MCE HOLDINGS BERHAD ( K)

Transcription

1 ( K)

2 1 CONTENTS 02 Notice of Annual General Meeting 04 Corporate Information 06 5 Years Group Financial Highlights 08 Profile of Directors 10 Profile of Key Senior Management 11 Corporate Governance Statement 21 Audit Committee Report 25 Statement on Risk Management and Internal Control 28 Corporate Social Responsibility Statement 33 Statement of Directors Responsibility in Relation to the Financial Statements 34 Chairman s Statement 36 Directors Report 39 Statement by Directors 39 Statutory Declaration 40 Independent Auditors Report 42 Statements of Financial Position 43 Statements of Profit or Loss and Other Comprehensive Income 44 Statement of Changes in Equity 46 Statements of Cash Flows 48 Notes to the Financial Statements 92 List of Properties 93 Analysis of Shareholdings Proxy Form

3 2 Notice of 1 st Annual General Meeting NOTICE IS HEREBY GIVEN THAT the 1st Annual General Meeting of MCE Holdings Berhad will be held at the Hop Sing II Hall, Ponderosa Golf & Country Club, 10-C, Jalan Bumi Hijau Tiga, Taman Molek, Johor Bahru, Johor on Tuesday, the 20th day of December, 2016 at 9.30 am for the following purposes: AS ORDINARY BUSINESS AGENDA 1. To receive the Audited Financial Statements for financial period ended 31 July 2016 together with the Reports of the Directors and Auditors thereon. 2. To re-elect Directors retiring pursuant to Article 82 of the Company s Articles of Association:- i) Mr Tai Lam Shin ii) Dr Goh Kar Chun iii) Mr Loo Shen Chang iv) Mr Lim Ming Kee (Mr Lim has notified that he does not wish to seek re-election as a Director and accordingly will retire as a Director upon the conclusion of the AGM) 3. To appoint Crowe Horwath as Auditors of the Company for the year ending 31 July 2017 and to authorise the Directors to fix their remuneration. (See Explanatory Note 1) Ordinary Resolution 1 Ordinary Resolution 2 Ordinary Resolution 3 Ordinary Resolution 4 AS SPECIAL BUSINESS To consider and if thought fit, to pass the following resolutions :- ORDINARY RESOLUTION 4. PROPOSED DIRECTORS FEE To approve the payment of Directors Fees of RM265,538 for the financial period ended 31 July ORDINARY RESOLUTION 5. PROPOSED RE-APPOINTMENT OF ENCIK SAMAD BIN KASSIM THAT pursuant to Section 129(6) of the Companies Act, 1965, Encik Samad bin Kassim who has attained the age of 70 years and retires pursuant to Section 129(2) of the Companies Act, 1965 be and is hereby re-appointed as a Director of the Company to hold office until the next annual general meeting of the Company. ORDINARY RESOLUTION 6. PROPOSED RETENTION OF INDEPENDENT DIRECTOR THAT Mr. Tai Lam Shin who has served as an Independent Non-Executive Director for a cumulative term of more than 9 years be retained and remain as an Independent Director of the Company. Ordinary Resolution 5 Ordinary Resolution 6 Ordinary Resolution 7 7. To transact any other business for which due notice shall have been given in accordance with the Company s Articles of Association and/or the Companies Act, BY ORDER OF THE BOARD LEE WEE HEE (MAICSA ) POW JULIET (MAICSA ) Secretaries Date : 28 November 2016

4 Notice of 1 st Annual General Meeting (cont d) 3 NOTE : 1. This Agenda item is meant for discussion only as the provision of Section 169(1) of the Companies Act, 1965 and the Company s Articles of Association do not require a formal approval of the shareholders and hence, is not put forward for voting. 2. A member entitled to attend and vote at the Meeting is entitled to appoint one or more proxies to attend and vote in his stead. 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. Notwithstanding this, a member entitled to attend and vote at the Meeting is entitled to appoint any person as his proxy to attend and vote instead of him at the Meeting. There shall be no restriction as to the qualification of the proxy. A proxy appointed to attend and vote at the Meeting shall have the same rights as the member to speak at the Meeting. 3. Where a member appoints more than one (1) proxy, the appointment shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy. 4. Where a member is an authorised nominee as defined under The Securities Industry (Central Depositories) Act, 1991, it may appoint at least one proxy 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 beneficial 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. 5. The instrument appointing a proxy shall be in writing under the hand of the appointer or of his attorney duly authorised in writing or, if the appointer is a corporation, either under Seal or under the hand of an officer or attorney duly authorised. 6. To be valid, the form of proxy must be deposited at the Registered Office of the Company situated at Suite 5.11 & 5.12, 5th Floor, Menara TJB, No. 9, Jalan Syed Mohd. Mufti, Johor Bahru, Johor not less than 48 hours before the time for holding the meeting or any adjournment thereof or in the case of a poll, not less than 24 hours before the time appointed for the taking of the poll. 7. In respect of deposited securities, only members whose names appear on the Record of Depositors on 14 December 2016, shall be eligible to attend the meeting or appoint proxy(ies) to attend and/or vote on his behalf. Statement Regarding Effect Of Resolutions Under Special Business 8. Directors Fees The Proposed Ordinary Resolution 5, if passed, will authorise the payment of Directors fees pursuant to Article 84 of the Articles of Association. 9. Re-appointment of Director The proposed Ordinary Resolution 6, will result in the re-appointment of Encik Samad bin Kassim, a Director who has attained the age of 70 years to hold office until the next annual general meeting of the Company. Pursuant to Section 129(6) of the Companies Act, 1965, the resolution to re-appoint Encik Samad bin Kassim requires a majority of not less than three fourth of such members of the Company as being entitled so to do vote in person or by proxy. 10. Proposed Retention of Independent Director The proposed Ordinary Resolution 7, if passed, will allow Mr Tai Lam Shin to be retained and continue acting as an Independent Director to fulfill the requirements of Paragraph 3.04 of Bursa Malaysia s Main Market Listing Requirements and in line with the recommendation No 3.2 of the Malaysian Code of Corporate Governance The full details of the Board s justification and recommendations for the retention of Mr Tai Lam Shin as an Independent Director is set out on Page 14 of the Board s Corporate Governance Statement in the 2016 Annual Report.

5 4 Corporate Information BOARD OF DIRECTORS Chairman Group Managing Director Group Executive Director Directors Samad Bin Kassim (Independent Non-Executive Director) Goh Kar Chun (Non-Independent Executive Director) Lim Ming Kee (Non-Independent Executive Director) Tai Lam Shin (Senior Independent Non-Executive Director) Loo Shen Chang (Independent Non-Executive Director) AUDIT COMMITTEE Chairman Members Loo Shen Chang (Independent Non-Executive Director) Tai Lam Shin (Senior Independent Non-Executive Director) Samad Bin Kassim (Independent Non-Executive Director) NOMINATION & REMUNERATION COMMITTEE Chairman Members Tai Lam Shin (Senior Independent Non-Executive Director) Loo Shen Chang (Independent Non-Executive Director) Samad Bin Kassim (Independent Non-Executive Director) SECRETARIES Lee Wee Hee (MAICSA ) Pow Juliet (MAICSA ) REGISTERED OFFICE Suite 5.11 & 5.12, 5th floor, Menara TJB, No. 9, Jalan Syed Mohd. Mufti, Johor Bahru, Johor, Malaysia. Tel : Fax : REGISTRAR Shareworks Sdn Bhd ( U) No. 2-1, Jalan Sri Hartamas 8, Sri Hartamas, Kuala Lumpur. Tel : Fax : /

6 Corporate Information (cont d) 5 AUDITORS Crowe Horwath (AF ) E-2-3 Pusat Komersial Bayu Tasek Persiaran Southkey 1, Kota Southkey Johor Bahru, Johor, Malaysia. PRINCIPAL PLACE OF BUSINESS No. 2 & 4, Jalan Waja 7, Kawasan Perindustrian Pandan, Johor Bahru, Johor, Malaysia. PRINCIPAL BANKERS AmBank (M) Berhad HSBC Amanah Malaysia Berhad SUBSIDIARY COMPANIES Multi-Code Electronics Industries (M) Bhd ( K) Beaucar Accessories (M) Sdn Bhd ( P) Multi-Code Technologies (M) Sdn Bhd ( P) Vantage Realm Sdn Bhd ( M) Vantage Medical Centre Sdn Bhd ( D) Multi-Code Electronics Industries (India) Private Limited (U74140HR2013PTC050859) STOCK EXCHANGE LISTING Main Market of Bursa Malaysia Securities Berhad WEBSITE

