 in the Notes to
the Financial Statements in the 2020 Annual Report.
The Audit and Risk Committee reviewed Rakon’s External Auditor Independence Policy in the year ended 31 March 2020 and the revised version
will be presented to the Board for adoption in FY2021. The policy provides comprehensive and current guidance to Directors and management to
assist them in determining the services that may or may not be performed by the external auditor.
PwC has provided the Audit and Risk Committee with written confirmation that, in their view, they were able to operate independently during
FY2020.
Recommendation 7.2 The external auditor should attend the issuer’s annual meeting to answer questions from shareholders in relation to audit.
The audit partner of the Company’s external auditor, PwC, is asked to attend the Company’s annual meetings, and to be available to answer
questions from shareholders at those meetings. The PwC audit partner attended Rakon’s 2019 Annual Shareholders’ Meeting.
Recommendation 7.3 Internal audit functions should be disclosed.
Rakon has a number of internal controls overseen by the Audit and Risk Committee and/or the Board which are supported by policy, processes and
procedures and regular reporting. These include controls for computerised information and management systems, cyber risk and information
security, business continuity management, insurance, health and safety, conflicts of interest, prevention and identification of fraud and legislative
compliance. The Company does not have an internal audit function. From time to time, the Company engages external audit services to review its
systems and internal controls. To maintain its ISO accreditation for a number of its management systems Rakon is subject to regular independent
audits.
Principle 8 – Shareholder rights and relations
The board should respect the rights of shareholders and foster constructive relationships with shareholders that encourage them to
engage with the issuer.
The Board is committed to open and regular dialogue and engagement with shareholders. Rakon seeks to ensure that investors understand its
activities by communicating effectively with them and giving them access to clear and balanced information. The Board regularly reviews its
shareholders communications strategy.
As a matter of good governance practice and in light of feedback from some of its shareholders, the Board is undertaking a review of Rakon’s
shareholder communications and investor relations strategies.
Recommendation 8.1 Issuers should have a website where investors and interested stakeholders can access financial and operational
information and key corporate governance information.
Rakon maintains a website www.rakon.com where shareholders and other stakeholders may obtain up-to-date financial and operational
information and key governance information along with other information about the Company and its products.
The Company’s annual Corporate Governance Reports are available on the Company’s website in the relevant annual report and as a separate
document including any updated versions of the Corporate Governance Report issued after the publication of the relevant annual report.
Recommendation 8.2 An issuer should allow investors the ability to easily communicate with the issuer, including providing the option to receive
communications from the issuer electronically.
Rakon has a calendar of communications and events for shareholders, including but not limited to:
 Annual and interim reports.
 Annual and interim results announcements.
 Annual and interim investor presentations.
 Annual meetings.
 Ad hoc investor presentations to institutional investors and retail brokers.
 Easy access to information through the Rakon website www.rakon.com
 Access to management and the Board via a dedicated email address investors@rakon.com
Shareholders are actively encouraged to attend the Company’s annual meetings and vote on major decisions which affect Rakon. Voting is by poll,
upholding the ‘one share, one vote’ philosophy. Shareholders may raise matters for discussion at these events.
All shareholders have the option to elect to receive electronic communications from the Company.
In addition to shareholders, Rakon has a wide range of stakeholders and maintains open channels of communication for all audiences, including
brokers, the investing community and the New Zealand Shareholders’ Association and regulators, as well as Rakon employees, customers and
suppliers.

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Recommendation 8.3 Quoted equity security holders should have the right to vote on major decisions which may change the nature of the issuer
in which they are invested.
In accordance with the Companies Act 1993, Rakon’s Constitution and the NZX Listing Rules, Rakon refers major decisions, which may change the
nature of Rakon to shareholders for approval.
Recommendation 8.4 If seeking additional equity capital, issuers of quoted securities should offer further equity securities to existing security
holders of the same class on a pro rata basis, and no less favourable terms before further equity securities are offered to other investors.
The Board notes the NZX Code recommendation in relation to considering the interests of all existing financial product holders. The Board will take
account of the recommendation in the event of a capital raise as well as the expectation that it should explain why any capital raising method other
than pro-rata was preferred when reporting against the NZX Code.

www.rakon.com
64

Directory
Registered Office
Rakon Limited
8 Sylvia Park Road
Mt Wellington
Auckland 1060
Telephone: +64 9 573 5554
Facsimile: +64 9 573 5559
Website: www.rakon.com

Mailing Address
Rakon Limited
Private Bag 99943
Newmarket
Auckland 1149
Directors
Bruce Irvine
Keith Oliver
Brent Robinson
Roger Yao (alternate director for Yin Tang Tseng)
Yin Tang Tseng
Lorraine Witten
Keith Watson
Principal Lawyers
Bell Gully
PO Box 4199
Shortland Street
Auckland 1140
Auditors
PricewaterhouseCoopers
Private Bag 92162
Auckland 1142
Share Registrar
Computershare Investor Services Limited
Private Bag 92119
Victoria Street West
Auckland 1142

Managing Your Shareholding Online:
To change your address, update your payment instructions
and to view your investment portfolio, including transactions, please visit:
www.investorcentre.com/nz
General enquiries can be directed to:
enquiry@computershare.co.nz
Telephone: +64 9 488 8777
Facsimile: +64 9 488 8787
Bankers
ASB Bank
PO Box 35
Shortland Street
Auckland 1140

---

2020 R EVIEW
Enabling the
Connected Future

2
•
RAKON R E V I E W F Y2020

REVENUE
▼
4.4%
$119.0m
UNDERLYING

EBITDA
1
▼
11.4%
$14.8m
▼
18.3%
$4.0m
NET PROFIT

AFTER TAXOPERATING

CASH FLOW
53 years of operation
Performance Snapshot F i n a n c i a l Yea r 2020
All amounts in this document are in NZ $ unless otherwise specified.
F Y2019 -$1.8m
FY2020 $9. 4 m
12 months ended 31 March 2020.
At a Glance
Global platform over 4 continents
950+ people, more than 40 nationalities represented
3 manufacturing, 6 Research and Development (R&D) centres,
16 customer support locations
Selling into 60+ countries in FY2020
In worldwide government and commercial
programmes where high performance is critical
Strategic supplier to some of the
largest telecommunications equipment companies
Since Rakon’s inception, approximately 1 billion products
manufactured for applications everywhere
%
Share of
Revenue
Telecommunications
54.8%
Space & Defence
23.7%
Global Positioning
15.9%
Emerging & Other
5.6%
Core markets – telecommunications,
space & defence, global positioning
1
Refer to the footnote on page 19 for the definition of Underlying EBITDA as a
measure of non-GA AP financial information, referred to in this document.
TelecommunicationsTelecommunications
Global PositioningGlobal Positioning
Space & DefenceSpace & Defence
Emerging and OtherEmerging and Other

