CONTENTS ANNUAL REPORT 2014

Transcription

1 Annual Report

2 Notice of Annual General Meeting 2-4 Corporate Information 5 Five-Year Group Financial Summary 6-7 Corporate Structure Chairman s Statement Directors Profile Audit Committee Report Corporate Governance Statement Additional Compliance Information Statement on Risk Management and Internal Control Directors Report Independent Auditors Report to the Members of Hexza Corporation Berhad Statements of Profit or Loss and Other Comprehensive Income Statements of Financial Position Statements of Changes in Equity Statements of Cash Flows Notes to the Financial Statements Supplementary Information - disclosure on realised and unrealised profits or losses 88 Statement by Directors 89 Declaration by the Officer Primarily Responsible for the Financial Management of the Company 89 Statement of Shareholdings Properties owned by Hexza Corporation Berhad & its Subsidiaries 92 Proxy Form CONTENTS ANNUAL REPORT

3 NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN that the Forty-fifth Annual General Meeting of Hexza Corporation Berhad will be held at Gopeng Hall, Level 3, Kinta Riverfront Hotel & Suites, Jalan Lim Bo Seng, Ipoh, Perak Darul Ridzuan on Saturday, 22 nd November at a.m. for the following purposes: A G E N D A 1. To receive the Audited Financial Statements for the financial year ended 30 th June and the Reports of the Directors and Auditors thereon. (Please refer Explanatory Note A) 2. To approve the payment of a first and final single-tier dividend of 8% in respect of the financial year ended 30 th June. (Resolution 1) 3. To approve the payment of Directors fees of 282,500 for the financial year ended 30 th June. (Resolution 2) 4. To re-elect Mr. Ooi Ying Hong who retires in accordance with Article 78 of the Company's Articles of Association and being eligible, offers himself for re-election as a Director of the Company. (Resolution 3) 5. To re-appoint the following Directors who retire pursuant to Section 129(6) of the Companies Act, 1965 and to hold office until the conclusion of the next Annual General Meeting: (i) Dr. Foong Weng Cheong (Resolution 4) (ii) Dato' Richard Ong Guan Seng (Resolution 5) (iii) Datuk Dr. Foong Weng Sum (Resolution 6) 6. To re-appoint Messrs. Deloitte & Touche as Auditors and to authorise the Directors to fix their remuneration. (Resolution 7) 7. As Special Business: Continuing in office as Independent Directors (a) Subject to the passing of Ordinary Resolution 5(ii), to re-appoint Dato Richard Ong Guan Seng to continue to act as an Independent Director of the Company. (Resolution 8) (b) To re-appoint the following Directors to continue to act as Independent Directors of the Company: (i) Mr. Leong Keng Yuen (Resolution 9) (ii) Tuan Haji Mohd Mohd Jalil Bin Sany (Resolution 10) 2 Annual Report

4 NOTICE OF ANNUAL GENERAL MEETING 8. To consider and, if thought fit, to pass the following ordinary resolution: Authority to issue shares pursuant to Section 132D of the Companies Act, 1965 ''THAT pursuant to Section 132D of the Companies Act, 1965, the Directors be and are hereby empowered to issue shares of the Company at any time until the conclusion of the next Annual General Meeting of the Company upon such terms and conditions and for such purposes as the Directors may, in their absolute discretion, deem fit, provided that the aggregate number of shares issued pursuant to this resolution does not exceed 10% of the issued capital of the Company for the time being and that the Directors are also empowered to obtain the approval for the listing of and quotation for the additional shares so issued on Bursa Malaysia Securities Berhad." (Resolution 11) 9. To transact any other business of which due notice shall have been given. NOTICE OF DIVIDEND ENTITLEMENT AND PAYMENT NOTICE IS ALSO HEREBY GIVEN that the first and final single-tier dividend of 8% in respect of the financial year ended 30 th June, if approved by the shareholders, will be paid on 10 th December to depositors who are registered in the Record of Depositors at the close of business on 26 th November. A depositor shall qualify for entitlement to the dividend only in respect of: a. Shares transferred into the Depositor s Securities Account before 4.00 p.m. on 26 th November in respect of ordinary transfers; and b. Shares bought on Bursa Malaysia Securities Berhad on a cum entitlement basis according to the Rules of Bursa Malaysia Securities Berhad. By Order of the Board CHONG YOKE SENG Company Secretary Ipoh 28 th October Notes: 1. A member, other than an exempt authorised nominee is entitled to appoint not more than two (2) proxies. A proxy may but need not be a member of the Company. 2. A member who is an authorised nominee may appoint not more than two (2) proxies in respect of each securities account held; whereas an exempt authorised nominee may appoint multiple proxies in respect of each omnibus account held. 3. A member who appoints a proxy must duly execute the Form of Proxy, and if more than one (1) proxy is appointed, the number of shares to be represented by each proxy must be clearly indicated. 4. An instrument appointing a proxy, in the case of an individual, shall be signed by the appointor or his attorney duly authorised in writing or in the case of a corporation, shall be either under its Common Seal or under the hand of an officer or attorney of the corporation duly authorised. 5. The duly executed Form of Proxy must be deposited at the registered office of the Company not less than forty-eight (48) hours before the time set for holding the meeting or any adjournment thereof. 6. Only members whose names appear in the Record of Depositors as at 17 th November will be entitled to attend and vote at the meeting. Annual Report 3