7 6 5 Years Group Financial Highlights Multi-Code Electronics Industries (M) Berhad MCE Holdings Berhad RESULTS (RM 000) (RM 000) (RM 000) (RM 000) (RM 000) Revenue 111, , ,768 90,028 76,901 Profit / (Loss) before tax 14,702 31,586 10,172 (229) (2,535) Profit / (Loss) after tax 10,787 29,200 8,991 (1,126) (2,192) Net profit/ (loss) attributable to owners of the parent 10,917 28,880 9,113 (1,075) (2,287) KEY CONSOLIDATED STATEMENTS OF FINANCIAL POSITION DATA Total assets 97, , , , ,968 Shareholders equity 67,037 93,253 97,036 93,723 90,955 Share capital 44,405 44,405 44,405 44,405 44,405 Loans and receivables 31,769 56,268 41,934 32,559 27,633 Total borrowings 6,465 4,934 12,169 9,169 5,578 KEY FINANCIAL STATISTICS / INDICATORS Basic earning/ (loss) per share (sen) (2.42) (5.15) Net dividend per share (sen) Net assets per stock unit attributable to ordinary equity holders of the Company (RM) Return on shareholding equity (%) (1.15) (2.51) Price earning ratio N/A* N/A* Gearing ratio * N/A - Not applicable

8 5 Years Group Financial Highlights 7 Revenue and Profit/(loss) after tax RM' , ,000 80,000 60,000 40,000 20, ,091 10, ,173 29,200 Revenue [Multi-Code Electronics Industries (M) Bhd] Profit/ (loss) after tax [Multi-Code Electronics Industries (M) Bhd] Revenue [MCE Holdings Berhad] Profit/ (loss) after tax [MCE Holdings Berhad] ,768 8,991 90,028 (1,126) 76,901 (2,192) 2016 Total assets [Multi-Code Electronics Industries (M) Bhd] Total assets and Shareholders' equity RM' ,000 Shareholders' equity [Multi-Code Electronics Industries (M) Bhd] Total assets [MCE Holdings Berhad] Shareholders' equity [MCE Holdings Berhad] 120, ,000 80,000 60,000 40,000 97,563 67, ,510 93, ,000 97, ,843 93, ,968 90,955 20, Basic earning/(loss) per share and Net Dividend per share Sen Basic earning/ (loss) per share [Multi-Code Electronics Industries (M) Bhd] Net dividend per share [Multi-Code Electronics Industries (M) Bhd] Basic earning/ (loss) per share [MCE Holdings Berhad] (2.42) - (5.15) Net assets per stock unit attributable to ordinary equity holder of the Company Return on shareholding equity RM 1.51 Multi-Code Electronics Industries (M) Bhd MCE Holdings Berhad % Multi-Code Electronics Industries (M) Bhd MCE Holdings Berhad 9.39 (1.15) (2.51) 2016

9 8 Profile of Directors ENCIK SAMAD BIN KASSIM Encik Samad Bin Kassim, Malaysian, aged 70, is the Chairman of the Board and an Independent Non-Executive Director of the Company. He was appointed to the Board on 10th June He was on the Board of Multi-Code Electronics Industries (M) Berhad from 2009 to He is a member of the Nomination and Remuneration Committee and the Audit Committee. He holds a Bachelor of Economics from University of Malaya and a Master in Public and International Affairs (MPIA) from University of Pittsburg, USA. He started his career as an Assistant Secretary in Ministry of Works in 1970 and later as an Economist in the Highway Planning Unit in In 1974, he was appointed as Assistant Director of the Services Division in the Public Services Department. He left the Public Services Department in 1979 and took up the position of Senior Assistant Secretary in Ministry of International Trade and Industry (MITI). In 1989, he was posted to Vienna, Austria as the Trade Commissioner of MITI. In 1996, he was appointed as the Director of MITI (Industry Division) in Kuala Lumpur. In 2000, he was appointed as Chief Executive Officer of Small and Medium Industries Development Corporation (SMIDEC) until his retirement in He sits on the Board of Kinsteel Berhad, public company listed on Bursa Malaysia Securities Berhad. He also sits on the Board of Ingress Corporation Berhad and Master Tec Holdings Berhad, both non-listed public companies. He has no family relationship with any directors and/or major shareholders of the Company and does not have any conflict of interest with the Company. He has had no convictions for any offences within the past 10 years. He directly holds 100,000 ordinary shares of RM1.00 each in the Company. MR. GOH KAR CHUN Mr. Goh Kar Chun, Malaysian, aged 40, is the Group Managing Director of the Company. He was appointed to the Board on 10th June He has been on the Board of Multi-Code Electronics Industries (M) Berhad since He holds a degree in Bachelor of Medicine, Bachelor of Surgery and Bachelor of Obstetrics from the Faculty of Medicine, University College Dublin, Ireland. Subsequently he obtained a Master of Business Administration from Victoria University, Australia. In year 2000, he worked as a medical doctor at ST. Vincent University Hospital, Ireland. He joined Multi-Code Electronics Industries (M) Berhad as a management staff responsible for marketing function in With his experience garnered in the automotive industry, he was appointed as Executive Director of Multi-Code Electronics Industries (M) Berhad in year 2008 primarily responsible for the overall group business development, marketing and sales. As at November 2010, his scope of work had been expanded to include direct responsibility on production, engineering and quality assurance functions. He does not hold any directorship in any other public Company. He has no family relationship with any directors of the Company and does not have any conflict of interest with the Company. He has had no convictions for any offences within the past 10 years. He is a major shareholder of the Company holding 9,997,240 ordinary shares of RM1.00 each and is a nephew of Mr. Goh Chai Siong, a major shareholder of the Company. He has deemed interest in 350,000 ordinary shares of RM1.00 each in the Company held by his spouse, Chuah Sai Ling, pursuant to Section 134 (12) (c) of the Companies Act 1965.

10 Profile of Directors (cont d) 9 MR. LIM MING KEE Mr. Lim Ming Kee, Malaysian, aged 57, is the Group Executive Director of the Company. He was appointed to the Board on 10th June He has been on the Board of Multi-Code Electronics Industries (M) Berhad since He obtained his Bachelor of Management Studies degree majoring in Accounting and Finance from the University of Waikato, New Zealand in He is a Chartered Accountant of the Malaysian Institute of Accountants since 24th July Mr Lim, has over 30 years of experience in finance and accounting, manufacturing and corporate management garnered from public accounting firms, public listed companies and multinational corporations. In 1998, he together with his co-founders, successfully established a company producing plastic injection moulded parts and components for the audio-video, telecommunication, computer and office equipment sectors for the electrical and electronics industries. He sits on the Board of Cabnet Holdings Berhad, a non-listed public company. He has no family relationship with any directors and/or major shareholders of the Company and does not have any conflict of interest with the Company. He has had no convictions for any offences within the past 10 years. He directly holds 778,900 ordinary shares of RM1.00 each in the Company. MR. TAI LAM SHIN Mr. Tai Lam Shin, Malaysian, aged 59, is an Independent Non-Executive Director of the Company. He was appointed to the Board on 10th June He was on the Board of Multi-Code Electronics Industries (M) Berhad from 2008 to He is the Chairman of the Nomination and Remuneration Committee and a member of the Audit Committee. He was identified by the Board as the Senior Independent Non-Executive Director of the Company. He is a Chartered Accountant of the Malaysian Institute of Accountants and Fellow of The Association of Chartered Certified Accountants, United Kingdom. He is experienced and exposed in areas of audit assurance, financial and corporate advisory, due diligence review and reporting accountants to public listed corporations, multinationals and private companies. He sits on the Board of Keck Seng (Malaysia) Berhad, a public company listed on Bursa Malaysia Securities Berhad. He has no family relationship with any directors and/or major shareholders of the Company and does not have any conflict of interest with the Company. He has had no convictions for any offences within the past 10 years. He directly holds 20,000 ordinary shares of RM1.00 each in the Company. MR. LOO SHEN CHANG Mr. Loo Shen Chang, Malaysian, aged 51, is an Independent Non-Executive Director of the Company. He was appointed to the Board on 10th June He is the Chairman of the Audit Committee and the member of the Nomination and Remuneration Committee. He was on the Board of Multi-Code Electronics Industries (M) Berhad from 2015 to He is an accountant by profession and a member of Malaysian Institute of Certified Public Accountants and Malaysia Institute of Accountants. He began his career in 1986 as an articled clerk in an accounting firm and has since accumulated more than 25 years of post-qualifying experience in the field of accounting and corporate finance activities, having held senior positions in several private and public listed companies. Currently, he is the Chief Operating Officer of LYL Group of Companies, which has vast interest in property development activities and real estate investments. He does not hold any directorship in any other public company. He has no family relationship with any directors and/or major shareholders of the Company and does not have any conflict of interest with the Company. He has had no convictions for any offences within the past 10 years. He does not hold any shares of the Company.