RAKON R E V I E W F Y2020

•
3
Rakon designs and manufactures world leading frequency control and timing solutions. Its products help set the frequencies that all
communications transmit and receive on. They also hold time and provide a stable timing reference for electronic equipment around the world.
This enables synchronised time globally, and the efficient and reliable transfer of data at ever-increasing precision and speed. Precise timing is
required for demanding applications within Rakon’s three core markets of telecommunications, global positioning and space & defence.
Connectivity, Anytime, Anywhere
Contents
Tribute to Our Founder 4
Chair’s and CEO’s Report 5
Board of Directors 8
Business and Strategic
Focus 9
Global Executive Team 10
Key Achievements FY2020 11
Financial Summary 12
Technology Leadership
Focus 14
Rakon Everywhere 16
Enabling the Connected
Future 18
Rakon’s Key Strengths 19
Glossary 19
Directory 20
5G is making a myriad of applications possible
“With dominant share allocations from key Tier One customers secured, our
products are being designed into all the main network providers’ 5G equipment.”
Brent Robinson, CEO / Managing Director

4
•
RAKON R E V I E W F Y2020

Tribute to Our Founder
From a young age, Warren had a curious mind.
His fascination with electronics led him to build a
radio at the age of 15 and he became one of the
youngest in New Zealand to receive an amateur
radio license. This hobby led him to spend
time as a technical trainee at the New Zealand
Broadcasting Service.
Warren then went to work for Electronic
Navigation as a technician in marine electronics.
He built his first radio telephone as the firm made
Skipper marine radio telephones for small ships
and ‘pleasure craft.’
While at Electronic Navigation, Warren met
Henri Klok who had experience in the marine
electronics business. Warren went on to form
a company in partnership with Henri. They
designed a new radio telephone, giving it the
trade name ‘Marlin’, and registered it under their
company, Marlin Electronics Limited. Warren
and Henri ran Marlin Electronics from 1955 until
1965 before deciding to sell out to Autocrat
Radio. While at Marlin Electronics, Warren had
experienced the frustration of crystals taking up
to three or four months to be delivered. The large
gap in the market for locally made crystals was
too big to ignore, so he decided to make his own
at his garage in Howick, Auckland.
Rakon was founded in 1967. As the business
grew, premises were set up initially in
Newmarket, Auckland and in 1971 the
company moved to Mt Eden and had a team of
30–40 staff. Warren then temporarily moved
to Singapore with his family and established
a manufacturing plant there in 1972. Over the
years the business evolved, to become the global
company that it is today. Warren continued as
Chair and a director of the company until 2006
when it went public and listed on the New
Zealand stock exchange (NZX). Warren then
became a director of the public company and
continued in that role until stepping down from
the Board in 2017. He continued to maintain a
keen interest in the success of the company.
In his later years, Warren continued to push
the envelope developing an olive grove and
vineyard on his estate on Waiheke Island, where
he produced his own olive oil and wine. His
fascination with technology never wavered. He
continued with his lifelong interest in amateur
radio. His choice of vehicle in retirement . . .

an electric car.
Those of us at Rakon privileged to know Warren recall
fondly a great man, who always made it a priority to
engage with our people.
Warren, your accomplishments will forever be embedded
within our history and your curiosity and passion for
electronics will continue to live on in the curious minds you
have enabled.
Inside Rakon’s previous facility
in Mt Eden, Auckland which opened in 1971.
Warren John Robinson
7 January 1935 – 10 September 2019
Sadly our founder Warren Robinson passed away during the year, at the age of 84. We pay
tribute to an electronics innovator, a business leader and a great New Zealander.

RAKON R E V I E W F Y2020

•
5
Chair’s and CEO’s Report
2
Refer to the footnote on page 19 for the definition of Underlying
EBITDA as a measure of non-GA AP financial information, referred to
in this document.
Welcome to the 2020 Annual Review of your company
Rakon Limited (‘Rakon’ or the ‘Group’).
Continued growth in the telecommunications segment and
positive operating cash flow of $9.4m were highlights for
the Financial Year ended 31 March 2020 (FY2020). Rakon
reported a net profit after tax of $4.0m compared with
$3.4m in FY2019.
Underlying EBITDA
2
was $14.8m compared with $13.3m in
FY2019. FY2020 included a positive impact of $3.1m from
the adoption of IFRS 16 Leases. Excluding this, Underlying
EBITDA is $11.7m. This reflects a much stronger than
expected finish to the year, predominantly from the growing
telecommunications segment.
Revenue of $119.0m was $5.0m higher, or up 4%, for the
period, with telecommunications increasing by $11.6m.
This was offset by declines of $3.4m in space & defence
(phasing of long-term customer contracts) and $1.6m in
global positioning (a decline of low-margin, high-volume
business). It was pleasing to see the growth in revenue
starting to come through in the last quarter from higher
share of business awarded to Rakon from its Tier One
telecommunications customers.
Gross profit was $52.0m, in line with the prior year. Although
improved product mix provided better underlying gross
profit, additional inventory obsolescence meant the overall
gross profit was flat. Operating expenses for the year were
$48.1m, up $0.7m compared to the prior year.
Net debt
3
was $7.9m, up $0.2m on the prior year. This
included a final payment of $2.1m for the acquisition of the
remaining 51% interest in Rakon India. Rakon’s shareholders’
equity stands at $91.9m, funding 61% of total assets.
Operational Overview

COVID -19
While COVID-19 had a negative short-term impact on the
Group, with our manufacturing operations in New Zealand
and India severely restricted for periods of time, the medium-
term to long-term effects are not expected to be significantly
negative. COVID-19 has increased the reliance on remote
communications, reliable telecommunications infrastructure
and higher network capacities, reinforcing the importance of
Rakon in the global telecommunications supply chain.
Rakon had a strong finish to the year with revenue and order
bookings despite our global team being affected by the
pandemic, with many required to work from home.
New products & XMEMS
™
4

It was pleasing to see a number of new products and variants
of existing products introduced to the market during the year,
and an increase in orders for Rakon’s 5G offering.
Customers are demonstrating a strong preference
for Rakon’s quartz-based products over silicon-based
competition, with higher shares awarded to Rakon from
major Tier One telecommunications customers.
Rakon released XMEMS
™
during the year, its key quartz-
based technology for future products. XMEMS
™
is our
advanced resonator technology made with our NanoQuartz
™

photolithography microfabrication process on quartz wafers,
which is delivering unprecedented resonator and oscillator
performance.
XMEMS
™
coupled with Rakon’s innovative proprietary
semiconductor Application Specific Integrated Circuits
(ASICs) enables the creation of new products not possible
using conventional mechanical processing methods which
are smaller, higher performing and more cost-effective.
Market update

Telecommunications
As mentioned, telecommunications grew strongly, with
revenue up 15% in USD terms this year compared with
FY2019. The 5G segment contributed 43% of this growth
and new 5G products showed 150% year-on-year growth,
mostly out of the New Zealand plant. These products are
going into early deployments of 5G in South Korea, China and
the US. Of particular note were the higher revenues from
the data centres market as data centre operators invested to
meet the growing worldwide data demand.
Outlook

The outlook for the telecommunications segment continues
to be positive with all three mobile operators in China
deploying 5G networks, and the continuing demand for
stable, reliable and greater capacity communications
networks accentuated by COVID-19. Balancing this is
the intensifying geopolitical uncertainty, which is creating
volatility in customer forecasts.
Space and Defence

Rakon’s space revenue dropped 13% in USD terms, due
predominantly to the phasing of long-term multi-year
projects. The prior year also included a significant initial
order for products going into the first Low Earth Orbit (LEO)
satellite network in China.
Although overall revenue was lower, it was
pleasing to see our European space business
4
Acronyms and definitions are explained in the Glossary on page 19.
3
Net debt within this document excludes IFRS 16 lease liabilities.

