[Type the document title] 2009 ANNUAL REPORT - 0 -

Transcription

1 [Type the document title] 2009 ANNUAL REPORT ANNUAL REPORT 2013

2 CONTENTS Corporate Vision & Mission - Corporate Vision & Mission ~ 2 ~ Corporate Information ~ 3 ~ Group Structure ~ 4 ~ Profile of Directors ~ 5~ Statement from The Executive Chairman ~ 7 ~ Corporate Governance Statement ~ 9 ~ Statement On Risk Management And Internal Control ~ 17 ~ Audit Committee Report ~ 19 ~ Statement of Directors Responsibilities In Relation To The Financial Statements ~ 22~ Directors Report ~ 23 ~ Independent Auditors Report ~ 26 ~ Financial Statements Statement of Profit or Loss and Other Comprehensive Income ~ 28 ~ Statement of Financial Position ~ 29 ~ Statements of Changes In Equity ~ 30 ~ Statements Of Cash Flows ~ 32 ~ Notes to The Financial Statements ~ 34 ~ Statement By Directors ~ 62 ~ Analysis of Shareholdings ~ 63 ~ List of Properties ~ 67 ~ Notice of Eleventh Annual General Meeting ~ 69 ~ Statement Accompanying Notice of Annual General Meeting ~ 71 ~ Form of Proxy - 1 -

3 Corporate Vision & Mission VISION To be a Global Enterprise with Sustainable Growth. To Continuously Develop Core Competencies to Achieve Competitive Advantage and Building a Global Enterprise that Lasts MISSION To delight our customers by providing quality support through value added products and services To provide conducive environment where employees can excel through our commitment to continuous training and development To practise corporate social responsibility and a culture that is environmentally friendly To build strategic partnership in the supply chain for sustainable growth To continuously deliver above average industry returns to shareholders - 2 -

4 Corporate Information Executive Chairman BOARD OF DIRECTORS Independent Non-Executive Directors Dato Saw Eng Guan Tan Chuan Yong Ng Siew Thong Siew Chee Choong AUDIT COMMITTEE Siew Chee Choong (Chairman) Tan Chuan Yong Ng Siew Thong PRINCIPAL BANKERS HSBC Bank Malaysia Berhad Citibank Berhad NOMINATING COMMITTEE Tan Chuan Yong (Chairman) Ng Siew Thong Siew Chee Choong REMUNERATION COMMITTEE Tan Chuan Yong (Chairman) Dato Saw Eng Guan Ng Siew Thong Siew Chee Choong COMPANY SECRETARIES Saw Bee Tin (LS 00823) Lam Sook Ching (MAICSA ) Low Bee Kheng (MAICSA ) AUDITORS Deloitte (Audit Firm No. 0080) Level 16, Menara LGB, 1 Jalan Wan Kadir, Taman Tun Dr. Ismail, Kuala Lumpur. REGISTERED OFFICE 35-1 (Room A), Jalan Dato Hj Hassan, Muar, Johor. Tel : Fax : BUSINESS ADDRESS PLO 3, Kawasan Perindustrian Bukit Pasir, Mukim Sungai Raya, Bukit Pasir, Muar, Johor. REGISTRARS Tricor Investor Services Sdn. Bhd. ( V) Level 17 The Gardens North Tower Mid Valley City, Lingkaran Syed Putra, Kuala Lumpur. Tel : Fax : STOCK EXCHANGE LISTING Listed on Bursa Malaysia Securities Berhad on 4 February 2005 Stock Name : TAFI Stock Code : 7211 WEBSITES

5 Group Structure TAFI Industries Berhad ( P) ( TAFI ) 100% T.A. Furniture Industries Sdn. Bhd. (80101-W) ( TA ) 100% T.A. Systems Furniture Industries Sdn. Bhd. ( V) ( TAS ) 100% Home & Office Furniture Sdn. Bhd. ( X) ( HO ) 100% Penquo Resources Sdn. Bhd. ( H) ( Penquo ) 100% Gerak Mahir Sdn. Bhd. ( U) ( Gerak Mahir ) 100% T.A. E-Furnishings Sdn. Bhd. ( V) ( TAE ) 28% Sachi Developments Sendirian Berhad (12498-A) ( Sachi ) 100% T.A. Rubber Reforestation (Johor) Sdn. Bhd. ( V) ( TA Rubber ) 100% T.A. Furniture Trading (M) Sdn. Bhd. ( W) ( TA Trading ) - 4 -

