CONTENTS. Notice Of Annual General Meeting. Group Structure. Group Financial Highligths. Corporate Information. Profi le of Board of Directors

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2 CONTENTS Notice Of Annual General Meeting Group Structure Group Financial Highligths Corporate Information Profi le of Board of Directors Chairman s Statement Corporate Governance Statement Audit Committee Report Statement on Risk Management & Internal Control Financial Statements Analysis of Shareholdings List of Group Properties Proxy Form

3 Notice of Annual General Meeting NOTICE IS HEREBY GIVEN THAT the Forty-Fifth Annual General Meeting ( 45 th AGM ) of the shareholders of the Company will be held at Bukit Kiara Equestrian and Country Resort, Dewan Berjaya, Jalan Bukit Kiara, Off Jalan Damansara, Kuala Lumpur, Malaysia on Tuesday, 23 June 2015 at a.m. for the purpose of considering and, if thought fi t, passing the following resolutions: - AGENDA 1. To receive the Directors Report and the Audited Financial Statements of the Group and the Company for the fi nancial year ended 31 December 2014 and the Auditors Report thereon. Please refer Explanatory Note A 2. To approve the payment of a fi rst and fi nal single-tier dividend of 2% per ordinary share of 0.10 each in respect of the fi nancial year ended 31 December To approve the payment of Directors fees in respect of the fi nancial year ended 31 December Ordinary Resolution 1 Ordinary Resolution 2 4. To re-elect the following Directors retiring in accordance with Article 83 of the Company s Articles of Association: - (a) Dato Ismail Bin Hamzah; and (b) Mr Siau Hock Cheng. Ordinary Resolution 3 (a) Ordinary Resolution 3 (b) 5. To re-elect the following Directors retiring in accordance with Article 90 of the Company s Articles of Association: - (a) Mr Ong Sim Jeng; and (b) En Aminuddin Yusof Lana. 6. To re-appoint Tan Sri Dato Tan Hua Choon as Director of the Company pursuant to Section 129(6) of the Companies Act, 1965 to hold offi ce until the conclusion of the next Annual General Meeting of the Company. 7. To re-appoint PCCO PLT (AF: 1056) as Auditors of the Company and to authorise the Directors to fi x their remuneration. Ordinary Resolution 4 (a) Ordinary Resolution 4 (b) Ordinary Resolution 5 Ordinary Resolution 6 8. To transact any other business of the Company for which due notice shall have been received in accordance with the Companies Act, NOTICE OF DIVIDEND ENTITLEMENT AND PAYMENT NOTICE IS ALSO HEREBY GIVEN THAT subject to the approval of the shareholders at the 45 th AGM, a fi rst and fi nal single-tier dividend of 2% per ordinary share of 0.10 each in respect of the fi nancial year ended 31 December 2014 will be paid on 15 July 2015 to depositors registered in the Record of Depositors of the Company as at 30 June A depositor shall qualify for entitlement only in respect of: a. Securities transferred into the Depositor s Securities Account before 4.00 p.m. on 30 June 2015 in respect of ordinary transfers; and b. Securities bought on the Bursa Malaysia Securities Berhad on a cum entitlement basis according to the Rules of the Bursa Malaysia Securities Berhad. 2 ANNUAL REPORT 2014 MARCO HOLDINGS BERHAD (8985-P)

4 Notice of Annual General Meeting By Order of the Board Lim Lai Sam (MAICSA No ) Tan Shien Yin (MAICSA No ) Secretaries Kuala Lumpur 29 May 2015 Notes on Proxy Form 1. A member entitled to attend and vote is entitled to appoint one or more proxies (but not more than two) to attend and vote instead of him. A proxy may but need not be a member of the Company and the provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company. Where a member appoints two (2) proxies, the member shall specify the proportion of his shareholding to be represented by each proxy, failing which the appointment shall be invalid. 2. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if the appointor is a corporation, either under the corporation s common seal or under the hand of an offi cer or attorney duly authorised. The instrument appointing a proxy shall be deemed to confer authority to demand or join in demanding a poll. 3. Where a member of the Company is an authorised nominee as defi ned under the Central Depositories Act, it shall be entitled to appoint not more than two (2) proxies in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple benefi cial owners in one securities account ( omnibus account ), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds. Where an authorised nominee or an exempt authorised nominee appoints more than one proxy, the proportion of shareholdings to be represented by each proxy must be specifi ed in the instrument appointing the proxies. 4. The Proxy Form shall be deposited with the Company s Share Registrars, Bina Management (M) Sdn Bhd, at Lot 10, The Highway Centre, Jalan 51/205, Petaling Jaya, Selangor Darul Ehsan, Malaysia not less than forty-eight (48) hours before the time appointed for holding the meeting or any adjournment thereof. 5. Depositors whose names appear in the Record of Depositors on a date not less than three (3) market days before the Annual General Meeting shall be entitled to attend and vote at the Annual General Meeting or appoint a proxy to attend, speak and vote on his behalf. Explanatory Note A This Agenda item is meant for discussion only as under the provisions of Section 169(1) of the Companies Act, 1965, the audited fi nancial statements do not require formal approval of members and hence, the matter will not be put forward for voting. ANNUAL REPORT 2014 MARCO HOLDINGS BERHAD (8985-P) 3

5 Group Structure As at 31 December 2014 MARCO CORPORATION (M) SDN BHD (13431-H) MARCO HERITAGE (M) SDN BHD ( V) MARCO WORLDWIDE SDN BHD ( P) Note: Companies which have not commenced active operations are excluded. 4 ANNUAL REPORT 2014 MARCO HOLDINGS BERHAD (8985-P)

6 Group Financial Highlights For the fi nancial years ended 31 December Revenue 151, , , , ,996 Profi t Before Tax 24,533 19,737 19,276 19,063 11,801 Profi t After Tax and non-controlling Interest Attributable to Shareholders 18,056 15,041 14,872 14,221 8,950 Dividends-Net 2,109 20,033 10,276 14,345 2,671 Shareholders Fund 145, , ,349 94,855 94,231 Earnings per Share Based on Profi t After Tax and non-controlling Interest 1.77 sen 1.86 sen 2.04 sen 1.92 sen 1.26 sen Net Assets Per Share sen sen sen sen sen Dividend Rate 2% 24% 14% 15% 6.5% REVENUE 000 PROFIT BEFORE TAX 000 SHAREHOLDERS FUND , , , , , ,533 19,737 19,276 19,063 11, , , ,349 94, ANNUAL REPORT 2014 MARCO HOLDINGS BERHAD (8985-P) 5