6
•
RAKON R E V I E W F Y2020

Margo Thomas
General Manager, Global People & Capability, Auckland, NZ
I continue to be inspired by the depth of global talent we have across Rakon. Our people ‘drive
hard’ to ensure we continue to lead from the front in our fields of expertise to maintain our
professional excellence.
Chair’s and CEO’s Report
5
Product acronyms and definitions are explained in the Glossary on page 19.
6
New Space refers to a globally emerging private spaceflight industry. This includes
aerospace companies and ventures working independently of governments and traditional
major contractors to develop faster, better and cheaper access to space and space
technologies. It includes Low Earth Orbit satellites such as CubeSats.
increasing, with some of Rakon’s traditional geostationary
satellite business returning during the year.
The defence segment lost some of the gains from the last
two years, with USD revenue down 15%. While the US
market held firm, the negative impact came out of Europe.
Outlook

Current bookings indicate some revenue growth in both
space and defence, including Rakon India having won new
contracts for supplying the local Indian market and good
forward orders for Space OCXOs
5
used in a US satellite
application. In the meantime progress continues to be made
in the New Space
6
LEO market, but it will take time for this
revenue to grow.
Global Positioning

Global positioning revenue declined 25% in USD terms,
predominantly due to one customer where high-volume,
low-margin business declined. The industrial high precision
Global Navigation Satellite System (GNSS) segment
(including agricultural and mining equipment) was flat, with
gains made in the first half offset by a lower second half,
the latter being affected by the US/China trade issues. It
was pleasing to see the emergency locator beacon market
segment growing 7%.
Outlook

Rakon’s market share is increasing in the high precision
sub-segment for low g-sensitivity products and this trend is
expected to continue.
In the high-volume sub-segment, competitive pressures
from global positioning module makers in Asia are expected
to increase price pressure; however with our partnership
with low-cost manufacturer Taiwan-based Siward Crystal
Technology Co. Limited (‘Siward’) Rakon is expected to
remain competitive.
Corporate Governance

The Board was deeply saddened by the passing of Rakon’s
founder and former Chair and director Warren Robinson
in September. We would like to acknowledge Warren’s
outstanding contribution to New Zealand’s technology
sector and his 50+ year dedication and commitment to our
company. Warren was a remarkable New Zealander and
formed strong connections with our people. He will be sorely
missed.
FY2020 was a year of consolidation of the new team of
directors completed in late 2018 and strengthening of
governance practices, and there was a particular focus on
key organisational and operational matters that would drive
company performance. Looking forward, following a review
of company strategy, the Board is seeking improved results
through gross profit growth and continued focus on the
development of best-in-class technology for existing and
new customers.
The Board has appreciated the efforts of the whole Rakon
team in responding to the COVID-19 pandemic, both as
it emerged in the latter months of FY2020 and as the
lockdowns and restrictions were imposed across the world
affecting our operations, our supply chains, our customers
and the day-to-day lives of our people. Amidst the immense
uncertainty caused by the pandemic, Rakon employees
rallied to support the business and to meet the requirements
of our customers. They did so while working at Rakon’s
manufacturing sites, where permitted, under strict health
and safety protocols or, where practical, working from
home; and having agreed to take a pay reduction. As part
of the supply chain for essential communications and civil
defence services, it was important to stay connected with
our suppliers and understand delivery logistics to meet our
customers’ requirements to the extent possible.
We also appreciated the efforts of our fellow directors who
took a 50% reduction in their fees and met more frequently
to support management through the crisis.
Closing Comments and Outlook

At this point in time we seem to be through the worst of
COVID-19’s impact and we were fortunate that there were
no permanent effects for our staff personally. With our global
manufacturing operations largely back to normal, Rakon is
well positioned for the rest of FY2021.
We expect the coming period to show continuing growth
in telecommunications, tempered by potential uncertainties
from geopolitical tensions within the telecommunications
market.
Rakon’s XMEMS
™
technology will continue to be developed
and commercialised, and will be more important to Rakon’s
longer-term future as it becomes a key point of difference
with regard to competitors.
Brent Robinson
CEO / Managing Director
Bruce Irvine
Chair
7
Icons represent Rakon’s areas of strategic focus. Refer to graphic on page 9.
7

Financial Year 2020
Performance Summary
• Revenue of $119.0m vs. $114.0m in FY2019.
• Underlying EBITDA of $14.8m vs. $13.3m in FY2019.
• Net profit after tax of $4.0m vs. $3.4m in FY2019.
• Net debt was $7.9m vs. $7.7m in FY2019.
The Surface Mount Technology area at Rakon’s Auckland facility
prior to the COVID-19 health emergency. While manufacturing
operations in New Zealand and India were severely restricted for
a period of time, the medium-term to long-term effects are not
expected to be significantly negative.
RAKON REVIEW FY2020

•
7

8
•
RAKON R E V I E W F Y2020

Board of Directors
Brent Robinson
Executive Director
Brent has 41 years at Rakon, which includes
establishing global operations and markets and 34
years as CEO / Managing Director.
Under Brent’s leadership Rakon has grown into
a global business and a recognised leader in the
frequency control product industry. Brent is an
Honorary Fellow of the Institution of Professional
Engineers New Zealand. He was awarded the New
Zealand Hi-Tech Trust – Flying Kiwi Award in 2011.
Bruce Irvine
Chair and Independent Director
Bruce is a professional director with extensive
experience across a wide range of industries. He is a
Chartered Fellow of the Institute of Directors, as well
as an Accredited Fellow of Chartered Accountants
Australia and New Zealand (CAANZ).
He is currently Chair of Heartland Bank Limited,
Market Gardeners Limited and Skope Industries
Limited. He is also a director of Scenic Hotel Group
Limited and House of Travel Holdings Limited and a
number of other private companies.
Yin Tang Tseng
Non-Executive Director
Yin Tang (Tony) is the current Chair of Siward Crystal
Technology Co. Limited, a substantial shareholder
(16.6%) in Rakon.
Tony has more than 30 years of experience in the
frequency control product industry, having founded
Siward in 1988 and grown the company to become
one of the leaders in the industry globally, with
revenue of US$100+ million. Tony is a director of
Securitag Assembly Group Limited.
Lorraine Witten
Independent Director
Lorraine is a professional director with extensive
experience in technology and Information
Communications Technology (ICT) sectors. She is
a Chartered Fellow of the New Zealand Institute of
Directors and a member of Chartered Accountants
Australia and New Zealand (CAANZ).
Lorraine is Chair of the Corrections Department Audit
& Risk Committee and a director of TIL Logistics
Group Limited and Horizon Energy Group. She is
also Chair of Simply Security Limited, a company she
founded in 2007, and Chair of vWork Limited.
Keith Watson
Independent Director
Keith is a professional director with substantial
experience in the technology and engineering
sectors. He is a Chartered Member of the Institute
of Directors in New Zealand. Keith has governance,
management and leadership experience in
companies across the Asia Pacific region, the
Americas, Central Europe, the UK, Australia and
New Zealand.
Keith is currently the Chair of the New Zealand
Institute of Economic Research (NZIER) and
a director of Acumen Republic Limited, Taska
Prosthetics Limited and Complete 3D.
Keith Oliver
Independent Director
Keith is a professional director and a business
advisor with Alto Capital, where he is also a director.
He is a past director of a range of NZ technology
companies operating in international markets in Asia,
Europe and the Americas, several of which he has
been a founder and investor in.
Keith is currently the Executive Chair of Blackhawk
Tracking Systems Limited and a director of
Wellington Drive Technologies Limited.
Read full biographies at:
www.rakon.com/corporate/investor/ir-gov/ir-bod

