TRC SYNERGY BERHAD ( D)

Transcription

1 TRC SYNERGY BERHAD ( D) a n n u a l r e p o r t

2 Our Vision To become a large and diversified conglomerate with core business in construction, property development, privatization of government projects and oil and gas.

3 Contents Chairman s Statement Corporate Information Profile of Directors Corporate Structure Statement on Corporate Governance Statement on Internal Control Audit Committee Report Financial Statements List of Properties Analysis of Shareholdings Analysis of Warrant A Holdings Analysis of Warrant B Holdings Notice of Fifteenth Annual General Meeting Statement Accompanying Notice of Annual General Meeting Proxy Form

4 2 Chairman s Statement Dato Sri Sufri Bin Hj Mohd Zin Executive Chairman Dear Shareholders, On behalf of the Board of Directors, I am pleased to present the Annual Report and the Group Audited Accounts of TRC Synergy Berhad and its subsidiaries for the year ended 31 December Overview The year 2011 has proven to be another challenging year for the group. Recently, the construction industry has seen an increase in competition and pricing pressure and to cope with this difficult circumstance, we have taken increased measures to better manage our costs, improve efficiency and intensify our management processes. We remain confident that our strategies are sound and our market capitalization going forward, will fully reflect and vindicate the success of our measures and vision. Financial Review For the period under review, the group revenue increased by 6.4% to RM400.7m (year 2010 : RM376.7m) but the operating profit was reduced to RM10.3m (year 2010 : RM19.3m), resulting in an operating margin of 2.6%, compared with the previous year of 5.1%. Likewise, the profit after tax also registered a reduction from RM16.2m in 2010 to RM13.0m in 2011 representing a reduction of 19.8%. The lower operating margin and profit after tax was largely due to additional material and labour costs incurred during the defect liability period for completed projects. The above results reflect the tough market conditions which remained very challenging throughout the year 2011 and the over capacity in the construction industry thus maintaining pressure on margins. Whilst the market conditions in 2012 will remain challenging, our order books in the construction division is at a healthy level of RM1.5billion, giving good forward visibility of workload which coupled with a strong pipeline of further opportunities from the Mass Rapid Transit (MRT) works and Economic Transformation Programme (ETP) will translate into revenue growth for the group in the years to come. Construction In 2011 this division achieved its target of securing at least RM500 million of projects per year. It also set another milestone by successfully procuring its first significant project overseas ie The Modernisation of Brunei International Airport. Further to this, the group has incorporated its fully owned subsidiary TRC (B) Sdn Bhd, with its mission of exploring more opportunities in Brunei.

5 3 Chairman s Statement (Cont d) Construction (cont d) Progress on its biggest project, the RM950 million Kelana Jaya Line Extension Project (Package A) is about 30% slower than anticipated due to site problems which is expected to be fully resolved in The slow progress has affected out turnover in 2011 but this will be balanced with increase turnover in 2012 once the site issues are resolved. The outcome of tenders participated in a few significant projects in SCORE and the KVMRT, among others, are still pending. We anticipate the outcome to be known in 2012 and we hope to secure some of these packages. This division still remains the main revenue earner with a profit contribution of about RM9.7 million out of the group s total of RM13.2 million. Property The development on lot 196, Taman Ukay Tropika, Ulu Klang, Selangor was launched in the fourth quarter of This development which consists of 83 units of 3-storey houses and a club house will generate a Gross Development Value of approximately RM87 million to the company. The demand for these houses has surpassed our expectation as we managed to secure sales exceeding 50% within 3 months of soft launch. The construction work has now reached 20% completion and we expect to deliver the units much earlier than the contractual obligation date of March The development of Impian Senibong Phase 2 in Johor Bahru will comprise 243 units of apartments and SOHOs with an anticipated Gross Development Value of approaximately RM60million. We expect to launch this development in the fourth quarter of We also projected a similar strong demand for this development as the Johor Bahru East Coast Highway and the Eastern Dispersal Link (EDL) have been completed and this will reduce travelling time to the Causeway and Pasir Gudang significantly. Besides this, other land bank which will be developed in the medium term is the 27 acres piece of land in Bandar Seri Alam, Johor Bahru. This division is aggressively on the lookout for good land banks throughout the country with the main focus in KL, Selangor and Johor to ensure continual growth and sustainable earnings. The overseas property division, TRC Land (Cambodia) Ltd. through its purchase of 34% equity stake in Delta Garden Ltd. In Cambodia is currently developing 40 units of double storey villas in Phnom Penh, Cambodia. TRC Land (Cambodia) Ltd. is also the main contractor to this development. Once the above plans and projects materialized in the near future, we expect this division to be one of the main contributors to the Group s revenue. TRC (Aust) PtY Ltd. The year 2011 saw the group s emphasis in investment in this subsidiary with its second purchase of a property in Melbourne ie the 588 Swan Street property. This property is presently tenanted but the group has plan to redeveloped it in the future. It also marked the year that significant contribution is shown from this subsidiary. The subsidiary recorded a RM6.4million profit contribution, mainly from it s property development in Springridge, Wallan through it s 33% stake in Pretty Sally Pty Ltd. Going forward, we see income contribution to be more forthcoming from the Springridge Development and on a longer term the Swan Street redevelopment.