7 Corporate Information BOARD OF DIRECTORS Tan Sri Dato Tan Hua Choon Siau Hock Cheng Wong Hok Yim Woo Hin Weng Dato Ismail Bin Hamzah Haji Azizzuddin Bin Haji Hussein Siew Cheau Sheang Ong Sim Jeng (Appointed w.e.f. 1 August 2014) Aminuddin Yusof Lana (Appointed w.e.f. 1 November 2014) (Chairman, Non-Independent Non-Executive Director) (Deputy Chairman) (Executive Director) (Non-Independent Non-Executive Director) (Independent Non-Executive Director) (Independent Non-Executive Director) (Executive Director - Finance) (Executive Director) (Independent Non-Executive Director) AUDIT COMMITTEE NOMINATION COMMITTEE REMUNERATION COMMITTEE SENIOR INDEPENDENT NON- EXECUTIVE DIRECTOR Haji Azizzuddin Bin Haji Hussein (Chairman) Dato Ismail Bin Hamzah Woo Hin Weng (MIA member) Tan Sri Dato Tan Hua Choon Haji Azizzuddin Bin Haji Hussein Dato Ismail Bin Hamzah Tan Sri Dato Tan Hua Choon Woo Hin Weng Dato Ismail Bin Hamzah Fax: (03) COMPANY SECRETARIES REGISTERED OFFICE PRINCIPAL BANKERS REGISTRARS AUDITORS STOCK EXCHANGE LISTING Lim Lai Sam Tan Shien Yin 8-3, Jalan Segambut Kuala Lumpur Malaysia Tel: (03) Fax: (03) HSBC Bank Malaysia Berhad Malayan Banking Berhad Bina Management (M) Sdn Bhd Lot 10, The Highway Centre Jalan 51/ Petaling Jaya Selangor Darul Ehsan Malaysia Tel: (03) Fax: (03) PCCO PLT (AF : 1056) (Chartered Accountants) Bursa Malaysia Securities Berhad Main Market Stock Name : MARCO Stock Code : ANNUAL REPORT 2014 MARCO HOLDINGS BERHAD (8985-P)

8 Profi le of Board of Directors Tan Sri Dato Tan Hua Choon aged 74, Malaysian Chairman, Non-Independent Non-Executive Director Tan Sri Dato Tan was appointed as Chairman and Director of the Company on 20 December On 20 March 2002, he was appointed to the Nomination Committee and Remuneration Committee of the Company. Tan Sri Dato Tan is a self-made businessman with vast experience in businesses and industries. He has been involved in a wide range of businesses which include manufacturing, marketing, banking, shipping, property development and trading. He has also built-up investments in numerous public listed companies and is currently the Chairman of the Boards of Jasa Kita Berhad, Keladi Maju Berhad, FCW Holdings Berhad and Goh Ban Huat Berhad. He was also Chairman of the Board of GPA Holdings Berhad from 2000 to Siau Hock Cheng aged 57, Malaysian Deputy Chairman Mr Siau was appointed as Executive Director of the Group on 20 December He was redesignated as Deputy Chairman on 1 August Mr Siau holds a Diploma in Marketing, Chartered Institute of Marketing, United Kingdom obtained in November 1984 and a degree in Business Administration from the National University of Singapore. He was a Product Executive with Lam Soon (M) Berhad in 1982 and left in 1985 to join Carlsberg Brewery (M) Berhad as the Product Manager. From 1991 to 1994, he was attached with the East Asiatic Co (M) Berhad where he was the General Manager for the non-food consumer product division. He has extensive experience in the fi eld of marketing and is responsible for the overall operations of the Group. He is also a Director of Marco Corporation (M) Sdn Bhd since 1996 and Director of several private limited companies. Wong Hok Yim aged 49, Permanent Resident Executive Director Mr Wong was appointed to the Board of the Company on 20 December 2001 and subsequently became an Executive Director of the Company on 1 February Mr Wong graduated from DeMonfort University, Leicester, United Kingdom in 1992 with a Bachelor of Science combined studies degree majoring in Accounting and minoring in Law. Subsequently, he obtained Master in Business Administration in Finance from University of Hull, United Kingdom in He also sits on the Boards of GPA Holdings Berhad, Computer Forms (Malaysia) Berhad and several private limited companies. Woo Hin Weng aged 57, Malaysian Non-Independent Non-Executive Director Mr Woo was appointed to the Board and Audit Committee of the Company on 20 December He was later appointed to the Board s Remuneration Committee on 1 June He is a member of the Malaysian Institute of Accountants and a Fellow member of the Chartered Association of Certifi ed Accountants. He joined Jasa Kita Engineering Sdn Bhd, a wholly-owned subsidiary company of Jasa Kita Berhad, as the Financial Controller in Prior to joining Jasa Kita Berhad, he has held senior positions in accounting and fi nance. He is also a Director of Jasa Kita Berhad. ANNUAL REPORT 2014 MARCO HOLDINGS BERHAD (8985-P) 7

9 Profi le of Board of Directors Haji Azizzuddin Bin Haji Hussein aged 57, Malaysian Independent Non-Executive Director Haji Azizzuddin was appointed to the Board and Chairman of the Audit Committee as well as member of Nomination Committee on 9 September He obtained a Higher National Diploma in Business Studies, majoring in Finance and Accounting from Stockport College of Technology (Manchester), United Kingdom in 1979 and did his practical training in London where he was attached to a Chartered Accountants fi rm from 1980 to Upon his return to Malaysia, he ventured into private business. From 1992 to 1997, he was a management consultant and at end 1997, he joined Myriad MISM (M) Sdn. Bhd., a software development and management information system consultancy company, as its Finance & Administration Director and left in He was a director of A&M Realty Berhad, a property development company from 1994 to He was a State Assemblyman for the constituency of Mengkebang, Kelantan representing Barisan Nasional from 2004 to Between 2000 to 2014, Haji Azizzuddin was a Board member of GPA Holdings Berhad, Jasa Kita Berhad, Keladi Maju Berhad and Malaysia Aica Berhad. Currently, he also sits on the Board of FCW Holdings Berhad. Dato Ismail Bin Hamzah aged 69, Malaysian Independent Non-Executive Director Dato Ismail was appointed to the Board and Audit Committee of the Company on 2 May He was also appointed to the Board s Nomination Committee and nominated as the Senior Independent Non-Executive Director of the Company on the same date. Dato Ismail graduated from the University of Malaya in 1970 with a Bachelor of Economics (Honours) in Analytical Economics. He held many key positions in governmental agencies, and has many years of experience in various aspects from economics to fi nance. He also serves on the Boards of GUH Holdings Berhad, Engtex Group Berhad, SCC Holdings Berhad and Goh Ban Huat Berhad. Siew Cheau Sheang aged 45, Malaysian Executive Director-Finance Ms Siew was appointed to the Board of the Company on 27 January She is an associate member of Chartered Institute of Management Accountants (CIMA) since 1997 and also a member of Chartered Global Management Accountants (CGMA) respectively. She obtained Master in Business Administration from University of Bath, United Kingdom in She joined Marco Corporation (M) Sdn Bhd, a wholly-owned subsidiary company of Marco Holdings Berhad as the Finance and Administration Manager in 2002 and was subsequently promoted to Financial Controller in Prior to joining Marco Corporation (M) Sdn Bhd, she had many years of experience in the accounting and fi nance fi elds from various industries. Ong Sim Jeng aged 39, Malaysian Executive Director Mr Ong was appointed to the Board of the Company on 1 August He holds a Bachelor Degree in Corporate Administration & Management from Curtin University of Technology, Western Australia. Mr Ong was a Marketing Executive of PDI, subsidiary brand of Padini Holding Bhd from October 1999 to June He left PDI and joined AV Business System Sdn Bhd, the distributor and dealers of projectors, as Sales Manager until June From July 2004 to February 2006, he was attached with IJO Communication Sdn Bhd, an advertising agency, as Business Development Manager. Prior to his appointment to the Company, Mr Ong was the General Manager of Questeam Sdn Bhd, the sole distributor of THEFACESHOP Korean brand products in Malaysia. 8 ANNUAL REPORT 2014 MARCO HOLDINGS BERHAD (8985-P)