11 10 Profile of Key Senior Management ENCIK MOHD FARIDH BIN DOL Encik Mohd Faridh Bin Dol, Malaysian, aged 50, is the Head of Business Development and Marketing. He joined Multi-Code Electronics Industries (M) Berhad in December He obtained his Bachelor Business Administration (Accounting) from Pacific Lutheran University, Tacoma Washington USA. He has more than 25 years of working experience in automotive industry, both in Original Equipment Manufacturer (OEM) carmaker and automotive component makers. MR. LIM CHERN TIN Mr. Lim Chern Tin, Malaysian, aged 49, is the Group Operations Manager of Multi-Code Electronics Industries (M) Berhad. He holds an engineering diploma from Federal Institute of Technology. He joined Multi-Code Electronics Industries (M) Berhad in August 1999 as its Quality Assurance (QA) Manager and was promoted to the position of Group Engineering and QA Manager in May He was subsequently re-designated to the position of Group Operations Manager in December He has more than 26 years of working experience in areas of quality assurance, engineering and production. MS. GOH ANNE Ms. Goh Anne, Malaysian, aged 35, is the Group Financial Controller (Chief Financial Officer) of the Company. She joined Multi- Code Electronics Industries (M) Berhad in July She obtained her Bachelor of Business from University of Technology Sydney, Australia. She is a Member of the Certified Practising Accountants, Australia and Malaysian Institute of Accountants. She has more than 11 years of working experience in finance and accounting garnered from a public accounting firm and public listed companies. Save as disclosed, none of the Key Senior Management have:- 1. any directorship in public companies and listed issuers; 2. any family relationship with any directors and/or major shareholders of the Company; 3. any conflict of interest with the Company; 4. any conviction for offences within the past 5 years other than traffic offences, and 5. any public sanction or penalty imposed by the relevant regulatory bodies during the financial year.

12 Corporate Governance Statement 11 MCE Holdings Berhad s listing on 1st July 2016 was pursuant to an Internal Reorganisation, by way of a Members Scheme of Arrangement under Section 176 of the Companies Act 1965 undertaken by Multi-Code Electronics Industries (M) Berhad ( MCEIB ) culminating in the transfer of the listing status of MCEIB to MCE Holdings Berhad ( Internal Reorganisation of MCEIB ). Accordingly the disclosures in this Report cover the period when MCEIB was listed and up to the time its listing status was taken over by MCE Holdings Berhad ( MCE or the Company ) from 1st July 2016 onwards. The Board of Directors ( the Board ) of MCE recognises the importance of good corporate governance and continues to be committed to ensure that high standards and appropriate practices are in place throughout the MCE Group to protect, enhance and support the business affairs and financial performance of the Group with the ultimate objective of safeguarding shareholders investment and enhancing shareholders value. On this note, the Board is pleased to report the manner in which the Board has applied the principles of corporate governance and the extent of its compliance with the recommendations set out in the Malaysian Code on Corporate Governance 2012 ( the Code ) during the financial year. THE BOARD OF DIRECTORS Board Composition The Code emphasises the importance of right board composition in enhancing the Board decision making process and the transparency of policies and procedures in selection and evaluation of board members. The present Board composition comprises Executive and Non-Executive Directors with a mix of suitably qualified and experienced professionals enabling the Board to carry out its responsibilities effectively. In accordance with Article 75 of the Company s Articles, unless otherwise determined by General Meeting, the number of directors shall not be less than two (2) nor more than twelve (12). Presently, the Board consists of five (5) members, two (2) are Executive Directors and three (3) are Independent Non-Executive Directors which exceed the prescribed one-third (1/3) requirement. All Independent Non-Executive Directors are independent of management and have no family or business relationships with the Executive Directors and major shareholders which would interfere with the exercise of their independent judgement. The Chairman of the Board is an Independent Non-Executive Director while the number of independent directors maintained by the Board currently is above the prescribed composition and number of independent directors recommended in the Code and the Bursa Malaysia Securities Berhad ( Bursa Malaysia ) Main Market Listing Requirements ( Listing Requirements ). The positions of Chairman and Group Managing Director ( GMD ) are separately held ensuring balance of power, accountability and division of roles and responsibilities of the Board and the Management of the Group s business and operations. The Board has developed descriptions for responsibilities of the Board Chairman, GMD, the individual board members as well as the Group Financial Controller (Chief Financial Officer). The details of these responsibilities are articulated in the Board Charter which is accessible at Descriptions of the background of each director are presented on pages 8 and 9. The Board acknowledges the benefit of gender diversity in the Board and has set a policy that at least one (1) member of the Board will be of the female gender. The Board through the Nomination and Remuneration Committee will on a continuous basis source and review appropriate candidates identified, to ensure that Board s policy on boardroom diversity is met by having at least one (1) female member on the Board.

13 12 Corporate Governance Statement (cont d) Supply of Information and Board Effectiveness It is recognised that the supply, timeliness and quality of the information affect the effectiveness of the Board to oversee the conduct of the business and to evaluate the Management performance of the Group. All information within the Group is easily accessible to the directors in furtherance of their duties. The Board affirms that they have unrestricted access to timely and appropriate information and access to the advice and services of the Company Secretary to enable it to discharge its duties. The Company Secretary together with the GMD and Group Financial Controller assist the Chairman of the Board and Chairmen of Board Committees to deal with the Board agenda and to provide the relevant information and documents to directors on a timely basis. In reviewing and analysing the quarterly interim financial results, the Board was provided with various corroborative information and data. This information was circulated to the Board members within seven (7) days prior to the Board meetings so as to provide the Directors with relevant and timely information to enable them to deliberate issues raised during Board meetings more effectively. The key business information and data cover budget, management report on operations, business development, performance of its subsidiaries, the Management s quarterly risk assessment and its status of action plans undertaken by the Risk Management Committee. Additionally, Management was also invited to brief and report in meetings of the Board and Board Committees. The powers and duties of the Directors are as set out in the Articles of Association and as prescribed at law. The Board had devised the following schedule of matters reserved for its approval in its Board Charter: - Acquisition, divestment and disposal of business and investment; Overseas ventures; Corporate Finance and Proposals; Terms of key/main agreements not within the ordinary course of business; Acquisition and disposal of Properties and Motor Vehicles; Acquisition and disposal of fixed assets, other than properties and motor vehicles, for amounts RM100,000 and above; Disposal and write offs of current assets, for amounts RM100,000 and above; Material expenditure other than capital expenditure not within the ordinary course of business, for amounts RM100,000 and above; Bank borrowings and financing arrangements; and Placements/withdrawal of bank fixed deposits. The Board was also kept informed progressively of the various requirements and updates issued by the various regulatory authorities. These requirements and updates were provided and briefed by the Management, the Company Secretary, external and internal auditors. The Management, external and internal auditors were invited to attend Board meetings to provide additional insights and professional advice on specific items on the meeting agenda. Procedurally, when external advices are necessary, the director who intends to seek such consultation or advice shall notify the Chairman for approval. Upon approval, the Chairman will facilitate obtaining such advice and, where appropriate, disseminate the advice to all Directors. The Board has the authority to conduct or direct any investigation required to fulfil its responsibilities and has the authority to retain at the Company s expense, such legal, accounting or other services, consultants, advisers or experts as it considers necessary from time to time in the performance of its duties. Support of Company Secretary Both Company Secretaries of MCE are external secretaries attached with a professional services firm, qualified to act as Company Secretary under Section 139A of the Companies Act 1965, and are associate members of the Malaysian Institute of Chartered Secretaries & Administrators. The Company Secretaries provide the required support to the Board in carrying out its duties and stewardship role, providing the necessary advisory role with regards to the Company s constitution, Board s policies and procedures as well as compliance with regulatory requirements, codes, guidelines and legislations. The Board are of the view that the Company Secretaries have been competent and kept themselves abreast with the evolving regulatory changes and developments through continuous education programmes and attendance of relevant conferences, seminars and training programmes. The Board is satisfied with the performance and support rendered by the Company Secretaries to the Board.