5 NOTICE OF ANNUAL GENERAL MEETING (continued) Explanatory Note A This Agenda item is meant for discussion only as the provision of Section 169(1) of the Companies Act, 1965 does not require a formal approval by the shareholders and hence, is not put forward for voting. Explanatory Notes on Special Business: 1. Resolutions 8, 9 & 10 The proposed Resolutions 8, 9 & 10, if passed, will enable the named Driectors to continue to hold office until the next Annual General Meeting of the Company as Independent Directors notwithstanding that they have served a cumulative term of more than nine years. In line with the recommendation 3.2 of the Malaysian Code on Corporate Governance 2012, the Board on the recommendation of the Nominating Committee, after the annual assessment of the Directors independence have recommended that Dato Richard Ong Guan Seng, Mr. Leong Keng Yuen and Tuan Haji Mohd Mohd Jalil Bin Sany who have served as Directors of the Company for a cumulative term of more than nine years, be re-appointed as Independent Directors of the Company based on the following justifications: (i) (ii) (iii) they have fulfilled the criteria under the definition of Independent Director as stated in the Main Market Listing Requirements of Bursa Malaysia Securities Berhad and therefore would be able to function as a check and balance and bring an element of objectivity to the Board. they each remain independent and actively participate in board discussions and provide an independent and objective voice on the Board. they act in the best interests of all shareholders and their re-appointment as Independent Directors will provide a check and balance to operational management. 2. Resolution 11 The proposed Resolution 11, if passed, will empower the Directors to issue shares in the Company up to an amount not exceeding in total 10% of the issued share capital of the Company for the time being for such purposes as the Directors consider would be in the interests of the Company. This authority, unless revoked or varied by the Company in a general meeting, will expire at the conclusion of the next Annual General Meeting of the Company. The general mandate sought for issue of shares is a renewal of the general mandate sought in the preceding year. As at the date of Notice, no new shares in the Company were issued pursuant to the mandate granted to the Directors at the Forty-fourth AGM held on 23 rd November and hence no proceeds were raised therefrom. The general mandate will provide flexibility to the Company for any possible fund raising activities, including but not limited to further placing of shares for purpose of funding future investment project(s), working capital and/or acquisitions. STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING The details of Directors standing for re-election and re-appointment are set out in the Profile of Directors and the details of their interests in the securities of the Company are disclosed in this Annual Report. 4 Annual Report

