STEEL IS OUR BUSINESS EXCELLENCE IS OUR COMMITMENT

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2 STEEL IS OUR BUSINESS EXCELLENCE IS OUR COMMITMENT

3 CONTENTS 02 Corporate Information 03 Corporate Structure 04 Board of Directors 06 Profile of Directors 10 Chairman s Statement 14 Management Review 16 Corporate Governance Statement 22 Report of the Nomination Committee 24 Report of the Audit Committee 29 Report of the Remuneration Committee 32 Statement on Risk Management and Internal Control 33 Additional Compliance Information 35 Financial Statements 95 List of Properties 97 Statistics on Shareholdings 100 Notice of Seventh Annual General Meeting 104 Statement Accompanying Notice of Annual General Meeting Proxy Form

4 2 ANNUAL REPORT 2013 Corporate Information Board of Directors Dato Ng Ah Ng Soon Por Independent Non-Executive Chairman Ooi Bin Keong Group Managing Director Ooi Seng Khong Executive Director Ooi Kong Tiong Executive Director Ooi Shang How Executive Director Ng Kok Teong Executive Director Chan Kee Loin Independent Non-Executive Director Tan Did Heng Independent Non-Executive Director Tan Sack Sen Independent Non-Executive Director Audit Committee Tan Did Heng (Chairman) Chan Kee Loin Tan Sack Sen Nomination Committee Chan Kee Loin (Chairman) Tan Sack Sen Tan Did Heng Remuneration Committee Tan Sack Sen (Chairman) Chan Kee Loin Ooi Bin Keong Company Secretaries Yeoh Chong Keat (MIA 2736) Lim Fei Chia (MAICSA ) Registered Office Suite 11.1A, Level 11 Menara Weld 76 Jalan Raja Chulan Kuala Lumpur Tel : (603) Fax : (603) Principal Place of Business Wisma Leon Fuat No.11, Lorong Keluli 1B Kawasan Perindustrian Bukit Raja Selatan Seksyen 7, Shah Alam Selangor Darul Ehsan Tel : (603) Fax : (603) Auditors Baker Tilly AC (formerly known as Moore Stephens AC) (AF001826) Baker Tilly MH Tower Level 10, Tower 1, Avenue Kuala Lumpur Tel : (603) Fax : (603) Share Registrar Symphony Share Registrars Sdn Bhd ( D) Level 6, Symphony House Pusat Dagangan Dana 1 Jalan PJU1A/ Petaling Jaya Selangor Darul Ehsan Tel : (603) Fax : (603) Principal Bankers AmBank (M) Berhad (8515-D) Level 18, Menara Dion Jalan Sultan Ismail Kuala Lumpur Tel : (603) Fax : (603) Hong Leong Bank Berhad (97141-X) Level 5, Wisma Hong Leong 18 Jalan Perak Kuala Lumpur Tel : (603) Fax : (603) Stock Exchange Listing Main Market of Bursa Malaysia Securities Berhad

5 Leon Fuat Berhad (Company No D) 3 Corporate Structure 100% LF Hardware Leon Fuat Hardware Sdn Bhd Trading and processing of steel products 100% LF Klang Leon Fuat Hardware (Klang) Sdn Bhd Trading and processing of steel products 100% Supreme Steelmakers Supreme Steelmakers Sdn Bhd Trading and processing of stainless steel and other steel products 100% ASA Steel ASA Steel (M) Sdn Bhd Trading and processing of alloy steel and other steel products

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7 Leon Fuat Berhad (Company No D) 5 Board of Directors From left to right: Tan Sack Sen, Ooi Shang How, Ooi Kong Tiong, Ooi Bin Keong, Dato Ng Ah Ng Soon Por, Ng Kok Teong, Ooi Seng Khong, Tan Did Heng, Chan Kee Loin

8 6 ANNUAL REPORT 2013 Profile of Directors Dato Ng Ah Ng Soon Por Malaysian, aged 64 Independent Non-Executive Chairman Dato Ng Ah Ng Soon Por was appointed to the Board on 6 November He graduated from Tunku Abdul Rahman College in 1974 with the accountancy qualification ACCA awarded by the Association of Chartered and Certified Accountants of United Kingdom. He is a member of Malaysia Institute of Accountants, a Fellow Member of the Association of Chartered and Certified Accountants of United Kingdom, and also a member of the Malaysia Institute of Chartered Secretaries & Administrators. He began his career in 1974 when he joined the audit firm Turquand, Youngs & Co./Azman, Wong, Salleh & Co. as an Auditor. In 1977, he left the audit firm and joined Spicers International Ltd, as a Finance Manager. In 1982, he left Spicers International Ltd when he was elected as Selangor State Legislative Assemblyman for Sungei Pelek constituency, and held the position until During his tenure as an assemblyman, he was also a Selangor Executive Councillor from 1990 to Subsequently in 1995, he joined Paper Converting Industries Sdn Bhd as a Finance Director until He was also a member of the Selangor Public Service Commission from 2002 to From 2008 to date, he is involved in managing his own personal investment in commercial properties. He is an Independent Non-Executive Director of Turbo-Mech Berhad, a company listed on the Main Market of Bursa Securities. He was appointed as the Independent Non-Executive Director of XingQuan International Sports Holdings Limited in 2009 and subsequently resigned in He has no family relationship with any director and/or major shareholder of the Company and has no conflict of interest with the Company. Ooi Bin Keong Malaysian, aged 64 Group Managing Director Ooi Bin Keong was appointed to the Board on 21 June He is a member of the Remuneration Committee of the Board. After completing his primary education in 1963, he worked at a coffee shop before he established Leong Huat Trading & Co in 1972 as a partnership, which was then mainly involved in the trading of steel products and undertook minor processing work. He currently oversees the overall management of the Group. In 1982, he co-founded the Group together with Ooi Kong Tiong and the late Ng Chee Tiang, by establishing LF Hardware to take over the business of Leong Huat Trading & Co. They then established LF Klang, Supreme Steelmakers and ASA Steel in 1983, 1991 and 1995 respectively. As the co-founder and Group Managing Director, he has been instrumental in the growth and development. With approximately 40 years of experience in the steel industry, he has contributed significantly to the success particularly in driving the Group s overall vision. He is the 2nd Vice President of the Malaysia Steel and Metal Distributors Association (MSMDA) for the period He is the father of Ooi Shang How, brother of Ooi Seng Khong and Ooi Kong Tiong, and uncle of Ng Kok Teong. He has no conflict of interest with the Company.