6 4 Chairman s Statement (Cont d) REVENUE (RM 000) PROFIT/(LOSS) BEFORE TAXATION (RM 000) SHAREHOLDERS S FUND (RM 000) NET TANGIBLE ASSETS PER SHARE (sen) 23,040 16, , , ,763 38, ,662 61, , , , , Energy Our associate company, PetroBru (B) Sdn. Bhd. which was incorporated to venture into an oil refinery and storage facility in Brunei Darussalam, has submitted a detailed feasibility study proposal to the Brunei Government to seek its final approval for the proposed venture. To date we are still awaiting its approval. Manufacturing This division was incorporated to complement the group s construction activities. We do not foresee its revenue to have an impact on the group s performance. Dividend Through the bracing environment of 2011, we have emerged stronger and we are confident of our ability to create longterm value with our stakeholders. In view of this, the Board has recommended a first and final dividend of 2 sen less income tax of 25% for the financial year ended 31 December Future Prospects In accordance with the Economic Report 2011/2012, the construction sector is projected to grow strongly by 7% in 2012 (2011 : 3.4%) driven by the commencement of large infrastructure projects and vibrant housing construction activities. The civil engineering sub-sector will be supported by the implementation of development projects to enhance the long-term potential growth of the economy. These include the construction of Sungai Buloh-Kajang MRT line, and the integrated transport terminal in Gombak. In addition, the development of Sabah gas and oil terminal will further support the growth of this sub-sector. Other notable projects which will support this sub-sector include the ongoing KLIA2, expansion of clean water supply and electrification projects to rural areas, especially in Sabah and Sarawak as well as construction of 430.7km rural roads under the NKRA on rural infrastructure. With the anticipated strong growth in the construction sector, we believe that our integrated business model will continue to provide a good breath of opportunities and with our track record of delivery, the group is well positioned to make further progress in the new financial year. Acknowledgement I would like to take this opportunity to thank the Board for their invaluable contribution and outstanding services to the group. I would also like to thank our management and staff for their dedication and commitment and also our shareholders, bankers and business associates for their continuous support. Together we shall steer the group towards greater growth and profitability. Dato Sri Sufri B. Mhd. Zin Executive Chairman

7 5 Corporate Information Board of Directors Dato Sri Sufri bin Hj Mohd Zin (Executive Chairman) Dato Abdul Aziz bin Mohamad (Executive Director) General (R) Tan Sri Mohd Shahrom Bin Dato Hj Nordin (Senior Independent, Non-Executive Director) Noor Zilan bin Mohamed Noor (Independent Non-Executive Director) Abdul Rahman bin Ali (Independent Non-Executive Director) Company Secretary Abdul Aziz bin Mohamed (LS ) Registered Office / Principal Place of Business TRC Business Centre Jalan Andaman Utama Ampang, Selangor Tel No. : Fax No. : info@trc.com.my Branch Office Lot 3626, Block 16, KCLD Taman Timberland, Lorong Rock Kuching, Sarawak Tel No. : Fax No. : Website Auditors AljeffriDean (AF-1366) , 5th Floor, Menara KLH No. 2, Jalan Kasipillay Kuala Lumpur Share Registrar Mega Corporate Services Sdn Bhd Level 15-2, Sheraton Imperial Court Jalan Sultan Ismail, Kuala Lumpur Tel : Fax : & Principal Bankers EON Bank Berhad Affin Bank Berhad AmBank (M) Berhad Malayan Banking Berhad United Overseas Bank Berhad RHB Bank Berhad CIMB Bank Berhad Standard Chartered Bank Malaysia Berhad Solicitors Messrs Noorzilan & Partners Messrs C.C. Choo, Hazila & Teong Messrs Zain Megat & Murad Stock Exchange Listing Bursa Malaysia Securities Berhad Main Market (Construction) Stock No.s : WA 5054 WB

8 6 Profile of Director s Dato Sri Sufri Bin Hj Mohd Zin Executive Chairman, 56 years of age Malaysian Dato Sri Sufri Bin Hj Mohd Zin is the founder of TRC Group. He was appointed as the Managing Director of TRC Synergy Berhad ( TRC or the Company ) on 29 March 2002 and presently he is the Executive Chairman of the Company and the Managing Director of its subsidiary Companies. Dato Sri Sufri graduated from MARA Institute of Technology in 1982, with a Diploma in Business Studies. He began his career as a banker with Bank Bumiputera Malaysia Berhad in He later pursued a Bachelor Degree in Jurisprudence from Universiti Malaya and he also holds an MBA, which he obtained in In August 2009, Dato Sri Sufri was selected as one of the winners of the Outstanding Entrepreneurship Award organized by Enterprise Asia. Dato Sri Sufri achieved a personal milestone when he was honored as the CEO of the Year by the Construction Industry Development Board (CIDB) in He is also a member of the Jawatankuasa Pemandu established by the Works Minister in the implementation of the MOU between the Government of Malaysia and the Government of India on co-operation relating to the provision of Technical Assistance Services on Highway Management and Development. Dato Sri is the Vice President and Council Member of Master Builder Association Malaysia ( ), a member of the Road Engineering Association of Asia and Australia (REAAA) and Persatuan Kontraktor-Kontraktor Melayu Malaysia (Cawangan Wilayah Persekutuan). Recently he was appointed as a Board Member to Tun Hussein Onn University, Malaysia. During the Financial year ended 31 December 2011 he attended all five Board of Directors Meetings. Dato Abdul Aziz Bin Mohamad Executive Director, 53 years of age Malaysian Dato Abdul Aziz Bin Mohamad was appointed as an Executive Director of the Company on 29 March He joined TRC Group s, Trans Resources Corporation Sdn Bhd as a Senior Contract Executive in 1994 and now holds the post of Chief Executive Officer (CEO) of that subsidiary company. He had his early education in the Malay College Kuala Kangsar (MCKK) and graduated from Trent Polytechnic in Nottingham, England in He is a Quantity Surveyor by profession and a member of the Institution of Surveyors, Malaysia. He started his career as an Assistant Quantity Surveyor in England with Rider Hunt and Partners in 1982 and later joined Jabatan Kerja Raya (JKR) in 1983 as a Quantity Surveyor until subsequently joining TRC. YBhg Dato Abdul Aziz attended all five Board of Directors Meetings held during the financial year ended 31 December He does not have any personal interest in any business arrangement involving the Company. Note:- Save as disclosed above, 1. none of the Directors have:- i. any family relationship with any director and/ or substantial shareholders of the Company; ii. any conflict of interest with the Company; and iii. any conviction for offences (other than traffic offences) within the past ten (10) years. 2. none of the Directors holds directorship in other public companies.

