Taking On Challenges. A nnual R eport

Transcription

1 Taking On Challenges A nnual R eport 2016

2 group s 5 year financial highlights 30 Jun 31 Dec 31 Dec 31 Dec 31 Dec (RM 000) Revenue (RM 000) 146, , , ,688 85,258 Shareholders Equity (RM 000) 25,520 61,685 69,189 64,525 59,281 PBT (RM 000) (36,980) (7,866) 8,482 8,400 4,766 PAT after NCI (RM 000) (36,166) (5,908) 6,270 6,962 3,930

3 contents 02 Corporate Structure 03 Corporate Information 04 Chairman s Statement 09 Corporate Social Responsibility Statement 11 Profile of Directors 15 Profile of Key Management 17 Corporate Governance Statement 29 Audit Committee Report 33 Risk Management and Internal Control 36 Other Compliance Information 38 Financial Statements 130 List of Properties 133 Analysis of Shareholdings 136 Notice of Annual General Meeting 139 Statement Accompanying Notice of Annual General Meeting 143 Proxy Form 1

4 corporate structure 2

5 Corporate information DIRECTORS Tan Sri Ahmad Fuzi Bin Abdul Razak Independent Non-Executive Director cum Chairman Wong Wai Hung Executive Director Chan Foong Ping Independent Non-Executive Director Tan Ah Tan Ah Ping Non-Independent Non-Executive Director COMPANY SECRETARY Pang Kah Man (MIA 18831) REGISTERED OFFICE 3-2, 3rd Mile Square No. 151, Jalan Kelang Lama Batu 3 1/2, Kuala Lumpur Tel: (603) Fax: (603) CORPORATE OFFICE Lot 1A - 1C, Lorong Bunga Tanjung 1/3 Senawang Industrial Park Seremban, N. Sembilan, Malaysia Tel: (606) Fax: (606) AUDITORS Crowe Horwath (AF 1018) SHARE REGISTRARS Tricor Investor & Issuing House Services Sdn Bhd STOCK EXCHANGE LISTING Main Market of Bursa Malaysia Securities Berhad 3

6 chairman s statement Dear Shareholders, It gives me great pleasure to present the Annual Report and Audited Financial Statements for the financial period ended 30 June 2016 on behalf of the Board of Directors and the Management of Seremban Engineering Berhad ( SEB ). 4

7 chairman s statement (cont d) Market Outlook 2015/2016 has been a challenging year for SEB. However, with the support of continued resilience in domestic demand, the Company has managed to keep the factories occupied with order books worth approximately RM50 million for the first half of the financial year 2017 and we are cautiously optimistic that we are on the right track to obtain encouraging order books in the coming periods. Thus, this is a turnaround for the Group and with appropriate strategies put in place, the Company expects to generate positive results. As the market continues to fluctuate, the Group will continue to focus on its strength in the core business of storage tanks and vessels fabrication for industries such as oil and fats, water treatment, food industries, chemical plants and oil refineries. This is the bread and butter in the Group s revenue contributor. Fabrication has been a proven income generator through the years and we are confident that with this strength, we will be able to meet our targets. The Group is also exploring other opportunities by securing turnkey order books from bigger projects that include power plants, new petrochemical plants, pharmaceutical industry and high volume structural steel and shop piping fabrication works. 5

8 chairman s statement (cont d) 6 Performance Review Our financial performance reflects the ongoing turbulence of the Malaysian economy and stiff competition within the industry. For the financial period ended 30th June 2016, covering an 18- month period, the current year results showed Group revenue of RM million and a net loss after taxation attributable to owners of the Company of RM36.16 million. The results were mainly due to cost overrun on the Sabah Ammonia Urea ( SAMUR ) project, impairment of SAMUR project trade receivables and further provision for Kencana projects cost recognised during the financial period ended 30 June Strategies Reviewing the Group s plans for the year of 2017, the Group has developed a set of strategies to achieve our goals for the year. Firstly, the Group is committed to maintain on-time delivery and superior quality that we are known for. We will broaden our customer base in various industries such as palm oil refinery, chemical, waste management, petrochemical, food and pharmaceutical with wider product range including structural steel and shop piping fabrication works. Secondly, the Group has put in place some cost-cutting measures. These measures are intended to reduce overhead and to consolidate resources. The Group has decided to close down some dormant subsidiaries and to divert resources back to SEB. This streamlining of operations and cost-cutting measures have resulted in improved processes and systems for the Group.

9 chairman s statement (cont d) Thirdly, the Group has established a dedicated new Project Management Team (PMT) for Site Work to manage and resolve all related matters in a more efficient manner. The Team will get all the support and involvement of the top management and marketing personnel of the Group. The Group is also putting emphasis on building trust and better relationship with clients during the bidding stage of any project as well as on establishing a strategic alliance with companies and individuals based on the Group s superior fabrication capabilities. Finally, the Group is also working on sourcing more reliable materials to supply the evergrowing demand of high quality products from SEB. Special focus will be given on training of staff of SEB to the next level as well as on aggressive and focused marketing campaigns in order to reach our 2017 goals. Remedial Measures The 2015/2016 s losses are mainly due to cost overrun from the SAMUR Project as a result of weaknesses in project management. Consequently, two Executive Directors have resigned. The Group now has a more lean and efficient Board of Directors and management team. This change has brought about more enhancement, communication and robust discussion between the management and Board Members. 7

10 chairman s statement (cont d) Remedial Measures (cont d) The setting up of the PMT has also significantly enhanced the efficiency and effectiveness of the costing system for better project management, coordination and control within the Group. Efforts will be made to widen the customer base by reviewing inactive clients as well as reactivating potential clients. Similarly special focus will be given to explore new industries and markets to identify standard products to manufacture and sell. In this regard SEB will be visiting related industrial expos such as PIPOC, OGA, Oil & Fats International Asia and MOGSEC with proactive follow up actions with the relevant sales personnel to achieve our goals. 8 Prospect Despite the challenges that we foresee in 2016/2017, we are confident that our planned strategies and remedial counter-measures indicated above will see the Group successfully delivering positive results in Acknowledgement On behalf of our fellow Board members, I would like to convey our sincere gratitude and appreciation to our valued shareholders, customers, business associates, suppliers and bankers for the continuous support, confidence and unwavering support extended to the Group over the years. Our deep gratitude and heartfelt appreciation also go to the management and staffs of the Group for their steadfast dedication and perseverance in undertaking their work and in ensuring SEB Group s continued growth. Last but not least, I wish to record our sincere gratitude and heartfelt thanks to all Members of the Board for their wise guidance, invaluable contributions and commitment in helping overcome the various challenges faced by the SEB Group. It will be our firm commitment to stand together and to persevere in facing all adversities ahead. Tan Sri Ahmad Fuzi Bin Abdul Razak Chairman