14 Corporate Governance Statement (cont d) 13 Board Roles and Responsibilities It is the primary governance responsibilities of the Board to lead and control the Group. The Board plans the strategic direction, development and control of the Group and has taken initiatives to embrace the responsibilities listed in the Code, which facilitate the discharge of the Board s stewardship responsibilities. When implementing the strategic plan, the Executive Directors are responsible for making and implementing operational and corporate decisions while the Non-Executive and Independent Directors ensure corporate accountability by providing unbiased and independent views, advice and judgement in safeguarding the interests of the shareholders. As explained in the earlier paragraph, the Board has defined the roles and responsibilities for the Board and its chief executive. In discharging its fiduciary responsibilities, the Board emphasises strongly during its Board meetings on the deliberation and review of the financial performance of the Group, the execution of strategic plan by GMD, the principal risks faced by the Group and effectiveness of management mitigation plan, the appraisal of executive Management and senior Management succession plans as well as the integrity of the management information and systems of internal control of the Group. The Board maintains specific Board Committees namely Audit Committee ( AC ) and Nomination and Remuneration Committee ( NRC ). These Committees ensure greater attention, objectivity and independence are provided in the deliberations of specific board agenda. The Board has defined the terms of reference for each Committee and the Chairman of these respective committees would report to the Board during the Board meetings on significant matters and salient matters deliberated in the Committees. The Board will review its Charter as and when the need arises in order to keep it current and relevant at all times. The Board Charter and policies to strengthen its board governance proceedings which include Corporate Disclosure Policy, Shareholders Communication Policy, Corporate Code of Conduct and Business Ethics and Continuing Education Policy were adopted on 30th June 2016 and are published under the caption of Board Charter in the Investor page of the Company s corporate website. Whilst the Board has not specifically defined its whistleblowing policy, it has identified the GMD and Senior Independent Non- Executive Director for staff members and other stakeholders to report violations of the Code of Conduct and Business Ethics policy. In order to further uphold the principles in this code of conduct, the Group has also implemented annual procedure for declaration of compliance and interest for all staff members. Going forward, the Board will be looking into the adoption of a formal whistleblowing policy to enhance its governance practices. Board Independence Independence is important for ensuring objectivity and fairness in board s decision making. The roles and responsibilities of the Chairman and GMD continue to be separated and the Chairman of the Board is an Independent Director. The Board has adopted the best practices for assessing the independence of independent directors annually and the tenure of an independent director should not exceed a cumulative term of nine (9) years. When the Board retains an independent director who has served in that capacity for more than nine (9) years, the Board would justify its decision and seek shareholders approval. The Board Charter provides that each director is expected to advise the Chairman immediately if he is no longer independent. Any director who have concern about the independence of a director shall immediately raise the issue during a Board meeting. The Company will make an immediate announcement to Bursa Malaysia when an independent director loses his independent status. As at the reporting date, there were no independent director s tenure which is more than nine (9) years. However, Mr. Tai Lam Shin will reach his nine (9) years tenure as Independent Director on 29th January The Board through its NRC has conducted assessment of independence of all its Independent Directors and is satisfied that the Independent Directors have fulfilled the criteria under the definition of Independent Director as stated in the Listing Requirements of Bursa Malaysia and are able to provide objective and independent judgment in deliberation of the Board s agenda. Based on the Board s assessment, the Board had recommended to put forward a resolution in the forthcoming Annual General Meeting ( AGM ) to retain Mr. Tai Lam Shin as an Independent Director. Both the NRC and the Board hold the view that a Director s independence should not solely be determined by reference to a set period of time alone and believe that the Group will benefit from long serving independent directors who have proven and demonstrated their commitment, experience and continued independence.

15 14 Corporate Governance Statement (cont d) Board Independence (cont d) The Board s and NRC s justification to retain Mr. Tai Lam Shin is premised on the following: - Mr. Tai continues to fulfil the criteria and definition of an Independent Director as set out under Paragraph 1.01 of Bursa Malaysia Listing Requirements; During his tenure in office, Mr. Tai has not developed, established or maintained any significant personal or social relationship whether direct or indirect with the Executive Directors, major shareholders or Management of the Company (including their family members) other than normal engagements and interactions on a professional level consistent and expected of him to carry out his duties as the Senior Independent Non-Executive Director and Chairman of the NRC; During his tenure in office, Mr. Tai has never transacted or entered into any transactions with, nor provided any services to the Company and its subsidiaries, the Executive Directors, major shareholders or Management of the Company (including their family members) within the scope and meaning as set forth under Paragraph 5 of Practice Note 13 of the Listing Requirements; During his tenure in office as Independent Non-Executive Director in the Company, Mr. Tai has not been offered or granted any options by the Company. Other than directors fees and allowances paid which had been the norm and been duly disclosed in the annual reports, no other incentives or benefits of whatsoever nature had been paid to him by the Company; During his tenure in office, Mr. Tai, a Chartered Accountant by profession, has demonstrated consistently his integrity, commitment and contributed effectively to the Board s decision making process; and During his tenure in office, Mr. Tai has gained significant and detailed understanding and insights into the business operations, and industry sectors in which the Group operates in. This includes an understanding of the peculiarities, strengths and weaknesses of the industry sectors thereby enabling him to offer a different perspective during the decision making process which a fresh appointee or a director holding office for a short length of time would not be able to offer. Board Commitment The underlying factors of directors commitment to the Group are devotion of time and continuous improvement of knowledge and skillsets. The Board meets at least every quarter and on other occasions, as and when necessary, to inter-alia review and approve quarterly financial results, statutory financial statements, the annual report, business ventures as well as to review the performance of the Company and its operating subsidiaries, governance matters and other business development matters. A corporate calendar of all scheduled meetings and planned events for the financial year are furnished to all Directors and the Management by the Company Secretary normally at the 1st quarter Board meeting to aid and facilitate the Directors in scheduling and meeting their time commitments. All Directors are also required to inform the Board before accepting any other directorships in other listed companies or groups. During the financial year, six (6) Board meetings were held and these meetings were attended by members of the Board with the Company Secretary in attendance as follows: - Name of Director Position Attendance Encik Samad Bin Kassim Independent Non-Executive Director 6/6 Mr. Goh Kar Chun Non-Independent Executive Director 6/6 Mr. Lim Ming Kee Non-Independent Executive Director 6/6 Mr. Tai Lam Shin Senior Independent Non-Executive Director 6/6 Mr. Loo Shen Chang Independent Non-Executive Director 4/5 Mr. Chai Lai Koon* Independent Non-Executive Director 3/3 *retired as a Director on 20th January 2016

16 Corporate Governance Statement (cont d) 15 Audit Committee The composition requirement of the AC members is in accordance with the regulatory requirements. The AC Chairman has access to all the Executive Directors, senior Management, External and Internal Auditors. On a separate note, the Board is mindful of the Listing Requirements on the review of the terms of office and performance of the AC and each of its members. The review of the terms of office and performance of the AC and each of its members are carried out annually. In accordance with the review which was carried out in line with the assessment procedures adopted by the Board, by way of peer assessment in the form of evaluation questionnaires. Following the latest review, the NRC and the Board are of the opinion that the performance of the AC has been excellent and each member of the AC has carried out and discharged their responsibilities in accordance with the AC s terms of reference. Further information on the constitution and summary of work of the AC are set out on pages 21 to 24 of this Annual Report. Nomination and Remuneration Committee The NRC was established on 13th June 2016 and is currently comprised wholly of Non-Executive Directors as follows:- Chairman : Tai Lam Shin (Senior Independent Non-Executive Director) Members : Samad Bin Kassim (Independent Non-Executive Director) : Loo Shen Chang (Independent Non-Executive Director) The functions and responsibilities of this Committee are: In respect of nomination responsibilities To oversee the selection criteria and recruitment process and recommend to the Board, candidates for all directorships to be filled by the shareholders or the Board taking into consideration the candidates :- competencies, commitment, contribution and performance; professionalism; integrity; and in the case of candidates for the position of Independent Non-Executive Directors, the candidates ability to discharge such responsibilities/functions as expected from Independent Non-Executive Directors including formalising its stand and approach to boardroom diversity. Consider, in making its recommendations, candidates for directorships proposed by the GMD and, within the bounds of practicability, by any other senior executive or any director or shareholder. Recommend to the Board, directors to fill the seats on Board Committees. Reviewing on an annual basis, that the Board s size, composition and balance are appropriate and in particular that the required mix of skills and experience and other qualities, including core competencies which Non-Executive Directors should bring to the Board are present. To oversee the development, maintenance and review of the criteria to be used in the recruitment process and the annual review and assessment of the effectiveness of the Board as a whole, the committees of the Board, and the contributions of each individual director, including an assessment of the independence of the Independent Non-Executive Directors and their length of tenure in office in line with the recommendations of the Code. To make assessment, consider justifications and make recommendations on the element of independence of an independent director should the Board wish to retain as an independent director, a person who has served in that capacity for more than nine (9) years. Review of Board s succession plans and facilitate induction and training programmes.