6 CORPORATE INFOATION BOARD OF DIRECTORS Datuk Dr. Foong Weng Sum Chairman & Group Chief Executive Dato' Richard Ong Guan Seng Deputy Chairman/Independent Non-Executive Director Dr. Foong Weng Cheong Non-Independent Non-Executive Director Mr. Leong Keng Yuen Independent Non-Executive Director Tuan Haji Mohd Mohd Jalil Bin Sany Independent Non-Executive Director Mr. Ooi Ying Hong Independent Non-Executive Director AUDIT COMMITTEE Dato' Richard Ong Guan Seng Chairman Dr. Foong Weng Cheong Mr. Leong Keng Yuen Mr. Ooi Ying Hong REMUNERATION COMMITTEE Mr. Leong Keng Yuen Chairman Datuk Dr. Foong Weng Sum Dr. Foong Weng Cheong Dato' Richard Ong Guan Seng NOMINATING COMMITTEE Dato' Richard Ong Guan Seng Chairman Dr. Foong Weng Cheong Mr. Leong Keng Yuen REGISTERED OFFICE Lot 6 & 20, Persiaran Tasek, Kawasan Perindustrian Tasek, Ipoh, Perak Darul Ridzuan. Tel : Fax : hexza@po.jaring.my Website : REGISTRARS Symphony Share Registrars Sdn. Bhd. Level 6, Symphony House, Pusat Dagangan Dana 1, Jalan PJU 1A/46, Petaling Jaya, Selangor Darul Ehsan. Tel : Fax : AUDITORS Deloitte & Touche Chartered Accountants 87 Jalan Sultan Abdul Jalil, Ipoh, Perak Darul Ridzuan. Tel : Fax : PRINCIPAL BANKERS AmInvestment Bank Berhad Hong Leong Bank Berhad HSBC Bank Malaysia Berhad Malayan Banking Berhad RHB Bank Berhad RHB Investment Bank Berhad United Overseas Bank (Malaysia) Bhd. STOCK EXCHANGE LISTING Main Market of Bursa Malaysia Securities Berhad Stock Code : 3298 Stock Short Name : hexza COMPANY SECRETARY Ms. Chong Yoke Seng (MIA 3672) Annual Report 5

7 FIVE-YEAR GROUP FINANCIAL SUMMARY Year Ended 30 th June '000 ' '000 (restated) 2011 ' '000 Statement of Profit or Loss and Other Comprehensive Income Revenue 145, , , , ,744 Profit before tax 10,748 10,073 8,979 16,268 22,182 Income Tax (2,164) (1,191) (2,176) (2,833) (5,028) Profit After Tax 8,584 8,882 6,802 13,436 17,155 Profit After Tax attributable to shareholders of the company 8,079 8,475 5,962 12,104 15,895 Statement of Financial Position Total non-current assets 122, , , , ,795 Total current assets 129, , , , ,333 Total assets 251, , , , ,128 Shareholders' fund 215, , , , ,169 Total non-current liabilities 9,304 9,889 10,397 7,093 7,800 Total current liabilities 20,141 10,533 17,394 10,405 11,802 Share Information Per Ordinary Share Earnings per share (sen) Gross dividend (sen)* Net dividend proposed/paid (sen)* Net assets () Financial Ratio Return on shareholders' funds (%) Note: * The proposed final dividend for the financial year ended 30 th June is subject to approval by the shareholders at the forthcoming Annual General Meeting of the Company. 6 Annual Report

8 FIVE-YEAR GROUP FINANCIAL SUMMARY Revenue Shareholders' Funds (million) (million) Year Year Profit Before Tax Total Assets (million) (million) Year Year Earnings Per Share (sen) Gross Dividend Per Share (sen) sen sen Year Year Annual Report 7

9 CORPORATE STRUCTURE AS AT 30 TH JUNE HEXZA CORPORATION BERHAD 8 Annual Report

10 CHAIAN'S STATEMENT Dear Shareholders, On behalf of the Board of Directors, I am pleased to present you the Annual Report and Financial Statements of the Group and of the Company for the financial year ended 30 June. One of the key responsibilities of a board of directors is to set a strategy. As I will outline in this statement, and as we strive to demonstrate throughout the Annual Report, your Board has chosen a clear strategic route to follow. This is rooted in our heritage to deliver high quality products and sets out our ambition to continuously improve. As your Directors review our strategy and carry out our other responsibilities, it is my role as Chairman to lead the Board effectively. Good governance is at the core of that, and with good governance comes transparent reporting. manufactures formaldehyde based adhesives and resins, premium quality ethanol and organically fermented vinegar. Our products are used by customers in a variety of industries. Formaldehyde based adhesives and resins are used in the manufacture of plywood, particle boards and medium density fibre boards. Ethanol is used by the pharmaceutical, cosmetics as well as the food and beverage industries. In addition, it is also used as a solvent for industrial applications. In addition to manufacturing, the Group also has a property development arm. While not immune to the challenging economic conditions which are evident across the markets in which we operate, our performance remained robust. Financial Performance registered a turnover of million in compared to million in, an increase of million or 16.7%. Profit before tax was also higher at million in compared to million in, an increase of 0.68 million or 6.7%. The lower incremental profit before tax of million on revenue of million in compared to is primarily due to capital gains of 4.19 million recognised in the profit before tax. Group EBITDA in increased to million from million in, an increase of 0.49 million or by 3.1%. Group Earnings Per Share dropped slightly, that is from 4.2 sen (per ordinary share of 50 sen) in to 4.0 sen (per ordinary share of 50 sen) this year. The Company registered weaker revenue, a decrease of 0.07 million or 0.7%. Revenue fell to 9.20 million in from 9.27 million in. Profit before tax of million in was significantly lower by 4.2 million compared to, this is primarily due to capital gains of 4.19 million recognised in. OPERATIONAL Performance The manufacturing segment registered improved revenue, an increase of million or 18.2%. Revenue grew to million in from million in. Profit before tax increased by 5.40 million. The significant improvement was contributed mainly by the substantial increase in sales of the ethanol and resins divisions, by 37.4% and 9.7% respectively. The trading segment registered weaker revenue, a decrease of 0.16 million or 5.8%. Revenue fell to 2.59 million in from 2.75 million in. However, profit before tax was higher at 0.54 million primarily due to lower operating expenses in. Annual Report 9