RAKON R E V I E W F Y2020

•
9
INPUTS
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HOW WE
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FUTURE
TECHNOLOGY
LEADERSHIP
KEY FOCUS
WORLD
CLASS
QUALITY
KEY FOCUS
OPERATIONAL
EXCELLENCE
PARTNERSHIPS
L
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KEY FOCUS
FAST
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KEY FOCUS
PROFESSIONAL
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HIGHLY
FLEXIBLE
PRODUCT
PLATFORMS
Business and Strategic Focus
950+ global team
Global platform
Strong ecosystem
partnerships
& customer
relationships
Our 53-year

trusted brand
Investment

in R&D
Deep application

expertise
Growth of our
people
Increased
shareholder value
Improved service
and efficiencies for
our customers
Enabling our

customers to
advance technology
Enabling applications
that change the way
we live our lives
KEY FOCUS
Karl Ward
Principal Design Engineer, Harlow, UK
Rakon is uniquely positioned in the frequency
control product industry with its own in-house
ASIC design team. Our experienced team
produces advanced designs for Rakon products,
strengthening and extending performance ranges,
allowing us to meet future market demands.
O UTPUTS

10
•
RAKON R E V I E W F Y2020

Brent Robinson
CEO / Managing Director &
Chief Technology Officer
Brent was appointed Managing Director
and Chief Executive Officer in 1986.
Under Brent’s leadership, Rakon has
grown into a global company and
recognised leader in the frequency
control product industry with revenue
of $119.0m in FY2020.
In his capacity as Chief Technology
Officer, Brent oversees the business’s
technology and innovation. He has
41 years’ experience at Rakon in the
design and manufacture of crystals and
oscillators, which has included leading
the development of Rakon’s core
business.

Darren Robinson
Chief Marketing Officer
Darren has led sales and marketing
since 1990, having earlier held
various roles with the company in
New Zealand and overseas. He has
been instrumental in the company’s
expansion into new markets, its
commercialisation of new applications
and its development of business
relationships with many Fortune 500
companies.
Through Darren’s in-depth
understanding of the markets Rakon
competes in, he also plays an integral
part in steering its R&D efforts. He
guides product development teams to
meet new requirements in emerging
applications and solve problems for
customers.

Dr. Sinan Altug
Chief Operating Officer
Sinan joined Rakon in 2002 and
commenced as COO in January 2020.
In this newly created position he leads,
aligns and drives the company’s global
operations to best meet customer
demand and create profitable growth.
Other senior positions held by Sinan
include Managing Director of Rakon’s
European businesses and Global
Business Development Director. Sinan
held various management positions in
the frequency control product industry
before joining Rakon, including Director
of European Operations for Champion
Technologies. He has a PhD in Electrical
Engineering and an MBA.

Anand Rambhai
Chief Financial Of ficer
Anand joined Rakon in January 2012
and was appointed CFO in November
2018. Anand brings strong leadership,
commercial skills and in-depth Rakon
business knowledge to the company.
In his current role he is responsible for
Rakon’s finance, information systems
and investor relations functions.
Anand has gained broad financial and
commercial experience in previous
roles, including as GM of Finance
and General Manager. His previous
experience includes tenures at Sony,
British Telecom and Deloitte. Anand is
a member of Chartered Accountants
Australia and New Zealand (CAANZ).
Margo Thomas
General Manager,
Global People and Capability
Margo joined Rakon in January 2016. In
her current role she is responsible for all
global Human Resources (HR) strategy,
policies and processes including
organisational alignment, talent
acquisition, leadership development,
change management, employment
relations and health and safety.
Prior to this, she held the position
of General Manager of People and
Capability New Zealand. Margo has
20 years’ experience working in HR
including senior HR positions in a range
of industries with Crowe Horwath,
Spark, Westpac and New Zealand Post.
Scott Stemper
Global Quality Manager
Scott joined Rakon in January 2015.
He leads the development and
improvement of quality processes and
systems to enhance Rakon’s drive to
be the leading provider of world-class
frequency control products.
Scott’s background includes ten
years as Global Quality Manager with
Raltron Electronics Corporation and
20 years with CTS Frequency Controls
in oscillator product engineering and
quality management roles. He has
also held senior quality management
positions with L3 Technologies and
D&S Consultants Incorporated.

Dr. Roy Cann
Head of Global Engineering
Roy joined Rakon in May 2018 as Head
of Global Engineering. He is responsible
for driving new product developments
and leveraging the benefits of a
collaborative global R&D team.
Prior to joining Rakon, Roy held
the position of Electronic Controls
Design Manager at Fisher and
Paykel Technologies, where he was
responsible for the design and supply
chain management of high volume
microprocessor-based motor controllers
across New Zealand and China.
Prior to this, Roy was an Engineering
Director at Trimble for five years. He
has held a number of other senior roles
with multi-site responsibilities, including
positions with Avery Weightronix (UK),
Rolls-Royce Aerospace (UK), Meissner
Power Systems (South Africa), and
Connetics (NZ). Roy holds a PhD in
Electrical Engineering.

Maureen Shaddick
Company Secretary
Maureen joined Rakon in November
2018. She provides legal, company
secretarial and regulatory advice and
support. She has more than 25 years’
experience as a commercial lawyer
and governance adviser in private
practice, corporates and not-for-profit
organisations in New Zealand, London
and Dubai.
Maureen was the General Counsel and
Company Secretary of Genesis Energy
from 2003 to 2016. She is the Chair of
Cancer Research Trust New Zealand
and has been a Trustee since 2003. She
has also held a number of other not-for-
profit governance roles.
Borja Thomas (Thomas)
Head of Global Product
Management
Thomas joined Rakon in April 2015.
In his current role he is responsible for
generating and growing profit for the
business through its existing and future
product offering.
His previous senior positions at Rakon
include Head of Product Management
New Zealand and Senior Product Line
Manager.
Prior to joining Rakon, Thomas was
a Product Line Manager for Nexans
(formerly Alcatel) in France and led
the launch of two new product lines
addressing the smart grid and electric
vehicle markets.
Thomas has also spent time in Europe
in product consultancy roles in France
and began his career as an R&D
Engineer in the UK.