6 Profile Of Directors DATO SAW ENG GUAN Executive Chairman Member of Remuneration Committee Malaysian, Age 57 TAN CHUAN YONG Independent Non-Executive Director Member of Audit Committee, Chairman of Nominating Committee and Remuneration Committee Malaysian, Age 59 Dato Saw Eng Guan was appointed to the TAFI Board on 26 November 2004 and is the Executive Chairman of the Company since 28 August Dato Saw is a member of the Remuneration Committee of the Company. Dato Saw is a member of the Malaysian Institute of Accountants and has a Diploma in Marketing from the University of Malaya, Malaysia and a Master of Business Administration from the University of Nottingham, United Kingdom. Under the helm of Dato Saw, the Group expanded its global outreach considerably to include more markets worldwide as well as ventured into online B2B ecommerce sales. Dato Saw is not a director of any other public companies. He is the son of the late Mr. Saw Han Lim, a substantial shareholder and promoter of the Company. Apart from this, he does not have family relationship with any director and/or other substantial shareholders of the Company. He has not been convicted of any offences within the past ten (10) years. Dato Saw has not entered into any transactions, whether directly or indirectly, which has a conflict of interest with TAFI other than those disclosed in Note 21 in the accompanying financial statements. Dato Saw Eng Guan attended all four (4) Board meetings held during the financial year ended 31 December Trainings attended by Dato Saw during the financial year are as follows:- Tan Chuan Yong was appointed to the Board on 26 November 2004 as an Independent Non-Executive Director. He is a member of the Audit Committee, the Chairman of the Nominating Committee and the Remuneration Committee of the Company. Mr. Tan holds a Barrister-at-Law from The Honourable Society of Lincoln s Inn. He is an Advocate and Solicitor and Notary Public as well as a partner of Messrs. Tan Chuan Yong & S.M. Chan, Advocates & Solicitors. He has been a member of the Malaysian Bar since Mr. Tan is a director of Kelington Group Berhad. He does not have family relationship with any director and/or substantial shareholder of the Company nor has any personal interest in any business arrangement involving the Company. He has not been convicted of any offences within the past ten (10) years. Mr. Tan Chuan Yong attended all four (4) of the Board meetings held during the financial year ended 31 December Training attended by Mr. Tan during the financial year is as follows:- Seminar on The Construction Industry Payment and Adjudication Act 2012 organised by Kuala Lumpur Regional Centre for Arbitration. Persidangan Juruaudit Koperasi 2014 organised by Suruhanjaya Koperasi Malaysia. Goods and Services Tax A Preparatory Course for GST Consultants and Accountants organised by Malaysian Institute of Accountants. Seminar Percukaian Kebangsaan 2014 organised Lembaga Hasil Dalam Negeri Malaysia ( LHDN )

7 Profile Of Directors (cont d) Ng SIEW THONG Independent Non-Executive Director Member of Audit Committee, Nominating Committee and Remuneration Committee Malaysian, Age 57 SIEW CHEE CHOONG Independent Non-Executive Director Chairman of Audit Committee, Member of Nominating Committee and Remuneration Committee Malaysian, Age 59 Ng Siew Thong was appointed to the Board on 9 January 2006 as an Independent Non-Executive Director. He is a member of the Audit Committee, the Nominating Committee and the Remuneration Committee of the Company. Mr. Ng holds a Bachelor of Social Science (Honours) majoring in Business Management from the Universiti Sains Malaysia. Mr. Ng has over twenty (20) years experience as part of senior management of various multinational companies of which, for the immediate past sixteen (16) years, he was a member of the board of directors of his past immediate company with an executive function. He is presently the Managing Director of Goodway Rubber Company Pty. Ltd., Australia, a subsidiary of Goodway Integrated Industries Berhad. Mr. Ng is not a director of any other public companies. He does not have family relationship with any director and/or substantial shareholder of the Company nor has any personal interest in any business arrangement involving the Company. He has not been convicted of any offences within the past ten (10) years. Mr. Ng Siew Thong attended three of the four (4) Board meetings held during the financial year ended 31 December Training attended by Mr. Ng during the financial year is as follows:- Work Place Safety Training organised by Just Career Training, Sydney. Siew Chee Choong was appointed to the Board on 15 November 2010 as an Independent Non-Executive Director. He is Chairman of the Audit Committee, and member of the Nominating Committee and the Remuneration Committee of the Company. Mr. Siew holds a Master in Business Administration from the University of Bath, United Kingdom. He is a member of the Malaysian Institute of Certified Public Accountants and the Malaysian Institute of Accountants. Mr. Siew started his career with an international firm of accountants and has over thirty (30) years of extensive experience in financial management, operational management, corporate finance and auditing. He has served in various senior management positions in public listed companies and large organisations involved in diverse industries ranging from property development, construction, education, general insurance, manufacturing, trading, information technology, resource-based to auditing. He is currently a business consultant providing business management and financial consultancy related services. Mr. Siew is not a director of any other public companies. He does not have family relationship with any director and/or substantial shareholder of the Company nor has any personal interest in any business arrangement involving the Company. He has not been convicted of any offences within the past ten (10) years. Mr. Siew Chee Choong attended all four (4) Board meetings held during the financial year ended 31 December Trainings attended by Mr. Siew during the financial year are as follows:- Advocacy Sessions on Corporate Disclosure for Directors of Listed Issuers organised by Bursa Malaysia Berhad. Goods and Services Tax Seminar organised by the Malaysian Institute of Certified Public Accountants