9 7 Profile of Director s (Cont d) General (R) Tan Sri Mohd Shahrom Bin Dato Hj Nordin Senior Independent, Non-Executive Director, 64 years of age Malaysian General (R) Tan Sri Mohd Shahrom Bin Dato Hj Nordin was appointed as a Director of the Company on 25 March After his secondary education, he was selected for Officer Cadet training at the Royal Military College, Sungai Besi in 1966 before being commissioned as a Second Lieutenant into the Royal Malay Regiment in 1968 and assigned as a Platoon Commander with the 2nd Battalion, Royal Malay Regiment. General (R) Tan Sri Mohd Shahrom has served in various appointments at command, staff, training and the diplomatic services levels and he was the Chief of the Malaysia Army from 1st January 2003 to 15 September Prior to that appointment he was the Chief of staff at the Armed Forces Headquarters. Currently he is the Executive Director (Defence and Business Development) of the National Aerospace & Defence Industries Sdn Bhd (NADI). He is also a Director of SME Ordnance Sdn Bhd (SMEO) a subsidiary company of the NADI Group of Companies. General (R) Tan Sri Mohd Shahrom is the Chairman to the Audit Committee and the Senior Independent Non Executive Director of the Company. During the financial year ended 31 December 2011 he attended four out of five Board of Directors Meetings held. Noor Zilan Bin Mohamed Noor Independent, Non Executive Director, 52 years of age Malaysian Noor Zilan Bin Mohamed Noor was appointed as a Director of the Company on 13 May He graduated from ITM in 1983 with a Diploma in Law. He then joined United Malayan Banking Corporation as a Trainee Executive Officer before pursuing for further studies in the United Kingdom in 1984 and graduated from City of London Polytechnics with LLB (Hons) majoring in Business Law in Subsequently, he went on to read Law at Lincoln s Inn and was called to the English Bar in 1988 and upon returning to Malaysia he was then called and admitted to the Malaysian Bar in 1989 as an Advocate & Solicitor. He then worked as a Legal Assistant before starting his own law firm in 1991 and is now a Senior Practitioner with an established law firm in Kuala Lumpur specializing in the area of Corporate Law, Banking, Building and Construction Law apart from civil & criminal litigation. Noor Zilan is a member of the Audit Committee and the Chairman to the Nomination Committee and Remuneration Committee. He attended all five Board of Directors Meetings held during the financial year ended 31 December Abdul Rahman Bin Ali Independent, Non Executive Director, 55 years of age Malaysian Abdul Rahman Bin Ali was appointed as a Director of the Company on 13 May He graduated from University of Malaya in 1982 with a Degree in Accounting. He is currently a Chartered Accountant of the Malaysian Institute of Accountants. Upon graduated, he started his training with financial institution for a number of years before joining public accountancy practice. In 1994, he set up his own accounting firm by the name A. Rahman & Associates and later become a partner of AKN Arif in Abdul Rahman is a member of the Audit Committee, Nomination Committee and Remuneration Committee. He attended all five Board of Directors Meetings held during the financial year ended 31 December 2011.

10 8 Corporate Structure 100% TRC International Pte Ltd (LL04510) 100% TRC Energy Sdn Bhd ( K) 26% PetroBru (B) Sdn Bhd (AGO / RC / 6613 / 06) 100% TRC Land Sdn Bhd ( W) 100% TRC Infra Sdn Bhd ( P) 100% Trans Resources Corporation Sdn Bhd ( P) 100% Swan Synergy Holdings Pty Ltd ( ) 100% TRC Development Sdn Bhd ( U) 100% 34% TRC Land (Cambodia) Limited (6234/09E) 100% TRC (Sarawak) Sdn Bhd ( W) 100% TRC Concrete Industries Sdn Bhd ( V) 100% TRC (B) Sdn Bhd (RC/ ) 100% 60% Liputan Sutera Sdn Bhd ( H) Delta Garden Limited (11524/08P) Petrobru Build Sdn Bhd (RC/ ) 100% TRC (Aust) Pty Ltd ( ) 33.33% Pretty Sally Holdings Pty Ltd ( )

11 9 Statement on Corporate Governance The Board of Directors of TRC Synergy Berhad ( the Board ) recognizes the importance of maintaining a high standard of corporate governance as set out in the Malaysian Code on Corporate Governance ( The Code ) and committed to ensure the same are practiced throughout the Company and its subsidiaries ( TRC Group or the Group ). This has been accepted by the Board as the Group s key responsibilities in order to protect and enhance long term shareholder value and the financial performance of TRC group. The Board will continuously evaluate the Group s corporate governance practices and procedures, and where appropriate will adopt and implement the best practices as enshrined in the Code. The Board is pleased to disclose below how the Group has applied the principles set out in the Code and the extent to which it has complied with the best practices as set out in Part 1 and Part 2 of the Code respectively. DIRECTORS The Board of Directors ( the Board ) The Company is led and governed by the Board of Directors headed by the Executive Chairman who has detailed knowledge and vast experience in the construction industry. The rest of the Board members possess a wide range of skill and experiences ranging from construction, finance, legal and general management discipline suitable for managing the Group businesses. A brief profile of each Director is presented in this Annual Report on pages 6 and 7. The Board has overall responsibility in the stewardship of the Group s direction and its performance inclusive of corporate governance, strategic planning and maintaining effective control over financial and operational matters. Board Composition and Balance The Board currently consists of five (5) members comprising two (2) Executive Directors and three (3) Independent Non- Executive Directors. The Company fulfills the prescribed requirement of having at least one-third (1/3) of the Board Members as Independent Non-Executive Directors as stated in Paragraph of the Listing Requirements of Bursa Malaysia. The Independent Non-Executive Directors provide broad, unbiased and balanced assessment on proposals initiated by the Executive Directors and the senior management of the Group. They also contribute by the exercise of independent judgment and objective participation in the proceeding and decision making process of the Board. Their differing backgrounds collectively bring with them extensive experience augur well with this process. In compliance with Part 2, AA VII of the Code, the Company has appointed General (R) Tan Sri Mohd Shahrom Bin Dato Hj Nordin to resume the role as Senior Independent Non Executive Director to whom concern from the public may be conveyed. In view of this composition, the Board of the view that the present members of the Board are considered sufficient in addressing the issues affecting the Group.