11 corporate social responsibility statement As always, SEB believes that good corporate governance and responsibility places firm commitment towards corporate social responsibility towards the community it operates in. The Group has established a Corporate Social Responsibility (CSR) guideline that helps strike a balance between the Group s profitability and giving back to the community. We are constantly on the lookout on ways to improve our operations and reducing the Group s carbon footprint as well as ensuring the Group is supporting the community through various initiatives. WORKPLACE As the driving force behind the Group s success, employees are highly appreciated and in return, the management strives to give their employees the most conducive working environment. Starting by improving the quality and living standards of our employees, the Group is constantly providing training and programmes to upgrade employee s knowledge and standards. Employees in return are equipped with the required skills and attitude which are aligned with the Group s objective and direction. The Group always have the employee s welfare as a priority and maintains high standards of safety and health in the workplace and regular safety inspections are made to ensure infrastructures are well maintained. Sporting events and festive celebrations for employees are also organised to help raise the morale of all employees as well as to help them get to know one another. 9

12 corporate social responsibility statement (cont d) 10 MARKETPLACE Practicing good business ethics are also high on the Group s priority list and it has and will always be our philosophy to provide high quality products and services to meet our customer s expectations and satisfaction. It is our belief that the business should uphold high standards of behaviour and integrity at all times. It is also our responsibility to ensure the management and staff continuously give high standards of conduct in the performance of their duties to fulfil and maintaining a positive relationship with our shareholders, analysts, bankers, customers and suppliers. COMMUNITY Always there to support and to be involved in community service to assist the less fortunate, the Group will continue to aim to provide benefits to the community we serve to make it a better place to live in and to conduct business. ENVIRONMENT The Group will also continue to ensure that the environment that we operate in is always balanced and in harmony with the environment, we have adopted eco-friendly ways in protecting and respecting the environment by recycling office stationary and implementing switching off air conditioning and lighting whenever possible. We have also reorganised operating hours to minimise wastage of energy.

13 Profile of Directors Tan Sri Ahmad Fuzi Bin Abdul Razak Age : 67 Designation : Independent Non-Executive Director cum Chairman Appointment date : 03 September 2009 Gender : Male Nationality : Malaysian Tan Sri Ahmad Fuzi Bin Abdul Razak was previously the Secretary-General of the Ministry of Foreign Affairs Malaysia. He joined the Malaysian Diplomatic and Administrative Service in 1972, and served in various capacities at the Ministry of Foreign Affairs, mainly in the Political Division, and at the Malaysian Missions abroad in Moscow, the Hague, Canberra, Washington and Dhaka. Tan Sri Ahmad Fuzi has previously also served as Director General, Institute of Diplomacy and Foreign Relations Malaysia; Ambassador-at-Large; Malaysia s Representative to the ASEAN High Level Task Force (HLTF) on the Drafting of the ASEAN Charter and Malaysia s Representative to the High Level Panel (HLP) on the Drafting of the Terms of Reference of the ASEAN Human Rights Body. Tan Sri Ahmad Fuzi is currently, Secretary-General of the World Islamic Economic Forum Foundation (WIEF) and Chairman/Director of Amanahraya-Reit Managers Sdn Bhd; Seremban Engineering Berhad; Syarikat Takaful Malaysia Bhd; Theatre Management Associates Sdn Bhd; Optima Capital Sdn Bhd; Sofgen (Malaysia) Sdn Bhd, ACE Holdings Sdn Bhd, IMAN Research Consultancy Sdn Bhd and Ultra Deep Seabed Sdn Bhd. Tan Sri Ahmad Fuzi is also a member of the Board of Directors of; Puncak Niaga Holdings Berhad; Management Development Institute of Singapore (MDIS) Malaysia Sdn Bhd; MDIS Unicampus Malaysia Sdn Bhd; Alstar Solutions Sdn Bhd; Lejadi Medimax Sdn Bhd and WEROS Technology Sdn Bhd. Tan Sri Ahmad Fuzi is currently also a Distinguished Fellow, Institute of Strategic and International Studies (ISIS) and Institute of Diplomacy and Foreign Relations; Deputy Chairman, Malaysian Member Committee of the Council for Security Cooperation in the Asia Pacific (CSCAP Malaysia); Member, Board of Trustee, MERCY Malaysia, Perdana Global Peace Foundation (PGPF) and Yayasan Sarana Pendidikan Malaysia; Member, Institute of Advanced Islamic Studies (IAIS) and Advisor, Asia Pacific Entrepreneurship Award (APEA), Malaysia-Myanmar Chamber of Commerce and High School Bukit Mertajam Alumni Malaysia. In recognition of his service to the nation, he was awarded the AMN (1979), the JSM (1999), the DSPN (1999), the DMPN (2002) the PSM (2003) and the DSLJ (Brunei Darussalam 2014). 11 Tan Sri is not related to any of the directors and/or major shareholders of the listed issuer. He has no convictions for offences within the past 5 years other than traffic offences. He has no conflict of interest with the Company. He attended fourteen out of the fourteen Board Meetings held during the financial period ended 30 June 2016.

14 Profile of Directors (cont d) WONG WAI HUNG Age : 49 Designation : Executive Director Appointment date : 09 July 2015 Gender : Male Nationality : Malaysian Mr. Wong Wai Hung was appointed to SEB Board on 9 July 2015 as the Executive Director. He heads the finance, estimation, purchasing, and production departments involving in the strategic and operational issues and decision making of these various departments. He obtained his Diploma in Commerce majoring in Management Accounting from Tunku Abdul Rahman College in He has been an Associate Member and Chartered Management Accountants in He was also admitted as an Associate Member of the Malaysian Institute of Accountants in In 2004, he obtained his Master of Business Administration in Electronic Commerce from Charles Stuart University, Australia. He started his career as an Audit Trainee with Ong & Wong. In 1991, he joined Chong Kee Ling & Son as an Accounts Assistant. He joined EAC Rubber Industries (M) Sdn Bhd later that same year as an Accounts Supervisor. He subsequently joined NKK International (M) Sdn Bhd as an Assistant Accountant in He then joined Cahaya Kelang Construction Sdn Bhd as an Accountant in He joined Success Electronic & Transformer Manufacturer (SETM) in 1998 as the Finance Manager, and has been promoted the position as Group Finance Manager of Success Transformer Corporation Berhad from 2010 to August Later he joined EcoTower Sdn Bhd as General Manager (Finance) until May Currently, he assumes as Chief Operating Officer and Executive Director of SEB. Mr. Wong does not hold any directorship in other public companies and listed issuers and he is not related to any of the directors and/or major shareholders of the listed issuer. Mr. Wong has no convictions for offences within the past 5 years other than traffic offences. He has no conflict of interest with the Company. He attended nine out of the nine Board Meetings held during the financial period ended 30 June