11 CHAIAN'S STATEMENT (continued) Operations The manufacturing division comprise the manufacture of formaldehyde based adhesives and resins, ethanol and bio-fermented vinegar. The manufacture of formaldehyde based adhesives and resins and the manufacture of ethanol represent the core activity of the Group. The performance of the Resins division continues to reflect the distinctly different macro economies in which they operate. Hexzachem Sarawak Sdn. Bhd., which operates out of Kuching and serves East Malaysia, manufactures adhesives which are used in the production of export quality plywood, particle boards and medium density fibre boards; while Norsechem Resins Sdn. Bhd., which operates out of Port Klang and serves Peninsular Malaysia, manufactures adhesives which are used in the wood panels industry. Hexzachem Sarawak Sdn. Bhd. appears to have turned the corner in terms of production and sales volume, and can be expected to continue its current growth path. Hexzachem Sarawak Sdn. Bhd. continues to work diligently towards improving its products and to satisfy its customers requirements, an example is the development of emission free formaldehyde resins. In this endeavour, it works closely with its world class technology partner. In spite of the very competitive environment in which it operates, Norsechem Resins Sdn. Bhd. was able to report an improved performance this year with a lower loss. Chemical Industries (Malaya) Sdn. Bhd. considers itself a premium quality manufacturer focussing on producing high quality potable industrial and pharmaceutical grade ethanol with low impurities which conform to British Pharmacopoeia We also produce absolute alcohol through the utilisation of Membrane Separation technology. We are proud to be a qualified global stockist for a multinational pharmaceutical company. In the financial year ended 30 th June, we were awarded the Overall Best Licence Holder and the Best Excise Duty Licence Holder by the Perak Royal Customs Department. We continue to work closely with our customers taking cognisance of their needs and ensuring on time deliveries. The manufacture of organically fermented vinegar by Bio-Acetic Products Sdn. Bhd. has just started to see growth and is showing signs of achieving its potential. While there are many types of food grade vinegar in the market, naturally derived organic fermented vinegar provides consumers a healthier and better choice. Summit Development Corporation Sdn. Bhd. the property development arm, continues to seek and review potential development opportunities that come its way, particularly that of boutique and mix development projects. As with all our undertakings, we adopt a prudent approach bearing in mind the financial viability of the project. Outlook and Prospects Any review of the Group will have to reflect the environment in which it operates. The economic uncertainties I touched on in previous Annual Reports remain. The market for our products continue to grow and the underlying demographics remain positive towards long term growth, nevertheless many of the raw materials required are under pressure. We face an ongoing productivity challenge. Costs have risen significantly in the past decade and this is expected to continue. In addition, we also face increasingly stringent environmental regulations as well as the volatility of foreign exchange between the Ringgit Malaysia vis-a-vis the U.S. Dollar. Added to this is the introduction of the Goods and Services Tax ( GST ) in Malaysia next year. With its implementation the overall cost of living is expected to increase. Fortunately, we fare better on the demand side. Despite the many uncertainties, we believe that our emphasis on quality, supply chain management, financial and budgetary improvements have served us well and allowed our products to remain competitive. Your Board has been quite conservative in its approach to expansion and diversification and will henceforth adopt a more aggressive but studied approach in growing its top and bottom lines. 10 Annual Report