10 Profi le of Board of Directors Aminuddin Yusof Lana aged 66, Malaysian Independent Non-Executive Director En. Aminuddin was appointed to the Board of the Company on 1 November He holds a Bachelor of Commerce and Administration Degree from Victoria University of Wellington, New Zealand. He is a Chartered Accountant of the New Zealand Society of Accountants and an Associate member of the Institute of Chartered Secretaries and Administrators of London and Wales. He had previously served as Director and later Group Managing Director of Renong Berhad from 1990 to 1994 and as Director and Group Managing Director of Faber Group Berhad from 1990 to He was the Managing Director of Metacorp Berhad from 1995 to He was also the Managing Director of UEM Builders Berhad from 2000 to Currently, he also sits on the Boards of PDZ Holdings Bhd and Goh Ban Huat Berhad. FURTHER INFOATION ON THE BOARD OF DIRECTORS Family Relationship None of the Directors have any family relationship with other Directors and major shareholders of the Company except for Tan Sri Dato Tan Hua Choon who is the father-in law of Mr Wong Hok Yim, a Director of the Company. Conflict of Interest None of the Directors have any confl ict of interest with the Company. Conviction of Offences None of the Directors have been convicted of any offence within the past 10 years, other than traffi c offences, if any. ANNUAL REPORT 2014 MARCO HOLDINGS BERHAD (8985-P) 9

11 Chairman s Statement Dear Shareholders, On behalf of the Board of Directors, I am pleased to present the Annual Report of Marco Holdings Berhad ( Group or the Company ) for the fi nancial year ended 31 December THE YEAR IN REVIEW 2014 was a challenging year for the Group. The year started on a positive note which carried through to the fi rst half and to a certain extent into the third quarter of the year. During these periods, most of the economic indicators were showing an encouraging trend despite the many challenges faced by the Country. The momentum however, started to slow down in the third quarter and became more pronounced in the fourth quarter. Among the external factors was the rapid fall in the price of crude oil, which has dropped considerably against the normal trading range. Being a net oil exporter, this has a bearing to the country s fi scal budget that led to a substantial weakening of the Ringgit and as a result, it started to impact us with higher import costs. On top of this external factor, severe fl oods and the Malaysian airline tragedies which occured during the year did not help either, coupled with the impending Goods and Services Tax ( GST ) implementation, we started to experience even slower consumer spending. Malaysia s retail industry revised its estimated annual growth rate for 2014 to 4.9% from 6%. Domestic demand remained the anchor of growth in the fourth quarter, mainly on account of the improvement in private sector activity. Moving forward, the global economy is expected to remain on a moderate growth path, but with increasing divergence in the growth momentum among the major economies. Against the above backdrop, the Group has weathered through by improving processes and maintaining product costs at a competitive level with prudent foreign exchange management to help offset the higher purchase costs. In January 2014, we welcomed our principal Casio Computer Co Ltd, which established its whollyowned subsidiary, Casio Malaysia Sdn Bhd. The set up was to enhance the working relationship between Casio and our Group to further promote the sales and marketing activities in the Country, while improving operations effi ciency. PERFOANCE In FY2014, total revenue of the Group increased by 32.6 million or 27% to million as compared to the previous year of million. The increase in revenue was mainly contributed by better sales achievement as a result of the Group s effort in its heavy promotional activities and the yearly Dealers Conference. In tandem with the increase in revenue, the Group reported a profi t before tax of 24.6 million for the year under review, as compared to 19.7 million in FY2013, an increase of 25%. Underlying earnings per share was 1.77 sen, down 5% from 1.86 sen. DIVIDENDS In line with the Group s commitment to enhance the return to shareholders, the Board of Directors is pleased to recommend the payment of a fi rst and fi nal single-tier dividend of 2 percent per share for the fi nancial year ended 31 December 2014, which is subject to shareholders approval at the coming Annual General Meeting. REVIEW OF GROUP OPERATIONS Timepiece Division On the domestic front, the Group s Timepiece business saw turnover grew by 26% through its marketing and promotional activities especially during the festive seasons. This Division accounted for 67% of the Group s total revenue in The Edifi ce range continued to benefi t from the yearly Edifi ce Dealers Conference that was held in the 3rd quarter of G-Shock and Baby-G increased their volume through prominent promotional activities during the year such as the video advertisement at The Cube and Billboard Advertisement at Lot 10. At the operational level, to stay in line with the fast changing retail environment and to enhance consumer s shopping experience, we continued to lift the standard of visual merchandising at dealers shop and renovated existing G-Factory outlets to the latest concept from Japan. 10 ANNUAL REPORT 2014 MARCO HOLDINGS BERHAD (8985-P)