Arun Parasnis

Managing Director,
Rakon India
Arun joined Rakon in October 2018
and is responsible for overseeing all
business functions at Rakon India.
Arun has had 30 years of experience
in the electronics industry, overseeing
functions including engineering,
operations, business development and
profit and loss management.
His experience across the electronics
industry includes electronic
components, consumer electronics and
Electronics Manufacturing Services
(EMS). Prior to joining Rakon, Arun was
the Vice President of Cyient Limited.
He has also held senior positions at
Radiall India Private Limited, Jabil
Circuit India Private Limited and Vishay
Components India Private Limited
(formerly the Philips Electronics Passive
Components division).
Global Executive Team
Biographies are available at:
www.rakon.com/corporate/investor/ir-gov/ir-mgmt

Carole Gagnard
Product Assurance Manager, Space & Defence Business Unit, Pont-Sainte-Marie, France
At Rakon product quality is paramount. Our quality team is involved from the initial purchase
order right through to the final shipment of products to our space & defence customers.
We are involved in project review, components selection, operator qualification, product
inspection (including before sealing with customer participation) and final quality control.
Key Achievements FY2020
18 new products
8
introduced
including launch of Mercury+
™
, the world’s smallest OCXO
9
6 core R&D advanced technology developments under way
including release of XMEMS
™
,

Rakon’s

key quartz-based technology
for future requirements
Launched global Sales & Operations Planning (S&OP) review
process, significantly improving worldwide customer
satisfaction and employee engagement
34 million products shipped
Increased share of major Tier One telecommunications
customers’ business
Rakon is designed into the transportation and radioheads for 5G
All business units recertified to global quality standards
RAKON R E V I E W F Y2020

•
11
Strong finish to the year with revenue and order bookings
Preference for Rakon’s quartz-based products
over silicon-based competition
Ramping up for 5G – Mercury+
™
, Neptune
™

and Mercury
™
10
products
New products being developed for emerging
5G millimetre wave (mmWave) requirements
8
New products introduced by Rakon to the market are defined as products which have begun sampling.
9 & 10
Visit www.rakon.com/products for more information on Neptune
™
(Ultra Stable TCXO) , Mercury
™
and Mercury+
™

(IC OCXO) products, or scan the QR code on page 17. For the Mercury+
™
release visit www.rakon.com/corporate/about/news

12
•
RAKON R E V I E W F Y2020

Summary of Revenue and Profit
For the year ended 31 March 2020
2020
$000s
2019
$000s
Revenue118 , 9 8 0113,985
Underlying EBITDA14,78713,270
Depreciation and amortisation(8,823)(5,802)
Interest(1,055 )(534)
Adjustment for associates and joint venture share of interest,
tax and depreciation

(1,447)

(1,120)
Other non-cash items(178)(340)
Income tax expense696(2,110)
Net profit after tax3,9803,364
Summary of Statement of Cash Flows
For the year ended 31 March 2020
2020
$000s
2019
$000s
Net cash flow
– Operating activities9,401(1,768)
– Investing activities(6,631)(12,674)
– Financing activities(3,078)(24)
Net (decrease) / increase in cash and cash equivalents(308)(14,466)
Foreign currency translation adjustment(672)144
Cash and cash equivalents at the beginning of the period(6,782)7,540
Cash and cash equivalents at the end of the period(7,762)(6,782)
This financial summary provides partially summarised financial information only, regarding the financial performance of Rakon Limited
for the year ended 31 March 2020. Please refer to the Rakon Limited Annual Report 2020 for the full financial statements and
accompanying notes.
11
Refer to the footnote on page 19 for explanation of Underlying EBITDA.
Financial Summary
Keerti Prakash
Procurement Manager, Supply Chain, Auckland, NZ
Strong supplier partnerships are foundational to a business’s overall
success. They provide partners with a more complete understanding
of our business needs, leading to improved services and reduced
costs. The team has been involved in open and ongoing dialogue
with our strategic partners, which has helped build strong business-
to-business engagement. As we have seen, solid partnerships take
dedicated effort, but they deliver more mutual value.
REVENUE
UNDERLYING EBITDA
11
$101.1m
$114.0m
THREE-YEAR PERFORMANCE SNAPSHOT (NZ$)
2018 2019 2020
$119.0m
$12.1m
$13.3m
2018 2019 2020
$14.8m
OPERATING EXPENSES
$41.6m
$ 47. 3 m
2018 2019 2020
$48.1m
NET PROFIT AFTER TAX
$10.0m
$3.4m
$4.0m
2018 2019 2020

RAKON R E V I E W F Y2020

•
13
Non-current assets
Trade and other receivables2,7022,267
Derivative financial instruments–258
Financial asset at fair value through other comprehensive
income
2,9184,549
Property, plant and equipment18,92419,394
Intangible assets9,0039,149
Investment in associates11,71410,399
Deferred tax asset9,2467,352
Right-of-use assets9,730–
Total non-current assets64,23753,368
Total assets150,244136,504
Balance Sheet
As at 31 March 2020
2020
$000s
2019
$000s
Assets
Current assets
Cash and cash equivalents5,0864,719
Trade and other receivables42,37938,220
Financial asset at fair value through profit and loss219
Derivative financial instruments27307
Inventories37,62439,310
Current income tax asset889561
Total current assets86,00783,136
Balance Sheet
As at 31 March 2020
2020
$000s
2019
$000s
Liabilities
Current liabilities
Bank overdraft12,84811,501
Borrowings145474
Trade and other payables22,25226,398
Derivative financial instruments5,040945
Lease liabilities2,741–
Provisions714471
Deferred consideration on acquisition–1,885
Deferred income – government wage subsidy2,000–
Total current liabilities45,74041,674
Non-current liabilities
Derivative financial instruments2,840343
Borrowings–412
Provisions2,9182,990
Deferred tax liabilities1861,069
Lease liabilities6,704–
Total non-current liabilities12,6484,814
Total liabilities58,38846,488
Net assets91,85690,016
Equity
Share capital181,024181,024
Other reserves(23,293)(21,153)
Retained earnings(65,875)(69,855)
Total equity91,85690,016
Total equity and liabilities150,244136,504