12 10 Statement on Corporate Governance (Cont d) DIRECTORS (cont d) Board Meeting The Board meets at least four (4) times in a year and additional meetings are convened as and when necessary. During the financial year ended 31 December 2011, the Board met five (5) times and the attendance record for each Director is as follows:- Name No. of Meeting Attended % of Attendance Dato Sri Sufri Bin Hj Mohd Zin 5/5 100 Dato Abdul Aziz Bin Mohamad 5/5 100 Jen (B) Tan Sri Mohd Shahrom Bin Dato Hj Nordin 4/5 80 Noor Zilan Bin Mohamed Noor 5/5 100 Abdul Rahman bin Ali 5/5 100 In the meetings, the Board deliberated and considered matters relating to the Group s financial performance, key business and operational issues and business plans. All Directors have complied with the minimum 50% attendance requirement in respect of Board meeting as stipulated by the Bursa Listing Requirements. Supply of Information to the Board All Directors have full and unrestricted access to all information pertaining the Group s business and affairs as a full Board or in their individual capacity in carrying out their duties and responsibilities effectively. The Chairman undertakes primary responsibility for organizing information to be distributed to the Board. They also have direct access to the advice and services of the Company Secretary, senior management, internal and external auditors and other independent professional at all times and at the Company s expense. As for the Board meeting, all Directors are provided with the agenda and Board papers in sufficient time prior to the meetings to enable them to obtain further information and explanation, where necessary in order to be adequately informed before the meeting. Senior officers of the Group are invited to clarify and explain the relevant matters tabled to the Board. Appointment and Re-election of the Board The Company has a formal and transparent procedure for the appointment of new Directors and re-election of Directors. These aspects are spelt out clearly in the Company s Articles of Association. Besides, The Nomination Committee reviews and recommends any proposed appointments before the same are approved by the Board. All the newly appointed Directors are subject to election by shareholders at the Annual General Meeting subsequent to their appointment. As for the re-election of Directors, the Articles of Association of the Company provides at least one-third (1/3) of the Directors are required to retire by rotation at each financial year and are eligible to offer themselves for reelection at the Annual General Meeting. All Directors shall retire from office once at least in each three (3) years. At the last Annual General Meeting held on 29 June 2011, Noor Zilan Bin Mohamed Noor and Abdul Rahman Bin Ali retired and were elected to the Board. Directors Training All Directors have attended the Mandatory Accreditation Programme prescribed by Bursa Malaysia Securities Berhad. They believes that continuous training is essential to the Board members to ensure that they are updated with appropriate skills and knowledge to enable them to discharge their duties effectively. During the financial year ended 31 December 2011, majority of the Directors have attended the relevant training programmes and seminars to further broaden their knowledge and skills in the Group core business and on matters concerning their skills and professional fields as well as to keep abreast with development in the market place.

13 11 Statement on Corporate Governance (Cont d) DIRECTORS (cont d) Directors Training (cont d) Amongst the training programmes attended by the Directors are as follows:- Directors Training Programme 1 Dato Sri Sufri Bin Hj Mohd Zin i) Seminar on Plantation, Construction, Property & Hotel ii) OHSAS Awareness & Implementation Training iii) Malaysian Alliance of Corporate Directos (MACD) Corporate Directors Conference iv) International Seminar on Asset and Facility Management 2 Dato Abdul Aziz Bin Mohamad i) OHSAS Awareness & Implementation Training 3 General (R) Tan Sri Mohd Shahrom Bin i) Diners Club - Management Philosophy and Best Practice of Military Dato Hj Nordin Commanders Experience In Business World ii) Aerospace Conference - The Equilibrium in South China Sea Air & Space Perspectives 4 Noor Zilan Bin Mohamed Noor Nil 5 Abdul Rahman Bin Ali i) Malaysian Tax Conference 2011 ii) Persidangan Zakat dan Cukai Kebangsaan Ke 5 - Memartabatkan Zakat dalam Arus Perdana Negara iii) Workshop on New Public Rulings in 2011 iv) 2012 Budget Seminar v) MIA-AFA Conference Converge, Transform, Sustain : Towards World Class Excellence Noor Zilan bin Mohamed Noor did not attend any training programme during the year due to work commitments. Apart from that, frequent visit to the operational projects sites and occasional trips to meet overseas suppliers and consultants and active participation on the relevant association have equipped the Executive Directors with the latest information and technologies in the industry. Board Committees As recommended by the Code, the following committees have been established to assist the Board in the execution of its duties:- i) Audit Committee ii) Nomination Committee iii) Remuneration Committee iv) Employees and Directors Share Option Scheme (ESOS) Committee Each of this committee has its own functions and responsibilities and they report to the Board. DIRECTORS REMUNERATION The Group has adopted the principle recommended by the Code whereby the level or remuneration of the Directors and senior management should reflect the level of responsibility and contributions toward the successful and efficient running of the Group s activities. Procedure To assist the Board in the discharge of its duties, the Board has established a Remuneration Committee. As at the date of the Annual Report, the composition of the Remuneration Committee is as follows:- i) Noor Zilan Bin Mohamed Noor ii) Abdul Rahman bin Ali The Committee will review and recommend to the Board the remuneration package of the executive directors and senior management of the Group with the main aim of providing level of remuneration sufficient to attract and retain competent executives who can manage the Group effectively.

14 12 Statement on Corporate Governance (Cont d) DIRECTORS REMUNERATION (cont d) Disclosure The aggregate remuneration of the Directors received and receivable from the Company and its subsidiaries during the financial year ended 31 December 2011 are as follows:- Category Fees (RM) Salaries (RM) EPF & SOCSO (RM) Bonus Executive Directors - 2,187, , , Non-Executive Director 91, Total 91, ,187, , , The remuneration paid to the Directors, analysed into the following bands, is as follows:- Range of Remuneration Number of Executive Directors Number of Non-Executive Directors Less than RM 50,000-3 RM50,001 RM1,100,000* - - RM1,100,001 RM1,150, RM1,150,001-RM1,900,000* - - RM1,900,001-RM1,950, * No Directors within this range of remuneration. RELATIONSHIP WITH INVESTORS AND SHAREHOLDER COMMUNICATION The Board is fully aware that the key element of good corporate governance is the effective communication and proper dissemination of all important issues and major development concerning the Company to all shareholders and investors. Effective communication channels with the Company s shareholders, investors and the public are maintained through the dissemination of press releases, timely announcement and disclosures made to Bursa Malaysia. During the financial year ended 31 December 2011, the Company organized a number of meetings and briefings with financial analysts to establish better understanding of the Company s objective and performance and to convey other information that may affect shareholders interest. The Company also has a cordial relationship with reporters who have been playing a very effective role in conveying the Group s information to the public, shareholders and investors. Press releases are also occasionally organized to clarify on certain matters related to the Company and its operating unit. Besides, shareholders, investors and members of the public may also obtain updated information on the Group by accessing to the Company s website at THE ANNUAL GENERAL MEETING ( AGM ) The Company s AGM remains the primary channel of communication with the Company s shareholders in particular private investors. At each AGM and Extraordinary General Meeting Shareholders are encouraged and given sufficient time and opportunity to participate in the proceedings, to raise questions and participate in discussions pertaining the operation and financial aspects of the Group. They may seek clarifications on the Group s performance, major development as well as on the resolutions being proposed. All Board members, senior management as well as the Company s external auditors are available to respond to shareholders relevant questions raised at the meeting. A press conference is held after AGM where the Executive Chairman with other Directors as well as the Senior Management of the Company will answer questions posed by the media on various issues convening the Group.