8 Statement From The Executive Chairman Dear Shareholders, On behalf of the Board of Directors of TAFI Industries Berhad, I am pleased to present to you the Annual Report and the Audited Financial Statements of the Company and the Group for the financial year ended 31 December Financial Performance reported higher profit before tax of RM1.38 million compared to RM0.23 million the year before on the back of lower revenue. Group revenue was RM27.94 million against RM30.68 million in the financial year ended 31 December The higher profit before tax was contributed by the gain on disposal of fixed assets of RM1.98 million. Total revenue was lower than the year before as sales of office furniture to our overseas customers who are mainly concentrated in Africa and the Middle East have not recovered as these countries are still grappling with and overcoming internal problems such as the Ebola virus and civil unrest. While office furniture remains the main staple product of the Group, we have diversified our product lines to expand into manufacturing of home furniture and we expect to secure orders as original equipment manufacturer ( OEM ) for some major overseas customers from Europe and North America in the second half of Outlook and Prospects for the Financial Year 2015 Worldwide demand for home furniture has been showing an encouraging uptrend and Management expects the market segment of this product to continue growing exponentially. In addition, the positive news of Europe s improving economic outlook coupled with the upturn in the economic growth of the United States of America which the International Monetary Fund predicts to hit 3% in 2015, the Group is highly optimistic of the contribution from its home furniture to sales and bottomline. Sales of the office furniture is expected to be stable with marginal growth. Partnering with world renowned customer has raised the level of the Group s internal standards in all respects from its manufacturing processes, staff welfare and supply chain to its social responsibility towards sustainable practices to conform to international standards and the Group is poised to enjoy the fruits of its labour and its new found recognition in the years to come. Investment in a Property Development Company had during the financial period ended 31 December 2014, acquired a 28% stake in Sachi Developments Sendirian Berhad, a property development company, at a cost RM1,300,000 through its wholly-owned subsidiary company, Gerak Mahir Sdn. Bhd. The investment is intended to provide the Group with another revenue stream in the future when Sachi s property development projects takes off, which is not expected to take place in the short term. Environmentally Friendly and Sustainable Practices having international conglomerates as its customers has no choice but to adopt sustainable and eco-friendly practices in its entire manufacturing and supply chain process. This entailed a major revamp to uplift the whole spectrum of the Group s management style, example of areas in which the Group has instituted improvements are:- (i) ensuring the water discharged from its factory is free of any dangerous affluents. (ii) materials used to produce the Company s furniture products are light and durable and are degradable. This means that less materials and resources are consumed in the making of that product and less energy is expended during the transportation process of these lighter weight goods. (iii) the use of degradable materials will render the furniture to be easily recycled and re-used or otherwise, easier to decompose back to nature thus less harm to mother nature and the environment

9 Statement From The Executive Chairman (cont d) (iv) The factory working environment has been upgraded to meet the more stringent international standards by placing higher emphasis on safety, cleanliness, energy saving measures and leveraging on the use of technology to minimise wastage which on the whole, optimised the use of all resources. (v) The higher standards practiced also resulted in improvement to the treatment of our foreign workers such as non-retention of workers passports, lodging and working conditions and environment that meets the human rights standards imposed by our European customers. Acknowledgement and Appreciation Our dedicated Management team and workforce continue to shine with their exemplary dedication and excellent teamwork during these challenging times and my fellow Board members and I wish to place on record our heartfelt appreciation and sincere gratitude to our committed and hardworking team of human capital. We are also grateful to our valued customers, shareholders, business partners, Board of Directors and government authorities for their continued support and confidence in the Company and we look forward to forging a closer win-win working relationship with these stakeholders. Thank you. DATO SAW ENG GUAN Executive Chairman - 8 -

10 Corporate Governance Statement The Board and Management of TAFI, being mindful of the trust and expectations placed on them by the shareholders and stakeholders alike, endeavours to comply with the best practices of the principles of good corporate governance as set out in the Malaysian Code on Corporate Governance 2012 (the MCCG 2012 ) issued by the Securities Commission Malaysia and the Main Market Listing Requirements ( MMLR ) of Bursa Malaysia Securities Berhad ( Bursa Securities ). The Board wishes to report to the shareholders the manner of application of the principles contained in the MCCG 2012 and the extent of the Group s compliance with the best practices during the financial year ended 31 December BOARD OF DIRECTORS 1.1 Principal Responsibilities The Board has overall stewardship of the Group in that the Directors are ultimately responsible for providing strategic leadership, overseeing the business conduct, identification and management of principal risks and ensuring the adequacy and integrity of internal control systems. The Board, headed by the Executive Chairman, is assisted by a competent management team to run the Group. The Executive Chairman oversees the Management in its day-to-day running of the Group and he furnishes the Board with periodic updates and as and when needed, on ad-hoc basis, regarding the Group s activities. The Board has delegated specific responsibilities to three (3) committees namely the Audit Committee, the Nominating Committee and the Remuneration Committee. These three (3) Committees discharge the duties and responsibilities in accordance with their respective Terms of Reference. The actual decision lies with the Board after considering recommendations from the respective committees. 1.2 Composition There are four (4) directors on the Board comprising the Executive Chairman and three (3) Independent Non- Executive Directors. The Board composition of the Company complies with the MMLR of Bursa Securities which stipulates that at least two (2) directors or one-third (1/3) of the board of directors of a listed issuer, whichever is the higher, are independent directors. The Company s Board composition has also met Recommendation 3.5 of the MCCG 2012 which provides that the Board must comprise a majority of independent directors where the Chairman of the Board is not an independent director. A list of the entire Board and their respective profiles are found on page 3 and pages 5 to 6 of this Annual Report. The Independent Non-Executive Directors bring with them an element of check and balance to the Board and are crucial in providing objective, independent views, advice and judgement to the Board in the interest of shareholders and stakeholders. The composition of Directors with their diverse mix of skills and experience in business, corporate, finance and law, brings to the Board not only essential commercial skills needed for sound investment decisions but also invaluable practical and operational experience to professionally manage the Group. 1.3 Board Charter The Board Charter adopted by the Board provides guidance to the Board in the fulfilment of its roles, duties and responsibilities which are in line with the principles of good corporate governance. The Board Charter will be reviewed on a periodic basis and may be amended by the Board from time to time to keep abreast of the latest changes. The Board Charter is available on the Company s website at