15 Profile of Directors (cont d) Chan Foong Ping Age : 45 Designation : Independent Non-Executive Director Appointment date : 22 April 2016 Gender : Female Nationality : Malaysian Ms Chan Foong Ping graduated with a Bachelor of Accountancy from Faculty of Economic and Business Management, Universiti Putra Malaysia. She is a Chartered Accountant, fellow member of Malaysian Institute of Accountants since After graduation from Universiti Putra Malaysia, Ms Chan joined Deloitte Touche Tohmatsu Kuala Lumpur in 1995 as auditor and subsequently she joined the Lion Group (listed Bursa) as Accounting Manager. In 2000, she joined Phillips Foods Group (U.S.A), played key roles in senior management position including Director for Controllership of international operations, company director of the group, Asia Pacific and Africa subsidiaries. Prior to departure, led the shared services centres in Indonesia and India. Throughout the period with the group, she responsible for overseeing regional financial system of 14 manufacturing plants covering 10 different countries. In 2011, Ms Chan joined Resource Holding Management Ltd (LSE AIM) as Group Finance Director to complete the RTO on PUC Founder (M) Bhd (Bursa). In 2014, she was appointed as corporate advisor of Swiss Biological Medicine Group Ltd (SBMG) pursuing for a potential listing at LSE. Recently, SBMG becomes a subsidiary of Huapont Life Science which is listed at Shenzen Exchange Board. Ms Chan is the Independent Non-Executive Director for Success Transformer Corporation Berhad. Ms Chan is not related to any of the directors and/or major shareholders of the listed issuer. Ms Chan has no convictions for offences within the past 5 years other than traffic offences. She has no conflict of interest with the Company. She attended one out of the one Board Meeting held during the financial period ended 30 June

16 Profile of Directors (cont d) TAN AH TAN AH PING Age : 65 Designation : Non-Independent Non-Executive Director Appointment date : 01 March 2007 Gender : Male Nationality : Malaysian Mr. Tan Ah Tan Ah Ping, the founder of Success Transformer Manufacturer Group, was appointed to SEB Board on 1 March 2007 as Non-Independent Non-Executive Director. He is also a member of the Nomination and Remuneration Committee. He is a representative of Success Transformer Corporation Berhad ( STC ), the holding company of SEB and is currently the Managing Director of STC responsible for the overall management, strategic business planning and development, decision making and technical advisory of the STC Group. He also assumes the role of Managing Director or Director of most subsidiaries of STC. Mr. Tan is not related to any of the directors the listed issuer. Mr. Tan has no convictions for offences within the past 5 years other than traffic offences. He has no conflict of interest with the Company. He attended thirteen out of the fourteen Board Meetings held during the financial period ended 30 June

17 profile of key management SEE BOON CHUN Marketing Director Mr. See Boon Chun, age 45, male, Malaysian, was assigned to SEB on 1 January 2016 as Marketing Director. Mr. See heads the Marketing, Estimation and Site Project Management Team involving in the strategic and operational issues and decision making of these various departments. He obtained his honor Degree in Social Science & majoring in Anthropology and Sociology from National University of Malaysia in year He started his career as a Human Resources Executive with Hong Leong Group in year In 2000, he joined YKK as a Human Resources Manager. In year 2005, he joined Success Electronics & Transformer Manufacturer Sdn. Bhd. as a Human Resources Manager. In year 2009, he was assigned and promoted as a Director of Omega Metal Industries Sdn Bhd (a subsidiary of Success Transformer Corporation Berhad) and running the entire company. Omega Metal principally involving in the fabrication of metal enclosure and any other steel fabrication works. In year 2014, he returned to Success Electronics & Transformer Manufacturer Sdn Bhd involving in the operation of production and its related department and in the capacity of General Manager. On 1 January 2016, he was appointed to SEB as the Marketing Director, the position which he assuming till now. Mr. See does not hold any directorship in other public companies and listed issuers and he is not related to any of the directors and/or major shareholders of the listed issuer. Mr. See has no convictions for offences within the past 5 years other than traffic offences. He has no conflict of interest with the Company. 15

18 profile of key management (cont d) Lim Fung Nee Financial Controller Ms Lim Fung Nee, age 50, female, Malaysian, was appointed as financial controller on 26 September Ms Lim graduated with a Bachelor of Accountancy from Monash University, Melbourne and holds a Masters Degree major in finance from Mulitmedia University, Malaysia. She is a Chartered Accountant, fellow member of Malaysian Institute of Accountants. Ms Lim started her career as an audit assistant with A.Z. Ariffin & Co in 1989 before joining PricewaterhouseCoopers, Kuala Lumpur in 1992 as a tax consultant for 5 years. Ms Lim has over 20 years of experience in accounting and finance functions. Her career encompassed a spectrum of industries such as construction, agriculture, consumer apparels, manufacturing and retailing. Ms Lim does not hold any directorship in other public companies and listed issuers and she is not related to any of the directors and/or major shareholders of the listed issuer. Ms Lim has no convictions for offences within the past 5 years other than traffic offences. She has no conflict of interest with the Company. 16

19 Corporate Governance Statement The Board of Directors recognises the importance of establishing and maintaining good corporate governance within the Company and its subsidiaries and associates ( Group or SEB Group ). The Board is committed to ensure the adoption of the principles and best practices of the Malaysian Code on Corporate Governance 2012 ( MCCG 2012 ) as a fundamental part of discharging its responsibilities to protect and enhance shareholders value and the financial performance of the Group. This statement sets out the manner in which the Group has applied and observed the principles and recommendations of the MCCG 2012 during the financial period under review. PRINCIPLE 1 ESTABLISH CLEAR ROLES AND RESPONSIBILITIES The Board is responsible for the overall governance and conduct of the Group s strategic plan, including its implementation, and is accountable for the performance of the Company and the Group. The Board assumes the following duties and responsibilities: a) Review and adopt a strategic plan for the Company, addressing the sustainability of the Company s business policies and performance and ensure they fit in with the Company s overall business strategy The Board plays an active role in the development of the Company s strategy. Management will present to the Board its recommended strategy and proposed business plans and the Board will review and deliberate upon both Management s and its own perspectives. b) Overseeing the conduct of the Company s business The Executive Director is responsible for the day-to-day management of the business and operations of the Group. The Board will assess the management s performance through a status report which is tabled to the Board and includes a comprehensive summary of the financial performance during the reporting period. c) Identifying principal risks faced by the Group and ensuring the implementation of appropriate systems to manage and mitigate these risks The Board oversees the risk management framework of the Group. The management will advise the Audit Committee and the Board on areas of high risk and the corresponding internal controls that are implemented. d) Succession planning, including appointing and training, replacing Directors and key managements The Nomination and Remuneration Committee is responsible for reviewing Directors and key managements position and determining the remuneration for these appointments. All Directors are required to attend trainings to further enhance their skills and knowledge and fully equip themselves to effectively discharge their duties. During the financial period, all Directors have successfully completed the Mandatory Accreditation Programme prescribed by Bursa Securities. 17

20 Corporate Governance Statement (cont d) PRINCIPLE 1 ESTABLISH CLEAR ROLES AND RESPONSIBILITIES (cont d) e) Overseeing the development and implementation of a shareholder communication policy The Group regularly updates the Company s website ( press/media releases as and when required, as well as timely announcements being made to Bursa Securities as and when required. f) Reviewing the adequacy and integrity of the Group s internal control management information system The Board is responsible for the adequacy and integrity of the Company s internal control system. Details pertaining to the Company s internal control system are available in the Statement on Risk Management and Internal Control of this Annual Report. To assist in the discharge of its duties, the Board has established Board Committees, namely the Audit Committee ( AC ), Nomination Committee ( NC ) and Remuneration Committee ( RC ), to examine specific issues within their respective terms of reference as approved by the Board and to report their recommendations to the Board. The ultimate responsibility for decision making, however, lies with the Board. i. Charter of Board ii. There is a formal schedule of matters reserved to the Board for its deliberation and decision to ensure the direction and control of the Company are in its hand. In discharging its duties, the Board is guided by its Charter which outlines the authority, delegations, responsibilities of the Board, and other matters that are specifically reserved for the Board. The management function is conducted by, or under the supervision of, the Executive Director as directed by the Board and by other officers to whom the management function is properly delegated by the Executive Director. The Board will be supplied by Management with information in a form, timeframe and quality that will enable the Board to discharge its duties effectively. Directors are entitled to request additional information at any time when they consider it appropriate. In line with Recommendation 1.7 of the MCCG 2012, the Board Charter is available on the corporate website at Code of Conduct 18 The Board has formalised a Code of Conducts, setting out the standards of conduct expected from Directors and all employees of the Group. The Code of Conduct provides guidance for Directors regarding ethical and behavioural considerations and/ or actions as they address their duties and obligations during the appointment. The Board should periodically review the Code of Conduct and a summary of the Code of Conduct is available on the company website.