9 Leon Fuat Berhad (Company No D) 7 Profile of Directors Ooi Seng Khong Malaysian, aged 52 Executive Director Ooi Seng Khong was appointed to the Board on 21 June He is currently responsible for the Group s business development and procurement. After completing his primary school education in 1975, he was involved in his family s paper packaging business before joining Leong Huat Trading & Co as a machine operator in In 1982, he joined LF Hardware as a sales personnel and subsequently in 1983, he was appointed as Head of Operations of LF Klang. In 1999, he was appointed as Managing Director of LF Klang. As the Group s Executive Director, he has been instrumental in the growth and development of the Group. With approximately 33 years of experience in the steel industry, he has contributed significantly to the Group s success particularly in overseeing the business development and procurement activities of the Group. He is the brother of Ooi Bin Keong and Ooi Kong Tiong, and uncle of Ng Kok Teong and Ooi Shang How. He has no conflict of interest with the Company. Ooi Kong Tiong Malaysian, aged 60 Executive Director Ooi Kong Tiong was appointed to the Board on 21 June He currently oversees the Group s sales operations and is responsible for the Group s business planning and implementation. After completing his primary education in 1967, he opted to join the working community and worked at a coffee shop before he joined Leong Huat Trading & Co in 1972 as a machine operator and sales executive. In 1982, he cofounded the Group together with Ooi Bin Keong and the late Ng Chee Tiang, by establishing LF Hardware to take over the business of Leong Huat Trading & Co. Together with Ooi Bin Keong and the late Ng Chee Tiang, he established LF Klang, Supreme Steelmakers and ASA Steel in 1983, 1991 and 1995 respectively. As the Group s co-founder and Executive Director, he has been instrumental in the growth and development of the Group. With approximately 40 years of experience in the steel industry, he has contributed significantly to the Group s success particularly in driving the sales operations for the Group. As such, he oversees the Group s sales and business development requirements and is responsible for responding to the customers needs. He is the brother of Ooi Bin Keong and Ooi Seng Khong, and uncle of Ng Kok Teong and Ooi Shang How. He has no conflict of interest with the Company.

10 8 ANNUAL REPORT 2013 Profile of Directors Ng Kok Teong Malaysian, aged 45 Executive Director Ng Kok Teong was appointed to the Board on 21 June He obtained his Diploma in Business Studies from Stamford College, Malaysia in He began his career in 1990 when he joined LF Hardware as a sales personnel. In 1999, he was appointed as Executive Director of LF Hardware. He currently oversees the procurement section of the Group. He is the nephew of Ooi Bin Keong, Ooi Seng Khong and Ooi Kong Tiong and cousin of Ooi Shang How. He has no conflict of interest with the Company. Ooi Shang How Malaysian, aged 34 Executive Director Ooi Shang How was appointed to the Board on 21 June He is in charge of the Group s administration and information technology needs. In 1997, he obtained his Cambridge A-Level certificate from Taylor s College, Malaysia. Between 1998 and 2001, he undertook studies in Monash University and IT in Australia, but, returned to Malaysia to assist the Group s business. He began his career in 2002 when he joined LF Klang as a sales and marketing personnel. Later, he was tasked to develop information technology capability for the company. In 2005, he was appointed as Executive Director of LF Klang where he was mainly involved in business development and procurement planning as well as information technology areas of the company. He currently oversees new business development area of the company. He is the son of Ooi Bin Keong, nephew of Ooi Seng Khong and Ooi Kong Tiong and cousin of Ng Kok Teong. He has no conflict of interest with the Company. Chan Kee Loin Malaysian, aged 50 Independent Non-Executive Director Chan Kee Loin was appointed to the Board on 21 June He is the Chairman of the Nomination Committee, a member of Audit Committee and Remuneration Committee of the Board. He was educated at Tunku Abdul Rahman College ( TAR College ), Malaysia, where he completed the three (3) year extra-mural course in Financial Accounting in 1987 and is currently a finalist in professional examination of the Association of Chartered Certified Accountants, United Kingdom. He started his career in 1988 as an audit assistant with Messrs. Soh & Co., a firm of Public Accountants in Johor Bahru, and left in 1989 to join Messrs. Tet O. Chong & Co., a firm of Public Accountants in Kuala Lumpur. Messrs. Tet O. Chong & Co. had since evolved into the current Messrs. Baker Tilly AC, where he held the position of Director from 2000 until he left in His experience in these firms includes statutory audits, due diligence audits, share and business valuation and rendering professional services as adviser, co-ordinator and reporting accountants for corporate exercises. He had since ceased working fulltime. He currently sits on the Board of CAM Resources Berhad as an Independent Non-Executive Director. He has no family relationship with any director and/or major shareholder of the Company and has no conflict of interest with the Company.

11 Leon Fuat Berhad (Company No D) 9 Profile of Directors Tan Did Heng Malaysian, aged 43 Independent Non-Executive Director Tan Did Heng was appointed to the Board on 21 June He is the Chairman of the Audit Committee and a member of Nomination Committee of the Board. From 1992 to 1994, he attended TAR College to undertake the course and examinations leading to membership with the Malaysian Institute of Certified Public Accountants (MICPA) and the Malaysian Institute of Accountants (MIA) in In 1994 he joined Tai, Yapp & Co as an associate. He left the firm in 2000 and joined United Straits Amalgamated Berhad as an Accountant. Thereafter, he started D.H. Tan & Associates in 2001 as the managing proprietor to-date. He is an Approved Company Auditor and Licensed Tax Agent since 2001 and 2005 respectively. He is also currently the managing proprietor of Y.W. Woon & Co. He has no family relationship with any director and/or major shareholder of the Company and has no conflict of interest with the Company. Tan Sack Sen Malaysian, aged 38 Independent Non-Executive Director Tan Sack Sen was appointed to the Board on 21 June He is the Chairman of the Remuneration Committee, a member of Audit Committee and Nomination Committee of the Board. In 2007, he obtained his Bachelor of Law (Honours) Degree from the University of Wales, Cardiff, United Kingdom and has obtained the Certificate of Legal Practice from the Board of Legal Practice in He began his career with Messrs. K.B.Chua & Co. and was admitted to the Bar in He then joined Messrs. T. G. Lim & Partners in 1999 and further his practice in banking litigation. Thereafter, he joined Messrs. Jal & Lim in 2001 to conduct in various defence work and general litigation matters. In 2002, he was invited by Messrs. Chong & Tiong to handle and manage the Litigation Department. In 2003, he started the firm Messrs. Yee How & Tan where he manages the main office at Kuala Lumpur. He has no family relationship with any director and/or major shareholder of the Company and has no conflict of interest with the Company. Note: None of the above Directors have committed any offences which require disclosure pursuant to the Main Market Listing Requirements of Bursa Malaysia Securities Berhad.

12 10 ANNUAL REPORT 2013 Chairman s Statement On behalf of the Board of Directors of Leon Fuat Berhad ( Leon Fuat ), I am pleased to present to you our annual report, our first as a listed entity, for the financial year ended 31 December 2013 ( FY2013 ). DATO' NG AH NG SOON POR Chairman

13 Leon Fuat Berhad (Company No D) 11 Chairman s Statement The year 2013 was a landmark year for the Group as we took a huge step forward and listed on the Main Market of Bursa Malaysia Securities Berhad on 5 June Our initial public offering of 59.3 million shares at an issue price of 0.60 per share was strongly received, where the public portion of the shares was oversubscribed by times. We debuted on the first day of trading at a premium of 3.5 sen. Rewarding Our Shareholders I am pleased to announce that Leon Fuat achieved a revenue of million and a net profit of million for FY2013. On 26 August 2013, we also declared our first interim single-tier dividend of 1.5 sen per ordinary share in respect of FY2013, which was paid out on 8 October This is equivalent to a total payout of 4.65 million. In view of our performance in FY2013, the Board is also proposing a final single-tier dividend of 1.5 sen per ordinary share which is subject to shareholders approval at the forthcoming Annual General Meeting. This will amount to a total dividend declared of 3.0 sen which is equivalent to a total payout of approximately 9.30 million in respect of FY2013. The total dividend payout ratio will be 36.1% of profit after tax ( PAT ) and is above our intended dividend payout ratio of up to 30% of PAT as set out in our Prospectus issued in conjunction with the initial public offering. The Year That Was Leon Fuat understands that the greatest asset a business can have is its people. As such, we have always advocated the fostering of togetherness and tolerance within the workplace. We believe that we should not work for one another but with each other. Earlier this year, we organised an annual dinner for our staff at Setia City Convention Centre with the aim of having fun and making everyone feel special. Our staffs were our special VIPs and we dished out Best Dressed prizes to those who turned up in style. Throughout the dinner, we also recognised the contributions of our loyal employees by presenting 10 Years, 15 Years, 20 Years and 25 Years Service Awards. We also came up with a special award, Perfect Health Award, for employees that had taken zero medical leave for the entire Despite being a business entity, having a sense of compassion is a value we uphold highly. In 2013, we decided to bring some cheer to the Handicapped and Disabled Children s Association of Klang in Selangor and encouraged our employees to interact with the children. During the trip, they fed, played with and celebrated the birthdays of the children.