17 16 Corporate Governance Statement (cont d) Nomination and Remuneration Committee (cont d) In respect of remuneration responsibilities To establish, recommend and constantly review a formal and transparent remuneration policy framework and terms of employment for the Board to attract and retain directors which should be aligned with the business strategy and long term objectives of the Company taking into consideration that the remuneration of the Board should reflect the Board s responsibilities, expertise and complexity of the Company s activities. Director re-election provides an opportunity for shareholders to renew their mandate conferred to the Directors. The Articles of Association of the Company provides that all directors shall retire by rotation once in every three (3) years or at least one-third (1/3) of the Board shall retire but shall be eligible to offer themselves for re-election at the AGM. Directors who are of or over the age of seventy years (70) shall retire pursuant to Section 129 of the Companies Act 1965 and shall be re-appointed under the provision of Section 129(6) of the said Act annually. The above provisions are adhered to by the Board in every AGM. Information of directors standing for re-election are outlined in the Profile of Directors covering their details of profession, directorships in other public companies and shareholdings in the Company and their attendance of the Board meetings are set forth on page 14 of this Annual Report. The Board evaluation process is carried out by way of peer assessment, in the form of evaluation questionnaires to be reviewed and deliberated by the NRC before its findings and recommendations are tabled to the Board. The NRC had evaluated the Board s current structure, size, composition and performance during the financial year and concluded that the Board s dynamics are healthy and effective. The present members of the Board possess appropriate skills, experience and qualities to steer the Company forward. The NRC is also satisfied that the existing structure, size, composition, current mix of skills, competence, knowledge, experience and qualities of the existing Board members are appropriate to enable the Board to carry out its responsibility effectively. During the year the NRC also reviewed and recommended that Dr. Goh Kar Chun be designated and appointed as the GMD while Mr. Lim Ming Kee be designated and appointed as the Group Executive Director of MCE in line with succession plans agreed upon. Upon completion of the Internal Reorganisation of MCEIB which culminated with the listing of MCE, Dr. Goh Kar Chun was appointed as the GMD and Mr. Lim Ming Kee appointed as the Group Executive Director on 30th June The following current members of the Board who having been appointed as Directors on 10th June 2016, will retire as Directors pursuant to Article 82 of the Articles of Association at the forthcoming AGM: - a) Dr. Goh Kar Chun b) Mr. Tai Lam Shin c) Mr. Loo Shen Chang d) Mr. Lim Ming Kee Dr. Goh Kar Chun, Mr. Tai Lam Shin and Mr. Loo Shen Chang being eligible, have offered themselves for re-election. Based on the annual evaluation assessment carried out, the NRC had recommended and the Board concurred to recommend the re-election of all the three retiring Directors at the forthcoming AGM. Mr. Lim Ming Kee, the Group Executive Director, has indicated his intention not to seek re-election at the forthcoming AGM and will retire as a Director at the conclusion of the forthcoming AGM. Encik Samad Bin Kassim who has attained the age of 70 as at the date of the forthcoming AGM will be vacating his office as a Director pursuant to Section 129 (2) of the Companies Act Encik Samad Bin Kassim has indicated that he will be seeking re-appointment as a Director pursuant to Section 129(6) of the Companies Act 1965 and the NRC and Board having assessed his performance and taking note of his significant and valued contributions to the Board and its Committees, are recommending that shareholders re-appoint Encik Samad Bin Kassim as a Director of the Company at the forthcoming AGM.

18 Corporate Governance Statement (cont d) 17 Nomination and Remuneration Committee (cont d) Separately, the NRC had also reviewed the board gender diversity policy, defined the additional criteria required during the year for new director as well as reviewed and proposed to the Board for the appointment of a new director. Following are the key criteria for evaluation and selection of new board candidate: - Age; Industrial experience, skillsets and knowledge; Academic qualifications; Expected contributions to the existing and new businesses; and Expected enhancement to the board s strength and network. Upon appointment, an induction will be provided to new director in order to enable him/her to fit into the new board and to contribute and discharge his/her duties effectively. The underlying factors of directors commitment to the Group are devotion of time and continuous improvement of knowledge and skill sets. At minimum, all board members shall meet at least every quarter and on other occasions, as and when necessary, to approve quarterly financial results, statutory financial statements, the annual report as well as to review the performance of the company and its operating subsidiaries, governance matters and various matters reserved for the Board s approval. Directors Trainings The Board has defined its training policy for its board members. Each Director is expected to attend at least one (1) full day continuing education programme each year. The extent and subject matter which may vary, is left to each individual director s discretion. In order to encourage continuing director education, the Company will reimburse directors for all costs of attending two (2) programmes each financial year. However, directors with the consent of the Chairman of the NRC may at the Company s expenses attend more than the two (2) programmes each year. Annually, the Chairman of the NRC is, based on the annual assessment of each director, authorised to make recommendations for each individual director s continuing education requirements to meet the intentions and purposes of this policy. During the financial year, the directors had attended/participated the following trainings and briefings: Course Title Director(s) Date Duration attended (No. of Days) What s Next for Private Entities - MPERS/MFRS Basic Module Loo Shen Chang & Workshop on Enhanced Understanding of Risk Management Goh Kar Chun and Internal Control for Chief Financial Officers, Internal Auditors and Risk Officers Board Chairman Series : Tone from the Chair and Samad Establishing Boundaries Bin Kassim 2016 Budget Seminar Lim Ming Kee Tai Lam Shin Deloitte Tax Max Goh Kar Chun Mandatory Accreditation Programme for Directors Loo Shen Chang & of Public Listed Companies

19 18 Corporate Governance Statement (cont d) Directors Trainings (cont d) Course Title Director(s) Date Duration attended (No. of Days) 2016 Budget Seminar Tai Lam Shin Strategic Workshop II - Sailing in the Storm Lim Ming Kee Goh Kar Chun Corporate Governance Breakfast Series with Directors - Tai Lam Shin How to Maximise Internal Audit The New Auditor s Report Sharing the UK experience Samad Bin Kassim Director Accreditation Program 125/2016 (Thailand) Samad Bin Kassim An Overview of Latest Developments in MFRS Tai Lam Shin & Amendments to BM Listing Requirements & GST updates Tai Lam Shin Corporate Governance Breakfast Series : Future of Samad Auditor Reporting - The Game Changer for Boardroom Bin Kassim BOARD REMUNERATION 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 review of the remuneration of all the Board members had been conducted by the NRC and recommendations made to the Board for approval during the financial year. The directors do not participate in decisions on their own remuneration. The number of directors whose annual income falls within the following bands is set out as follows: Remuneration Bands Executive Directors Non-Executive Directors RM0 RM50,000-2 RM50,001 - RM100,000-2 RM800,001 RM850, RM1,250,001 RM1,300, The details of the total Group s remuneration paid or payable to all directors of the Company for the financial year ended 31st July 2016 are further categorised into the following components: Salaries and other Benefits- Fees emoluments in-kind Total (RM) (RM) (RM) (RM) Company Executive Directors 7, ,000 Non-Executive Directors 14, ,167 Group Executive Directors 84,000 1,902,728 96,993 2,083,721 Non-Executive Directors 181,538 23, ,038 The proposed directors fees of RM84,000 for Executive Directors and RM181,538 for Non-Executive Directors for the financial year ended 31st July 2016 are subject to shareholders approval at the forthcoming AGM.

20 Corporate Governance Statement (cont d) 19 SHAREHOLDERS Corporate Disclosure The Board has adopted a Corporate Disclosure Policy which takes into consideration the Guidelines set out under Bursa Corporate Disclosure Guide issued in September The Board s Corporate Disclosure Policy aims to ensure that all stakeholders are provided with comprehensive, accurate and quality information on a timely and even basis to all shareholders and investors. Currently, the Company s information is disseminated through various disclosures and announcements made to Bursa Malaysia. This information is also published at Bursa Malaysia s website at The Company also maintains its website at containing business, investor and products information for access by the general public. Pursuant to Paragraph 9.21 of the Listing Requirements, the Board has leveraged on its corporate website to communicate, disseminate and add depth to its governance reporting. Shareholders and public investors can view the principal governance information such as board charter, board committees terms of reference, policies and codes in the corporate website. The Board recognises the need for transparency and accountability to the Company s shareholders and regular communication with its shareholders, stakeholders and investors on the performance and major developments in the Group. On this note, the Board has defined its shareholders communication policy with the aim of empowering its shareholders through effective communication. In this policy the Board has set out the practices and means of the Company when communicating with its shareholders (both current and prospective) on the quarterly financial results, circulars, annual reports, corporate announcements and press releases in Bursa Malaysia s website. These various announcements made are also available on the Company s website at General meeting is an important avenue through which shareholders can exercise their rights. Effective 1st July 2016, Paragraph 8.29A of the Listing Requirements provides that any resolution set out in the notice of any general meeting, or in any notice of resolution which may properly be moved and is intended to be moved at any general meeting, shall be voted by poll. Also, at least one (1) scrutineer will be appointed to validate the votes cast at the General Meeting who must not be an officer of the Company or its related corporation, and must be independent of the person undertaking the polling process. Other than the Board Chairman and GMD, the shareholders may also convey any concerns that they may have to the Senior Independent Non-Executive Director, Mr. Tai Lam Shin. ACCOUNTABILITY AND AUDIT Financial Reporting The AC has the responsibility to ensure the Group s financial statements comply with applicable financial reporting standards. The integrity of financial reporting is influenced by the competency, quality and integrity of the Management in charge of the preparation of financial reports and the competency, suitability and independence of External Auditors. During the financial year, the audit fee and non-audit fees for services provided by the External Auditors to the Group and the Company respectively for the financial year ended 31st July 2016 were as follows: Group 2016 Company Statutory audit fees 98,000 25,000 Non-audit fees 6,200 5,000 The present External Auditors were engaged in the current financial year. As part of the AC review processes, the AC has obtained written assurance from the External Auditors confirming that they are, and have been, independent throughout the conduct of the audit engagement in accordance with the terms of all relevant professional and regulatory requirements. Annually, the AC also reviews the appointment, performance and remuneration of the External Auditors before recommending them to the shareholders for re-appointment in the AGM.