21 Corporate Governance Statement (cont d) PRINCIPLE 1 ESTABLISH CLEAR ROLES AND RESPONSIBILITIES (cont d) iii. Sustainability of Business The Board is mindful of the importance of business sustainability and, in conducting the Group s business, the impact of the Group s business on the environmental, social and governance ( ESG ) is taken into consideration. The Board will incorporate ESG aspect while formalising the company s strategies on promoting its sustainability. The Group activities on corporate social responsibilities during the financial period under review are disclosed on page 9 on this Annual Report. iv. Access to Information and Advice The Board members have full and unrestricted access to all information pertaining to the Group s business and affairs. Directors are supplied with relevant information and reports on financial, operational, corporate, regulatory, business development and audit matters for decisions to be made on an informed basis and effective discharge of the Board s responsibilities. Besides, the Board may also obtain independent professional advice at the Company s expense through an agreed procedure set out in the Board Charter. In additional, the Board is regularly updated and advised by the Company Secretary who is qualified and competent on statutory and regulatory requirements in carrying out its roles and responsibilities. Management provides the Board with information in a form, timeframe and quality that will enable the Board to discharge its duties effectively. Directors are entitled to request additional information at any time when they consider it appropriate. Every possible effort will be made to ensure that Board papers tabled at a Board meeting will be made available in good time to all Directors attending, regardless of location. v. Assignment of Authority and Responsibility Directors may delegate their powers as they consider it appropriate through appropriate manual of delegations or manual of authorities. However, ultimate responsibility for strategy and control rests with the Directors as guided by the Executive Director. vi. Qualified and competent Company Secretaries The Company Secretary of the Group has legal credentials, and is qualified to act as company secretary under Section 139A of the Companies Act The Company Secretary plays an advisory role to the Board, particularly with regard to the Company s constitution, Board policies and procedures, and its compliance with regulatory requirements, codes, guidance and legislation. 19 The Company Secretary ensures that deliberations at Board and Board Committee meetings are well documented, and subsequently communicated to the relevant Management for appropriate actions.

22 Corporate Governance Statement (cont d) PRINCIPLE 2 STRENGTHEN COMPOSITION OF THE BOARD As at the date of the Annual Report, the Board has four (4) members comprising one (1) Independent Non-Executive Chairman, one (1) Independent Non-Executive Director, one (1) Executive Director and one (1) Non-Independent Non-Executive Director. This composition complies with Paragraph of the Main Market Listing Requirements ( Listing Requirements ) of Bursa Malaysia Securities Berhad ( Bursa Securities ) whereby the Company must have at least two (2) directors or one-third (1/3) of the Board, whichever is higher who are independent directors. The Board has a healthy mix of both genders. The Profile of each director is presented on pages 11 to 14. Appointments to the Board 20 The objective of the NC is to ensure that there is a formal and transparent procedure for appointment of new directors and appraisal of directors for recommendation to the Board. However, the Board has the final decision on appointments after considering the recommendations of the Committee. The members are as follows: Chairman Tan Sri Ahmad Fuzi Bin Abdul Razak Members Tan Ah Tan Ah Ping Chan Foong Ping Independent Non-Executive Director cum Chairman Non-Independent Non-Executive Director Independent Non-Executive Director The NC operates under its terms of reference and had two meetings during the financial period ended 30 June Review of Candidates Proposed for Appointment as Directors The NC s criteria to be used in the appointment process was largely focused on ensuring a good mix of skill, experience and strength in the qualities necessary for the Board to discharge its responsibilities in an effective and competent manner. Diversity of the Board s composition is important to facilitate optimal decision-making by harnessing different insights and perspectives. Diversity criteria reviewed by the NC include experience, skills, competence, race, gender, culture and nationality. Other factors considered by the NC include the candidates ability to commit sufficient time and energy to the Group s matters, and the ability to satisfy the test of independence taking into account the candidate s character, integrity and professionalism. Currently, there is one woman Director in the Board and taking into account the combination of skill, experience and strength in the qualities necessary to strengthen the composition of the Board.

23 Corporate Governance Statement (cont d) PRINCIPLE 2 STRENGTHEN COMPOSITION OF THE BOARD (cont d) Board Appointment Process The Company maintains a formal and transparent procedure for the appointment of new Directors. All nominees to the Board are first considered by the NC, taking into account the mix of skills, competencies, experience and other qualities before they are recommended to the Board. While the Board is responsible for the appointment of new Directors, the NC is delegated the role of screening and conducting an initial selection, which includes an external search, before making a recommendation to the Board. NC evaluates the nominees ability to discharge their duties and responsibilities before recommending their appointment as Directors to the Board for approval. During the year, the NC considered the skills, experience and respective backgrounds of Mr. Wong Wai Hung as the Company s Executive Director and Ms Chan Foong Ping the Company s Independent Non-Executive Director. Subsequently, NC recommended their nomination to the Board. The Board accepted their recommendations and they are duly appointed on 9 July 2015 and 22 April Board Assessment The NC carries out Board effectiveness assessment, including Board Committees and individual Director. The effectiveness of the Board is assessed in the areas of Board mix/ diversity, composition and governance, quality of information and decision-making and Boardroom activities. The effectiveness of the Board Committees is assessed in terms of composition and governance, meeting administration and conduct, skills and competencies, and roles and responsibilities. The Directors assessment are intended to assess their contribution, performance, calibre and personality in relation to the skills, experience and other qualities they bring to the Board. The assessment examines Directors ability to give input in meetings and demonstrate high level of integrity in decision making. Re-election of Directors In accordance with the Articles of Association of the Company, all directors shall retire from office once in every three (3) years but shall be eligible for re-election and one-third (1/3) of the directors shall retire from office and be eligible for re-election at each Annual General Meeting ( AGM ). Newly appointed directors during the financial period shall hold office until the next following AGM and shall then be eligible for re-election. This requirement has been adhered to by the Board members in AGM. 21