12 CHAIAN'S STATEMENT Corporate Social Responsibility Over the years, our conduct has been characterised by high ethical standards and respect for our stakeholders. Since we started operations close to fifty years ago, Corporate Social Responsibility has been part of our way of doing business and it goes beyond financial donations and sponsorship. Last year, I had stated that it may be ad-tedium for me to repeat our Corporate Social Responsibility Statement in full except to re-emphasise our Corporate Social Responsibility mission. This year, I would like to highlight certain events that underscore how Corporate Social Responsibility has been practised in Hexza. A few years back, we had to persevere with recurrent factory and operational stoppages which resulted in financial losses for the Group. During these difficult times, we did not downsize our work force nor was there any reduction in pay. Instead, competent employees were sent to undergo additional training and education to further develop their skills and knowledge as well as to improve working efficiency. We maintain our commitment to our employees and remain steadfast in our responsibility to provide them with sustainable employment opportunities. Your Company appreciates that without being socially and environmentally responsible, it is impossible to have economically sustainable operations in the long term. Corporate Social Responsibility and sustainability are the template of that strategy. For Hexza, Corporate Social Responsibility is about having a sustainable business plan in the face of local and global challenges. It is also about conducting business with a conscience, caring for its employees, the community, the environment, its customers, its shareholders and all stakeholders. Our Corporate Social Responsibility mission is for all our Directors, Senior Executives, Management and staff to be participants in the advancement of a caring, learning and civil community. Our ideals and endeavours remain consistent, and, Corporate Social Responsibility is in our social responsibility genetics. Dividend Your Board has recommended a first and final dividend of 4.0 sen net per ordinary share of 50 sen each comprising a single tier dividend of 8.0% in respect of the financial year ended 30 June. This is subject to the approval of the shareholders at the forthcoming Annual General Meeting. APPRECIATION On behalf of the Board of Directors, I would like to extend my appreciation to all our stakeholders, valued customers, business associates, loyal shareholders, the authorities and financiers for their continuous support. Last but not least, I would like to extend my appreciation to my fellow Board members for their invaluable advice and contributions. I would also like to extend my sincerest appreciation to the managers, executives and employees for their contribution, dedication and commitment in achieving our objectives. Datuk Dr. Foong Weng Sum Chairman & Group Chief Executive 30 th September Annual Report 11

13 DIRECTORS PROFILE Datuk Dr. Foong Weng Sum Chairman & Group Chief Executive Datuk Dr. Foong Weng Sum, aged 75, was appointed to the Board on 7 th May 1982 as Vice Chairman. On 23 rd October 1986, he also assumed the position of Group Chief Executive. He took over as Chairman of the Board on 1 st December He is also a member of the Remuneration Committee. Datuk Dr. Foong Weng Sum is a graduate in medicine from University of London s Guy s Hospital Medical School. He has considerable business experience in various business sectors, including manufacturing, property development, financial management and investment. DATO Richard Ong Guan Seng Deputy Chairman/Independent Non-Executive Director Dato Richard Ong, aged 76, was appointed to the Board on 25 th March 1994 and he was appointed as the Deputy Chairman of the Board on 8 th November He is also the Chairman of the Audit Committee and Nominating Committee and a member of the Remuneration Committee. Dato Richard Ong is a member of the Malaysian Institute of Accountants, the Malaysian Institute of Certified Public Accountants, the Institute of Chartered Accountants in Australia and the Institute of Chartered Secretaries and Administrators. He became a Partner of Peat Marwick (now known as KPMG), Malaysia in 1971 and was appointed Deputy Senior Partner in 1989 until he retired in He is also on the Board of The Tan Sri Tan Foundation and holds directorships in several private limited companies. Dr. Foong Weng Cheong Non-Independent Non-Executive Director Dr. Foong Weng Cheong, aged 81, was appointed to the Board on 7 th May He is also a member of the Audit Committee, Remuneration Committee and Nominating Committee. Dr. Foong Weng Cheong is a graduate in medicine from the University of Melbourne, Australia and is a Fellow of the Royal College of Surgeons of Edinburgh and also a Fellow of the Royal College of Surgeons of England. He was appointed Senior Lecturer ( ), Associate Professor ( ) and Professor & Head of Department of Surgery ( ) at the National University of Singapore and Chief of University Department of Surgery at Singapore General Hospital and National University Hospital until he retired in Since 1988 he is a Consultant Surgeon at Mount Elizabeth Medical Centre, Singapore. Mr. Leong Keng Yuen Independent Non-Executive Director Mr. Leong Keng Yuen, aged 64, was appointed to the Board on 15 th September He is also the Chairman of the Remuneration Committee and a member of the Audit Committee and Nominating Committee. Mr. Leong Keng Yuen was a partner of Ernst & Young Malaysia before retiring at the end of He is a member of the Malaysian Institute of Accountants and a Fellow of the Association of Chartered Certified Accountants. He also holds a Master of Science in Management from the Massachusetts Institute of Technology U.S.A. and a Bachelor of Engineering (First Class Honours) from University of Queensland, Australia. He is also a Non-Executive Director of OSK Ventures International Berhad, company listed on Bursa Malaysia. He is also on the Board of Datin Seri Ting Sui Ngit Foundation and The Perak Chinese Welfare Association. 12 Annual Report