21 20 Corporate Governance Statement (cont d) ACCOUNTABILITY AND AUDIT (cont d) Risk Management and Internal Control The Board acknowledges that risk management and internal control are an integral part of good governance. Risk is inherent in all business activities. It is however, not the Group s objective to eliminate risk totally but to provide structural means to identify, prioritise and manage the risks involved in all the Group s activities and to balance between the costs and benefits of managing and treating risks, and the anticipated returns that will be derived from. Further details of the Group s systems of risk management and internal control and the function of the Internal Auditors are reported in the Statement on Risk Management and Internal Control on pages 25 to 27. Compliance Statement The Board recognises and views that Corporate Governance is an ongoing process and is of the view that the Company has substantially complied with the recommendations of the Code and will take appropriate steps towards embracing the Principles and Recommendations under the Code at a pace and time frame consistent with the size, priority and dynamics of the Group. On 16th December 2015, Bursa Malaysia released its Analysis of Corporate Governance Disclosures in Annual Reports conducted on Annual Reports issued by listed issuers for The review and analysis carried out by Bursa Malaysia were to assess the level and quality of the Corporate Governance Disclosures by listed issuers. MCEIB s scores are tabulated below: MULTI - CODE ELECTRONICS INDUSTRIES (M) BERHAD 100.0% Score 100.0% 61.8% 81.5% 67.6% 66.7% 90.0% 80.0% 70.0% 60.0% 45.5% 50.0% 40.0% 30.0% 20.0% 10.0% Principle 1 Established Clear Goals & Responsibilities Principle 2 Strengthen Composition Principle 3 Reinforce Independence Principle 4 Foster Commitment Principle 5 Uphold Integrity of Financial Reporting Principle 6 Recognise and Manage Risks 0.0% MCEIB s Corporate Governance Disclosures scores and a detailed report of Bursa Malaysia s findings were tabled to the Board for noting and review. Going forward the Board will endeavour to enhance its disclosures on its governance practices. OTHER INFORMATION REQUIRED BY THE LISTING REQUIREMENTS OF BURSA MALAYSIA SECURITIES BERHAD In compliance with the Listing Requirements, the following additional information are provided: - Utilisation of Proceeds There were no proceeds raised from any corporate proposals by the Company during the financial year. Material contracts To the best of the Board s knowledge, there were no material contracts involving the Group with any of the directors, chief executive who is not a director and/or major shareholders during the financial year ended 31st July Contract relating to loan There were no contracts relating to loan by the Company and its subsidiaries in respect of the preceding item.

22 Audit Committee Report 21 CONSTITUTION OF AUDIT COMMITTEE The Audit Committee ( AC ) of MCE Holdings Berhad ( MCE ) was established on 13th June 2016 prior to MCE s listing on the Main Market of Bursa Malaysia Securities Berhad ( Bursa Malaysia ) on 1st July MCE s listing on 1st July 2016 was pursuant to an Internal Reorganisation, by way of a Members Scheme of Arrangement under Section 176 of the Companies Act 1965 undertaken by Multi-Code Electronics Industries (M) Berhad ( MCEIB ) culminating in the transfer of the listing status of MCEIB to MCE Holdings Berhad ( Internal Reorganisation of MCEIB ). Accordingly the disclosures in this Report cover the activities of the AC of MCEIB up to 30th June 2016 and MCE from 1st July COMPOSITION OF AUDIT COMMITTEE The AC of MCE is comprised wholly of Independent Non-Executive Directors as follows: - Loo Shen Chang (Chairman, Independent Non-Executive Director) Samad Bin Kassim (Member, Independent Non-Executive Director) Tai Lam Shin (Member, Independent Non-Executive Director) Mr. Loo Shen Chang, the Chairman, and Mr. Tai Lam Shin are both Chartered Accountants of the Malaysian Institute of Accountants while, Encik Samad Bin Kassim, an Economist by training is financially literate. Accordingly, MCE is in compliance with Paragraph (1)(c)(i) of the Main Market Listing Requirements ( Listing Requirements ). During the financial year ended 31st July 2016, Mr. Chai Lai Koon, the Chairman of the AC, retired as a Director of the Company at the MCEIB s Annual General Meeting held in January 2016 and accordingly ceased to be Chairman of the AC. On 20th January 2016, Mr. Loo Shen Chang was appointed to the AC and elected as Chairman of the AC. The AC would like to place on record its gratitude and utmost appreciation to Mr. Chai Lai Koon for his past services as a Director and Chairman of the AC. SECRETARY The secretary(ies) to the AC are the Company Secretary(ies) of the Company. TERMS OF REFERENCE The detailed Terms of Reference of the AC outlining the composition, duties and functions, authority and procedures of the AC adopted on 13th June 2016 are published and available on the Company s website at During the 4th Quarter meeting on 28th September 2016, the AC reviewed its terms of reference and updated its terms of reference to be in line with amendments made to Paragraph 15.12(1)(g)(ii) of the Listing Requirements to enhance the role of the AC which came into effect on 1st July The AC is now required amongst others to review significant matters highlighted including financial reporting issues, significant judgements made by Management, significant and unusual events or transactions and how these matters are addressed.

23 22 Audit Committee Report (cont d) MEETINGS The attendance record of all members of the AC during the financial year ended 31st July 2016 at meetings of the AC, for MCEIB and MCE after assumption of the listing status of MCEIB are as follows: - For MCEIB For MCE Number of Percentage Number of Percentage Name Meetings Attended of Attendance Meetings Attended of Attendance (%) (%) Mr. Loo Shen Chang 2/ /1 100 Encik Samad Bin Kassim 5/ /1 100 Mr. Tai Lam Shin 5/ /1 100 Mr. Chai Lai Koon* 3/ *Retired as a Director on 20th January 2016 The Agenda for meetings, the relevant reports and papers were furnished to AC members by the Secretary after consultation with the AC Chairman in advance to facilitate effective deliberation and decision making at the respective meetings. During its scheduled quarterly meetings, the AC reviewed the risk management and internal control processes (with the assistance of its outsourced Internal Audit Function), the interim and year-end financial reports, the internal and external audit plans and reports, Related Party Transaction ( RPT ), and all other areas within the scope of responsibilities of the AC under its Terms of Reference. All issues and challenges were deliberated during AC meetings before arriving at any decisions, conclusions or recommendations and brought to the attention of the Board where necessary. The minutes of these deliberations and its resultant decisions, conclusions or recommendations at each AC meeting were properly recorded by the Company Secretary and subsequently elevated to the Board for review and notation. The Group Financial Controller (Chief Financial Officer) was invited to and attended all AC meetings to facilitate direct communication and interaction as well as provide clarifications on audit, financial and operational issues. The representatives of the outsourced Internal Audit Function attended the AC meetings to table their respective Internal Audit reports. The External Auditors of the Company represented by the Partner and Audit Manager leading the Audit attended AC meetings to present their Audit Plan, Audit Memorandum and Findings. SUMMARY OF ACTIVITIES During the financial year ended 31st July 2016, the AC in discharging its duties and functions carried out activities which are summarised broadly as follows: - a) Internal Audit The MCE Group has outsourced its internal audit function to a professional internal audit services company. The primary responsibility of this internal audit function is to assist the Board and the AC in reviewing and assessing whether the management systems of internal control procedures are effective and provide recommendations to strengthen these internal control procedures so as to foster a strong management control environment. The Internal Auditors have organised its work in accordance to the principles of the internal auditing standards covering the conduct of the audit planning, execution, documentations, communication of findings and consultation with key stakeholders on the audit concerns.