11 Corporate Governance Statement (cont d) 1. BOARD OF DIRECTORS (cont d) 1.4 Board Meetings The Board meets at least once every quarter upon finalisation of the results of each financial quarter to facilitate the review and approval of that quarter s financial results. Board meetings are usually scheduled three (3) months in advance to enable the Directors to plan ahead and additional ad-hoc meetings would be called if needed. During the financial year ended 31 December 2014, a total of four (4) Board meetings were held and the attendance record of each Director is as follows:- Directors Attendance Dato Saw Eng Guan 4/4 Tan Chuan Yong 4/4 Ng Siew Thong 4/4 Siew Chee Choong 4/4 1.5 Access to and Supply of Information to the Board Prior to the convening of a meeting, the agenda and the full set of Board papers containing pertinent information on matters to be deliberated are submitted to the Directors to provide them with sufficient time to evaluate the matters to be discussed and to enable a more informed decision-making process. Both the Company Secretaries are members of the Malaysian Institute of Chartered Secretaries and Administrators and are qualified to act as company secretary under Section 139A of the Companies Act They attend all Board and Committees meetings of the Company. Besides taking minutes of the proceedings and decisions of the Board and Committees meetings, the Secretaries duties include ensuring that Board and Committees proceedings are properly conducted, providing advice and ensuring that related statutory obligations namely compliance with Bursa Securities MMLR, the MCCG 2012, the Companies Act 1965 and other relevant requirements as may be applicable to the Company, are complied with. The Company Secretaries also advises the Board on matters relating to corporate governance issues and directors responsibilities to ensure compliance with the relevant legislations and regulations and updating them of new statutory and regulatory requirements relating to the discharge of duties and responsibilities of directors. Members of the Board have complete and unimpeded access to the services and advice of the Company Secretary. They also have full access to the senior management for assistance and information on the Company s affairs and where necessary, the advice of independent professionals. 1.6 Appointments and Re-Election Appointments of directors to the Board are assessed and recommended by the Company s Nominating Committee and would only take place if it has the approval of the Board. In accordance with the Articles of Association of the Company, all directors of the Company including the Managing Director, if any, shall retire from office at least once every three (3) years at the Annual General Meeting ( AGM ) but they shall be eligible for re-election and all retiring Directors can offer themselves for reelection. The Company s Articles also provide that Directors appointed by the Board during the financial period before an AGM are subject to retirement and shall be eligible for re-election by the shareholders at the Company s next AGM to be held following their appointments. In addition, Recommendation 3.2 of the MCCG 2012 recommends that the tenure of an independent director should not exceed a cumulative term of nine (9) years. Upon completion of the nine (9) years, an independent director may continue to serve on the Board subject to that Directors re-designation as a non-independent director. However, Recommendation 3.3 of the MCCG 2012 provides that the Board may retain as an independent director, a person who has served in that capacity for more than nine (9) years provided the shareholders approve it

12 Corporate Governance Statement (cont d) 1. BOARD OF DIRECTORS (cont d) 1.6 Appointments and Re-Election (cont d) In this respect, the Independent Directors of the Company impacted by the above Recommendation 3.2 of MCCG 2012 are Mr. Tan Chuan Yong and Mr. Ng Siew Thong. Mr. Tan Chuan Yong and Mr. Ng Siew Thong have each served a cumulative term of nine (9) years as from 25 November 2013 and 8 January 2015 respectively. Hence, the Board is seeking the approval of its shareholders at the forthcoming Eleventh AGM of the Company to retain the aforesaid directors as Independent Directors of the Company. The Directors who are due for retirement and are seeking for re-election to the Board in pursuance to the Company s Articles of Association and also in pursuance to Recommendation 3.3 of the MCCG 2012 at the Company s forthcoming Eleventh AGM are listed in the Statement Accompanying Notice of AGM on page 71 of this Annual Report. 1.7 Directors Training Bursa Securities has placed the onus to identify seminars suitable to the Directors needs on the Board and per Recommendation 4.2 of the MCCG 2012, the Board should ensure its members have access to appropriate continuing education programmes. Accordingly, each member of the Board is encouraged to regularly undergo training to keep abreast of the latest changes and to widen their knowledge and each of them is aware of the need to continuously undergo training appropriate to their needs in line with Paragraph 15.08(3) of Bursa Securities MMLR. Trainings attended by each Director during the financial year are set out in their respective profile on pages 5 to 6 of this Annual Report. 1.8 Directors Remuneration The Company aims to set remuneration at levels which are sufficient to attract and retain the Directors needed to run the Company successfully, taking into consideration all relevant factors including the function, workload and responsibilities involved, but without paying more than is necessary to achieve this goal. The Remuneration Committee takes into consideration the contribution, responsibilities and performance of the executive director when deliberating on and making recommendations to the Board on the remuneration package of the executive director of the Company whilst the executive director concerned does not participate in decisions relating to his remuneration. For the financial year ended 31 December 2014, the remuneration packages of both the executive and nonexecutive Directors of the Company are as follows:- Category Fees RM Salaries RM Other Remuneration RM Benefits-in- Kind RM Total RM Executive Director 18, ,000 68,400 3, ,734 Non-Executive Directors 84, ,000 Total 102, ,000 68,400 3, ,734 The Directors remuneration for the financial year ended 31 December 2014 falls within the following bands:- Range of Remuneration Executive No of Director Non-Executive Below RM50,000-3 RM400,001 RM450,