14 DIRECTORS PROFILE Tuan Haji Mohd Mohd Jalil Bin Sany Independent Non-Executive Director Tuan Haji Mohd Jalil Sany, aged 67, was appointed to the Board on 20 th November He is a member of the Malaysian Institute of Accountants and a Fellow of the Association of Chartered Certified Accountants. In 1987 he attended an advanced Management Programme at Insead, Fontainebleu, France. He has over 40 years of working experience in diversified industries which includes unit trust and investment holdings, properties and hotels, banking and insurance, plantation, film distribution and exhibition, commercial agriculture, animal husbandry and book publication and distribution. In that 40 years period, he has contributed over more than 20 years in the industrial development of both the states of Sabah and Sarawak through holding various key positions as Chief Financial Officer, Chief Operating Officer and directors in investment and business organizations. He now holds directorships in several private limited companies. Mr. Ooi Ying Hong Independent Non-Executive Director Mr. Ooi Ying Hong, aged 48, was appointed to the Board on 12 th July He is also a member of the Audit Committee. He holds a Bachelor of Business (Accounting) degree from University of Southern Queensland, Australia. He started his career in auditing with KPMG and subsequently joined Matsushita Television Co. (M) Sdn. Bhd. He has many years of experience in various industries, including logistics, international trading, information technology, service and automotive. He also sits on the Board of Directors of various private limited companies. OTHER INFOATION Nationality All the Directors are Malaysians. Family relationship with any Director and/or substantial shareholder Dr. Foong Weng Cheong and Datuk Dr. Foong Weng Sum are brothers. Apart from this, none of the Directors has any family relationship with the other Directors or substantial shareholders of the Company. Conflict of interest Save as disclosed in Note 21 under Notes to the Financial Statements, none of the Directors has any conflict of interest with the Company. Convictions for offences None of the Directors has been convicted of any offence within the past ten years. Annual Report 13

15 AUDIT COMMITTEE REPORT The Board of Directors of Hexza Corporation Berhad ( the Board ) is pleased to present the report of the Audit Committee for the financial year ended 30 th June. COMPOSITION The Audit Committee comprises 3 Independent Non-Executive Directors and 1 Non-Independent Non-Executive Director. The Chairman of the Audit Committee is a member of the Malaysian Institute of Accountants and hence the Company is in compliance with the Listing Requirements which requires at least one member of the Audit Committee to be qualified. The Audit Committee consists of the following members: Dato' Richard Ong Guan Seng Mr. Leong Keng Yuen Dr. Foong Weng Cheong Mr. Ooi Ying Hong (Chairman, Independent Non-Executive Director) (Member, Independent Non-Executive Director) (Member, Non-Independent Non-Executive Director) (Member, Independent Non-Executive Director) The detailed profiles of all the members of the Audit Committee are shown in the Board of Directors profile. TES OF REFERENCE The terms of reference of the Audit Committee are as follows: 1. Membership (a) The Committee shall be appointed by the Board from amongst the Directors of the Company and shall consist of not less than three members of whom all the members must be Non-Executive Directors, with a majority of them being Independent Directors. At least one member of the Committee must be a member of the Malaysian Institute of Accountants or eligible for membership. (b) The members of the Committee shall select a Chairman from among their numbers who shall be an Independent Director. (c) The term of office and performance of the Committee and each of its members should be reviewed by the Board at least once every three years to determine whether such Audit Committee and members have carried out their duties in accordance with their terms of reference. 2. Authority The Audit Committee shall, in accordance with a procedure to be determined by the Board of Directors and at the cost of the Company: (a) have authority to investigate any matter within its terms of reference; (b) have the resources which are required to perform its duties; (c) have full and unrestricted access to any information pertaining to the Company; (d) have direct communication channels with the external auditors and the person(s) carrying out the internal audit function or activity; (e) be able to obtain independent professional or other advice; and (f) be able to convene meetings with the external auditors, internal auditors or both, excluding the attendance of the management, whenever deemed necessary. 3. Duties and Responsibilities The functions of the Audit Committee shall be to: (a) review with the external auditors, their audit plans; (b) review with the external auditors, their evaluation of the system of internal controls; (c) review with the external auditors, their audit reports; 14 Annual Report