24 Corporate Governance Statement (cont d) PRINCIPLE 2 STRENGTHEN COMPOSITION OF THE BOARD (cont d) Tenure of Independent Directors ( ID ) During the financial period, there is no ID served more than nine years cumulatively in the Group. Directors Remuneration The objective of the RC is to recommend the remuneration framework of executive directors to the Board. The remunerations and entitlements of the non-executive directors including the Non-Executive Chairman shall be a matter to be decided by the Board as a whole with the director concerned abstaining from deliberation and voting on his individual remuneration. The RC had one (1) meeting during the financial period ended 30 June This meeting was attended by all members during appointment. 22 The members of the RC are: Chairman Tan Sri Ahmad Fuzi Bin Abdul Razak Dato Dr. Ir. Andy Seo Kian Haw (resigned on 1 February 2016) Members Tan Ah Tan Ah Ping (appointed on 22 April 2016) Chan Foong Ping (appointed on 22 April 2016) Chiam Tau Meng (resigned on 22 April 2016) Wong Poh Chee (resigned on 28 August 2015) Independent Non-Executive Director cum Chairman Independent Non-Executive Director Non-Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director Executive Director The RC adopts the principles recommended by the MCCG 2012 in determining the directors remuneration, whereby, the executive remuneration is designed to link rewards to the Group s performance whilst the remuneration of the Non-Executive Directors is determined in accordance with their experience and the level of responsibilities assumed. The RC reviews the Board remuneration policy annually, considering various factors including the Non-Executive Directors fiduciary duties, time commitments expected of Non-Executive Directors and Board Committee members and the Company s performance as well as the market condition. The Directors fees are subject to the approval of the shareholders of the Company at AGMs.

25 Corporate Governance Statement (cont d) PRINCIPLE 2 STRENGTHEN COMPOSITION OF THE BOARD (cont d) Directors Remuneration (cont d) The number of Directors of the Company whose income falls within the following bands are set out as follows:- Number of Directors Range of Remuneration executive Non-Executive RM 50,000 and below - 5 RM 50,001 to RM 100, RM 100,001 to RM 150, RM 150,001 to RM 200, RM 250,001 to RM 300, RM 300,001 to RM 350, The aggregate remuneration paid or payable to all Directors are further categorised into the following components:- Salaries & others Benefits Group Fees * emoluments in kind Total rm 000 rm 000 RM 000 RM 000 Executive 52 1, ,348 Non-executive Salaries & others Benefits Company Fees * emoluments in kind Total rm 000 rm 000 RM 000 RM 000 Executive Non-executive * Subject to the approval of shareholders The above disclosure includes the remuneration paid to Directors who had received her remuneration from her capacity as Executive Director or Director of the subsidiaries of SEB. In respect of the non-disclosure of detailed remuneration of each director, the Board views that the transparency in respect of the Directors remuneration has been appropriately dealt with by the band disclosure presented in this statement. 23

26 Corporate Governance Statement (cont d) PRINCIPLE 3 REINFORCE INDEPENDENCE OF THE BOARD There is clear division of responsibilities between the Chairman and Executive Director to engender accountability and facilitate the division of responsibility, such that one individual has unfettered powers over decision making. The Chairman is responsible for ensuring the adequacy and effectiveness of the Board s governance process and acts as a facilitator at board meeting to ensure that contribution by Directors are forthcoming on matters being deliberated and that no Board member dominates discussion. The Executive Director, supported by the senior management team, implements the Group s strategic plan, policies and decision adopted by the Board and oversees the Operations and business development of the SEB Group. 24 The Independent Non-Executive Directors bring to bear objective and independent views, advice and judgment on interest, not only of the Group, but also of shareholder, employee, customers, suppliers and many communities in which the Group conducts its business. Independent Non-Executive Directors are essential for protecting the interest of shareholders and can make significant contributions to the Company s decision making by bringing in the quality of detached impartiality. PRINCIPLE 4 FOSTER COMMITMENT OF DIRECTORS The Board ordinarily meets at least five (5) times a year, scheduled well in advance before the end of the preceding financial year to facilitate the Directors in planning their meeting schedule for the year and additional meetings are convened as and when necessary. The Board obtains the commitment from Directors to devote sufficient time and efforts to carry out their responsibilities at the time of their appointment. Each Director is expected to commit time as and when required to discharge the relevant duties and responsibilities, besides attending meetings of the Board and Board Committees. It is also the Board s policy for Directors to notify the Chairman before accepting any new directorships notwithstanding that the Listing Requirements allow a Director to sit on the board of 5 listed issuers. Such notification is expected to include an indication of time that will be spent on the new appointment. At the quarterly Board meetings, the Board reviews the business performance of the Group and discusses major operational and financial issues. All pertinent issues discussed at Board meetings in arriving at decisions and conclusions are properly recorded by the Company Secretary by way of minutes of meetings. During the financial period under review, the number of Board of Directors meeting attended by each director is as follows: Name of Directors no.of meetings attended Tan Sri Ahmad Fuzi Bin Abdul Razak 14/14 Chan Foong Ping (appointed on 22 April 2016) 1/1 Tan Ah Tan Ah Ping 13/14 Chiam Tau Meng (resigned on 22 April 2016) 13/13 Wong Wai Hung (appointed on 9 July 2015) 9/9 Wong Poh Chee (resigned on 28 August 2015) 6/6 Wong Choon Cheon (retired on 9 July 2015) 5/5 Wong Chee Kian (resigned on 9 July 2015) 5/5 Ir. Mohamad Noh bin Serul (resigned on 31 July 2015) 5/5 Dato Dr. Ir. Andy Seo Kian Haw (resigned on 1 February 2016) 7/8

27 Corporate Governance Statement (cont d) PRINCIPLE 4 FOSTER COMMITMENT OF DIRECTORS (cont d) Directors Training All Directors have successfully completed the Mandatory Accreditation Programme prescribed by Bursa Securities. The Directors will continue to attend other relevant training programmes as appropriate, to further enhance their skills and knowledge and fully equip themselves to effectively discharge their duties. The training programmes attended by the Directors are as follows: Name of Directors Training Programme Tan Sri Ahmad Fuzi Bin Abdul Razak WIEF Cordoba Roundtable. Bank Negara Malaysia FEA Rules Training Program. WIEF AFF Roundtable PGPF International Conference on Rohingyas International CSR Summit Capital Market Directors Program. Board Chairman Series Part 2 Leadership Excellence From the chair. WIEF Roundtable 2nd WIEF Graduates Entrepreneurship Training Maximising Board Effectiveness Through A Strong Risk oversight Role Beyond Financial Performance. AMLATFPUAA 2011 : The Law & Compliance. Malaysian Financial Reporting standard (MFRS) Made Simple for Directors & Senior Management. Reshaping The Board`s Expectations in Evaluating & Executing overseas Investments. IMAN Habibie Centre Roundtable on The Role of Media In Countering Religious Extremism 11th World Islamic Economic Forum Maybank Refresher Program on AMLATFPUAA Tan Ah Tan Ah Ping Conflict Management Workshop Chan Foong Ping Wong Wai Hung Mandatory Accreditation Programme for Directors of Public listed Companies The Trans-Pacific Partnership Agreement (TPPA)-Potential economic Impact on the Malaysian Economy New Regulatory Updates-Recent Amendments to Listing requirements 2015 and 2016 The Company Secretary normally circulates the relevant statutory and regulatory requirement from time to time for the Board s reference and briefs the Board on the updates, where applicable. External Auditors also brief the Board on Malaysian Financial Reporting standards that affect the Group s financial statement for the period under review. 25 The Board will on continuing basis evaluate and determine the training needs of each Director, particularly on relevant new law and regulations and essential practices for effective corporate governance and risk management to enable the Directors to effectively discharge their duties.