13 Corporate Governance Statement (cont d) 1. BOARD OF DIRECTORS (cont d) 1.8 Directors Remuneration (cont d) The aggregate annual Directors fees are approved by shareholders at the AGM of the Company based on the Board s recommendation. It is the practice for the Directors concerned to abstain from deliberating their individual remuneration. 2. COMMITTEES OF THE BOARD The three (3) Committees set up to assist the Board have specific powers and responsibilities. Chairman of the respective committees reports the outcome of decisions and recommendations to the Board and minutes of committee meetings are tabled for the Board s notation. Notwithstanding recommendations from the committees, the ultimate decision on all matters lies with the entire Board. 2.1 Audit Committee The main purpose of the Audit Committee is to assist the Board in fulfilling its responsibilities relating to accounting and reporting practices of the Group. The report of the Audit Committee, its salient terms of reference, the list of committee members and its activities during the financial year are set out on pages 19 to 21 of this Annual Report. 2.2 Nominating Committee The role of the Nominating Committee ( NC ) is to recommend suitable candidates for appointment to the Board and Board committees. The Committee is also required to evaluate the effectiveness of the Board as a whole, the various committees of the Board and to assess the contribution of each individual director to the effectiveness of the Board s decision-making process on an annual basis. The terms of reference for NC are spell out in the Appendix B of the Board Charter. The NC of the Company comprises exclusively of Independent Non-Executive Directors as follows:- Tan Chuan Yong (Chairman) (Senior Independent Director) Ng Siew Thong (Member) Siew Chee Choong (Member) Mr. Tan Chuan Yong, Chairman of the NC, is recognised by the Board as the senior independent director of the Company. The Committee met once during the financial year ended 31 December 2014 and the attendances of each member is as follows:- Members Attendance Tan Chuan Yong 1/1 Ng Siew Thong 1/1 Siew Chee Choong 1/1 During the financial year ended 31 December 2014, activities undertaken by the Nominating Committee include:- (i) reviewed the size, structure and composition of the Board of Directors and its board balance; (ii) reviewed the required mix of skills and experience and other qualities including core competencies the non-executive directors and executive director should gave; (iii) reviewed the effectiveness of the Board as a whole, contribution of each individual director and committees of the Board; (iv) reviewed the performance of the finance manager in discharging the role of the Chief Financial Officer; (v) discussed the Board s succession plan, training programmes for the Board members and the independence of the Independent Directors of the Company; and (vi) reviewed the Directors retiring and standing for re-election by the shareholders at the forthcoming Annual General Meeting

14 Corporate Governance Statement (cont d) 2. COMMITTEES OF THE BOARD (cont d) 2.2 Nominating Committee (cont d) Appraisals conducted above were performed by reference to the assessment forms in Corporate Governance Guide issued by Bursa Malaysia Berhad. The NC having discussed and concluded the results of the assessment, considers that the Board comprise of members who have the character, experience, integrity, competence and time to effectively discharge their respective roles. During the year under review, there were no new Board members appointed and in case the need arises, the Board will ensure the selection takes into consideration the call for gender, age and ethnicity diversity while not compromising on the competency of the candidate being considered. 2.3 Remuneration Committee The Remuneration Committee is governed by the terms of reference appearing in Appendix C of the Company s Board Charter. This committee is responsible for drawing up the policy framework and to make recommendations to the Board on the remuneration package of the executive director of the Company. The executive director does not participate in decisions relating to his remuneration. The Board as a whole agrees on the Directors fees to be recommended for approval by the shareholders with the Directors concerned abstaining from participating in decisions respecting their individual remuneration. The Remuneration Committee of the Company comprises the following Directors:- Tan Chuan Yong (Chairman, Independent Non-Executive Director) Dato Saw Eng Guan (Member, Executive Chairman) Ng Siew Thong (Member, Independent Non-Executive Director) Siew Chee Choong (Member, Independent Non-Executive Director) The Committee met once during the financial year ended 31 December 2014 and the attendances of the members are as follows:- Members 3. SHAREHOLDERS Attendance Tan Chuan Yong 1/1 Dato Saw Eng Guan 1/1 Ng Siew Thong 1/1 Siew Chee Choong 1/1 During the financial year ended 31 December 2014, activities undertaken by the Remuneration Committee include:- i) reviewed the existing remuneration policy framework and procedure to ensure levels of remuneration is sufficiently attractive and able to retain directors of the caliber needed to successfully run the Company; ii) reviewed the component parts of remuneration link rewards to corporate and individual performance and to assess the needs of the Company for talent at Board level; and iii) discussed the remuneration packages/proposed remuneration, services arrangements and other employment conditions for the Executive Director of the Company for the financial year ending 31 December Shareholders Communication and Investor Relation The Company is committed to maintaining good communications with its shareholders and stakeholders alike. In this respect, information on the Group s financial performance and/or major developments are disseminated to the public as soon as practicable via appropriate channels of communication, chief of which is the Bursa LINK provided by Bursa Securities as well as the Company s website at Information is also channelled by way of the Annual Reports and relevant circulars, press releases and press conferences, if so applicable, the quarterly financial results and the various disclosures and announcements to Bursa Securities issued in compliance with the MMLR