12 Chairman s Statement Calculator Division Revenue from calculators contributed to 10% of the Group s total revenue which is an increase of 10% compared to Investments in marketing and promotional activities continued to take place due to the subdued consumer sentiment in We stepped up our efforts in expanding our coverage in the modern trade channels for our range of general calculators. We also executed nationwide new user cultivation activities, a key campaign in pushing our label printer sales. This was further supported by a comprehensive marketing campaign, which included product displays and in-store sampling as well as advertisements in the mainstream and digital media. Both the promotional activities had resulted in successful sales uplift and increased the Group s market shares. Digital Camera Division With the ever expanding digitalised world and maturing industry, this sector continued to be challenging in 2014, with the increasing and tougher competition amongst existing players in the market. Players strengthen their positions in the market with more advanced camera functions at competitive pricing. Despite all the challenges, this Division registered a 106% year-on-year increase in its revenue and doubled its contribution to the Group s total revenue to 14% from 7% in FY2013. During the year, collaborating with 5 universities, we launched the Casio University Tour to offer different experience to our customers by giving the touch and feel on Casio Exilim camera for students to try on. We also carved out our competitive advantage and further our partnership with our dealers by carrying out consumer awareness campaign that created much hype amongst the consumers during the TR50 soft launch at the end of Musical Keyboard Division Compared with 2013 s lower revenue, our musical keyboard division s performance for 2014 was marginally better. During the year, we ran various promotional campaigns to create consumer awareness. We participated in the Smart Kids Asia Fair 2014 and collaborated with Casio Malaysia on appointment of spokesperson to gain product exposure, we had also worked closely with our appointed dealers on new product launches and emphasized on Casio image in order to maintain brand loyalty. Operation Efficiency We have made steady progress to improve on operations to provide various new customer experience initiatives. Further to the implementation of e-warranty registration and checking of service status in 2013, we continued with our information modernization initiatives by investing in the barcoding system to improve product delivery turnaround time, and also implemented the online and mobile delivery status checking facility. THE YEAR AHEAD For 2015, GDP growth is forecasted to slow down compared to that of The introduction of the 6% GST on 1 April 2015 will lead to a drop in spending as many consumers are likely to have made their major purchases in advance and will naturally adopt a more cautious attitude towards future purchases of goods and services until prices have normalised. We are expecting a softening in household spending during the second quarter of 2015 which could linger on into the third quarter of the year before retail spending returns to normal levels. We are likely to see some pressure on top line growth due to the underlying fragile retail sentiment during this period and margin pressures to be felt as a result of the weaker Ringgit. But with appropriate strategies and measures in place, we expect the Group to continue performing moderately. The Group will remain active in expanding its product portfolio while improving its website for better customer online experience. The Board is optimistic of the Group s outlook in 2015 given our strong brand offerings for quality products. APPRECIATION In closing, I would like to extend my appreciation to the management team and all staffs for their dedication and commitment, and for playing an essential role in pushing the Company forward. My appreciation also goes to our business partners, dealers, customers and shareholders for their continued support and loyalty to our Company and brands. Tan Sri Dato Tan Hua Choon Chairman ANNUAL REPORT 2014 MARCO HOLDINGS BERHAD (8985-P) 11

13 Corporate Governance Statement The Board of Directors of Marco Holdings Berhad recognises the importance of practicing and maintaining sound corporate governance throughout the Company and its subsidiaries ( the Group ) in discharging its responsibilities with integrity, transparency and professionalism to enhance the business prosperity and maximise the shareholders value of the Company. In this respect, the Board is committed to uphold good corporate governances based on the principles and recommendations of the Malaysian Code on Corporate Governance 2012 ( the Code ) and as such will continue to evaluate the Group s corporate governance practices and procedures, and where appropriate will adopt and implement the recommendations as enshrined in the Code to the best interest of the shareholders of the Company. The Board is pleased to present below on the manner in which the Group has applied the principles set out in the Code ( Principles ), having regard to the recommendations prescribed under each Principle, throughout the fi nancial year ended 31 December A. BOARD OF DIRECTORS i) The Board Marco Holdings Berhad is led and managed by an experienced and effective Board of Directors. The Board has within it professionals drawn from varied background in the fi elds of management, marketing, administration, fi nance, accounting and horology. Together, they form a team with broad range of skills, experience and knowledge to direct and manage the Group s business activities. The Board views that the current composition of the Board and its size constitute an effective Board in terms of background, qualifi cation, mix of skills and expertise suffi cient and optimum for the Board to discharge its duties and responsibilities effi ciently to bring a broader view to the Company s business activities. During the fi nancial year ended 31 December 2014, the Board met twice where it deliberated and considered matters relating to the Group s fi nancial performance, operational issues, business development and strategies, property management, recurrent related party transactions, audit fi ndings and the relevant recommendations from the Internal Audit Consultants. All the deliberations and conclusions of the Board meetings were properly recorded by the Company Secretaries present at the meeting. The details of attendance of each Board Member at the Board Meetings held during the fi nancial year ended 31 December 2014 are set out below :- Director Status % of Attendance Tan Sri Dato Tan Hua Choon Chairman 100 Non-Independent Non-Executive Director Mr Siau Hock Cheng Deputy Chairman 100 Mr Wong Hok Yim Executive Director 100 Ms Siew Cheau Sheang Executive Director - Finance 100 (appointed w.e.f ) Mr Ong Sim Jeng Executive Director 100 (appointed w.e.f ) Mr Woo Hin Weng Non-Independent 100 Non-Executive Director Dato Ismail Bin Hamzah Independent Non-Executive Director 100 Haji Azizzuddin Bin Haji Hussein Independent Non-Executive Director 100 En Aminuddin Yusof Lana Independent Non-Executive Director * (appointed w.e.f ) * There was no Board meeting held pursuant to En Aminuddin s appointment to the Board. 12 ANNUAL REPORT 2014 MARCO HOLDINGS BERHAD (8985-P)

14 Corporate Governance Statement A. BOARD OF DIRECTORS (CONT D) ii) Board Committees The Board has delegated specifi c responsibility to its three committees namely Audit, Nomination and Remuneration Committees, all of which have terms of reference to govern their respective responsibilities. The Board Committees will deliberate and examine issues within their defi ned terms of reference and report to the Board with their recommendation. Audit Committee The Audit Committee was established on 12 April The details of the Audit Committee Report are set out in pages 21 to 24 of this Annual Report. Nomination Committee The Nomination Committee, which was established on 20 March 2002 and comprising three Non-Executive Directors, two of whom are independent, is charged with the responsibility of proposing suitable new nominees for appointment as Directors and to fi ll the seats on Board Committees wherever necessary. It will also carry out the process of assessing the effectiveness of the Board as a whole, the Board Committees and the contribution of each individual Director. The present members of the Nomination Committee are:- 1) Tan Sri Dato Tan Hua Choon - Non-Independent Non-Executive Director 2) Dato Ismail Bin Hamzah - Independent Non-Executive Director 3) Haji Azizzuddin Bin Haji Hussein - Independent Non-Executive Director Generally, the Board, via the Nomination Committee, will review annually its required mix of skills, experience and other qualities, including core competencies of the Non-Executive Directors. The Nomination Committee ( NC ) met three times during the fi nancial year where all the NC members present at the meetings carried out assessment on the proposed appointment of new Directors as well as performed the annual evaluation process on the Board of Directors as a whole, Board Committees and each individual Director based on various aspects to ensure that they possess the appropriate balance of expertise and ability to lead the Group towards higher level of achievement. All the assessment and evaluation carried out were properly documented. Remuneration Committee The Remuneration Committee was established on 20 March 2002 and comprises wholly of Non-Executive Directors. Its main responsibility is to recommend to the Board the remuneration of the Executive Directors in all its forms, drawing from outside advice where necessary. The members of the Remuneration Committee are: - 1) Tan Sri Dato Tan Hua Choon Non-Independent Non-Executive Director 2) Mr Woo Hin Weng Non-Independent Non-Executive Director The Remuneration Committee met once during the fi nancial year where it reviewed the remuneration packages and benefi ts accorded to the Executive Directors as well as the Non-Executive Directors remuneration. The relevant Executive Directors do not participate in discussion to be held on their own remuneration packages. ANNUAL REPORT 2014 MARCO HOLDINGS BERHAD (8985-P) 13