15 13 Statement on Corporate Governance (Cont d) ACCOUNTABILITY AND AUDIT Financial Reporting In presenting the Company s financial statements and quarterly results to shareholders and other interested parties, the Board aims to present a balanced and understandable assessment of the Group s financial position and prospects. The Board is responsible for ensuring that the financial statements give a true and fair view of the financial position of the Group and of the Company as at the accounting period. In preparing the financial statements, the Directors have ensured that financial statements have been drawn up in accordance with Financial Reporting Standard and the Companies Act The Audit Committee assists the Board by reviewing the Group s annual financial statements and quarterly results to ensure completeness, accuracy and adequacy prior to release to Bursa Malaysia and Securities Commission. The Statement explaining the Directors responsibilities for preparing the annual audited financial statements pursuant to paragraph 15.27(a) of the Listing Requirements is set out on page 16 of the Annual Report. Internal Control The Board acknowledges and placed strong emphasis in maintaining a sound system of internal control which provides reasonable assurance of effective and efficient operations and compliance with regulations as well as with internal procedures and guidelines. Details of the Group s internal control system is presented in the Statement on Internal Control and Audit Committee Report set out on pages 17 to 18 and pages 19 to 22 respectively. Relationship with External Auditors Through the Audit Committee, the Board has established a transparent and appropriate relationship with the Group s internal and external auditors in seeking their advice and towards ensuring compliance with the applicable Approved Accounting Standards. The external auditors are invited to attend the Audit Committee meeting and to the Board meeting on a need basis as and when deemed appropriate. Corporate Social Responsibility ( CSR ) The Board recognizes the importance of the CSR the framework of which has been launched by the Bursa Malaysia on 15 September The move by Bursa Malaysia is seems to be in line with the decent intention of the Government to inculcate the culture of corporate social responsibility among the public listed companies. Therefore, the Board has agreed to beef up the Company s social activities with an intention to share the company s profitability with the public in forms of contribution on social responsibility activities. During the financial year ended 31 December 2011, the Company had incorporated a foundation which is known as Yayasan TRC. The primary objective of Yayasan TRC is to encourage TRC Group s employees where education is concerned to continuously upgrade themselves and to give better educational opportunity to their family members as well as to assist them in form of monetary such as donation, scholarship and/or educational tools and equipment to their eligible family members. Besides providing immediate assistance and relief to the employees who suffer losses from any sort of misfortune, the Yayasan would also assist members of society particularly those from areas in which the TRC Group has business activities, in form of providing contribution and donation to educational institutions, orphanage, local association/clubs and other suitable bodies in upholding their activities and objectives. In December 2011, the Yayasan had assisted a Company s staff whose house was caught on fire. Besides channeling its philanthropic activities through the Yayasan, the Company had also make direct contributions to associations, NGOs and school for activities such as Save and Clean Hulu Kelang Campaign, and sponsorship for Sekolah Menengah Taman Melawati F1 Team. The Company had also made monetary contribution to Persatuan Keluarga Polis (PERKEP), Persatuan Diabetes Malaysia and few other organizations.

16 14 Statement on Corporate Governance (Cont d) STATEMENT OF COMPLIANCE WITH THE BEST PRACTICE OF THE MALAYSIAN CODE ON CORPORATE GOVERNANCE (THE CODE) Save as disclosed below, the group has substantially complied with the Best Practices in Corporate Governance set out in Part 2 of the Code:- Provision of the Code Details Explanation Part 2, AA II Chairman and Chief Executive The Company is headed by an Executive Chairman and therefore, the roles of the Chairman and the Chief Executive Officer are not separate. The Board is of the opinion that the check and balance of power is undertaken by the strong presence of Independent Non-Executive Directors in the Board. Furthermore, the Chairman encourages all Directors to participate actively in all deliberation of issues that concern the Group. Hence, the Board maintains the view that this combined arrangement will not hamper the Board from making fair decisions for the best interest of the Group. ADDITIONAL COMPLIANCE INFORMATION In compliance with the Listing Requirements, the following information is provided:- Utilization of Proceeds For the financial year ended 31 December 2011, there was no proceed raised from any exercise. Share Buybacks The Company has not undertaken any share buyback exercise during the financial year ended 31 December Option, Warrants or Convertible Securities During the financial year ended 31 December 2011, the Company issued 3,942,000 ordinary shares of RM1.00 each and 261,000 ordinary shares of RM0.50 each pursuant to the exercise of options under the Employees Share Option Scheme which was implemented in June ,300 ordinary shares of RM1.00 each were issued by virtue of the conversion of Irredeemable Convertible Unsecured Loan Stocks 2007/2012 (ICULS). Pursuant to the Trust Deed dated 15 November 2006, the ICULS had attained its maturity on 20 February ,500 ordinary shares of RM1.00 each were issued through the exercise of 2007/2017 Warrants at an exercise price of RM1.00 each. Consequential to the Share Split and Bonus Issue Exercise undertaken by the Company during the financial year 2011, 93,495,995 bonus issue of warrants were issued, the exercise price of which was RM0.61. None of those warrants were exercised during the financial year. American Depository Receipt (ADR) / Global Depository Receipt (GDR) The Company has not sponsored any ADR or GDR Programme. Sanctions and / or Penalties There were no sanction and/or penalty imposed on the Company and its subsidiaries, Directors or Management by the relevant regulatory bodies during the financial year ended 31 December 2011.