15 Corporate Governance Statement (cont d) 3. SHAREHOLDERS (cont d) 3.1 Shareholders Communication and Investor Relation (cont d) The AGM and Extraordinary General Meeting ( EGM ) of the Company are the primary forum of interaction with its private and institutional investors. During such shareholders meetings, the Executive Director and other Board members and key senior executives as well as the external auditors of the Company would be at hand to address any questions that might be raised by the shareholders. Status of all resolutions proposed at shareholders meetings would be released to Bursa Securities on that day itself. 3.2 Annual General Meeting ( AGM ) The coming Eleventh AGM would provide the Company s shareholders with an avenue to raise any queries that they may have on the Company and the Group. Each item of special business set out in the notice of AGM is accompanied with an explanatory statement in respect of the resolutions proposed and where relevant, Circular to Shareholders setting out the relevant information would be submitted to the shareholders at least twenty-one (21) days prior to the meeting. 4. ACCOUNTABILITY AND AUDIT 4.1 Financial Reporting The Board considers that it has provided a balanced, fair and representative assessment of the Company s and the Group s business in its quarterly results and annual financial statements. The financial statements of the Company and the Group for the financial year ended 31 December 2014 are set out on pages 23 to 62 of this Annual Report and a statement by the Board of its responsibilities in preparing the financial statements is on page Internal Control and Risk Management The Board has overall responsibility for maintaining a sound system of internal controls to safeguard shareholders investments and the Company s assets. It must be noted that while the internal control system is devised to cater for the particular needs of the Group as well as risk management, such controls by their nature can only provide reasonable assurance but are not an absolute assurance against any material misstatements, loss or fraud. A statement on the risk management and internal control within the Group is set out on pages 17 to 18 of this Annual Report. 4.3 Relationship with Auditors The Board maintains a formal, objective, professional and transparent relationship with both its internal and external auditors. The role of the Audit Committee in relation to the external auditors is set out in the Report of the Audit Committee on pages 19 to 21 of this Annual Report. 5. STATEMENT OF COMPLIANCE WITH BEST PRACTICES OF THE MCCG 2012 Based on the above, the Board considers that it has taken steps to comply as far as possible with the Best Practices of the MCCG 2012 for the financial year ended 31 December

16 Corporate Governance Statement (cont d) 6. ADDITIONAL COMPLIANCE INFORMATION Utilisation of Proceeds There were no proceeds raised by the Company from any corporate proposals during the financial year ended 31 December Share Buy-Backs The Company did not seek the approval from its shareholder for authority to buy back its own share last year. Since the Company s first share buy-back on 5 January 2006 till its last share buy-back conducted on 26 November 2013, the Company had bought-back a total of 2,540,500 of its own shares from the Bursa Securities at a total consideration of RM1,040,933.94, all of which are kept as treasury shares and none have been resold or cancelled. Options or Convertible Securities The Company has not issued any options or convertible securities during the financial year ended 31 December Depository Receipt Programme The Company has not sponsored any depository receipt programme during the financial year ended 31 December Sanctions and/or Penalties The Company and its subsidiaries, Directors and Management have not been imposed with any sanctions and/or penalties by any regulatory bodies during the financial year ended 31 December Non-Audit Fees Non-audit fee of RM2, was paid to the external auditors during the financial year ended 31 December 2014 for the review of the Statement on Risk Management and Internal Control. Variation in Results There was no profit forecast issued by the Company and its subsidiary companies during the financial year ended 31 December Profit Guarantee There was no profit guarantee given by the Company during the financial year ended 31 December Material Contracts There were no material contracts entered into by the Company and its subsidiaries involving the interests of directors and substantial shareholders of the Company either subsisting at the end of the financial year or entered into since the end of the previous financial year. Recurrent Related Party Transactions ( RRPT ) Save as disclosed in Note 21 of the Financial Statements, there are no existing and proposed related party transactions and conflict of interest in relation to the TAFI Group and its promoters, substantial shareholders and directors. The MMLR of Bursa Securities provides that a listed issuer with an issued and paid-up capital which is less than RM60 million is required to make an immediate announcement in respect of RRPT where: (i) the consideration, value of the assets, capital outlay or costs of the Recurrent Transaction is equal to or exceeds RM1 million; or (ii) the percentage ratio of such Recurrent Transaction is equal to or exceeds 1%,