15 Corporate Governance Statement A. BOARD OF DIRECTORS (CONT D) iii) Board Balance The Board currently has 9 members, comprising 4 Executive Directors and 5 Non-Executive Directors, 3 of whom are Independent Non-Executive Directors. With this Board composition, the Company has fully complied with the Main Market Listing Requirements of Bursa Malaysia Securities Berhad ( Main Market LR ), with regard to the constitution of the Board of Directors and the required ratio of independent directors, as well as the requirement for a Director who is a member of the Malaysian Institute of Accountants to sit on the Audit Committee. The profi le of each Board member is set out in pages 7 to 9 of this Annual Report. There is clear segregation of roles between the Chairman of the Board and Executive Directors to ensure that there is a balance of power and authority. The Executive Directors have the primary responsibility of communicating matters to the Board and to ensure major proposals by the Management are thoroughly deliberated and examined to take into account the overall interest of the shareholders and the communities in which the Group conducts its business. The Code recommends that the board of directors of a public listed company should comprise of majority of independent directors where the chairman of the board is not an independent director. The Board of Directors of the Company, whose Chairman is a Non- Independent Non-Executive Director notwithstanding, is of the opinion that the element of independence which currently exists is adequate to provide assurance that there is balance of power and authority on the Board. The Board acknowledges the importance of boardroom diversity, including gender, ethnicity and age. The Group practices the selection of suitable candidates as new Board members based on the candidates competency, knowledge, skills, experience, character, time commitment and other qualities in meeting the needs of the Group. The Group had always been in support of non-discrimination on the basis of gender, age, race and religion. iv) Supply of Information The Board of Directors has access to all information pertaining to the Group as well as to the advice of the Company Secretaries and independent professional advisers, if necessary, in appropriate circumstances at the Company s expense to enable the Board to discharge its duties with adequate knowledge on the matters being deliberated. It is also kept informed of the requirements and updates issued by the regulatory authorities from time to time. Prior to each scheduled Board Meeting, all the Directors were provided with the agenda for the meeting together with the detailed reports to enable them to have suffi cient time to peruse the papers and if necessary, obtain further information or clarifi cation from the Management to assess all aspects of the Group s performance and make informed decision. Senior Management members were invited to attend these meetings to explain and clarify matters tabled. There is a formal schedule of matters specifi cally reserved for the Board s decision including, among other things, the major operational and fi nancial issues which include business strategies, investment policies, acquisitions and disposals of material assets and approval of fi nancial statements. Apart from the Board Meetings, the Board exercises control on matters that require its approval through Directors Circular Resolutions. 14 ANNUAL REPORT 2014 MARCO HOLDINGS BERHAD (8985-P)

16 Corporate Governance Statement A. BOARD OF DIRECTORS (CONT D) v) Appointments to the Board Appointment of new Directors will be decided by the full Board after taking into consideration the recommendations of the Nomination Committee which had established a formal and transparent procedure for the appointment of new Directors to the Board. vi) Directors Training All the existing Directors have completed the Mandatory Accreditation Programme conducted by Research Institute of Investment Analyst of Malaysia whose role is now taken over by Bursatra Sdn Bhd. The Directors have also attended various accredited seminars under the Continuous Education Programme ( CEP ) prescribed by the Main Market LR. With the repeal of mandatory CEP under the Main Market LR, the Directors are encouraged to evaluate and determine their training needs from time to time so as to keep abreast with the latest statutory and regulatory requirements and the development in the industry for the enhancement of their skills and knowledge so as to enable them to discharge their duties effectively. Besides, the Directors also received updates on new regulations and statutory requirements from time to time. During the 2014 fi nancial year, the Directors have attended several seminars/courses pertaining to Goods & Services Tax. Newly appointed directors will be provided with a brief induction of the Group for an insight of the Group s business operations, past performances and corporate exercises undertaken. In addition, the Directors were also briefed by the Company Secretaries from time to time on updates and changes of statutory requirements such as amendments to Main Market LR. vii) Re-election of Directors In accordance with the Company s Memorandum and Articles of Association, one third of the Directors, or if their number is not a multiple of three, the number nearest to one-third, are subject to retirement and re-election at each Annual General Meeting. Newly appointed Directors shall hold offi ce until the next Annual General Meeting and shall be eligible for reelection, but shall not be taken into account in determining the number of Directors who are to retire by rotation at such meeting. The Articles also provide that all the Directors are subject to retirement by rotation at least once every three (3) years. In addition, Directors whose age are seventy years and above are required to submit themselves for re-appointment annually in accordance with Section 129(6) of the Companies Act, B. DIRECTORS REMUNERATION i) Level and make-up The Board ensures that the levels of remuneration offered for Directors are suffi cient to attract and retain people needed to run the Group successfully, while taking into consideration at the same time the state of the economy in general and the performance of the industry and the Group in particular. In the case of Executive Directors, the component parts of remuneration are structured to link rewards to corporate and individual performance. In the case of Non-Executive Directors, the level of remuneration refl ects the level of participation and responsibilities undertaken by the persons concerned. ANNUAL REPORT 2014 MARCO HOLDINGS BERHAD (8985-P) 15

17 Corporate Governance Statement B. DIRECTORS REMUNERATION (CONT D) ii) Procedure The Remuneration Committee is responsible for recommending to the Board the policy framework of executive remuneration and the fi xing of the remuneration of individual Director. The determination of remuneration and benefi ts of Non-Executive Directors together with Non-Executive Chairman are also reviewed by the Remuneration Committee to ensure that the levels of remuneration offered for Directors are suffi cient to attract and retain people needed to manage the Group successfully. Directors concerned do not participate in decisions on their own remuneration packages. The fees payable to the Directors are subject to the approval of the shareholders of the Company. iii) Disclosure The details of Directors Remuneration paid/payable to all the Directors of the Company during the fi nancial year ended 31 December 2014 are as follows:- a) Aggregate remuneration of Directors are categorised into the following components: Executive Non-Executive Directors Directors Total Category of Remuneration () () () (a) Fees - 43,000 43,000 (b) Salaries and other emoluments 886, ,251 (c) Bonuses 213, ,422 (d) Estimated value of benefi ts-in-kind Total 1,099,673 43,000 1,142,673 b) The number of Directors whose remuneration fall within the respective band is as follows : No. of Executive No. of Non-Executive Band () Directors Directors Total 1 50, , , , , , , , , , , , , , , , , Total ANNUAL REPORT 2014 MARCO HOLDINGS BERHAD (8985-P)