17 15 Statement on Corporate Governance (Cont d) ADDITIONAL COMPLIANCE INFORMATION (CONT D) Non-Audit Fees The non-audit fees paid to external auditors amounting to RM7,000 for the financial year ended 31 December Variation of Results There was no material variation between the audited results for the financial year ended 31 December 2011 with the unaudited results announced. Profit Guarantee There was no profit guarantee given by the Company during the financial year ended 31 December Material Contracts There was no material contracts between the Company and its subsidiaries involving Directors and major shareholders interests during the financial year ended 31 December Recurrent Related Party Transaction The Company did not enter into any recurrent related party transaction which requires the shareholders mandate during the financial year ended 31 December Information in Relation to the Company s Share Option Scheme for Employees and Directors (ESOS) Further to the statement by the Audit Committee in relation to the allocation of share option scheme as reported in the Audit Committee Report, explained below are the additional information on ESOS. The Company only has one share option scheme during the financial year ended 31 December 2011, the details of which are as follows:- i) Total number of ESOS granted 15,981,000 ii) Total number of ESOS exercised before Adjustment due to share split and bonus issue exercise 9,273,000 ( Adjustment ) iii) Total outstanding ESOS before Adjustment 6,708,000 In consequences to the share split and bonus issue exercise which was completed in July 2011, the employees and directors entitlements had been adjusted pursuant to the ESOS By-Laws. Highlighted below are the information on ESOS after Adjustment. i) Total number of ESOS after Adjustment 16,099,200 ii) Total number of ESOS exercised after Adjustment (As at 26 April 2012) 5,894,460 iii) Total outstanding ESOS after Adjustment (As at 26 April 2012) 10,204,740 ESOS Granted to Directors i) Total number of ESOS granted to Directors 1,750,000 ii) Total number of ESOS exercised by Directors before Adjustment 500,000 iii) Balance number of ESOS held by Directors after Adjustment 3,000,000 iv) Total number of ESOS exercised by Directors after Adjustment (As at 26 April 2012) 1,840,000 v) Outstanding ESOS yet to be exercise by the Directors after Adjustment (As at 26 April 2012) 1,160,000

18 16 Statement on Corporate Governance (Cont d) ESOS Granted to Directors and Senior Management Pursuant to the Company s ESOS By-Laws, not more than fifty percent (50%) of the Company s shares available under the scheme shall be allocated to Directors and senior management. As at 26 April 2012, the Company has granted 32.9% of ESOS to its Directors and senior management staffs. STATEMENT OF DIRECTORS RESPONSIBILITY IN RELATION TO THE FINANCIAL STATEMENTS The Board is responsible to ensure that the financial statements are prepared in accordance with the provision of the Companies Act, 1965 and applicable approved accounting standards in Malaysia so as to ensure a true and fair view of the state of affairs of the Group and the Company as at the end of each financial year and of their results and their cash flows for that financial year then ended. The Board is also responsible to maintain accounting records that disclose with reasonable accuracy the financial position of the Group and the Company, and which enable them to ensure that the financial statements comply with the Companies Act, The Directors have general responsibilities for taking such steps that are reasonably available to them to safeguard the assets of the Group, and to prevent and detect fraud and other irregularities. The Directors are satisfied that in preparing the financial statements of the Group for the financial year ended 31 December 2011, the Group has adopted appropriate accounting policies and applied them prudently and consistently. They are also satisfied that reasonable and prudent judgments and estimates were made and all applicable Approved Accounting Standards in Malaysia have been followed accordingly.

19 17 STATEMENT ON INTERNAL CONTROL The Board of Directors ( the Board ) is committed to maintaining a sound and effective System of Internal Control in TRC Synergy Berhad ( the Group ). The Board is pleased to provide the following Statement on Internal Control which outlines the nature and scope of internal control of the Group during the financial year ended 31 December BOARD RESPONSIBILITY The Board acknowledges its responsibility for maintaining a sound system of internal control and risk management, and for reviewing the adequacy and integrity of these systems. The internal control system involves the core business and its key management, including the Board, and is designed to meet the Group s business objectives and to manage the risks to which it is exposed. The system of Internal Control aims to :- i) Safeguard shareholders interest and the assets of the Group; ii) Ensure that proper accounting records are maintained; and iii) Ensure that the financial information used within the business and the publication to the public is reliable. The Board is fully aware that this system, by its nature, can only provide reasonable and not absolute assurance against material misstatement, fraud and error. These systems are designed to manage and mitigate, rather than eliminate, the risk of failure to achieve business objectives of the Group. The Board s responsibility for internal control does not cover those of the associated companies which are separately managed. INTERNAL CONTROL The key elements of the Group s internal control system are described below:- Internal Audit Function The Board is fully aware of the importance of the internal audit function and has established the Internal Audit Department for the Group on 20 August The main objective of this department is to review the key business processes and controls and to assists the Audit Committee in the discharge of its duties and responsibilities. Its role is to provide independent and objective reports on the organization, management, accounting and other records, accounting policies and internal controls to the Audit Committee and the Board. As required by the Listing Requirements, the Internal Auditors report directly to the Audit Committee and is independent of activities its audits. They provide periodic reports to the Audit Committee on the outcome of the audit works conducted by them which would be reviewed and evaluated by the Audit Committee. None of the weaknesses or issues identified during the review for the financial year ended 31 December 2011 has resulted in non compliance with any relevant policies or procedures, listing requirements and other recommended industry practices that require disclosure in the Company s Annual Report. The presence of the internal audit function has provided the level of assurance as to the effectiveness of the operation and validity of the Group s internal control system. The details of the Internal Audit activities are mentioned on page 21 of this Annual Report. Quality Policy The construction arm of the Group has a clear and well documented Quality Policy in accordance with ISO 9001 : This policy and the related procedures are communicated to the respective staff members. Amongst the salient features of the Quality Policy are as follows:- i) Internal Quality Audits are conducted at planned intervals to determine whether the Quality Management System is effectively implemented and maintained and conforms to the established system requirements of Internal Standard, ISO 9001:2000. ii) On an annual basis, an overall Internal Quality Audit Plan is devised encompassing every departments and projects, taking into consideration the status and importance of relevant process, areas to be audited as well as results of previous audits. iii) Qualified Internal Quality Auditors will be assigned with audit works in accordance with the Internal Quality Audit Plan where the reports shall be examined and analyzed and reported to the management during Management Review Board Meeting. iv) As part of the Quality Management System, the management shall meet on monthly basis to discuss and deliberate all issues relating to the business of the Group.