28 Corporate Governance Statement (cont d) PRINCIPLE 5 UPHOLD INTEGRITY IN FINANCIAL REPORTING BY THE COMPANY The Board is committed to present a balanced and understandable assessment of the Group s financial position and prospects to the public. These results are contained in the quarterly financial results, audited financial statements and annual reports. The Board is assisted by the AC in overseeing the Group s financial reporting processes and the accuracy, adequacy and completeness of its financial reports. The audit committee is to ensure that the financial statements of the group and Company have been prepared in conformity with Malaysian Financial Reporting Standards issued by the Malaysian Accounting Standards Board and in accordance with the provisions of the Companies Act, 1965 in Malaysia. The roles of the AC in relation to the External Auditors are described in the Audit Committee Report set out on pages 29 to 32. Financial Reporting 26 In overseeing the Group s financial reporting, the AC reviewed the quarterly financial statements and the annual audited financial statements. The AC s recommendations were presented for approval at the subsequent Board meetings. External Auditor The Board, via the AC, maintains a formal and transparent relationship with the Group s external auditors in seeking valuable professional advice and in ensuring compliance with Malaysian Financial Reporting Standards issued by the Malaysian Accounting Standards Board in Malaysia. The AC meets up with the External Auditors at least twice a year to review audit plans and exchange views on issues requiring attention. There is no any significant issue raised by External Auditor during the financial period. The AC reviewed the External Auditors Audit Plan outlining their scope of work and proposed fees for the statutory audit and review of the Statement of Risk Management and Internal Control. The AC further resolved to recommend the proposed fees to the Board for approval. The AC carries out an annual review of the performance of the External Auditors, including assessment of their independence in performing their obligations, adequacy of experience and resources of the firm and the professional staff assigned to the audit. Based on the annual evaluation of their performance and audit fees, the AC was satisfied with the External Auditors technical competency and independence for With that, the AC further recommended to the Board the reappointment of the External Auditors for In assessing the independence of External Auditors, the AC required written assurance from the External Auditors conforming that they are, and have been, independent throughout the conduct of the audit engagement with the Company in accordance with the independence criteria set out by the Malaysian Institute of Accountants. The External Auditors provided written assurance to the AC that in accordance with the terms of all relevant professional and regulatory requirements, they had been independent throughout the audit engagement.

29 Corporate Governance Statement (cont d) PRINCIPLE 5 UPHOLD INTEGRITY IN FINANCIAL REPORTING BY THE COMPANY (cont d) Internal Auditor The Company outsourced its internal audit function to an external consulting company, NGL Tricor Governance Sdn Bhd. The audit team members are independent of the activities audited by them. The Internal Auditors presented to the AC updates on its activities comprising progress of the Annual Audit Plan and ad-hoc assignments. The AC considered the adequacy of scope and coverage of the Group s activities and approved the Internal Auditor s Annual Audit Plan. The AC reviewed the annual Statement on Risk Management and Internal Control for publication in the Annual Report. PRINCIPLE 6 RECOGNISE AND MANAGE RISK OF THE GROUP With the assistance of the internal audit function, the Board also affirms its responsibility for maintaining a sound system of internal control for the Group. The effectiveness of the systems of key internal control, which are in place, is reviewed by internal auditors, who operated independently from the activities of the Company. The independent internal audit function is currently outsourced to an external consulting company who reports directly to the AC on the adequacy and effectiveness of the Group s internal controls during the quarterly AC meetings. The scope of work covered by internal audit function during the financial period under review is provided in the Statement on Risk Management and Internal Control of this Annual Report. PRINCIPLE 7 ENSURE TIMELY AND HIGH QUALITY DISCLOSURE The Board will formalize internal corporate disclosure policies and procedures not only to comply with the disclosure requirements set out in the Bursa Malaysia Listing Requirements, but also setting out the persons authorized and responsible to approve and disclose material information to regulators, shareholders and stakeholders. Amongst the policies is to upload its announcements to the regulators, the Board Charter, rights of shareholders and Annual Report in the Company s website timely. Various contact details are provided on the Company s website to address queries from customers, shareholders and other Public. PRINCIPLE 8 STRENGTHEN RELATIONSHIP BETWEEN THE COMPANY AND ITS SHAREHOLDERS The Board values dialogue with investors as a means of effective communication that enables the Board and management to convey information about the SEB Group s performance, corporate directions and other matters affecting shareholders interests. Such information is disseminated through various disclosures and announcements made to the Bursa Securities covering quarterly financial results, audited financial statements and annual reports. This information is also accessible by the public through the Bursa Securities website at 27

30 Corporate Governance Statement (cont d) PRINCIPLE 8 STRENGTHEN RELATIONSHIP BETWEEN THE COMPANY AND ITS SHAREHOLDERS (cont d) In addition, the Company s website at provides information on the Group s business, corporate development and announcements to Bursa Securities. Other information relevant to shareholders and investors such as annual reports, circulars and quarterly reports are available for download at the Company s website. The Company s AGM continues to be used as a principal forum for dialogue and interaction with shareholders. The Notice of AGM is circulated at least twenty one (21) clear days before the date of the meeting to enable shareholder to go through the Annual Report. Shareholders are encouraged to participate in discussions and to give their views to the Board. Extraordinary General Meetings are held as and when required. At the General Meetings, the Directors will respond to the shareholders queries. Proposed resolutions for special business included in the notice of meeting will be accompanied by an explanatory statement to facilitate shareholders understanding and evaluation of issues involved. Statement of Directors Responsibility for Preparing the Financial Statements The Board is responsible for ensuring that the financial statements are properly drawn up in accordance with Malaysian Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the state of affairs of the SEB Group as at 30 June 2016 and of the results and the cash flow of the SEB Group for the financial period ended on that date. In preparing the financial statements, the Directors have adopted suitable accounting policies and applied them consistently, and made estimates and judgements which are reasonable and prudent. The financial statements have been prepared on a going-concern basis. The statement by Directors pursuant to section 169 of the Companies Act, 1965 is set out on page