14 In an effort to continuously improve ourselves and keep abreast of matters affecting our industry in order to stay ahead of the ballgame, we have, among others, arranged for our staff to attend trainings and seminars, both in-house and external, intended to sharpen their skills and broaden their knowledge in their respective job fields. The range of trainings include Goods & Services Tax for the Finance department, product training for the Purchasing & Sales staffs and Minimum Retirement Age Act 2012 for Human Resource personnel. The Board of Directors also attended a Mandatory Accreditation Programme (MAP) for Directors of Public Listed Companies. Besides this, we also held a company-wide Fire Prevention Awareness Seminar and Anti-Crime Awareness Programme.

15 Leon Fuat Berhad (Company No D) 13 Chairman s Statement What To Expect Ahead During our IPO in 2013, we had laid out our future plans which are focused in two key areas. The first was the construction of a new processing plant with warehousing facilities on a piece of land near to our head office at Wisma Leon Fuat. We had purchased the piece of freehold industrial land with an existing detached building with annexed office building in We intend to house two new slitting machines in the new plant with the remaining floor space being used to stock steel materials for trading and processing purposes. As of the date of this annual report, the timeline to commence construction of the plant in 2015 and start operations in 2016 is still on track. A second key focus of our future plans is the purchase of new machinery for slitting process to add to the other processing services that we already offer. The purchase of the two slitting machines will be made in 2016 and will be housed in the new processing plant. This decision was brought on to enable us to add more value to our current customers and penetrate into new markets. Appreciation On behalf of the Board, I would like to convey my thanks to our shareholders, customers, business partners and suppliers for their continued support and belief in us. Having being in the business for more than 40 years, we have managed to build a strong network of relationships. As we are well aware, our business thrives on trust and we are truly grateful to have customers and suppliers who have stood by us from the start and continue to deal with us until this very day. My deepest appreciation is also extended to the regulators, namely Securities Commission of Malaysia and Bursa Malaysia for their guidance in ensuring a smooth listing. Also, to my fellow Board members for their wise counsel. Each of you has been instrumental in the growth of the Group and I look forward to achieving greater heights with all of you. Last but not least, what is a company without its assets; the people. Our staffs make up the strong foundation on which our Group stands and their contribution has been significant in helping the Group to grow, even beyond its potential. We look forward to better things, and remain committed to moving forward progressively and delivering another profitable year so that our shareholders and associates can share with us in reaping the fruits of our labour. Dato Ng Ah Ng Soon Por Chairman

16 14 ANNUAL REPORT 2013 Management Review OOI BIN KEONG Group Managing Director

17 Leon Fuat Berhad (Company No D) 15 Management Review Financial Review In respect of FY2013, I am proud to announce that Leon Fuat achieved a revenue of million and a net profit of million. This was due to our two major segments, namely trading of steel products and processing of steel products that collectively contributed approximately 99.9% to our revenue. As expected, the processing segment continued to overtook the trading segment with a revenue contribution of 60.5%. The former also accounted for approximately 60.4% of our gross profit in respect of FY2013. The trading segment recorded an improvement in gross profit margin as a result of lower average cost of input materials especially in regards to flat mild steel products whilst, the gross profit margin derived from the processing of steel products segment remained fairly stable. Operations When Leon Fuat was first founded in 1972, we were mainly involved in trading of steel products. 40 years on, the Group has diversified its business to include the processing of steel products as well, with a specialisation in rolled long and flat products. We have also incorporated in-house facilities to undertake cutting, levelling, shearing, profiling, bending and finishing of products as well as production of expanded metal. Today, Leon Fuat operates from three production facilities located in Shah Alam, Sungai Besi and Jalan Chan Sow Lin. A new processing plant with warehousing facilities near Wisma Leon Fuat in Shah Alam is also expected to commence operations in Purchase of the piece of land on which the plant will be constructed was made in 2012 and comes with an existing detached building with annexed office building. Initially, the trading of steel products segment was a major contributor to the Group s revenue. However, in recent years, the processing of steel products segment has expanded tremendously to the extent of taking the lead in terms of revenue contribution, thanks to a conscious effort on our part. Since 2012, we have also been scaling down on the trading of low margin products, namely flat carbon steel products, in line with the Group s strategy to optimise the utilisation of its operational and financial resources. Our focus will remain on expanding our value-added services over the next few years as we intend to incorporate slitting services into our existing line of processing services. We target to purchase two new slitting machines by 2016, which will be housed in the new processing plant with warehousing facilities. We believe that the wider range of machinery will put us in a better position to meet the diverse needs of a larger base of customers to achieve higher processing sales. Outlook In view of the Malaysia Government s initiatives as reflected in the 10th Malaysia Plan and Economic Transformation Programme that include the implementation of various development plans, will benefit user industries such as the construction and manufacturing sectors which will, in turn, have a positive flow-on effect to the Rolled Steel Industry. The growth in the Malaysian production of steel for 2014 is forecast at 9.1% year-on-year. Domestic market, rather than imports, is also expected to drive demand in the sector 1. Additionally, demand outlook in 2014 remains positive for steel companies as it will be anchored by construction activities. Domestic consumption should remain buoyant as most infrastructure projects, especially rail, and property development projects are major off takers of steel products. Barring unforeseen circumstances, we expect the Group s prospects for the financial year 2014 to be positive. At the same time, we remain committed to upholding our reputation as a reliable provider of quality products and services which has helped us maintained long-term business relationships with our customers, and deliver another fruitful year to our shareholders. Ooi Bin Keong Managing Director 1 Source: Malaysia Metals Report Q1 2014