14
•
RAKON R E V I E W F Y2020

Technology Leadership Focus
Rakon develops product solutions to enable its
customers, some of whom are world-leading
companies within their respective markets,
to advance their systems to the next level of
performance.
Rakon’s R&D capability has kept it at the
forefront of the frequency control products
industry.
“One of the key aspects is that Rakon has
developed strong in-house R&D capability in our
core foundational technologies. We have our
own ASIC design and development team, along
with the quartz resonator development team’s
in-house microfabrication facility where we
can develop technologies such as XMEMS
™
,”
says Advanced Technology Manager of Global
Engineering Michael McIlroy.
The General Manager of Rakon’s UK R&D
business unit Philip Davies says such a
combination is formidable.
“Having the XMEMS
™
technology plus an ASIC
design team in the same company is extremely
rare, if not unique. Putting those two things
together gives us incredible benefits in terms
of developing new technologies, enhancing
product performance and maintaining technology
leadership.”
Investment in innovation and close collaboration
are also important.
“Rakon continues to invest heavily in R&D
and innovation. Without this we could not
maintain our leadership. It’s all about investment
in automation, investment in highly skilled
engineers – and not only those that look after
design, but also the process engineers who
Michael McIlroy
Advanced Technology Manager
Global Engineering
Philip Davies
General Manager UK
Roy Cann
Head of Global Engineering
A key focus and strategy for Rakon is technology leadership. Three senior members involved
in executing this strategy explain how Rakon maintains its leadership, and discuss current
technology developments and what the future of technology holds.
play a huge part in implementing the new
technologies they are presented with by the
R&D teams.
“Our close collaboration with customers, our in-
house engineering systems level understanding
and our experienced and highly knowledgeable
engineering community are also key.
“To tie it all together, we have strategic
relationships with customers who are Tier One
companies in their respective industries, so
we know what’s coming; then we invest in
technologies and realise their requirements using
our crystal and ASIC technology to its best and
fullest extent. It’s knowing what customers need
at the start of that process, and also that systems
level knowledge, which sets Rakon apart.”
A highly technical understanding of the
ecosystems in which Rakon operates is also
essential.
“We link in a strong understanding of customer
and market needs. We also have a highly
technical understanding of our customers’
requirements. In combination with that is a drive
to invest, be innovative, develop technology and
the world-class R&D teams we have, to support
those technology drives and developments,”says
McIlroy.
Head of Global Engineering Roy Cann says
entrepreneurial spirit, agility and pushing the
boundaries are also key differentiators at Rakon.
“Generally, it is about attacking cutting edge
specifications, whether that’s in terms of stability
or slope or whatever it may be. So we are
constantly pushing the envelope around product
specification, whether it’s performance or size,
based on what our customers are looking for in
terms of products, to underpin their new systems.
We are agile and willing to take risks. We do
things which are technically very difficult, where
we are not guaranteed to succeed. We take on
the difficult specifications.”
Future proofing and foresight have also been crucial
says Davies.
“Management at the senior level is very
technically savvy, which is critically important –
and we have a technology focused culture where
everybody is pulling in the same direction. That
and the foresight of management and the Board in
making the right strategic decisions have ensured
we maintain our technology leadership.”
In the past financial year alone the company
invested $13.9m in R&D, with technology
developments under way at its R&D facilities in
NZ, the UK, France and India.
In India product developments have included a
space-grade TCXO, crystal filter and distribution
amplifier for space applications and a narrow
bandwidth miniature VCO for a defence
application.
In France the team diversified its product portfolio
with the release of its high performance VCSO
range of products. Developments have also
included a complete Frequency Generation Unit
for a space application and customer sampling of
an OCXO for the New Space market.
In the UK exciting progress was made with a
proprietary post-compensation TCXO and a next
generation high stability OCXO. Davies says the
post compensation technology has already been
released to some select customers.
“It is a very clever technology, allied to some
highly sophisticated algorithms. Basically, it
doubles the product’s performance, enabling even
tighter frequency tolerances.”

RAKON R E V I E W F Y2020

•
15
In New Zealand, the release of XMEMS
™
has been a key
technology development in FY2020, says McIlroy.
“XMEMS
™
is a key foundational technology and we will be
using it to develop the core resonator portion of our oscillator
products further.
“XMEMS
™
is leveraging the high performance possible with a
quartz-based resonator. It is leveraging the fantastic history and
legacy of quartz-based products but linking in new geometries,
structures and microfabrication techniques. This further
enables the best characteristics of the quartz to be used and
drawn out into that final resonator performance. It is taking
our oscillator products to a new level in terms of size, stability,
phase noise, and g sensitivity. All of the key parameters are
leveraged off the resonator and our XMEMS
™
technology.”
McIlroy says additionally that part of his role as Advanced
Technology Manager (a new role established 12 months ago)
has been to further enable Rakon to leverage and benefit from
the synergies of the global team’s technical competencies.
“A key role of mine is to work to pull teams together, find
those synergy points and cross-fertilise as needed.
“Sometimes technology at one level which has been
developed for a particular market then becomes important
in another market, and we are able to leverage our initial
developments in one market over to another. So for example
. . . if you take the New Space requirements, where lower
power, smaller form factor OCXOs are required, we can
leverage some of the technology that we’ve developed in the
telecommunications miniature OCXO market and feed that
into the requirements for New Space.”
Davies said the UK team are working on developing a next
generation ‘Super TCXO’ in the near future.
“Using all the knowledge we have gained over the past two to
three years in our core ASIC technology developments, we are
now about to start developing the next TCXO chip. We believe
it will be a world-beater, offering extremely tight frequency
stability performance.”
So what lies further ahead for Rakon and what does the future of
technology look like?
“We will continue to focus on achieving and exceeding the
upper limits of performance specifications and being first to
market while keeping design costs down. I see us having a
very good connection into all of the markets that we operate in.
It’s really just continuing to push the boundaries,” says Cann.
Markets will continue to evolve and Cann and McIlroy believe
Rakon is positioned well at the high performance end of those
markets.
“Rakon will continue to excel in areas that require high
accuracy; for example, applications like automotive, car-to-car
communications, or where more stringent applications of
quality and design processes are required. These areas often
have safety and life criticality associated with them – like
what we’re already doing in the global positioning and rescue
beacons space,” says Cann.
“Demand for high performance frequency control products is
growing, with demand throughout the telecommunications,
space & defence and global positioning markets, while also
now expanding into areas such as automotive with smart
vehicles and those types of applications.
“So our demand and growth will continue to be for higher and
specific requirements. This will come about with demand for
tighter stabilities, increased robustness, performance at higher
temperatures and smaller form factors across all of those
markets. We will continue to meet these requirements while
maintaining cost effective solutions enabling our customers to
advance their own technology,” says McIlroy.
Avilash Singh
Engineering Manager, Product R&D, Auckland NZ
At Rakon we keep pushing the boundaries and focusing on innovation to develop leading-edge
flexible product platforms. These platforms are then leveraged to deliver world-leading product
solutions for our high-tech customers.
Inside Rakon’s microfabrication laboratory. Photo masks used in Rakon’s
NanoQuartz
™
photolithography microfabrication process.