17 Corporate Governance Statement (cont d) 6. ADDITIONAL COMPLIANCE INFORMATION (cont d) Recurrent Related Party Transactions ( RRPT ) (cont d) whichever is the lower. In view of this provision, no shareholders mandate on RRPT was sought last year. Similarly, the Board does not foresee the need to obtain shareholders mandate for RRPT in respect of the financial year ended 31 December Nonetheless, the Board, through the Audit Committee and the management, will continue to review and monitor the status of RRPT in every quarter to ensure compliance with the MMLR. Corporate Social Responsibility ( CSR ) The TAFI Group sees itself as a model corporate citizen. Wherever possible, the Group incorporates elements of CSR into every aspect of its business operations and processes as reported in the statement from the Executive Chairman appearing on pages 7 and 8 of this Annual Report. While there are no notable CSR activities that were particularly significant as the Group s CSR activities are an ongoing affair, some of the routine CSR activities of the Group are its consistent compliance with environmental regulations for protection against pollution and sustainable manufacturing practices, the on-going program to provide industrial training for university and vocational students, factory greening program including tree planting and generally, always being mindful of its corporate CSR responsibilities and making constant conscious and regular efforts to minimise stress and harm to the environment. Improvements in the recycling of its wastes such as material board which was previously discarded, into small furniture items and other product components, have led to a much reduced amount of waste and therefore, less stress and harm to mother nature. Other CSR activities undertaken by the Group include improving staff welfare and enhancing existing working conditions and work processes as and when needed, investing in courses and conducting training for staff, including sponsoring employee sporting activities for teambuilding purposes; all these were effected with the objective of enhancing staff worklife balance. In the process of selecting and recruiting candidates to fill job vacancies, the Group selects the most suitable candidates based on job requirement and does not discriminate on the gender, ethnicity and age of the candidates being considered for recruitment. also make regular donations, in cash and in kind, to various charitable organisations. was accredited with the FSC (Forest Stewardship Council) Certification in 2008 which accorded the Group a competitive edge when marketing to its overseas customers especially those in Europe. The FSC promotes responsible management of the world s forests and its certification is an endorsement that the Groups production processes play a role in sustainable forestry. FSC certified products are products where the entire supply chain is FSC compliant. In tandem with its green initiatives, the Group has in 2013 been using the more expensive alternative PUR glue in its lamination processes. The PUR glue has rich properties and is both chemically and mechanically better than the usual industrial glue and most importantly, has near zero emission of formaldehyde gas. Scientific studies have shown that long term exposure to formaldehyde gas has carcinogenic effects

18 Statement On Risk Management And Internal Control Introduction The Board acknowledges the importance of maintaining a good internal control system covering risk management and the financial, operational and compliance controls as set out under Principle 6 of the Malaysian Code on Corporate Governance 2012 ( MCCG 2012 ) to safeguard shareholders investments and the Group s assets. For the purpose of disclosure, this Statement takes into account the Guidelines for Directors of Listed Issuers ( Guidelines ) on the issuance of the Statement pursuant to Paragraph 15.26(b) of the Main Market Listing Requirements ( MMLR ) of Bursa Malaysia Securities Berhad ( Bursa Securities ). Board s Responsibility The Board affirms its overall responsibility for the Group s system of internal control and risk management, which includes the review of its adequacy and effectiveness to ensure compliance to policies and procedures and operating standards, so as to enable the Group to achieve its business objectives. The process of identifying, evaluating, monitoring and managing significant risks affecting the achievement of its business objectives is an ongoing process. The Board however, reiterates that such a system is designed to manage risk rather than eliminate risk of failure to achieve business objectives and provides only reasonable assurance but not absolute assurance against material misstatement or loss. Risk Management The Board recognises that an important element for a sound system of internal control is to have in place a risk management framework in order to identify principal risks and implement appropriate controls to manage such risks. Key performance indicators to monitor risks have been clearly identified for each business process. Internal Audit Function The Audit Committee was established to examine and monitor the Group s system of internal control on behalf of the Board. This is accomplished through the review of the report from the internal audit department by the Audit Committee, usually on a quarterly basis. The internal audit department functions as an independent party to test the existing controls put in place in accordance to riskbased approach and the internal audit plan. The internal audit plan is reviewed quarterly and if necessary, adjusted to reflect the changes in the Group s operating environment. Any significant change to the plan will be referred to the Audit Committee for notification prior to the commencement of the internal audit. Audit findings and recommendations on possible improvement to the internal controls of the Group are submitted to the Audit Committee for review and recommendations followed by implementation of corrective actions as and when needed. The cost incurred to maintain the internal audit function for the financial year ended 31 December 2014 amounted to RM32,500. System of Internal Control The Board confirms that there is a continuous process for identifying, evaluating and managing the significant risks faced by the Group. Key activities that have been established in reviewing the adequacy and integrity of the system of internal control are as follows: Limits of authority and responsibility Establishing a clear organisational structure with key job functions and well-defined responsibilities communicated to all levels of the organisation. Key responsibilities are properly segregated so that no employee has total control of a transaction. Written policies and procedures The management sets well defined authorisation procedures and exercises strict control to ensure compliance by all levels of employees. Planning, monitoring and reporting The Audit Committee reviews the quarterly unaudited financial results to monitor the Group s progress in achieving the Group s objectives. Review of key performance indicators (KPIs) by Senior Management team on quarterly basis

19 Statement On Risk Management And Internal Control (cont d) Assurance provided by the Executive Chairman and Finance Manager In line with the Guidelines, the Executive Chairman and Finance Manager have provided assurance to the Board that the Group s risk management and internal control systems have operated adequately and effectively, in all material aspects, to meet the Group s objectives during the financial year under review. Conclusion The Board is satisfied that during the financial year ended 31 December 2014, the risk management and internal control system has not resulted in any material losses, contingencies or uncertainties that would require disclosure in the Group s annual report. The Board continues to take pertinent measures to sustain and, where required, to improve the Group s risk management and internal control system in meeting the Group s strategic objectives. Review Of This Statement Pursuant to paragraph of the MMLR of Bursa Securities, the external auditors have reviewed this statement for inclusion in the Annual Report of Group for the year ended 31 December 2014 and reported to the Board that nothing has come to their attention that caused them to believe that the Statement on Risk Management and Internal Control intended to be included in the annual report is inconsistent with their understanding of the process the Board of Directors has adopted in the review of the adequacy and integrity of internal control of the Group