18 16 ANNUAL REPORT 2013 Corporate Governance Statement The Board of Directors ( the Board ) of Leon Fuat Berhad ( the Company ) is committed to ensuring that the Company and its subsidiaries ( the Group ) comply with the high standards of corporate governance practices that are in accordance with the Malaysia Code on Corporate Governance 2012 ( the Code ) as part of the Board s fundamental duties to deliver value to the Company s shareholders. In order to uphold good corporate ethics, the Board has, since the listing of the Company on the Main Market of Bursa Malaysia Securities Berhad ( Bursa Malaysia ) continuously evaluate and where appropriate, implement relevant policies and procedures to ensure adherence to good corporate governance. The following Statement outlines the manner and extend in which the Board has applied the Principles of the Code during the financial year ended 31 December ESTABLISH CLEAR ROLES AND RESPONSIBILITIES 1.1 Functions of the Board and Management The Board is responsible for the proper stewardship of the Group to ensure the maximisation of shareholders value and safeguarding the stakeholders interests including securing sustainable long-term financial results and increasing shareholders value, with proper social and environmental considerations. The Board is also responsible to promote and ensure effective execution of good corporate governance practice and a corporate culture of ethical conduct especially among its members and generally that would permeates throughout the Company vide effective communication including the establishment and adoption of the Board Charter by the Board in 2014 which sets out the roles and responsibilities of the Board and that of the Management/Group Managing Director. 1.2 Board Roles and Responsibilities The Company is led and managed by the Board that comprises a group of individuals who collectively possess a wide range of experience and qualifications. The Board has the following major responsibilities, which facilitate the discharge of the Board s fiduciary and leadership functions in the pursuit of the best interest of the Group: (a) (b) (c) (d) (e) (f) Adopting and reviewing a strategic plan of the Group; Overseeing the conduct of the Group s business to evaluate whether the business is being properly managed and sustained; Identifying principal risks and ensuring the implementation of appropriate systems to manage these risks; Succession planning, including appointing, training, fixing the remuneration of and where appropriate, replacing senior management personnel of the Group; Developing and implementing an investor relations programme by way of analyst report for the Group and pro-active communication with shareholder during the AGM and EGM; and Reviewing the adequacy and integrity of the Group s internal control systems and management information systems, including systems for compliance with applicable laws, regulations, rules, directives and guidelines. Besides the Board, other Board Committees, namely the Audit Committee, Nomination Committee and Remuneration Committee have been established with written terms of references to bear some of the responsibilities of the Board in order to ensure the proper discharge of the Board s fiduciary duties.

19 Leon Fuat Berhad (Company No D) 17 Corporate Governance Statement 1. ESTABLISH CLEAR ROLES AND RESPONSIBILITIES cont d 1.3 Code of Ethics and Conduct The Board has adopted a Code of Ethics and Conduct which dictates the ethics and standard of good conduct expected of every director and employee. 1.4 Promoting Sustainability The Company will put in place its strategies to promote sustainability of environment, social and governance aspects of its business in due course. 1.5 Access to information and advice The Board members have ready and unrestricted access to the following parties in carrying out its roles and responsibilities to discharge their duties effectively: To all key management personnel for obtaining accurate and timely information pertaining to the Group; To the Company Secretaries for procedural and regulatory advice, board policies and procedures; and To the External and Internal Auditors of the Group for advice on accounting and internal control issues. The Board members are also able to seek independent professional advice in the course of their duties at the expense of the Company as may be mutually agreed by the Board with the Chairman and/or the Group Managing Director. Prior to Board meetings the agenda together with relevant meeting papers are distributed to the Directors to ensure that they have sufficient time to review and be prepared for discussion. The information provided can be of a financial or non-financial in nature, quantitative or qualitative to facilitate the review by the Board prior to arriving at a sound and informed decision. 1.6 Company Secretaries The corporate secretarial function of the Company has been outsourced to Archer Corporate Services Sdn Bhd. The main responsibilities of the Company Secretaries, among others, are provision of secretarial services and keeping the Board abreast and appraised of regulatory legislations and corporate governance guidelines from time to time. 1.7 Board Charter The Board Charter was formalised in 2014 and will be reviewed from time to time to ensure that it remains current and relevant. The Board Charter is published on the Company s website 2. STRENGTHEN COMPOSITION 2.1 Nomination Committee The Board has established the Nomination Committee which comprises three (3) members, all of whom are Independent Non-Executive Directors. The Board has identified the Chairman of the Nomination Committee as Senior Independent Director to whom all concerns of shareholders and stakeholders can be effectively directed. The functions of the Nomination Committee and its activities are laid down in the Report of the Nomination Committee on pages 22 to 23.

20 18 ANNUAL REPORT 2013 Corporate Governance Statement 2. STRENGTHEN COMPOSITION cont d 2.2 Recruitment and Annual Assessment of Directors The Nomination Committee s responsibilities as set out in its Terms of Reference include assessing and recommending to the Board the candidate of directors having regard to the established criteria for recruitment as well as for annual assessment of directors. The Board has not establish a gender diversity targets as it is of the view the board membership should be determined based on a candidate s skills, experience and other quality regardless of gender but will nevertheless considers appointing more directors of a female gender where suitable. 2.3 Remuneration Policies and Procedures The Board has established the Remuneration Committee which comprises three (3) members the majority of whom are Independent Non-Executive Directors. The Remuneration Committee is responsible for reviewing and recommending to the Board the policy and framework of the directors remuneration packages of the Executive Directors. The Board believes that fair remuneration is important to attract, retain and motivate Directors. Other functions of the Remuneration Committee and its activities as well as the aggregate remunerations for services rendered by our Directors for the financial year under review are set out in the Remuneration Committee Report on pages 29 to REINFORCE INDEPENDENCE 3.1 Annual Assessment of Independent Directors The Board has adopted the legal and regulatory definition of Independent Director as defined in the Listing Requirements, amongst other criteria to assess independent. The Nomination Committee has been tasked to carry out annual assessment of the independence of the Independent Directors annually, upon admission and when any new interest or relationship develops. 3.2 Tenure of Independent Directors None of the Company s Independent Directors have served the Company for nine (9) years or a cumulative service of nine (9) years with intervals. 3.3 Separation of the Position of Chairman and Group Managing Director The Chairman and the Group Managing Director of the Company are held by different individual, to ensure balance of power and authority. The Chairman is a Non-Executive member of the Board, he is responsible for ensuring the integrity and effectiveness of the governance processes of the Board and will consult with the Board promptly over any matter of major concern. The Chairman will act as facilitator at meetings of the Board and ensure that no Board member, whether executive or non-executive, dominates the discussion, and that appropriate discussion takes place and that relevant opinion among Board members are forthcoming. On the other hand, the key roles and functions of the Group Managing Director are to ensure the day to day business affairs of the Group is effectively managed as well as ensuring the Group s strategies and corporate policies are effectively implemented.

21 Leon Fuat Berhad (Company No D) 19 Corporate Governance Statement 3. REINFORCE INDEPENDENCE cont d 3.4 Board Composition The Board currently comprises five (5) Executive Directors including the Group Managing Director and four (4) Independent Non-Executive Directors. This composition ensures that at least one third of the Board comprise of independent directors in accordance to the requirement of paragraph of the Main Market Listing Requirements of Bursa Securities. The presence of the Independent Non-Executive Directors ensures that views, consideration, judgment and discretion exercised by the Board in decision-making remains objective, unbiased and independent whilst assuring the interest of other parties such as minority shareholders are addressed and adequately protected as well as being accorded with due consideration. 4. FOSTER COMMITMENT 4.1 Director s Time Commitment The Directors of the Company are expected to devote sufficient time to carry out their duties and responsibilities and are required to notify the Chairman of the Board before accepting any new directorship. During the financial year under review, two (2) meetings were held subsequent to the listing with the attendance records of the Directors set out below: Name of Directors Dato Ng Ah Ng Soon Por Ooi Bin Keong Ooi Seng Khong Ooi Kong Tiong Ng Kok Teong Ooi Shang How Chan Kee Loin Tan Did Heng Tan Sack Sen Attendance 2/2 2/2 2/2 2/2 2/2 2/2 2/2 2/2 2/2 All the members of the Board hold less than five (5) directorships in listed issuer, in compliance with paragraph of the Main Market Listing Requirement of Bursa Securities thus expected to dedicate sufficient time and effort in discharging their duties and responsibilities effectively. 4.2 Directors Continuing Education Programmes All Directors of the Company have during the financial year under review attended the Mandatory Accreditation Programme as prescribed by Bursa Securities. The Directors are encouraged to attend other appropriate training programmes to equip themselves with the knowledge and keep abreast of latest regulatory developments to effectively discharge their duties as Directors.