31 AUDIT COMMITTEE REPORT 1. COMPOSITION OF AUDIT COMMITTEE Chairman Chan Foong Ping * Members Tan Sri Ahmad Fuzi Bin Abdul Razak Tan Ah Tan Ah Ping Independent Non-Executive Director Independent Non-Executive Director cum Chairman Non-Independent Non-Executive Director * Appointed on 22 April 2016 to replace Mr. Chiam Tau Meng who resigned as Director of the Company on the same date. 2. FREQUENCY OF MEETINGS Audit Committee will meet at least once a quarter and such additional meetings as the Chairman shall decide in order to fulfil its duties. In addition, the Chairman may call a meeting if a request is made by any Committee member, the Company s Executive Director, the external auditors or the internal auditors where applicable. The Executive Director and representatives of internal audit should normally attend the Audit Committee meetings. Other Board members may attend meeting upon the invitation of the Audit Committee. The Company Secretary shall be responsible for keeping the minutes of meetings of the Committee, and circulating them to Committee members and to other Members of the Board. A quorum for a meeting shall be two (2) members, with the majority of the members present shall be Independent Directors. The Board must prepare an Audit Committee Report at the end of the financial year in the Annual Report of the Company which summarises the Audit Committee s activities during the year and the related significant findings. 3. AUTHORITY The Audit Committee is authorised to investigate any activity of the Company within its Terms and Reference and all employees shall be directed to co-operate with any request made by the Audit Committee. The Audit Committee shall have unrestricted access to any information pertaining to the Company and have direct communication channels with the external and internal auditors, when applicable and to the senior management of the Group. The Audit Committee shall be empowered to retain persons or experts having special competence as necessary to assist the Audit Committee in fulfilling its responsibilities. The Audit Committee also has the rights to convene meetings with external auditors, internal auditors or both, without the attendance of executive Board members and employees at least twice a year. 29

32 AUDIT COMMITTEE REPORT (cont d) 4. DUTIES AND RESPONSIBILITIES The duties and responsibilities of the Audit Committee shall be as follows: to consider and recommend the appointment of the external auditors, the audit fees and any other related matters; to oversee all matters pertaining to audit including the review of the audit plan and audit report with the external auditors; to review any letters of resignation from the external auditors or suggestions for their dismissal; To convene meetings twice a year within the financial period with the external auditors, the internal auditors or both excluding the attendance of other Directors and employees of the Group, whenever deemed necessary; 30 To review the quarterly and annual financial statements of the Company and the Group prior to the approval by the Board of Directors, focusing particularly on: Any changes in or implementation of major accounting policy changes. Significant and unusual events. Significant adjustments arising from the audit. The going concern assumption. Compliance with Financial Reporting Standards issued by the Malaysian accounting Standards Board and other legal requirements. The accuracy and adequacy of the disclosure of information essential to a fair and full presentation of the financial affairs of the Group. The Chairman of the Audit Committee should engage on a continuous basis with senior management, such as the Chairman, the Executive Director, the Financial Controller, the external auditors as well as internal auditors in order to kept informed of matters affecting the Company. in relation to the internal audit function : review the Statement on Risk Management and Internal Control to be published in the Annual Report; review the adequacy of the scope, function and resources of the internal audit function, and that it has the necessary authority to carry out its works; review the internal audit programme and results of the internal audit process and, where necessary, ensure that appropriate actions are taken on the recommendations of the internal audit function; review any appraisal or assessment of the performance of members of the internal audit function; review the appointment or re-appointment of the internal auditors, the audit fee and questions of resignation or dismissal.

33 AUDIT COMMITTEE REPORT (cont d) 4. DUTIES AND RESPONSIBILITIES (cont d) to review any related parties transactions and conflict of interest situations that may arise within the Company or the Group including transaction, procedure or course of conduct that raises a question of management integrity; to review the application of corporate governance principles and the extent of the Group s compliance with the best practices set out under the MCCG 2012 directives and guidelines established by the relevant regulatory bodies; to consider all areas of significant financial risk and arrangements in place to mitigate those risks to acceptable level; to ensure that the Group is in compliance with the regulations of the Companies Act 1965, listing Requirements of Bursa Securities and other legislative and reporting requirements; to identify and direct any special project or investigate and to report on any issues or concerns in regards to the management of the Group; and such other functions as may be mutually agreed upon by the Audit Committee and the Board. 5. AUDIT COMMITTEE MEETING ATTENDANCE The Audit Committee was formed by the Board on 3 September During the financial period under review a total of eleven (11) meetings were held. Details of attendance of the Directors at the Audit Committee meetings held during the financial period are as follows: N no. of Meetings Name of Directors attended Chairman Chan Foong Ping Independent Non-Executive Director 2/2 (appointed on 22 April 2016) Chiam Tau Meng Independent Non-Executive Director 9/9 (resigned on 22 April 2016) Members Tan Sri Ahmad Fuzi Bin Independent Non-Executive Director 11/11 Abdul Razak cum Chairman Tan Ah Tan Ah Ping Non-Independent Non-Executive Director 2/2 (appointed on 22 April 2016) Wong Choon Cheon non-independent Non-Executive Director 4/4 (retired on 9 July 2015) Dato Dr. Ir Andy Seo Kian Haw Independent Non-Executive Director 7/7 (resigned on 1 February 2016) 31

34 AUDIT COMMITTEE REPORT (cont d) 6. SUMMARY OF WORK During the financial period, the Audit Committee had carried out the following works: a) Reviewed the quarterly financial results and announcements prior to submission to the Board of Directors for consideration and approval; b) Reviewed the audit plan of the external auditors in terms of their scope of audit prior to the commencement of annual audit; c) Reviewed the audit reports in relation to audit and accounting issues arising from the audit, matters arising from the audit of the Group in meetings with the external auditors without the presence of the executive Board members and management; d) Considered the nomination of external auditors for recommendation to the Board re-appointment; e) Reviewed the internal audit plan, findings and reports; f) Reviewed the recurrent related party transactions and control procedures to ensure that these transactions are fair and reasonable to and not to the detriment of minority shareholders. 7. INTERNAL AUDIT FUNCTION The internal audit function is essential to assist the Board in obtaining the assurance of the system of internal control maintained by the management. To achieve this objective, the Company outsourced its internal audit function to an external consulting company, NGL Tricor Governance Sdn Bhd. The audit team members are independent of the activities audited by them. The internal auditors review and assess the Group s system of internal control and report to the Audit Committee. The Audit Committee approves the annual internal audit plan before the commencement of the internal audit reviews for each financial year. During the financial period, the internal auditors conducted reviews on the operations of the Group and presented their reports to the Audit Committee. The findings and areas for improvements identified were communicated to the management for the necessary corrective action and being followed up and reported to the audit committee accordingly. 32

35 RISK MANAGEMENT & INTERNAL CONTROL INTRODUCTION Pursuant to Paragraph (b) of the Listing Requirements of Bursa Securities, the Board is pleased to present this Statement which illustrates the nature and scope of risk management and internal control of the Group during the financial period ended 30 June BOARD RESPONSIBILITY The Board is committed to maintain a sound system of internal control. In addition, the Board is also responsible for the Group s risk management and to review the adequacy, integrity and effectiveness of these systems to safeguard shareholders investment and Group s assets. The system of internal control is reviewed by the Board in accordance with the guidelines for Directors of listed issuers on the Statement on Risk Management and Internal Control ( Guidelines ). Due to inherent limitations in any system of internal control, such systems can only manage, rather than eliminate risk of failure in achieving the Group s business objectives and to provide reasonable, but not provide absolute, assurance against material misstatement or loss. THE SYSTEM OF INTERNAL CONTROL The principal elements of the Group s system of internal controls are summarised as follows: 1. A documented hierarchical organisation structure defining the line of management responsibility, authority and appropriate reporting structure; 2. Internal policies, procedures and manuals are updated from time to time. These policies, procedures and manual are further strengthened with the implementation of ISO 9001:2008 Quality Management System; 3. Financial statements and management information are provided to the Audit Committee and the Board on a quarterly basis for review. These reviews help the Audit Committee and the Board members to complement its understanding of the risk management in the Group; 4. Annual budgets are being presented and reviewed by the Board and Audit Committee. Status of order books, sales and work in progress are being monitored regularly by the management via management reporting system, highlighting significant variances between actual and budget; 5. Management and operational meetings are held to monitor and review the operational performance and changes in the business environments. These meetings are led by executive directors and attended by the senior management; 6. Significant corporate matters and its status discussed at the management meetings, if any are brought to the Board meetings for further deliberation and review by the Board members; and 7. Appointment of staff is based on the required level of qualification, experience and competency to fulfill their responsibilities. Trainings and development programs are provided as part of the management succession plan for selected staff to further enhance their skill and capability. 33