20 18 STATEMENT ON INTERNAL CONTROL (Cont d) INTERNAL CONTROL (CONT D) Quality Policy (cont d) v) The Audit Committee is accessible to the relevant reports produced in relation to the Quality Management and if the need arise, the matter shall be further discussed in the Board Meeting. Line of Reporting Clearly defined delegation of responsibilities from the Board to its committees operating units, including authorisation levels for all aspects of the business. This also includes detailed job description and specification provided to each employee of the Group which is further reiterated through a well defined organizational structure. Dissemination of Information within the Group Regular and comprehensive information is provided to management covering financial performance and key business indicators, key operating statistics/ indicators, key business risks, legal, environmental and regulatory matters. Key matters affecting the Group are brought to the attention of the Audit Committee and are reported to the Board on a regular basis. Detail Budgeting Process A detailed budgeting process where operating units prepare budgets for every project for discussion in the management meeting. A monthly monitoring of results against budget, with major variances being explained and deliberated. If necessary, management action and follow up would be initiated. Risk Management Framework The Group has in place an on-going process for identifying, evaluating, monitoring and managing the significant risks affecting the achievement of its business objectives. This is an on-going process, subject to regular review by the Board, and accords with the Statement on Internal Control: Guidance for Directors of Public Listed Companies. The Group adopts a decentralised approach to risk management by encouraging participation of all employees in such a manner that the employees take ownership and responsibility for risks at their respective levels. The process of risk management and policy implementation is overseen by the senior management and report to the Board through the Audit Committee. The risk management framework is also embodied in the Quality Policy in accordance with ISO 9001 : 2008 practised by a whollyowned subsidiary of the Company. Audit Committee The Audit Committee, on behalf of the Board, regularly reviews and holds discussions with the management on the matters relating to internal control, the external auditors and the management. The Report on the Audit Committee set out on pages 19 to 22 of this Annual Report contains further details on the activities undertaken by the Audit Committee in Board The Board holds regular discussions with the Audit Committee, management and external auditors and reads their reports on matters relating to internal controls and deliberates their recommendations for implementation. The Directors have taken the necessary steps, as are reasonably open to them, to ensure that adequate systems of internal controls are in place to adequately safeguard the assets of the Group through the prevention and detection of fraud and other irregularities and material misstatements in the financial statements. The Directors believe that the system of internal control is operating effectively and considered adequate to safeguard the Group business operations, and that the risks taken are at an acceptable level within the context of the business environment of the Group. The Board is not aware of significant weaknesses in the internal control system that will substantially affect the business operations which could result in material losses to the Group. This statement is made in accordance with a resolution of the Board of Directors dated 23 May 2012.

21 19 AUDIT COMMITTEE REPORT The Board of Directors of TRC Synergy Berhad is pleased to present the Audit Committee Report for the financial year ended 31 December Composition of the Audit Committee The Audit Committee of the Company comprises of the following members. All of them are Independent Non Executive Directors. Chairman Member : General (R) Tan Seri Mohd Shahrom Bin Dato Hj Nordin (Senior Independent Non-Executive Director) : i) Noor Zilan bin Mohamed Noor (Independent Non-Executive Director) ii) Abdul Rahman Bin Ali (Independent Non-Executive Director) (Member of the Malaysian Institute of Accountants) Secretary : Abdul Aziz Bin Mohamed (Company Secretary) 2. Terms of Reference i. Composition The Board of Directors shall elect an Audit Committee from amongst themselves (pursuant to a resolution of the Board of Directors) comprising of not less than three (3) members all of them must be Non-Executive Directors with a majority of them being Independent Directors. The members of the Audit Committee shall elect a Chairman from amongst themselves. All members of the Audit Committee, including the Chairman, will hold office only so long as they serve as Directors of the Company. Should any member of the Audit Committee cease to be a Director of the Company, his membership in the Audit Committee would cease forthwith. If the members of the Audit Committee for any reason be reduced to below three (3), the Board of Directors shall within three (3) months of that event, appoint such number of the new members as may be required to make up the minimum number of three (3) members. ii. Objectives The primary objectives of the Audit Committee are: a. To provide assistance to the Board in fulfilling its fiduciary responsibilities particularly relating to business ethics, policies and practices and financial management and control. b. To provide greater emphasis on the audit functions by increasing the objectivity and independence of external and internal auditors and providing a forum for discussion that is independent of the management. c. To maintain through regularly scheduled meetings a direct line of communication between the Board and the external auditors, internal auditors and financial management.

22 20 AUDIT COMMITTEE REPORT (Cont d) 2. Terms of Reference (cont d) iii. Duties and Responsibilities The duties and responsibilities of the Audit Committee shall be: a. To consider the appointment of the external auditors, audit fee and any questions of resignation or dismissal. b. To discuss with the external auditor before the audit commences the nature and scope of the audit, and ensure co-ordination where more than one audit firm is involved. c. To review the quarterly results and year end financial statements before submission to the board, focusing particularly on: i. any changes in accounting policies and practices ii. major judgmental areas iii. significant adjustments resulting from the audit iv. the going concern assumption v. compliance with accounting standards vi. compliance with the stock exchange and legal requirements d. To discuss problems and reservations arising from the interim and final audits, and any matters the auditor may wish to discuss (in the absence of management where necessary). e. To review the internal audit programme, consider the major findings of internal audit investigations and management s response, and ensure co-ordination between the internal and external auditors. f. To keep under review the effectiveness of the internal control systems and in particular review the external auditor s management letter and management s response. g. to review any related party transactions and conflict of interest situations that may arise within the Group including any transactions, procedure or course of conduct that raises questions of management integrity. h. To carry out such other functions as stipulated in the Bursa Securities Listing Requirements and other functions as may be agreed to by the Audit Committee and the Board of Directors. iv. Authority The Committee is authorised by the Board to investigate any activity within the terms of reference. It is authorized to seek any information it requires from any employee and all employees are directed to co-operate with any request made by the Committee. The Committee is empowered by the Board to retain persons having special competence as necessary to assist the Committee in fulfilling its responsibilities. v. Meeting and Minutes The Audit Committee shall not hold less than three (3) meetings a year and the quorum for each meeting shall be two (2) members. Minutes of each meeting shall be kept and distributed to each member of the Committee and also to the other members of the Board. The Committee Chairman shall report on each meeting to the Board. The Company Secretary shall act as the Secretary to the Audit Committee.