18 Corporate Governance Statement C. RELATIONSHIP WITH SHAREHOLDERS AND INVESTORS i) Dialogue between Companies and Investors The Board recognises the importance of establishing a direct and effective line of communication with shareholders and investors through timely dissemination of information on the Group s performance and major corporate developments via appropriate channel of communication which includes distribution of annual reports, relevant circulars to shareholders, press releases (where appropriate), quarterly performance results and corporate announcements to Bursa Securities. The Shareholders and the public can also obtain up-to-date information on the Group s various new products releases and business promotional activities by accessing its website at ii) Annual General Meeting The Annual General Meeting ( AGM ) is the principal forum for dialogue and interaction with shareholders. Notices of AGM and Extraordinary General Meetings ( EGM ) are distributed to shareholders within a reasonable and suffi cient time frame and are published in a nationally circulated daily newspaper. Shareholders are encouraged to attend and participate in the AGM where the Board presents the performance and progress of the business of the Group during the particular fi nancial year as contained in the Annual Report. They are given the opportunity to seek clarifi cations on the Group s performance, business activities and prospects as well as to communicate their expectations and concerns of the Group wherein, the Directors, Finance Director and the External Auditors are available to respond to the queries and to provide explanation on the issues raised thereat. A press conference is usually held immediately after the AGM or EGM whereat the Board members inform the media of the resolutions passed, and answer questions posed on the Group s operations and plans. Dato Ismail Bin Hamzah has been appointed by the Board as the Senior Independent Non- Executive Director of the Company to whom concerns or enquiry regarding the Company and the Group may be conveyed, if any. D. ACCOUNTABILITY AND AUDIT i) Financial Reporting The Board takes the responsibility to ensure that the quarterly results and fi nancial statements of the Group present a balanced, fair and understandable assessment of the Group s position and prospects. The Board is assisted by the Audit Committee to oversee the Group s fi nancial reporting process for quarterly results and annual fi nancial statements to ensure correctness and adequacy prior to the release of them to Bursa Securities via the Bursa LINK. A statement by Directors of their responsibilities pursuant to Section 169 of the Companies Act, 1965 is set out in page 20 of this Annual Report. ANNUAL REPORT 2014 MARCO HOLDINGS BERHAD (8985-P) 17

19 Corporate Governance Statement D. ACCOUNTABILITY AND AUDIT (CONT D) ii) Internal Control The Board always places signifi cant emphasis on maintaining a sound system of internal control which encompasses fi nancial, operational and compliance controls and risk management for the Group to achieve its corporate objectives within an acceptable risk level so as to safeguard the Group s assets and shareholders investment. Such controls, by its nature, can only provide reasonable but not absolute assurance against material misstatement, loss or fraud. Ongoing reviews are continuously performed by the Internal Audit Consultants throughout the year to identify, evaluate and manage signifi cant risk for assurance of adequate and effective internal controls within the Group. The Group s overview of the state of internal controls is presented in the Statement on Risk Management & Internal Control by the Board of Directors set out in pages 25 to 26 of this Annual Report. iii) Relationship with Auditors The Board through the Audit Committee, maintains a formal and transparent relationship with the external auditors in seeking professional advice and ensuring compliance with the applicable accounting standards. Signifi cant audit issues which merit the special attention of the Board and the Audit Committee would be brought up and discussed at Audit Committee meetings. The role of the Audit Committee in relation to the external auditors is described in pages 21 to 24 of this Annual Report. E. OTHER COMPLIANCE INFOATION Options, Warrants or Convertible Securities Exercised Pursuant to the terms and conditions stipulated in the Deed Poll dated 25 February 2004 which constituted the Company s Warrants 2004/2014, the exercise rights of the Warrants had expired at 5.00 p.m. on Monday, 26 May 2014 ( Expiry Date ). During the 2014 fi nancial year, the Company received 22 batches of warrant conversions involving the issue of 201,970,450 Ordinary Shares of 10 sen each before its Expiry Date. As at the Expiry Date, 12,767,430 Warrants remaining unexercised had lapsed and ceased to be valid for any purpose. The Warrants were removed from the Offi cial List of the Bursa Malaysia Securities Berhad with effect from Tuesday, 27 May 2014 at 9.00 a.m. Non-Audit Fees The amount of non-audit fees incurred for services rendered to the Group by the Company s auditors for the 2014 fi nancial year was 22,824. Material Contracts During the fi nancial year, there were no material contracts entered into by the Group involving Directors and major shareholders interests. 18 ANNUAL REPORT 2014 MARCO HOLDINGS BERHAD (8985-P)

20 Corporate Governance Statement E. OTHER COMPLIANCE INFOATION (CONT D) Recurrent Related Party Transactions of a Revenue Nature The details of the recurrent related party transactions of a revenue or trading in nature which took place during the 2014 fi nancial year are disclosed in the Notes to the Financial Statements set out in page 72 of this Annual Report. F. CORPORATE SOCIAL RESPONSIBILITY The Group undertakes its corporate social responsibility ( CSR ) conscientiously by doing business in a responsible manner, for our shareholders, employees and business partners at large. The CSR contributions of the Group, amongst others, include :- Workplace The Group believes its human resources are an important asset and hence, constantly invest in its employees through, amongst others, the following: - As part of our human capital developments, the Group arranged relevant training programmes, courses and workshop focusing on job related training and management development to enhance employees job performance, upgrading of employees skill, knowledge and career development. Ensuring the safety, health and welfare of employees are not compromised at the workplace, Group s insurance policies, which cover medical and personal accident, are provided for all employees. Fulfi lling the obligation of making contributions to EPF, SOCSO and etc. In order to promote interaction among employees to strengthen the bonds of friendship and instill a sense of belonging, the Group organized various social and sports activities such as monthly birthday parties, annual dinners, Christmas party and other outings for our staffs and families on a yearly basis through its Sports Club. The Group presents long service awards to employees in appreciation of their loyalty and commitment to the Group. The Group also presents best salesman award to sales person in appreciation of their dedication and efforts in achieving good results for the Group. Recruitment of staff workforce is based on candidates competency, knowledge, skills, experience and attitude. The Group is committed to provide an environment where all staff, regardless of age, gender, ethnicity, race and religion have equal opportunity to work together in achieving organisational goals. Marketplace The Group recognizes the importance of customers to its business and seeks to strengthen existing customer relationships through twice yearly Customer Satisfaction Survey; and constantly strive to meet and satisfy customers needs with new products and services. ANNUAL REPORT 2014 MARCO HOLDINGS BERHAD (8985-P) 19

21 Corporate Governance Statement G. DIRECTORS RESPONSIBILITY STATEMENT IN RESPECT OF THE AUDITED FINANCIAL STATEMENTS The Board is fully aware of its responsibility to ascertain that the presentations of the fi nancial statements of the Group and the Company are in line with the applicable approved accounting standards of Malaysia and the provisions of the Companies Act, 1965 so as to give a true and fair view of the Group and the Company s state of affairs, results and cash fl ow for the fi nancial year ended 31 December As such, the Board ensured that in preparing the fi nancial statements of the Group and the Company for the fi nancial year ended 31 December 2014, the Group has adopted and consistently applied the relevant and appropriate accounting policies, made reasonable judgments and estimates that are prudent and on the going concern basis. Apart from that, the Board takes the general responsibilities of : ensuring that the Group keeps adequate accounting records which disclose with reasonable accuracy, the fi nancial position of the Group and which will enable them to ensure that the fi nancial statements comply with the Companies Act, 1965; and taking reasonable steps open to them to safeguard the assets of the Group to prevent and detect fraud and other irregularities. 20 ANNUAL REPORT 2014 MARCO HOLDINGS BERHAD (8985-P)