22 20 ANNUAL REPORT 2013 Corporate Governance Statement 5. UPHOLD INTEGRITY IN FINANCIAL REPORTING 5.1 Compliance of Financial Statements with Applicable Financial Reporting Standards The Audit Committee is tasked to assist the Board in fulfilling its fiduciary responsibilities and ensuring the financial statements comply with approved financial reporting standard, as laid down in the Audit Committee s Terms of Reference. The Board is responsible to ensure that the financial statements are properly drawn up in accordance with the provisions of the Companies Act, 1965 and approved accounting standards in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as of financial year ended 31 December 2013 and of their financial performance and cash flows for the financial year then ended. The Directors are satisfied that in preparing the financial statements of the Group for the year ended 31 December 2013, the Group has adopted suitable accounting policies and applied them consistently, prudently and reasonably. The Directors also consider that all applicable approved accounting standards have been followed in the preparation of the financial statements, subject to any material departures being disclosed and explained in the notes to the financial statements. The financial statements have been prepared on the going concern basis. The Directors are responsible for ensuring that the Group keeps sufficient accounting records to disclose with reasonable accuracy the financial position of the Group and which enable them to ensure that the financial statements comply with the Companies Act, Assessment of Suitability and Independence of External Auditors The Audit Committee has established the relevant policies and procedures to assess the suitability and independence of External Auditors. 6. RECOGNISE AND MANAGE RISKS 6.1 Internal Control and Risk Management The Audit Committee has been entrusted by the Board to ensure effectiveness of the Group s risk management and internal control systems. The activities of the outsourced Internal Auditors are reported regularly to the Audit Committee which provides the Board with the required assurance in relation to the adequacy and integrity of the Group s system of internal controls. Information on the Group s risk management and internal control is presented in the Statement on Risk Management and Internal Control set out in page 32 of this Annual Report. 7. ENSURE TIMELY AND HIGH QUALITY DISCLOSURE 7.1 Corporate Disclosure Policies and Procedures The Board ensures that the Company complies with all applicable corporate disclosure laws and regulations. 7.2 Dissemination of Information The Company has established a website at where the public can access to the Company s corporate information, products and services, share prices information, financial results, media releases as well as the Company s announcements made to Bursa Malaysia.

23 Leon Fuat Berhad (Company No D) 21 Corporate Governance Statement 8 STRENGTHEN RELATIONSHIP BETWEEN COMPANY AND SHAREHOLDERS 8.1 Annual General Meetings The forthcoming Annual General Meeting is the Company s first general meeting involving public shareholders since the listing. Notice of the Annual General Meeting will be sent to the shareholders at least twenty-one days before the Annual General Meeting and the notice will also be advertised in the newspaper giving shareholders sufficient time to prepare and/or to appoint proxy to attend and vote for their behalf. The Company will consider and introduce electronic voting when appropriate. 8.2 Poll Voting The Board took cognisance and will consider putting substantive resolutions to vote by poll at general meetings. Shareholders will be informed of their right to demand for poll at the general meetings of the Company. 8.3 Dialogue between the Company and Stakeholders The Board believes that general meetings are the most effective communication platform between the Company and shareholders. The Board will treat the annual general meetings and/or extraordinary general meetings as the most direct and effective way for the Company to reach our shareholders and stakeholders. It serves as a platform for the Company to convey business plans and strategies and for the shareholders to seek clarification or raise any queries on the resolutions to be tabled at the meeting, as well as to allow the shareholder to share their view and feedback on matters relating to the Group. The above Statement was reviewed and approved by the Board on 25 April 2014.

24 22 ANNUAL REPORT 2013 Report of the Nomination Committee The Nomination Committee of Leon Fuat Berhad ( NC or Committee ) is pleased to present the following report for the financial year ended 31 December COMPOSITION OF THE NOMINATION COMMITTEE The Nomination Committee consists of three (3) members, all of whom are Independent Non-Executive Directors. The committee members are as follows: Directors Chan Kee Loin Tan Did Heng Tan Sack Sen Position Chairman of Nomination Committee & Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director TES OF REFERENCE OF THE NOMINATION COMMITTEE Constitution The Board has established a Committee of the Board to be known as the Nomination Committee. Membership 1. The Committee shall be appointed by the Board from amongst the Directors of the Company and shall comprise mainly of non-executive directors, majority of whom shall be independent. If a member of the Committee resigns or for any other reason ceases to be a member with the result that the number of members is reduced to below three (3), the Board of Directors shall, within three (3) months from the date of that event, appoint such number of new members as may be required to make up the minimum number of three (3) members. 2. The members of the Committee shall elect a Chairman from among their members. 3. The Company Secretary or his nominee or such other persons authorised by the Board shall act as the Secretary of the Committee. Meetings and Minutes 4. The Chairman of the Committee may request for a meeting as and when deemed necessary. The quorum for the meeting of the Committee shall consist of not less than two (2) members. 5. The Committee shall report to the Board and its minutes tabled and noted by the Board of Directors. The books containing the minutes of proceedings of any meeting of the Committee shall be kept by the Company at the registered office or the principal office of the Company and shall be open for inspection of any member of the Committee and the Board of Directors. 6. The Chairman of the Committee shall be entitled, where deemed appropriate, to invite any other person to a meeting of the Committee at which that person s expertise may be required having regard to the subject matter to be discussed.

25 Leon Fuat Berhad (Company No D) 23 Report of the Nomination Committee TES OF REFERENCE OF THE NOMINATION COMMITTEE cont d Functions 7. Assess and recommend to the Board of Directors the candidates for directorships of the Company. 8. Recommend to the Board, directors to fill the seats on board committees. 9. To annually assess the effectiveness of the Board as a whole, Board Committees and the contributions of each individual Director, taking into consideration the required mix of skills, expertise, experience and other requisite qualities including core competencies where non executive directors should bring to the Board. 10. Orientating and educating new directors as to the nature of the business, current issues within the company and the corporate strategies, the expectations of the company concerning input from the directors and the general responsibilities of directors. 11. To recommend to the Board the re-election of directors who retire at annual general meetings. 12. Periodically reporting to the Board on succession planning for the board Chairman and Group Managing Director, where appropriate and senior management. The Board should work with the Committee to evaluate potential successors. 13. Assessing independence of Independent Directors for recommendation to the shareholders for approval at the Company s general meeting, where appropriate. Reporting Procedures 14. The actual decision as to who shall be appointed to the Board should be the responsibility of the full board after considering the recommendations of the committee. 15. Reporting to the full board from time to time its recommendations for consideration and implementation. ACTIVITIES OF THE NOMINATION COMMITTEE During the financial year ended 31 December 2013, the Nomination Committee met once on 26 August 2013 to note the Terms of Reference and to discuss the proposed annual assessment by the NC of the effectiveness of the Board and individual director which will be carried out immediately after the end of the financial year 2013, amongst other matters. The NC took cognizance of its function in the review and assessment for appointment of new directors to the Board, taking into consideration inter-alia the suitability of the potential candidates, required mix of knowledge and skills before making recommendation to the Board.