20 Audit Committee Report 1. MEMBERS The three (3) members of the Audit Committee of the Company are as follows:- - Siew Chee Choong (Chairman, Independent Non-Executive Director) - Tan Chuan Yong (Member, Independent Non-Executive Director) - Ng Siew Thong (Member, Independent Non-Executive Director) The composition of the Audit Committee during the financial year complied with the Terms of Reference of the Audit Committee which is, the committee shall comprise not less than three (3) members and a majority of whom shall be independent directors and at least one (1) member of the Audit Committee has the required financial background and experience. Mr. Siew Chee Choong, who is a member of the Malaysian Institute of Accountants, fulfils this requirement. 2. MEETINGS During the financial year ended 31 December 2014, the Audit Committee held a total of five (5) meetings, details of attendances of the Committee members are as follows:- Members Attendance Siew Chee Choong 5/5 Tan Chuan Yong 5/5 Ng Siew Thong 4/5 Besides the Company Secretary, the Finance Manager, the Internal Auditor and the representatives of External Auditor attended the Committee meetings during the financial year ended 31 December 2014 on invitation by the Committee Chairman. 3. INTERNAL AUDIT FUNCTION The internal audit department plays a key role in undertaking independent, regular and systematic reviews of risk management, internal control and governance systems to provide the Group with reasonable assurance that the said systems are operating and will continue to operate satisfactorily and effectively. It is the responsibility of the internal audit team to provide the Audit Committee with independent and objective reports on the state of the risk management, control and governance processes pertaining to the various operating units within the Group and the extent of their compliance with the Group s established policies, procedures and relevant statutory requirements. 4. SALIENT TERMS OF REFERENCE 4.1 Duties and Responsibilities of the Audit Committee The Committee shall discharge the following functions: (1) review the following (and report the same to the Board of Directors):- (a) with the external auditor:- (i) the audit plan; (ii) his evaluation of the system of internal controls; and (iii) his audit report; (b) (c) (d) the assistance given by the employees of the Company to the external auditor; the adequacy of the scope, functions, competency and resources of the internal audit functions (which reports directly to the Committee) and that it has the necessary authority to carry out its work; the internal audit programme, processes, the results of the internal audit programme, processes or investigation undertaken and whether or not appropriate action is taken on the recommendations of the internal audit function;

21 Audit Committee Report (cont d) 4. SALIENT TERMS OF REFERENCE (cont d) 4.1 Duties and Responsibilities of the Audit Committee (cont d) (e) (f) (g) (h) (i) the quarterly results and year end financial statements, prior to the approval by the board of directors focusing particularly on:- (i) changes in or implementation of major accounting policy changes; (ii) significant and unusual events; and (iii) compliance with accounting standards and other legal requirements; any related party transaction and conflict of interest situation that may arise within the Company or Group including any transaction, procedure or course of conduct that raises questions of management integrity; any letter of resignation from the external auditors; whether there is reason (supported by grounds) to believe that the Company s external auditor is not suitable for re-appointment; and allocation of options pursuant to a share scheme for employees. (2) recommend the nomination of a person or persons as external auditors. (3) report promptly to the Exchange where the Committee is of the view that a matter reported by it to the Board of Directors has not been satisfactorily resolved resulting in a breach of the Main Market Listing Requirements ( MMLR ) of Bursa Malaysia Securities Berhad ( Bursa Securities ). 4.2 Powers of the Audit Committee The Audit Committee in carrying out its duties and responsibilities shall have the following rights: (1) authority to investigate any matter within its terms of reference; (2) the resources which are required to perform its duties; (3) full and unrestricted access to any information pertaining to the Company; (4) direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity; (5) obtain independent professional or other advice; and (6) 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. Attendance of any particular Audit Committee meetings by other directors and employees of the Company shall be at the Audit Committee s invitation and discretion and must be specific to the relevant meeting. 5. SUMMARY OF ACTIVITIES OF THE AUDIT COMMITTEE A brief summary and an overall view of the activities of the Audit Committee during the financial year ended 31 December 2014 in discharging its duties and responsibilities are as follows:- Reviewed each unaudited quarterly financial results of the Group before making their recommendations on the same to the Board of Directors prior to its release to Bursa Securities. Reviewed the draft audited financial statements of the Company and the Group for the year ended 31 December 2013, and the accompanying Audit Completion Memorandum issued by the external auditors, Messrs. Deloitte, before making their recommendations on the same to the Board of Directors prior to the release of the said audited financial statements to Bursa Securities. Reviewed and recommended action on the quarterly internal audit report of the Group presented by the Internal Auditor and briefing the Board of Directors on the same. Reviewed the Recurrent Related Party Transactions for compliance with the MMLR of Bursa Securities. Reviewed the Statement of Risk Management and Internal Control and Audit Committee Report prior to their inclusion into the Company s Annual Report Reviewed the Audit Planning Memorandum from the external auditors, Messrs. Deloitte, prior to the commencement of their audit of the Group s financial statements for the financial year ended 31 December Met twice with the external auditors, Messrs. Deloitte, for a private discussion without the presence of Management and executive board members of the Company. Recommended the re-appointment of auditors