RAKON R E V I E W F Y2020

•
17 16
•
RAKON R EVI EW
Rakon Everywhere
Irene Lee
Customer Service Coordinator, Shenzhen, China
In a very fast moving and fiercely competitive, changing market environment,
fast response times are essential to business sustainability and success.
When we understand each customer requirement and respond accurately and
efficiently, we maximise the potential to gain from every opportunity.
Telecommunications
The equipment that enables communications networks
to operate. Includes small cells, 4G / 5G mobile base
stations, microwave, backhaul networks as well as data
centres, switches, routers and optical transmission
equipment.
OCXOs, TCXOs, VCXOs and XOs
Global Positioning
Includes all Global Navigation Satellite System (GNSS)
equipment and other positioning systems. Applications
include Personal Navigation Devices (PNDs), high
precision positioning (surveying, mining, and agriculture),
emergency locator beacons, aviation, drones, automotive,
asset tracking, and sport and recreation products.
OCXOs, TCXOs, XOs and Crystals
Space & Defence
Applications where reliability, precision and performance
are all critical. Includes New Space, avionics, radars and
other high reliability applications.
Subsystems, OCSOs, USOs, VCSOs, VCOs, OCXOs,
TCXOs, VCXOs, XOs, Crystal Filters and Crystals
Emerging and Other
Many applications including wireless control, test and
measurement, smart grids and metering, Machine-to-
Machine (M2M), the Internet of Things (IoT), as well as
other emerging markets.
OCSOs, OCXOs, TCXOs, VCXOs, XOs and Crystals
Acronyms
Augmented Reality & Virtual Reality (AR / VR)
Digital Subscriber Line (DSL)
Ultra-Reliable Low-Latency Communication (URLLC)

Very Small Aperture Terminal (VSAT)
Wide Area Network (WAN)
Rakon products enable connectivity and are embedded in
electronic systems everywhere.
Products displayed for each application are representative only. Rakon has a broad
range of timing and frequency control products. For more information on Rakon’s
comprehensive product offering please visit: www.rakon.com/products/families
IoT
VSAT

INTERNET
OF THINGS
(IoT)
5G
DISTRIBUTION
UNITS
AVIONICS
TELECOM
EARTH
OBSERVATION &
GNSS SATELLITES
4G REMOTE
RADIO HEADS
DATA
CENTRES
SMART
GRIDS
URLLC
NETWORKS
INDUSTRIAL
AUTOMATION
SURVEILLANCE
RADARS
AR / VR
TELEHEALTH
MICROWAVE
TRANSMISSION
SYSTEMS
AIR TRAFFIC
CONTROL
DEEP SPACE
PROBES
DEEP SPACE
EXPLORATION
LOW
EARTH ORBIT
SATELLITES
CABLE
DSL / FIBRE TO
THE HOME
FINANCIAL
NETWORKS
ENTERPRISE
NETWORKS
AUTONOMOUS
VEHICLES
4G MACRO
BASE STATIONS
LAUNCH
VEHICLES
DEEP SEA
CABLE
EMERGENCY
LOCATOR
BEACONS
GROUND &
SHIPBOARD
STATIONS
ASSET
MANAGEMENT
LOW POWER
WAN
5G
SMALL CELLS
4G
SMALL CELLS
SPORT &
RECREATION
WEARABLES
5G REMOTE
RADIO HEADS
DRONES &
UNMANNED
AERIAL VEHICLES
5G
CENTRAL
UNITS
TIME
GRANDMASTER
SOLUTIONS
PRECISION
AGRICULTURE
TRANSPORT
& BACKHAUL
ROUTERS AND
SWITCHES
%
Share of
Revenue vs. FY2019
Telecommunications
54.8% [
▲22%]
Space & Defence
23.7% [▼11% ]
Global Positioning
15.9% [▼8%]
Emerging & Other
5.6% [▼20%]

18
•
RAKON R E V I E W F Y2020

Unnikrishnan PM
General Manager of Operations, Bengaluru, India
In today’s highly competitive global business environment, only organisations that
are agile, flexible and excellent in their operations can survive and grow. Rakon’s
success comes out of its strengths in leadership, employee engagement and
technological expertise. Rakon India’s ‘creating the future’ programme brings out
the best from every employee and helps toward achieving operational excellence.
Enabling the Connected Future
These applications may seem a way off for now,
but they are becoming possible with 5G, says
Rakon CEO Brent Robinson.
“Every ‘G’ or Generation of new wireless
network brings faster speed and functionality
to our wireless devices. 5G will not only bring
significant improvements to capability and the
end-user experience for existing applications
like video streaming, data transfer of distributed
databases, real time data transfer and
downloading; the functionality will also bring
to life many applications that are simply not yet
possible,” he says.
So what does 5G enable that 4G technology
cannot?
“5G will be ten times faster and will allow 1000
times more traffic capacity than 4G networks.
It will open up room for more users and more
traffic. A key factor is the very low latency
that 5G is enabling. Latency is the delay you
experience from the time data is transmitted and
received. It is the buffering or the frozen static
image you see on screen of that person you are
video calling, or the lag in time while you wait for
that movie to download.”
For Rakon the opportunities lie in the precise
timing that is required for 5G.
“We’re providing the precise timing that enables
5G to operate. Low latency is based around
synchronised timing, which our OCXOs
and TCXOs can provide. Our products are
embedded in the equipment that is supplied
into the telecommunications networks. It is
the low latency of 5G that will enable real
time data applications like remote surgeries
and autonomous cars to become a reality.
With applications like these, the time taken to
transmit and receive data is critical.”
Technologies are also emerging as the
foundation of 5G – one of them being millimetre
waves. Users are demanding more data and
bandwidth. Currently, this demand is largely
fulfilled by frequencies on the radio frequency
spectrum at between 1 GHz to 6 GHz, says
Brent.
“5G is opening up the spectrum for mobile
devices to operate on shorter millimetre waves
with frequencies that fall between 30 to 300
GHz, which is opening up the bandwidth.
We are supplying high frequency, low noise
VCXOs and timing devices that allow for higher
frequencies to be used – up into the 30 to 60
GHz range. To use these very high frequency
spectrums they need high frequency quartz
crystal products to allow them to access these
Imagine a world where specialist doctors could perform surgeries remotely, with the use
of robots and real time data transmitted and received from the other side of the world.
Imagine a world of complete autonomy, where connected cars could drive us to our next
destination.

Crystal Filter
A filter that allows only the desired frequency to pass through
to the output.
Crystal Micro-Electro-Mechanical System (XMEMS
™
)

Rakon’s advanced quartz-based resonator technology
.
It is made with Rakon’s NanoQuartz
™
microfabrication
process, delivering unprecedented resonator and oscillator
performance.
Crystal Oscillator (XO)

A quartz crystal combined with oscillation circuitry to
generate a repeating electric signal.
Crystal Resonator (Xtal)

At the heart of XOs, VCXOs, TCXOs and OCXOs are quartz
crystals, which are designed to resonate with electrical
stimulation using the piezoelectric effect.
Distribution Amplifier

A device that accepts a single input signal and provides these
same signal characteristics to multiple isolated outputs.
Frequency Generation Unit (FGU)

A complete subsystem that provides up to 48 outputs from the
same ultra stable reference oscillator.
NanoQuartz
™

Rakon’s proprietary photolithography microfabrication process
on quartz wafers.
Oscillator