26 24 ANNUAL REPORT 2013 Report of the Audit Committee The Audit Committee of Leon Fuat Berhad is pleased to present the following report for the financial year ended 31 December COMPOSITION OF THE AUDIT COMMITTEE The Audit Committee consists of three (3) members, all of whom are Independent Non-Executive Directors. The Chairman of the Audit Committee is also a member of the Malaysian Institute of Accountants. The committee members are as follows: Directors Tan Did Heng Chan Kee Loin Tan Sack Sen Position Chairman of Audit Committee & Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director MEETINGS AND ATTENDANCE The Audit Committee held a total of three (3) meetings during the financial year ended 31 December Details of attendance are as follows: Directors Attendance Tan Did Heng 3 out of 3 Chan Kee Loin 3 out of 3 Tan Sack Sen 3 out of 3 The Secretary was present at all Audit Committee Meetings held during the financial year ended 31 December TES OF REFERENCE OF THE AUDIT COMMITTEE Constitution The Board of Directors has established a Committee of the Board to be known as the Audit Committee (hereinafter referred to as Committee ). The Committee assists the Board in fulfilling its fiduciary responsibilities relating to corporate accounting, financial reporting practices, system of internal control, the audit process and the process of monitoring compliance with laws and regulations. Membership 1. The Committee shall be appointed by the Board of Directors from amongst the Directors of the Company and shall comprise of at least three (3) members, all of whom must be non-executive directors, with a majority of them being independent. 2. At least one member of the Committee:- (i) must be a member of the Malaysian Institute of Accountants; or

27 Leon Fuat Berhad (Company No D) 25 Report of the Audit Committee TES OF REFERENCE OF THE AUDIT COMMITTEE cont d Membership cont d 2. At least one member of the Committee:- cont d (ii) if he is not a member of the Malaysian Institute of Accountants, he must have at least three (3) years working experience and:- he must have passed the examinations specified in Part I of the 1st Schedule of the Accountants Act 1967; or he must be a member of one of the associations of accountants specified in Part II of the 1st Schedule of the Accountants Act 1967; or (iii) either one of the following qualifications and at least three (3) years post qualification experience in accounting or finance: a degree/masters/doctorate in accounting or finance; or a member of any professional accountancy organisation which has been admitted as a full member of the International Federation of Accountants; or (iv) at least seven (7) years experience being a chief financial officer of a corporation or having the function of being primarily responsible for the management of the financial affairs of a corporation. 3. No alternate director shall be appointed as a member of the Committee. 4. The members of the Committee shall elect a Chairman from among their number who shall be an Independent Director. 5. The Company Secretary or his nominee or such other persons authorised by the Board shall act as the Secretary of the Committee. 6. If a member of the Committee resigns or for any other reason ceases to be a member with the result that the number of members is reduced to below three (3), the Board of Directors shall, within three (3) months from the date of that event, appoint such number of new members as may be required to make up the minimum number of three (3) members. 7. The term of office and performance of the Committee and each of its members shall be reviewed by the Board of Directors at least once every three (3) years to determine whether such Committee and its members have carried out their duties in accordance with their terms of reference. Meetings and Minutes 8. The Committee shall meet at least four (4) times in a financial year, although additional meetings may be called at any time at the Committee Chairman s discretion. 9. The quorum for a meeting of the Committee shall consist of not less than two (2) members, majority of whom must be Independent Directors. 10. Other than in circumstances which the Chairman of the Committee considers inappropriate, the Chief Financial Officer, the representatives of the internal auditors and external auditors will attend any meeting of the Committee to make known their views on any matter under consideration by the Committee or which in their opinion, should be brought to the attention of the Committee. Other Board members, employees and external professional advisers shall attend any particular meetings upon invitation by the Committee.

28 26 ANNUAL REPORT 2013 Report of the Audit Committee TES OF REFERENCE OF THE AUDIT COMMITTEE cont d Meetings and Minutes cont d 11. At least twice in a financial year, the Committee shall meet with the external auditors without the Executive Directors being present. 12. The Committee shall report to the Board and its minutes tabled and noted by the Board of Directors. The books containing the minutes of proceedings of any meeting of the Committee shall be kept by the Company at the registered office or the principal office of the Company, and shall be open for inspection of any member of the Committee and the Board of Directors. Authority 13. The Committee is authorised by the Board to investigate any matter within the Committee s terms of reference. It shall have full and unrestricted access to any information pertaining to the Group and shall have the resources it requires to perform its duties. All employees of the Group are required to comply with the requests made by the Committee. 14. The Committee is authorised by the Board to obtain external independent professional or other advice, the expenses of which will be borne by the Company and to invite outsiders to attend the Committee s meetings if it considers necessary. 15. The Committee shall have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity. 16. The Committee shall be able to convene meetings with the external auditors, the internal auditors or both, excluding the attendance of other Directors and employees of the Company, whenever deemed necessary. 17. The Internal Auditors shall report directly to the Committee and shall have direct access to the Chairman of the Committee on all matters of control and audit. Functions and Duties 18. The Committee shall, amongst others, discharge the following functions: Review the following and report the same to the Board of Directors of the Company:- (a) (b) (c) (d) (e) (f) (g) with the external auditors, the audit plan, the nature and scope of work and ascertain that it will meet the needs of the Board, the shareholders and regulatory authorities; with the external auditors, their evaluation of the quality and effectiveness of entire accounting system, the adequacy and integrity of the internal control system and the efficiency of the Group s operations; with the external auditors, their audit report; the assistance given by employees of the Group to the external and internal auditors; the adequacy of the scope, functions, competency and resources of the internal audit functions and that it has the necessary authority to carry out its work including inter-alia the appointment of internal auditors; the internal audit programme, processes and results of the internal audit programme, processes, major findings of internal investigation and Management s response and whether or not appropriate action is taken on the recommendations of the internal audit function; review any appraisal or assessment of the performance of members of the internal audit function;

29 Leon Fuat Berhad (Company No D) 27 Report of the Audit Committee TES OF REFERENCE OF THE AUDIT COMMITTEE cont d Functions and Duties cont d 18. The Committee shall, amongst others, discharge the following functions:- cont d 18.1 Review the following and report the same to the Board of Directors of the Company:- cont d (h) the quarterly results and annual financial statements prior to the approval by the Board of Directors, focusing particularly on:- (i) (ii) (iii) (iv) (v) changes in or implementation of major accounting policies and practices; significant and unusual events; significant adjustments arising from the audit; compliance with accounting standards, other statutory and legal requirements and the going concern assumption; the accuracy and adequacy of the disclosure of information essential to a fair and full presentation of the financial affairs of the Group; (i) (j) (k) (l) any related party transactions and conflict of interest situations that may arise within the Company or Group and any related parties outside the Group including any transaction, procedure or course of conduct that raises questions of management integrity; any letter of resignation from the external auditors of the Company; whether there is reason (supported by grounds) to believe that the Company s external auditors are not suitable for re-appointment; and any significant audit findings, reservations, difficulties encountered or material weaknesses reported by the external and internal auditors, particularly any comments and responses in Management letters as well as the assistance given by the employees of the Group in order to be satisfied that appropriate action is being taken Review any matters concerning the appointment and dismissal of both the external and internal auditors, their audit fees and render its recommendations accordingly to the Board of Directors Promptly report to Bursa Malaysia Securities Berhad on any matter reported by it to the Board of the Company which has not been satisfactorily resolved resulting in a breach of Bursa Malaysia Securities Berhad s Listing Requirements Verify the allocation of option pursuant to a share scheme for employees, if any, at the end of each financial year and to prepare a statement verifying such allocation in the annual reports Carry out any other functions that may be mutually agreed upon by the Committee and the Board of Directors which would be beneficial to the Company and ensure the effective discharge of the Committee s duties and responsibilities Ensure the internal audit function of the Company reports directly to the Committee.