22 Audit Committee Report The Marco Holdings Berhad s ( Marco ) Audit Committee was established by the Company s Board of Directors on 12 April COMPOSITION OF AUDIT COMMITTEE Chairman Haji Azizzuddin Bin Haji Hussein Independent Non-Executive Director Members Mr Woo Hin Weng (MIA Member) Dato Ismail Bin Hamzah Non-Independent Non-Executive Director Independent Non-Executive Director TES OF REFERENCE 1. Membership The Marco Audit Committee shall be appointed by the Board from amongst their number and shall consist of not less than 3 members, a majority of whom shall be Independent Non-Executive Directors. Executive Directors and alternate director(s) cannot be appointed as member(s) of the Committee. In the event of any vacancy in the Committee which results in non-compliance of paragraph 15.09(1) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad ( Main Market LR ), the vacancy shall be fi lled within 3 months. At least one member of the Committee must be qualifi ed under paragraph 15.09(1)(c) of the Main Market LR. The Chairman of the Committee shall be an Independent Non-Executive Director appointed by the Board. 2. Frequency of Meetings Meetings shall be held not less than four times a year. In addition, the Chairman of the Committee may call a meeting of the Committee upon the request of the External Auditors, to consider any matter the External Auditors believe should be brought to the attention of the Board and Shareholders. Majority members present in person who are Independent Non-Executive Directors shall be a quorum. 3. Secretaries The Company Secretaries shall be the Secretaries of the Committee. 4. Authority The Marco Audit Committee shall, at the Company s expense, have the following authority and rights:- 1. full and unrestricted access to any information and documents from the External Auditors and Senior Management of the Company and the Group which are relevant to the activities of the Company; 2. be provided with the necessary resources which are required to perform its duties; 3. the right to investigate into any matter within its Terms of Reference and as such, have direct communication channel with the External Auditors and persons carrying out the internal audit function of the Company; ANNUAL REPORT 2014 MARCO HOLDINGS BERHAD (8985-P) 21

23 Audit Committee Report TES OF REFERENCE (CONT D) 4. Authority (cont d) 4. the liberty to obtain independent professional advice and to secure the attendance of such external parties with relevant experience and expertise at its meeting if it considers this necessary; 5. be able to convene meetings with the External Auditors, the Internal Auditors or both, excluding the attendance of other directors and employees of the Group, whenever deemed necessary; and 6. may extend invitation to other non-member Directors and Offi cers of the Company to attend a specifi c meeting, whenever deemed necessary. 5. Duties The Marco Audit Committee shall report to the Board of Directors either formally in writing, or verbally, as it considers appropriate on the matters within its Terms of Reference. The duties of the Marco Audit Committee shall be :- 1. To review the audit plan with the External Auditors; 2. To review the audit report with the External Auditors; 3. To review the assistance given by the Company s Offi cers to the External Auditors and to meet with the External Auditors without executive board members presence at least twice a year; 4. To review the quarterly results and year-end fi nancial statements of the Company and the Group, prior to the approval by the Board, focusing particularly on: a. changes in or implementation of major accounting policies; b. signifi cant and unusual events; and c. compliance with accounting standards, regulatory and other legal requirements. 5. To review any related party transaction and confl ict of interest situation that may arise within the Company and the Group including any transaction, procedure or course of conduct that raises questions of management integrity; 6. To review the adequacy of the scope, functions, competency and resources of the internal audit function and to ensure that it has the necessary authority to carry out its work; 7. To take cognizance of resignations of internal audit staff members and provide the resigning staff member an opportunity to submit his/her reasons for resigning, if the staff member concerned so desires; 8. To review any internal audit programme, processes, the results of the internal audit programme, processes or investigations undertaken and whether or not appropriate action is taken on the recommendations of the internal audit function; 9. To review any evaluation made on the systems of internal controls with the Internal and External Auditors; 22 ANNUAL REPORT 2014 MARCO HOLDINGS BERHAD (8985-P)

24 Audit Committee Report TES OF REFERENCE (CONT D) 5. Duties (cont d) 10. To recommend to the Board of Directors the appointment of the External Auditors and the level of their fees; 11. To consider any resignation or removal of the External Auditors, and to furnish such written explanation or representation from the External Auditors to Bursa Malaysia Securities Berhad; 12. To review whether there is reason (supported by grounds) to believe that the External Auditors are not suitable for re-appointment; 13. The Chairman of the Audit Committee should engage on a continuous basis with Senior Management, the Head of Internal Audit and the External Auditors in order to be kept informed of matters affecting the Company; and 14. To undertake such other functions as may be agreed by the Marco Audit Committee and the Board. 6. Performance Review The term of offi ce and performance of the Marco Audit Committee and each of its members shall be reviewed by the Board of Directors of the Company at least once every three (3) years to determine whether the Audit Committee and members have carried out their duties in accordance with the Audit Committee s Terms of Reference. MEETINGS The Marco Audit Committee held four meetings with due notice of issues to be discussed circulated to the Committee Members during the fi nancial year ended 31 December, The attendance records of the Audit Committee members at the meetings are as follows : Date of Meeting % of Member 20/2/ /5/ /8/ /11/2014 Attendance Haji Azizzuddin Bin Haji Hussein 100 Mr Woo Hin Weng 100 Dato Ismail Bin Hamzah 100 The Executive Directors and Internal Audit Consultants were usually invited to attend the Marco Audit Committee meetings to brief on the activities involving their areas of responsibilities. The Audit Committee was also briefed by the External Auditors on their annual audit fi ndings and new provisions introduced by the Malaysian Accounting Standards Board ( MASB ), where applicable. The proceedings and conclusions of each Audit Committee meeting were documented and distributed to each member of the Audit Committee and also to the other non-audit Committee Board members. ANNUAL REPORT 2014 MARCO HOLDINGS BERHAD (8985-P) 23