24 Audit Committee Report (cont d) 23 SUMMARY OF ACTIVITIES (cont d) a) Internal Audit (cont d) Annually, before the commencement of the internal audit reviews, an internal audit plan is produced and presented to the AC for approval. Upon approval by the AC, internal audit reviews would be carried in accordance with the approved internal audit plan. Thereafter during the quarterly meetings following the presentation of the Internal Audit Report, the AC also reviews with the Internal Auditors, the progress and coverage of the Internal Audit Plan to ensure that the audit direction remains relevant and is in line with the AC s expectations. After considering the changes in the operating environment in the Group, the Internal Audit Plan was developed in consideration of the Group s risk profile and the Board and Management concerns. Prior to the presentation of reports and findings to the AC, comments from the Management were obtained and incorporated into the internal audit findings and reports. The internal audit reports also covered the follow-up by the Management on the implementation of recommendations in their earlier reports. The Internal Auditors had attended four (4) AC meetings during the financial year. The functional areas and operating processes reviewed by the Internal Auditors were as follows: - i. Follow-up; ii. Production function; iii. Warehouse and inventory function; and iv. Business development and marketing function. The total cost incurred during the current financial year for the internal audit function of the Group was RM77,452 (2015:RM68,620). b) Financial Reporting In overseeing and discharging its responsibilities in respect of financial reporting by MCE Group, the AC: i. Reviewed the financial positions, quarterly interim financial reports and announcements for the respective financial quarters prior to submission to the Board for consideration and approval. The 1st, 2nd, 3rd and 4th Quarter Interim Financial Reports were tabled at the AC meetings held on 23rd December 2015, 28th March 2016, 22nd June 2016 and 28th September 2016; ii. The quarterly reports and Audited Financial Statements ( AFS ) were prepared in compliance with the Malaysian Financial Reporting Standard ( MFRS ) while the quarterly reports took into consideration Paragraph 9.22 including Appendix 9B of the Listing Requirements; iii. Reviewed the External Auditors Audit Planning Memorandum for the financial year ended 31st July 2016; iv. Reviewed the AFS and the External Auditors findings and recommendations for the financial year ended 31st July 2015 on 20th November 2015; v. Conducted independent meeting session with the External Auditors without the presence of executive board members and Management personnel on 28th September 2016 and 26th October 2016; vi. Reviewed the Budget for the financial year ending 31st July 2016 prepared by Management during its 1st Quarter meeting on 23rd December 2015 and ensured that the assumptions and estimates were reasonable and prudent; vii. Reviewed and revised the Budget for the year ending 31st July 2016 during its 3rd Quarter meeting on 22nd June 2016, taking into consideration the performance of the Group up to that date; viii. Considered the performance of External Auditors, reviewed the independence of External Auditors and recommended to the Board for re-appointment; ix. To ensure the integrity of the financial information, received assurance from the Group Managing Director ( GMD ) and Group Financial Controller, that: - - Appropriate accounting policies had been adopted and applied consistently; - The going concern basis applied in the Annual Consolidated Financial Statements was appropriate; - Prudent judgements and reasonable estimates had been made in accordance with the requirements set out in the MFRSs; - Adequate controls and processes were in place for effective and efficient financial reporting and relevant disclosures under MFRSs and Bursa Malaysia s Listing Requirements; and - The Annual Consolidated Financial Statements and the Quarterly Condensed Consolidated Financial Statements did not contain material misstatements and gave a true and fair view of the financial position. x. Reviewed the Statement of Risk Management and Internal Control together with the Internal Auditors and External Auditors and received assurance from the GMD and Group Financial Controller that the Group s risk management and internal control systems are operating adequately and effectively in all material aspects before recommending the Statement to the Board of Directors.

25 24 Audit Committee Report (cont d) SUMMARY OF ACTIVITIES (cont d) c) External Audit Prior to the completion of the Internal Reorganisation of MCEIB, the AC of MCEIB had determined that the External Auditors of the Company engaged had remained unchanged since its listing on Bursa Malaysia since In line with the Internal Reorganisation of MCEIB, the AC had recommended that a new External Auditors be appointed for MCE. Messrs Crowe Horwath was accordingly appointed as the First External Auditors for MCE on 10th June 2016 and as External Auditors for all the subsidiaries in Malaysia on 13th July Upon completion of the Internal Reorganisation of MCEIB, Messrs Crowe Horwath led by their engagement partner, Mr. Piong Yew Peng, attended the first AC meeting for MCE on 22nd June 2016 and during presentation of their Audit Planning Memorandum for the financial year ended 31st July 2016, had declared and confirmed that they were independent and would be independent through their audit engagement. Subsequent to the financial year ended 31st July 2016, the AC met with the External Auditors in the absence of Management on two (2) occasions during 28th September 2016 and 26th October The AC had the opportunity to assess the cooperation extended by the Management to the External Auditors, their attitude and readiness to provide documentation and explanations, as well as the adequacy of resources in the Group s finance department. There were no areas of major concerns raised by Messrs. Crowe Horwath that warranted escalation to the Board. The External Auditors were also informed by the AC that should there be any significant incidents or matters detected in the course of their audits or reviews which warrant their knowledge or intervention, it shall be reported to the AC accordingly. At the same time Messrs Crowe Horwath had the opportunity to obtain feedback from the AC on their perspectives on the areas of major concerns, which they would like the External Auditors to look into. The AC carried out an assessment of the performance and suitability of Messrs Crowe Horwath based on the quality of services, sufficiency of resources, adequate resources and trained professional staff assigned to the audit. The AC has been generally satisfied with the independence, performance and suitability of Messrs Crowe Horwath based on the assessment and are recommending to the Board and shareholders for approval for the re-appointment of Messrs Crowe Horwath as External Auditors for the financial year ending 31st July CORPORATE GOVERNANCE PRACTICES Apart from discharging its duties with respect to the internal audit, financial reporting and external audit, the AC also reviewed the disclosures made in respect of the financial results and Annual Report of the Company in line with the principles and spirit set out in the Malaysian Code on Corporate Governance 2012, other applicable laws, rules, directives and guidelines. During the financial year under review, the AC took note and reviewed the 2015 Analysis of Corporate Governance Disclosures in Annual Reports conducted by Bursa Malaysia based on Annual Reports issued by listed issuers for The review and analysis carried out by Bursa Malaysia were to assess the level and quality of the Corporate Governance Disclosures by listed issuers. MCEIB s Corporate Governance Disclosures scores and a detailed report of Bursa Malaysia s findings were tabled to the AC, reviewed and noted together with appropriate recommendations for the Board s further action. In addition, before finalising the various governance disclosures in the Annual Report, the AC together with all other Board Members and Management had reviewed the Corporate Governance Statement, AC Report, Statement on Risk Management and Internal Control together with other compliance disclosures.

26 Statement on Risk Management and Internal Control 25 The Board of Directors ( the Board ) is pleased to present its Statement on Risk Management and Internal Control for the financial year ended 31st July This Statement is prepared pursuant to Paragraph 15.26(b) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad ( Bursa Malaysia ) and guided by the latest Statement on Risk Management and Internal Control Guidelines for Directors of Listed Issuers ( the Guidelines ) endorsed by Bursa Malaysia. Risk Management The Board recognises that automotive industry is a highly competitive and dynamic industry. On this note, all Board Members acknowledge that it is imperative for the Group to have on-going process for identifying, evaluating and managing its principal risks and to maintain adequate and effective risk management and systems of internal control to manage its risks. One of the primary responsibilities of the Group Managing Director ( GMD ) is to ensure that the Group has the appropriate risk management practices and policies. The Group has established its Risk Management Committee ( RMC ) which is chaired and led by the GMD. The key mandates of the RMC are: - a) To formulate and carry out strategies and actions needed to manage risks; b) To promote organisational risk awareness associated in the delivery of products and services to customers; c) To ensure adequate knowledge, infrastructure, resources and systems are in place for risk management; d) To report to the Board periodically on the emerging risks and their impacts on operations, profitability and business plan and the status of Management actions to manage these risks; and e) To minimise high dependency areas and ensure business continuity. The members of RMC are selected from the respective senior heads of department and other Management personnel as deemed appropriate and appointed by the GMD. With the appointment of key senior Management staff in RMC, the responsibilities on risk management are cascaded down and shared across Management personnel at operational level. The identification of risks, evaluation and management are an ongoing and continuous process. These processes are carried out from Board to line Management level. The Board deliberated strategic business issues and action plans in its periodic board meetings while various Management review meetings covering status of action plans were held. The objective of these meetings is to ensure risks are communicated, understood and managed effectively and at the same time to reinforce the monitoring and supervision controls at the line Management level. All issues deliberated in these meetings are recorded in minutes for reference in the future. In the annual management strategic meeting, the Group has identified the following key success factors for its automotive business. Any challenges to these key success factors are considered risks to the Group. Research and Development covering the technical know-how, trainings, designs and supports; Product Range involving continuous design upgrading and enhancement to our products and services offered; Market Place pertaining to development of new domestic and export markets; Production Methodology requiring continuous improvement and re-engineering of production processes to achieve greater production efficiency and optimisation; Internal Work Culture relating to staff members commitment towards quality; and Suppliers Capability to offer, support and respond to the quality standards and expectations of the market. Internal targets and objectives are set for these key success factors while challenges are identified and managed. Progressively, person in charge will report to the RMC on the status of actions taken as well as further actions needed to manage new challenges as the Group progresses. As part of the process in developing the internal audit plan, the Internal Auditors has taken into account the challenges and action plans identified in these key success factors. By doing so, the Internal Auditors will focus their review on key risk areas and provide relevant feedback to the Board through the Audit Committee ( AC ) on the effectiveness of the Management s risk management actions.