30 28 ANNUAL REPORT 2013 Report of the Audit Committee ACTIVITIES OF THE AUDIT COMMITTEE During the financial year ended 31 December 2013, the activities carried out by the Audit Committee in the discharge of its duties and functions included, among others, the following: Reviewed the unaudited quarterly financial results prior to the Board of Directors approval for submission to Bursa Malaysia Securities Berhad; Reviewed and discussed with the External Auditors the scope of work and audit plan including the audit approach, the areas of audit emphasis, new developments on accounting standards and regulatory requirements; Reviewed the assistance provided by Management to the External Auditors during the course of their audit; Reviewed the recurrent related party transactions; Reviewed and discussed with the Internal Auditors risk assessment and management in the Group; Reviewed the audit plan of the Internal Auditors to ensure the adequacy of the scope; Reviewed the internal audit reports, audit recommendations made and management responses to these recommendations; and Reviewed the assistance provided by Management to the Internal Auditors during the course of their audit. INTERNAL AUDIT FUNCTION The Company has outsourced its internal audit function to an independent professional consultancy firm with the aim of providing independent and systematic reviews on the systems of internal control within the Group. The Internal Audit function provides an independent and objective feedback to the Audit Committee and the Board on the adequacy, effectiveness and efficiency of the internal control system within the Group. For the year under review, audits were performed to evaluate and identify any weaknesses of the internal controls affecting the Group, the adequacy of the existing system of control and to recommend measures to management to improve and rectify any weaknesses. On quarterly basis, the Internal Auditors report to the Audit Committee on their audit findings, their recommendations of the corrective actions to be taken by the management together with the management s responses in relation thereto. The activities carried out by the Internal Auditors during the financial year under review were as follows:- 1) Reviewed and reported on Sales, Delivery and Credit Control Function of the major subsidiary, Leon Fuat Hardware (Klang) Sdn Bhd; 2) Reviewed and reported on Trade Purchasing Function of Leon Fuat Hardware (Klang) Sdn Bhd; 3) Reviewed and reported on Recurrent Related Party Transactions entered into by the Group; and 4) Conducted a risk assessment review of the Company and its subsidiaries with Executive Director and relevant key personnel of the Group and reported the findings to the AC. The costs incurred for the internal audit function in respect of the financial year ended 31 December 2013 amounted to 15,900.

31 Leon Fuat Berhad (Company No D) 29 Report of the Remuneration Committee The Remuneration Committee of Leon Fuat Berhad ( Remuneration Committee or Committee ) is pleased to present the following report for the financial year ended 31 December COMPOSITION OF THE REMUNERATION COMMITTEE The Remuneration Committee consists of three (3) members, the majority of whom are Non-Executive Directors. The committee members are as follows: Directors Tan Sack Sen Ooi Bin Keong Chan Kee Loin Position Chairman of Remuneration Committee & Independent Non-Executive Director Group Managing Director Independent Non-Executive Director TES OF REFERENCE OF THE REMUNERATION COMMITTEE Constitution The Board has established a Committee of the Board to be known as the Remuneration Committee. Membership 1. The Committee shall be appointed by the Board from amongst the Directors of the Company and shall comprise wholly or mainly of non-executive directors of not less than three (3) members. If a member of the Committee resigns or for any other reason ceases to be a member with the result that the number of members is reduced to below three (3), the Board of Directors shall, within three (3) months from the date of that event, appoint such number of new members as may be required to make up the minimum number of three (3) members. 2. The members of the Committee shall elect a Chairman from among their members. 3. The Company Secretary or his nominee or such other persons authorised by the Board shall act as the Secretary of the Committee. Meetings and Minutes 4. The Chairman of the Committee may request for a meeting as and when deemed necessary. The quorum for the meeting of the Committee shall consist of not less than two (2) members. 5. The Committee shall report to the Board and its minutes tabled and noted by the Board of Directors. The books containing the minutes of proceedings of any meeting of the Committee shall be kept by the Company at the registered office or the principal office of the Company and shall be open for inspection of any member of the Committee and the Board of Directors. 6. The Chairman of the Committee shall be entitled, where deemed appropriate, to invite any other person to a meeting of the Committee at which that person s expertise may be required having regard to the subject matter to be discussed.

32 30 ANNUAL REPORT 2013 Report of the Remuneration Committee TES OF REFERENCE OF THE REMUNERATION COMMITTEE cont d Functions 7. Review and recommend to the board the framework of remuneration and its cost, and the remuneration package for executive directors and key management personnel, taking into account the performance of the individual, the inflation price index and information from independent sources on the rates of salary for similar jobs in a selected group of comparable companies. 8. Review and recommend to the Board the remuneration structure and policy for executive directors and key management personnel, the terms of employment or service contract, where relevant, any benefit, pension or incentive scheme entitlement, performance related bonuses, fees and expenses, compensation arrangement, and to review for changes to the policy, where necessary. 9. To reimburse reasonable expenses incurred by the directors in the course of their duties as directors. 10. To review annually the executive directors service contracts, if any. 11. To ensure the levels of remuneration be sufficiently attractive and be able to retain the Directors and key management personnel needed to run the Group successfully. 12. Ensure corporate accountability and governance in respect of the remuneration of the Directors and key management personnel and other relevant functions. Reporting Procedures 13. The remuneration of Directors shall be the ultimate responsibility of the Board after considering the recommendations of the Committee. 14. Directors do not participate in deliberation and decisions on their respective remuneration packages. ACTIVITIES OF THE REMUNERATION COMMITTEE The Remuneration Committee met on 26 August 2013 during the financial year ended 31 December 2013 to review and discuss the existing remuneration packages of the Executive Directors of the Company and its subsidiaries which comprise inter-alia salary, bonus and other benefits-in-kind. The RC also reviewed the Directors Fees and meeting allowance for the Directors in respect of the financial year under review. The RC discussed the establishment of a remuneration framework for Executive Directors which should include remuneration packages of the Executive Directors of the Company and its subsidiaries and other applicable key management personnel, to ensure the remuneration packages offered to the Executive Directors is reasonable and appropriate in the light of the Company s performance, to attract and retain directors and key personnel.