36 RISK MANAGEMENT & INTERNAL CONTROL (cont d) MONITORING AND REVIEW OF THE SYSTEM OF INTERNAL CONTROL During the period, major contributor of the Group s losses arose mainly from the SAMUR project due to cost overrun. Pursuant to an independent review commissioned by the Board to identify the causes of the cost overrun, weaknesses in controls relating to project management as well as lapses in internal controls had been identified. In response to these findings, the Board has taken measures to strengthen the internal controls relating to project management. In addition, a new Project Management Team has been set up for better project management coordination and control of site work and a project cost control team has also been formed to monitor the project costs on a proactive basis to ensure that the project costs are managed within budgets. Meetings between the project teams and supporting teams are conducted on regular basis so that project issues can be rectified immediately. 34 However, in view of the limitations that are inherent in any internal control system, such a system is designed to manage rather than to eliminate the risk of failure to achieve business objectives. Accordingly, the internal control system can only provide a reasonable combination of preventive, detective and corrective measures but not absolute assurance against losses or fraud. The system of internal control is reviewed by the Board in accordance with the Guidelines. RISK MANAGEMENT FRAMEWORK The Board regards risk management as an integral part of the business operations. The Executive Director and the senior management have put in place an ongoing process for identifying, evaluating and managing the significant risks faced by the Group throughout the financial period under review and up to the date of approval of this Statement for inclusion in this Annual Report. The Management s risk management initiative includes delegating the responsibilities of identifying and managing risk to the respective Head of each business units. Significant risk on daily operational matters are identified and discussed regularly during daily operational meetings. In addition, significant risks identified are also brought to the attention of the Audit Committee at their scheduled meetings. This is to ascertain risk is properly monitored, managed, and mitigated to an acceptable level. The Executive Director also reports to the Board on significant changes in the business and the external environment which affects the operation. Financial information, key performance and risk indicators are also reported on a quarterly basis to the Board. INTERNAL AUDIT FUNCTION The Group has an in-house internal auditor and has outsourced its internal audit function to an external consulting company to review the adequacy and effectiveness of the internal control systems of the business units. The internal auditors adopted a risk-based approach and prepared the audit strategy and plan based on the risk profiles of the business units of the Group. Audits were carried out according to the audit plan approved by the Audit Committee. The internal audit reports from the annual audits undertaken are presented to the Audit Committee at its regular meetings for review, discussion and direct actions on matters pertaining to reports, which among other matter, include findings relating to the adequacy and effectiveness of the internal control system of the Group.

37 RISK MANAGEMENT & INTERNAL CONTROL (cont d) INTERNAL AUDIT FUNCTION (cont d) After the Audit Committee had deliberated on the internal audit reports, the same were then forwarded to the relevant Head of the respective business units of the specific audit subject for attention and necessary actions. The relevant Head of the respective business units is responsible for ensuring recommended corrective actions on reported weaknesses were taken within the required time frame. A matrix which covers the overall audit ratings, nature of work and scope, and audit issues and its priorities have been developed by the internal auditors as a template to guide the conduct of the follow up audit. The total cost incurred for the financial period ended 30 June 2016 was approximately RM42, REVIEW OF STATEMENT BY EXTERNAL AUDITORS In accordance with the Paragraph of the Listing Requirements of Bursa Securities, the external auditors have reviewed this Statement and reported that nothing has come to their attention that causes them to believe that the contents of this Statement is inconsistent with their understanding of the actual processes carried out in the Group. CONCLUSION The Board acknowledges its overall responsibility for ensuring a sound and effective system of risk management and internal control is maintained throughout the Group to safeguards shareholders investment and Group s assets. The Group has received assurance from the Executive Director that regular review of its effectiveness and adequacy of the Group s internal controls will be in placed to ensure that risk management and internal control system is operating adequately and satisfactorily, in all material aspects, based on the risk management and internal control system of the Group. Taking into consideration the assurance from the Executive Director, input from the internal auditors and the measures taken in strengthening the Group s internal controls relating to project management, the Board is of the view that the Group has rectified the identified weaknesses in internal controls during the financial period under review and up to the date of the issuance of the financial statements. The Board is committed to maintain a sound system of internal control and will strive for continuous improvement where necessary to further enhance the Group s system of internal control. This Statement was approved by the Board on 11 October

38 Other Compliance Information 1. SHARE BUY-BACKS For the financial period ended 2016, our company has not purchased its own shares from the open market. 2. OPTIONS, WARRANTS OR CONVERTIBLE SECURITIES The Company has not issued any options, warrants or convertible securities during the financial period under review. 3. AMERICAN DEPOSITORY RECEIPT ( ADR ) OR GLOBAL DEPOSITORY RECEIPT ( GDR ) The Company has not sponsored any ADR or GDR programme during the financial period under review. 4. IMPOSITION OF SANCTIONS AND/OR PENALTIES No sanctions and/or penalties have been imposed by any regulatory bodies on the Company or its subsidiaries, or on the Directors or management of the Company or its subsidiaries during the financial period under review. 5. AUDIT AND NON-AUDIT FEES The audit fees for the Company and the Group are RM222, and RM261, An amount of RM3, was incurred to the external auditors by the Company for the review on the Statement of Risk Management and Internal Control. 6. MATERIAL CONTRACTS Other than the related party transactions as disclosed in Note 34 to the Financial Statements, there were no material contracts entered into by the Company and its subsidiaries involving the Directors and major shareholders interest, either still subsisting at the end of the financial period ended 30 June 2016 or entered into since the end of the previous financial year. 7. PROFIT FORECAST AND PROFIT GUARANTEE During the financial period under review, there were no profit guarantees given by the Company. 36

39 Other Compliance Information (cont d) 8. RECURRENT RELATED PARTY TRANSACTIONS OF REVENUE NATURE The details of the related party transactions were disclosed in Note 34 to the Financial Statements for the financial period ended 30 June 2016 on page VARIATION IN RESULTS FOR THE FINANCIAL period There were no material variance between the audited results for the financial period ended 30 June 2016 and the unaudited results previously announced. 37

40 financial statements 39 Directors Report 44 Statement by Directors 44 Statutory Declaration 45 Independent Auditors Report 47 Statements of Financial Position 49 Statements of Profit or Loss and Other Comprehensive Income 51 Statements of Changes in Equity 53 Statements of Cash Flows 56 Notes to the Financial Statements