27 26 Statement on Risk Management and Internal Control (cont d) Other Key Internal Controls The generic management controls including the Management reporting structure, authority and approval limits and procedures, segregation of duties, budgeting, Management review procedures as well as the periodic reporting and review of performance have been embedded in the business processes and activities. In addition, the manufacturing arm of the Group continues to be certified under the ISO 9001:2008 Quality Management System and ISO/TS 16949, the harmonised standard for automotive supply chain. These management systems formed the basis of operational procedures in the production processes. Internal quality audits are carried out on quarterly basis while annual surveillance audits are conducted by external certification body to provide assurance of compliance with the ISO/TS requirements. Management Responsibilities and Assurance In accordance to the Guidelines, Management is responsible to the Board for: - identifying risks relevant to the business of the Group s objectives and strategies implementation; designing, implementing and monitoring the risk management framework in accordance with the Group s strategic vision and overall risk appetite; and identifying changes to risks or emerging risks, taking action as appropriate and promptly bringing these to the attention of the Board. As reported under the Risk Management section above, Management has addressed the above responsibilities outlined in the Guidelines. Additionally, the Board has received assurance from the GMD and Group Financial Controller that, to the best of their knowledge the risk management and internal control systems of the Group are operating adequately and effectively, in all material aspects before producing this Statement. Board Review and Oversight Mechanism The Board recognises that the Group is operating in a dynamic business environment. Accordingly, the Board views that risk management and systems of internal control are integral parts of the Group and believes that the way it overseeing risk at the board is critical and will influence the tone and culture for effective risk management at Management level. Presently, the primary risk oversight role of the Group resides in the Board. When reviewing and deliberating risk issues in the Group, the Board is assisted by the AC and RMC in assessing whether the present systems of risk management and internal control provide reasonable assurance that risk is managed appropriately. Quarterly, the RMC will re-assess, summarise and report the existing and emerging risks and the management progress in managing risks to the Board. On the other hand, the AC is supporting the Board during its review of risk management by reporting to the Board the audit issues highlighted by the Internal and External Auditors. Based on evaluation of the information provided by the AC and RMC, the Board will then deliberate the actions and options needed and delegate the decided actions to GMD for execution. Management also supplements the Board consideration on effectiveness of the Group risk management systems when reporting their quarterly financial performance and results to the Board and AC. With Management inputs on the interim financial performance results, the Board and AC are able to cross examine the effectiveness of risk management and internal control systems as well as deliberate the integrity of the financial results.

28 Statement on Risk Management and Internal Control (cont d) 27 The Board s Conclusion Based on the review process undertaken, the Board is satisfied that there is an ongoing process for identifying, evaluating and managing significant risks faced by the Group and the existing level of systems of risk management and internal control are effective to enable the Group to achieve its business objectives. The Board also took cognisance that there were no reported material losses resulting from significant control weaknesses. The Board and Management will continue to ensure that risk management and internal control systems of the Group are continuously improved consistent with the evolving business development. Nonetheless, all stakeholders shall note that all systems of risk management and internal control are designed to manage rather than eliminate the risk threatening the achievement of business objectives. Hence, these systems can only provide reasonable but not absolute assurance against material misstatement and records, or against financial losses or fraud. Review of Statement on Risk Management and Internal Control by External Auditors Pursuant to Paragraph of the Main Market Listing Requirements, the external auditors have reviewed this Statement on Risk Management and Internal Control for inclusion in the annual report for the financial year ended 31st July Their review was performed in accordance with Recommended Practice Guide 5 (RPG 5) issued by the Malaysian Institute of Accountants. Though RPG 5 does not require the external auditors to consider whether this statement covers all risks and controls or to form an opinion on the effectiveness of the Group s risk management and internal control systems, 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 processes the Board has adopted in reviewing the adequacy and effectiveness of the risk management and internal control systems of the Group.

29 28 Corporate Social Responsibility Statement Bursa Malaysia Securities Berhad defines Corporate Social Responsibility ( CSR ) as open and transparent business practices that are based on ethical values and respect for the community, employees, the environment, shareholders and other stakeholders and designed to deliver sustainable value to society at large. Based on this philosophy, MCE Holdings Berhad and its subsidiaries( MCE ) is committed to continuously cultivate a positive corporate culture that emphasises good CSR and corporate citizenship. Environment Multi-Code Electronics Industries (M) Berhad ( MCEIB ), the immediate subsidiary of MCE, as an ISO 14001:2004 (the international specification for environment management system) accredited company, continues its efforts towards reducing environmental impact of its operations by adopting waste management, recycling programme and reducing usage of hazardous materials in its manufacturing process. Quality Assurance MCE has continued its drive to manufacture high quality products to cater to its esteemed customers requirements. MCE is committed in meeting its standards of excellence instilled through strong quality mindset and upholding best industry practices. MCE will continue its pursuit towards automatic manufacturing process in order to enhance production efficiency, quality consistency and product assurance as well as reduce dependence on human input and judgement. Workplace MCE advocates a corporate philosophy of happy, healthy and caring for its employees. Employees of different background, gender, age and ethnicity are given opportunities for career growth, fair performance evaluation and compensation programmes which commensurate with their rank and level of employment. In the year under review, 3S (Sort (Seiri), Set in order (Seiton) and Shine (Seiso)) activities were carried out and monitored by respective departments to improve process efficiency and productivity, maintain good control over the processes and ensure safety and cleanliness at workplace. Safety and Health MCE places great importance on safety and health aspects of its employees. Necessary precautions are in place and safety procedures take precedence in its daily operations. Besides having Emergency Response Teams to deal with emergencies, concerted efforts are made to prevent accidents and injuries at its workplace. An in-house Safety, Health and Environmental Committee (SHEC) oversees and ensures that safety and health are appropriately adhered to by all employees. Regular meetings and activities have been structured into MCE s safety work schedules and are rigorously carried out and monitored by SHEC. During the year under review, staff participated in fire safety trainings conducted by Jabatan Bomba, Tebrau Branch and Lembah Klang Branch at Johor Bahru and Telok Gong premises respectively. Employees Welfare, Skill Development, Social and Community Activities MCE pursues and organises employees and community related practices covering the following areas: - i) Sports activities, ii) Employees welfare, iii) Community related activities, and iv) Employees development. i) Sports activities To promote healthier lifestyle among employees, MCE sponsored weekly sporting activities such as badminton and futsal, and annual in-house sports competitions. Besides that, employees are encouraged to participate in half marathons and cash incentives are awarded to those who completed them.

30 Corporate Social Responsibility Statement (cont d) 29 Employees Welfare, Skill Development, Social and Community Activities (cont d) ii) Employees welfare MCE strives to create a happy and caring environment for our employees. As such Annual Dinner, Company Retreat and festive celebrations (Hari Raya and Christmas) are organised annually. In addition, monthly departmental activities and monthly birthday celebrations are organised to nurture a sense of togetherness and belongings. MCE acknowledges the importance of healthy and balanced lifestyle of its employees. Employees are encouraged to take annual medical check-up which are substantially subsidised by MCE. Healthcare providers, both in Johor Bahru and Klang Valley were invited to give health talks on general health awareness and free basic health check to our employees. iii) Community related activities During the year under review, MCE organised its annual blood donation campaign in collaboration with Hospital Sultan Ismail, Johor Bahru and Hospital Tengku Ampuan Rahimah, Klang. In its 2015 Charity Drive, MCE reached out to less fortunate children at IQ70+Persatuan, Kebajikan Kanak-Kanak Terencat Akal Malaysia. MCE visited and donated food and basic necessities items to the association. iv) Employees development MCE believes that efficient, effective, knowledgeable and satisfied employees are essential for the growth of the organisation. Recognising the importance of human capital development, MCE continuously provides in-house trainings, external workshops and seminars to enhance their skills, knowledge and competencies. During the year under review, MCE had provided in-house and external trainings to its employees covering both soft and hard skills Badminton Tournament (Aug 2015)

31 30 Corporate Social Responsibility Statement (cont d) 2015 Making A Difference (MAD) Training (Oct 2015) 2015 Taman Negara Trip (Oct 2015) 2015 Blood Donation (Nov 2015)

32 Corporate Social Responsibility Statement (cont d) Charity Drive (Nov 2015) 2015 Christmas Party (Dec 2015) 2016 Annual Dinner (Jan 2016)

33 32 Corporate Social Responsibility Statement (cont d) 2016 Bowling Tournament (Apr 2016) Model Factory Opening Ceremony (Aug 2016) Monthly Birthday Celebrations for Employees