33 Leon Fuat Berhad (Company No D) 31 Report of the Remuneration Committee DIRECTORS REMUNERATION The aggregate remunerations for services rendered by our Directors in all capacities to the Group for the financial year under review are as follows: Executive Directors 000 Non-Executive Directors 000 Salaries and other emoluments 3,671 - Fees Total 4, The Board s remunerations, which comprise salaries, bonuses, fees, allowances and other benefits-in-kind are required to be considered and recommended by the Remuneration Committee and subsequently by the Board. Our Directors Fees are subject to shareholders approval at Annual General Meeting. The number of Directors of the Company whose total remuneration falls into the each band of 50,000 distinguishing between Executive and Non-Executive Directors is as follows: Executive Directors Non-Executive Directors Up to 50, ,001 to 100, ,001 to 750, ,001 to 800, ,001 to 850, ,001 to 900, ,001 to 950, ,001 to 1,000, ,000,001 to 1,050, ,050,001 to 1,100,

34 32 ANNUAL REPORT 2013 Statement on Risk Management and Internal Control Pursuant to Paragraph (b) of the Bursa Malaysia Securities Berhad s Main Market Listing Requirements, the board of directors of a listed issuer is to include in its Annual Report a statement about the state of risk management and internal control of the listed issuer as a group. The Malaysian Code on Corporate Governance 2012 under Principle 6 states that the Board should establish a sound risk management framework and internal controls system. The Board of Leon Fuat acknowledges its overall responsibility for maintaining a sound internal control system for the Group to safeguard the shareholders investment and the Group s assets, and to discharge their stewardship responsibilities in identifying risks and ensuring the implementation of appropriate system to manage these risks in accordance with the best practices of the Malaysian Code on Corporate Governance. The Board also recognises that in establishing such system of risk management and internal control, the systems designed can only manage but not eliminate the risk of failure to achieve business objectives of the Group and that it can only provide reasonable assurance against material misstatement or loss. The Board has received assurance from the Group Managing Director and the Chief Financial Officer that the Group s risk management and internal control system is operating adequately and effectively, in all material aspects, based on the risk management and internal control system of the Group. In addition, Senior Management of the Group has been entrusted to continuously monitor the effectiveness and integrity of the system of risk management and internal control, which among others, include the following processes : - A risk management framework has been adopted as an on-going process for identifying, evaluating and managing the significant risks faced by the Group since 23 October 2013 and it has been in place up to the date of this statement. A Risk Management Committee has been established on 11 October 2013 to review issues relating to risk affecting the Group and to formulate risk management strategy to mitigate the potential risk. The Risk Management Committee reports to the Board. The Board receives and reviews on quarterly basis since the listing of the Company in June 2013 the reports on key financial data and performance. Quarterly results are compared with the immediate preceding quarter and variances are highlighted and explained by the Chief Financial Officer to the Board. The Audit Committee reviews internal and external audit findings and holds discussions with the management on action to be taken on accounting and internal control issues identified by the internal audit function and the external auditors. The internal audit function of the Group was outsourced to an independent professional service provider to facilitate in the risk assessment and conduct internal control reviews based on the approved internal audit plan. During the financial year, there were no material losses, contingencies or uncertainties arising from weaknesses in the internal control system that would require disclosure in the Group s Annual Report. Based on the foregoing, the Board is of the view that the Group s risk management and internal control system implemented is adequate and effective while recognising that these require continuous improvement. The above Statement on Risk Management and Internal Control was reviewed and approved by the Board on 25 April 2014.

35 Leon Fuat Berhad (Company No D) 33 Additional Compliance Information 1. UTILISATION OF PROCEEDS FROM THE PUBLIC ISSUE On 5 June 2013, the entire enlarged issued and paid-up share capital of the Company comprising 310,000,000 ordinary shares of 0.50 each ( Shares ) was listed on the Main Market of Bursa Malaysia Securities Berhad. In conjunction with and as an integral part of the listing, the Company undertook a public issue of 59,310,000 new Shares at an issue price of 0.60 per Share. The gross proceeds raised from the Public Issue amounting to million and the status of utilisation is as follows: Proposed utilisation (1) Actual utilisation Deviation Balance Purposes % 000 Intended timeframe for utilisation (from the listing date) Purchase of new industrial land with building Construction of new processing plant with warehousing facilities 13,000 (12,677) (323) (2) (2.5%) - Within 1 year 6, ,000 Within 3 years Purchase of new machines 6, ,000 Within 3 Years Working capital 7,786 (7,655) (131) (2)(3) (1.7%) - Within 1 year Estimated listing expenses 2,800 (3,254) (3) 454 (3) 16.2% - Upon listing Total gross proceeds 35,586 (23,586) ,000 Note: (1) The proposed utilisation of proceeds as disclosed above should be read in conjunction with the Prospectus of the Company dated 13 May (2) In respect of excess of proposed utilisation over the actual early settlement sum (including a one-off fee of 0.15 million levied by the bank for early settlement) for a term loan facility used to fund the purchase of the new industrial land with building. In accordance to the Prospectus dated 13 May 2013, any variation to the actual term loan and overdraft facility repayment shall be adjusted against the proposed utilisation for working capital. (3) Actual listing expenses incurred were more than the estimated listing expenses by 0.45 million mainly due to higher printing and advertisement costs as well as other incidental costs incurred in connection to the listing exercise. In accordance to the Prospectus dated 13 May 2013, the excess of listing expenses shall be adjusted against the proposed utilisation for working capital. 2. SHARE BUY-BACK The Company does not have a share buy-back programme in place. 3. OPTIONS OR CONVERTIBLE SECURITIES The Company did not issue any options or convertible securities during the financial year under review. 4. DEPOSITORY RECEIPT PROGRAMME The Company did not sponsor any depository receipt programme during the financial year under review.

36 34 ANNUAL REPORT 2013 Additional Compliance Information 5. IMPOSITION OF SANCTIONS AND/OR PENALTIES There were no public sanctions and/or penalties imposed on the Company and its subsidiaries, Directors or Management by the relevant regulatory bodies during the financial year. 6. NON-AUDIT FEES The amount of non-audit fees paid and payable to the External Auditors for services rendered for the financial year under review amounted to 89, VARIATION IN RESULTS There was no material variation between the audited results for the financial year under review and the unaudited results of the Group previously announced. 8. PROFIT ESTIMATES, FORECAST OR PROJECTION The Company did not issue any profit estimate, forecast or projection for the financial year under review. 9. PROFIT GUARANTEE The Company is not subject to any profit guarantee during the financial year under review. 10. MATERIAL CONTRACT INVOLVING DIRECTORS AND MAJOR SHAREHOLDERS There were no material contracts entered into by the Company and its subsidiaries which involved the interests of the Directors and major shareholders, either still subsisting at the end of the financial year under review, or which were entered into since the end of the previous financial year other than contracts entered into in the normal course of business. 11. RECURRENT RELATED Party TRANSACTIONS The relevant recurrent related party transactions of a revenue nature incurred by the Group for the period from 5 June 2013 (date of listing) to 31 December 2013 are set out in Note 26 of the audited financial statements for year ended 31 December 2013.

37 Financial Statements 36 Directors Report 41 Statement by Directors 41 Statutory Declaration 42 Independent Auditors Report 44 Statements of Profit or Loss and Other Comprehensive Income 45 Statements of Financial Position 46 Consolidated Statement of Changes in Equity 47 Statement of Changes in Equity 48 Statements of Cash Flows 50 Notes to the Financial Statements 94 Supplementary Information on The Diclosure of Realised and Unrealised Profit or Loss