23 21 AUDIT COMMITTEE REPORT (Cont d) 3. Summary of Activities of the Audit Committee. During the financial year ended 31 December 2011, the Audit Committee met five times. The Company Secretary acted as the secretary for the Committee at all the meetings held. Other Directors and senior management of the Group were also present at the meeting upon invitation. The details of the attendance of the members of the Audit Committee are as follows:- No. Audit Committee Attendance 1 Noor Zilan bin Mohamed Noor 5/5 2 Abdul Rahman Bin Ali 5/5 3 General (R) Tan Sri Mohd Shahrom Bin Dato Hj Nordin 4/5 During the financial year, the Audit Committee carried out the following review :- The quarterly unaudited financial results and the annual audited financial statements of the Company and Group. The review was to ensure compliance with statutory reporting requirements and appropriate resolution of all accounting and audit matters requiring significant judgment and where appropriate, made recommendations to the Board. The external auditors fees and to recommend their reappointment to the Board. Measures implemented by management with regard to risk management and internal control. The statement of Corporate Governance and Statement on Internal Controls which are prepared in accordance with the provisions set out under the Malaysian Code on Corporate Governance, the extent of compliance with the said Code and recommend to the Board action plan to address further compliance matters. The annual internal audit plan to ensure adequate scope and comprehensiveness of the activities and coverage on auditable entities with significant high risk. The internal audit reports issued by internal auditors and thereafter discuss the management s actions taken to improve the system of internal control and any outstanding matters. Reviewed with the external auditors their audit plan and scope of works for the year and the results of the annual audit, their audit reports and Management Letter together with Management s responses for the findings of the external auditors. 4. Internal Audit Function The Group s internal audit function is performed in house by its Internal Audit Department. The Internal Audit Department reports directly to the Audit Committee. The principal objective of the Department is to provide independent and objective reports on the effectiveness of the system of internal control within the business units and projects of the Group. It also to ascertain that adequate internal control is maintained to safeguard the assets of the Group and the shareholders interest. Throughout the financial year, the Internal Audit Department has undertaken several independent audit assignments in accordance with the approved annual audit plan. Details of the activities performed by the Department during the financial year are as follow:- Examine and reviewed the existing control over all significant Group operation and systems to ascertain reasonable assurance that the Group s objective and goals are met efficiently and economically. Carry out operational audit and recommend appropriate control measures for improvement where weaknesses or deficiencies are found. Reviewed the adequacy of scope, functions, competences and resources of Internal Audit which is necessary to carried out the audit. Reviewed the adequacy of control for procurement and material handling at all project sites. Reviewed the effectiveness of management and utilization of fixed assets within the Group.

24 22 AUDIT COMMITTEE REPORT (Cont d) 4. Internal Audit Function (cont d) Prepared the annual audit plan for consideration by Audit Committee. To complement with the Quality Management System in accordance with ISO 9001:2008. Continuous follow up of reviews on recommendation and outstanding issues to ensure both are implemented and resolved accordingly. From the internal audit findings, the Internal Audit Department will prepare independent opinion and reports accordingly to the Audit Committee on risks area, weaknesses identified and the relevant recommendations. All recommendations shall be reviewed and discussed accordingly and communicated to the management to rectify the identified weaknesses. The Department also established follow up reviews to monitor and ensure that the recommendations agreed by the Audit Committee have been effectively implemented. Going forward the Internal Audit Department will strengthen its capacity and efficiency for the better contribution to the Group pursuant to the Audit Charted and Internal Audit Plan which have been approved by the Audit Committee. Total cost incurred for the Internal Audit Department for the financial year ended 31 December 2011 was RM138, Statement in relation to the allocation of Share Option Scheme The Audit Committee noted that the Company had established Share Option Scheme for Employees and Directors ( The Scheme ) pursuant to the By-Laws which were approved by the shareholders at the Extraordinary General Meeting held on 30 April The Scheme shall remain in force for a duration of five (5) years commencing from 22 June 2004 and could be extended for another five (5) years at the discretion of the ESOS Committee. On 27 August 2008, the ESOS Committee had approved the extension of the Scheme for another five (5) years commencing from its expiry date of 21 June Therefore, the Scheme will expire on 20 June The salient terms of the Scheme are as follows:- i) the maximum number of the Company s new shares to be made available under the Scheme shall not exceed fifteen percent (15%) of the issued and paid up capital of the Company; ii) not more than fifty percent (50%) of the Company s shares available under the Scheme shall be allocated to Directors and senior management; iii) not more than ten percent (10%) of the Company s shares available under the Scheme shall be allocated to individual Director or eligible employees, who either singly or collectively through person connected to them holds twenty percent (20%) or more of the issued and paid up capital of the Company; iv) The eligible participants shall include eligible employees and Directors who as at the offer date have satisfied the following criteria :- a) is a confirmed employee or appointed director within the Group; b) has attained at least age of eighteen (18); c) is employed full time and on the payroll of the Group; d) is under such category and of such criteria that the option committee may from time to time decide. v) The Scheme shall remain in force for a duration of five (5) years from the effective date of the launch and could be extended for another five (5) years at the discretion of the ESOS Committee. vi) The option price for each share shall be based on the weighted average market price (WAMP) of the Company s share traded on the Exchange for the five (5) trading days preceding the date of offer with a discount if any, that does not exceed ten percent (10%) from the five (5) day of the Company s shares. The option under the Scheme was initially offered to the eligible employees and Directors at an offer price of RM1.70 per option share. Subsequently, consequent to the Rights Issue exercise which was completed on 31 January 2007, the exercise price of the Scheme was adjusted to RM1.47 per option share. The exercise price was further adjusted in 2008 to RM1.23 per option share in consequence to the Bonus Issue Exercise undertaken by the Company which was completed on 11 April In 2011, the exercise price was further adjusted to RM0.52 due to share split and Bonus Issue exercise undertaken by the Company. The staff s entitlements had also been adjusted due to the earlier-mentioned exercises.

25 Financial HightlighT Directors Report Statement by Directors Statutory Declaration Independent Auditors Report Statements of Comprehensive Income Statements of Financial Position Statement of Changes in Equity - Group Statement of Changes in Equity - Company Statements of Cash Flows Notes to the Financial Statements