25 Audit Committee Report ACTIVITIES OF THE COMMITTEE During the fi nancial year ended 31 December 2014, the activities carried out by the Audit Committee included, among others, the following:- a. Reviewed the unaudited quarterly reports on the consolidated results and fi nancial statements prior to tabling the same for the Board of Directors adoption. b. Reviewed the assistance given by the Management to the External Auditors. c. Reviewed the adequacy of the existing policies, procedures and systems of internal control of the Group. d. Reviewed the Group Budget for the fi nancial year ending 31 December e. Reviewed various variances arising from the comparisons of the Group s year-to-date actual results against the budget and from comparison of year-to-date results for year 2014 over f. Reviewed the Internal Audit Consultants audit fi ndings on the following aspects of the Group s business processes : Stock Purchasing; Management Information System; and Inventory Management. g. Reviewed the External Audit Report in relation to signifi cant audit and accounting matters for the fi nancial year ended 31 December 2013 prepared by the External Auditors. h. Discussed with the External Auditors on audit issues for the fi nancial year ended 31 December 2013, without the presence of the Executive Directors and Senior Management. i. Reviewed the Audit Plan in relation to the External Auditors audit program and some updates on new accounting standards/interpretations/amendments applicable to the Group s fi nancial statements for the 2014 fi nancial year. INTERNAL AUDIT FUNCTION The Group has outsourced its internal audit function to external consultants. The principal objective of the internal audit function is to assist the Board of Directors of Marco in maintaining a sound system of internal controls within the Group in order to safeguard the shareholders investment and the Group s assets. The internal audit function reports directly to the Marco Audit Committee. The internal audit function assists the Management to identify, evaluate and update signifi cant risks and develop risks based audit plans for approval by the Audit Committee. The scope of the internal audit function covers the audits of all units and operations of the Group. The total cost incurred for the internal audit function of the Group in respect of the 2014 fi nancial year amounted to 75,000. A summary of the activities performed by the internal audit consultants during the fi nancial year 2014 is set out in pages 25 to 26 of this Annual Report. 24 ANNUAL REPORT 2014 MARCO HOLDINGS BERHAD (8985-P)

26 Statement on Risk Management & Internal Control In compliance with Paragraph 15.26(b) of Bursa Securities Main Market Listing Requirements and the Statement on Risk Management & Internal Control - Guidelines for Directors of Public Listed Issuers, the Board is pleased to present the Statement on Risk Management and Internal Control which outlines the nature and scope of risk management and internal control of the Group during the fi nancial year ended 31 December Board s Responsibility The Board recognises its overall responsibility for the adequacy and effectiveness of the risk management framework and system of internal controls within the Group. However, the Board is equally aware that such systems and processes are designed to manage the Group s risks within an acceptable risk appetite, rather than eliminate the risk of failure to achieve the policies, goals and objectives of the Group. In this regard, the risk management framework and internal control system can only provide reasonable assurance, and not absolute assurance against material misstatement of fi nancial information and records or against fi nancial losses or fraud. 2. Risk Management Framework The Group adopts an enterprise wide risk management approach and all the active businesses of the companies within the Group are considered and categorized in accordance with their main functional activities. This process has been in place for the fi nancial year under review and up to the date of approval of the annual report and fi nancial statements. The main features of the risk management process are as follows: Establish the context of risk in relation to the Group s risk appetite; Risk identifi cation includes consideration of both internal and external environmental factors; Assess the potential impact and likelihood of the risks identifi ed and hence their risk levels; Assess the adequacy and effectiveness of existing controls for risk treatment; Ongoing monitor and review risk mitigating measures, risk levels and emerging risks. All the risks identifi ed and mitigating measures are documented into a Business Risk Profi le. The Business Risk Profi le of the Group is updated on an ongoing basis and approved by the Board. The Business Risk Profi le serves as a tool for the heads of department/business unit for managing key risks applicable to their areas of business. All key risks and issues are regularly reviewed and resolved by the Management team at regular meeting. Through these mechanisms, key risks identifi ed in the Business Risk Profi le are assessed in a timely manner and control procedures are re-evaluated accordingly in order to ensure that the key risks are mitigated to an acceptable level. The Internal Audit Function reviews the effectiveness and adequacy of control procedures adopted by the Company on a regular basis in mitigating the key risks identifi ed in the Business Risk Profi le. Any weaknesses noted during the audit review are reported to the Audit Committee. Through these mechanisms, the Audit Committee can be assured that the key risks of the Company are regularly reviewed and appropriately managed to an acceptable level. 3. System of Internal Controls The key elements of the Group s system of internal controls that the Board has established in reviewing the adequacy and effectiveness of the risk management and internal control system are as follows: The Group has an appropriate organizational structure for planning, executing, controlling and monitoring business operations in order to achieve the Group s business objectives. Lines of responsibility and delegations of authority are clearly defi ned. To ensure the uniformity and consistency of practices and controls within the Group, Standard Operating Procedures have been formalized and documented for the key business processes. ANNUAL REPORT 2014 MARCO HOLDINGS BERHAD (8985-P) 25

27 3. System of Internal Controls (cont d) Statement on Risk Management & Internal Control The trading operations are accredited with ISO9001:2000 international quality system standard and such quality management system provides the Group with improved control of key processes and a foundation for improving quality and customer satisfaction. The policies and procedures are regularly updated to refl ect changes in the operations and business processes. The Management establishes Key Performance Indicators (KPIs) to monitor certain key processes of the Group. Business units prepare an annual business plan and budget and present it to the Board for approval. Any variances of actual performance against budget are monitored and reported on a monthly basis to Management and quarterly to the Board. Appropriate actions are devised to address any areas of concerns arising from the regular review. Financial results are prepared and presented to the Management and to the Board and Audit Committee in a timely manner for effective monitoring and decision making. The Executive Directors act as the channel of communication between the Board and the Management. The Executive Directors are empowered to manage the businesses of the Group and implement the Board s directives and policies. Capital expenditures and investment options are referred to the Board for review and approval. Regular internal audit visit are carried out to provide independent assurance on the effectiveness of the Company s system of internal controls and advising Management on areas for further improvements. The Audit Committee meets at least four times a year. The Committee meets with the Internal Auditors and External Auditors regularly to review their reports. The Audit Committee reviews the actions taken to rectify the fi ndings in a timely manner, and to evaluate the effectiveness and adequacy of the Group s internal control systems. Through the establishment of sound internal control, which includes monitoring reporting systems, the Board reports that the existing system of internal controls is satisfactory. No material losses have occurred during the fi nancial year under review as a result of weakness in internal control. The Board together with the Management continue to take measures to strengthen the control environment. 4. Assurance from Management In accordance with the Statement on Risk Management & Internal Control Guidelines for Directors of Listed issuers, the Board has received assurance from the Executive Directors that to the best of their knowledge the risk management and internal control system of the Group are operating effectively and adequately, in all material respects, based on the risk management and internal control described above. 5. Review of the Statement by External Auditors As required by Paragraph of the Bursa Malaysia Securities Berhad Main Market Listing Requirements, the External Auditors have reviewed this Statement on Risk Management & Internal Control. The External Auditors have reported to the Board that nothing has come to their attention that causes them to believe that this Statement is inconsistent with their understanding of the process the Board has adopted in the review of the adequacy and integrity of internal control system and risk management of the Group. 26 ANNUAL REPORT 2014 MARCO HOLDINGS BERHAD (8985-P)

28 FINANCIAL STATEMENTS Directors Report Statement by Directors Statutory Declaration Independent Auditors Report Consolidated Statement of Profi t or Losses and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes In Equity Consolidated Statement of Cash Flows Statement of Profi t or Losses and Other Comprehensive Income Statement of Financial Position Statement of Changes In Equity Statement of Cash Flows Notes to the Financial Statements