A circuit or device that generates a repetitive electric signal
and consists of a resonator and electronic components.
Glossary
bands. So in addition to our products being able
to provide the reference for the timing, we are
also able to provide the high frequency, low noise
source required for millimetre wave frequency
bands.”
Rakon’s gain in revenue in the
telecommunications segment is an indication
that the 5G roll-out has begun and Brent says
the company is well-positioned with its product
offering, for anticipated widespread deployment.
“5G roll-out is happening in China and South
Korea right now. There are a few countries where
it is widely deployed already and it’s rolling out
further. With dominant share allocations from
key Tier One customers secured, our products
are being designed into all the main network
providers’ 5G equipment.”
Brent says that networks around the world are
running out of capacity. With the COVID-19
pandemic there has been a radical change in the
way the world conducts its business, putting
further unprecedented demand on network traffic
and accelerating 5G roll-out.
“Really, next year in 2021, I think, is when we will
see large 5G roll-out, but with the coronavirus it
may change. It seems there have been a lot of
commitments to accelerate it given COVID-19.
With more demand for data, with people self-
isolating and working from home, we believe
that trend will continue after the COVID-19 health
emergency ends. People will be adopting remote
working as a mode, because they will be able to
see that they can,” he says.
Rakon sees further opportunities ahead – not only
for telecommunications, but also in its other
core markets of space & defence and global
positioning.
“In global positioning we are well positioned for
the higher end industrial products like seismic
surveying, where there are difficult environmental
requirements like low g-sensitivity, wide
temperature range and very high precision. This
is where Rakon basically comes into its own in
that end of the market, rather than the consumer
end. So we’re positioned well, we’ve got a great
product offering and that end of the market is
growing for us.”
Brent says the company will continue to see a
convergence of its technologies across all of its
core markets in the future.
“In the New Space market, for example,
we are leveraging our heritage in supplying
the geostationary market and a blend of
telecommunications and GNSS products where
there is a lot more volume. Low Earth Orbit (LEO)
satellites are being mainly used today for global
broadband coverage. We’ve been developing a
hybrid between telecommunications, GNSS and
space products to deliver a lower cost, radiation-
hard product offering for this application. We are
continuing to leverage the combined expertise
of our R&D teams to enable new applications as
they emerge.”
RAKON R E V I E W F Y2020

•
19
Rakon’s Key StrengthsWhy Customers Choose
Rakon
Technology leaders in the frequency
control and timing industry
• Extensive application expertise
• In-house R&D teams
• Continued innovation
Innovation leadership enabling
leading-edge technologies
Global footprint
• Manufacturing facilities across 3
continents, 6 R&D centres,
16 support locations
Sustainability
• Strong ecosystem partnerships
• Well-established and strategic
customer relationships
• 53-year heritage
• Continuously evolving to meet
ever-changing requirements
• Localised customer support
• Faster response times
• Optimised performance and cost
• Continuity of supply
Trusted and respected brand
Oven Controlled Crystal Oscillator (OCXO)
A crystal oscillator that uses a miniaturised oven to keep its
internal temperature constant.
Oven Controlled SAW Oscillator (OCSO)

An oven controlled oscillator using Surface Acoustic Wave
(SAW) technology instead of a quartz crystal.
Subsystem

A fully programmable system solution used to upgrade an
existing radar, improve performance and extend its life.
Surface Acoustic Wave resonator (SAW)

At the heart of SAW oscillators are SAW resonators that use
the piezoelectric effect to generate electrically stimulated
acoustic waves at a resonant frequency.
Temperature Compensated Crystal Oscillator (TCXO)

A crystal oscillator with additional circuitry to remove
frequency variations due to temperature change.
Ultra Stable Oscillator (USO)

An extremely stable oscillator used in high-end space and
instrumentation applications.
Voltage Controlled Crystal Oscillator (VCXO)

A crystal oscillator with an adjustable output frequency.
Voltage Controlled Oscillator (VCO)

A purely electronic oscillator circuit with an adjustable output
frequency, without the use of a crystal or SAW resonator.
Voltage Controlled SAW Oscillator (VCSO)

A SAW oscillator with an adjustable output frequency.
Definition of Underlying EBITDA
Rakon has used ‘Underlying EBITDA’ as a measure of non-GA AP financial information in this 2020 Review document. Underlying EBITDA is defined as
‘Earnings before interest, tax, depreciation, amortisation, impairment, employee share schemes, non-controlling interests, adjustments for associate’s and
joint venture’s share of interest, tax and depreciation, loss on disposal of assets and other cash and non-cash items (Underlying EBITDA) ’.
Underlying EBITDA is a non-GA AP measure that has not been presented in accordance with GA AP. The Directors present Underlying EBITDA as a useful
non-GA AP measure to investors, in order to understand the underlying operating performance of the Group and each operating segment, before the
adjustment of specific cash and non-cash items and before cash impacts relating to the capital structure and tax position. Underlying EBITDA is considered
by the Directors to be the closest measure of how each operating segment within the Group is performing. Management uses the non-GA AP measure of
Underlying EBITDA internally, to assess the underlying operating performance of the Group and each operating segment.
Underlying EBITDA as non-GA AP financial information has been extracted from the financial statements for the year. Except for Underlying EBITDA,
other information provided to the chief operating decision maker is measured in a manner consistent with GA AP. The Directors provide a reconciliation of
Underlying EBITDA to net profit for the year, refer note 4 of the Rakon Limited Annual Report 2020.

Registered Office
Rakon Limited
8 Sylvia Park Road
Mt Wellington
Auckland 1060
New Zealand
Telephone: +64 9 573 5554
Website: www.rakon.com
Mailing Address
Rakon Limited
Private Bag 99943
Newmarket
Auckland 1149
New Zealand
Principal Lawyers
Bell Gully
PO Box 4199
Shortland Street
Auckland 1140
New Zealand
Auditors
PricewaterhouseCoopers
Private Bag 92162
Auckland 1142
New Zealand
Directory
Bankers
ASB Bank
PO Box 35
Shortland Street
Auckland 1140
New Zealand
Share Registrar
Computershare Investor Services
Limited
Private Bag 92119
Victoria Street West
Auckland 1142, New Zealand
Managing Your Shareholding Online
To change your address, update
your payment instructions or view
your investment portfolio, including
transactions, please visit:
www.investorcentre.com/nz
General enquiries can be directed to:
enquiry@computershare.co.nz
Telephone: +64 9 488 8777
Facsimile: +64 9 488 8787
www.rakon.com

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Rakon Limited
T +64 9 573 5554, F +64 9 573 5559
8 Sylvia Park Road, Mt Wellington, Auckland 1060, New Zealand
Private Bag 99943, Newmarket, Auckland 1149, New Zealand
Page 1 of 1 w w w . r a k o n . c o m

2 July 2020

RAK 2020 Annual Report & Review

Rakon Limited is pleased to provide its Annual Report 2020 and Review 2020.

Copies of the Report and the Review are available today on the company’s website:
here

-ends-

Contact:
Anand Rambhai
Chief Financial Officer
+64 9 571 9225
www.rakon.com

About Rakon
Rakon is a global high technology company and a world leader in its field. The company designs and
manufactures advanced frequency control and timing solutions. Its three core markets are Telecommunications,
Global Positioning and Space and Defence. Rakon products are found at the forefront of communications where
speed and reliability are paramount. The company’s products create extremely accurate electric signals which
are used to generate radio waves and synchronise time in the most demanding communication applications.
Rakon has three manufacturing plants, and has six research and development centres. Customer support
personnel are located in sixteen offices worldwide. Rakon is proud of its New Zealand heritage; it was founded
in Auckland in 1967. It is a public company listed on the New Zealand stock exchange, NZX, ticker code RAK.

Rakon (RAK) Presentation Slides for FY2020 Results Announc Rakon Notice of 2020 Annual Meeting of Shareholders

Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.