16 AUDIT COMMITTEE REPORT (d) review the assistance given by the Company s employees to the external auditors and meet the external auditors in the absence of management at least twice a year; (e) review the adequacy of the scope, functions, competency and resources of the internal audit functions and that it has the necessary authority to carry out its work; (f) review the scope and results of the internal audit procedures; (g) review the risk management function of the Group and the Risk Management Units assessment reports; (h) review the Group s quarterly results and year end financial statements, prior to the approval by the Board of Directors, focusing particularly on: (i) (j) (i) (ii) (iii) changes in or implementation of major accounting policy changes; significant and unusual events; and compliance with accounting standards and other legal requirements. review any related party transactions that may arise within the Company or Group; recommend the appointment of external auditors, audit fee and any question of resignation or dismissal; including a formal evaluation of the external auditors at least once a year; (k) consider the appointment of the head of the internal audit unit and his/her remuneration; (l) report to the Board of Directors on compliance with laws and regulations, related party transactions, code of ethics, significant results and findings from internal and external audit, internal control, corporate governance and risk management function; and (m) undertake such other functions as may be agreed to by the Audit Committee and Board of Directors. 4. Meetings (a) The Audit Committee shall meet not less than four (4) times a year. (b) The quorum of the Committee shall be at least two members; the majority of members present must be independent directors. (c) The Secretary to the Committee shall be the Company Secretary. 5. Reporting Procedures The Secretary shall circulate the minutes of meetings of the Committee to all members of the Board. 6. Documentation Procedures The Secretary shall be responsible, in conjunction with the Chairman, for drawing up the Agenda and the notice of meeting. The notice of meeting and the Agenda together with the relevant papers are distributed to the members at least three (3) days prior to each meeting. The minutes of the Audit Committee meetings are also distributed to all Board members. The Secretary is responsible for keeping the minutes and responsible for communicating the decisions made at the meeting to the relevant parties. Attendance During the financial year ended 30 th June, four (4) Audit Committee meetings were held and the details of the attendance were as follows: No. of Meetings Attended Dato' Richard Ong Guan Seng 4 out of 4 Mr. Leong Keng Yuen 2 out of 4 Dr. Foong Weng Cheong 4 out of 4 Mr. Ooi Ying Hong 4 out of 4 The Company Secretary attended all the meetings of the Audit Committee held during the financial year. Other members of the Board and employees also attended the meetings upon the invitation of the Committee. Annual Report 15

17 AUDIT COMMITTEE REPORT (continued) Summary of Activities During the Financial Year During the financial year ended 30 th June, in line with the terms of reference, the Audit Committee carried out the following activities in discharge of its duties and responsibilities: (a) financial results (i) Reviewed the Group s quarterly results announcements to Bursa Malaysia Securities Berhad before recommending them to the Board of Directors for approval. (ii) Reviewed the audited financial statements of the Company and of the Group with the External Auditors to ensure compliance with the provisions of the Companies Act, 1965 and the applicable accounting standards prior to submission to the Board of Directors for consideration and approval. (b) External Audit (i) Reviewed the scope of work and the audit plan of the External Auditors in respect of the financial year ended 30 th June. (ii) Reviewed auditors and management s responses, including corrective actions taken by the management on outstanding audit issues highlighted in the previous audit. (iii) Reviewed the audit fee for the financial year. (iv) Met twice with the External Auditors during the year without the presence of management including the Group Chief Executive and the Company Secretary. (v) Reviewed and evaluated the performance of the External Auditors and made recommendations to the Board on their re-appointment. (c) internal Audit (i) Reviewed and approved the internal audit plan. (ii) Reviewed and deliberated on the reports from the Internal Audit Unit and management s response to the recommendations and presented the reports to the Board of Directors. (iii) Reviewed the performance of the Internal Audit Unit against the annual audit plan for the financial year ended 30 th June and the costs incurred in connection with the performance of the audits during the year. (iv) Held independent meetings with the Internal Auditors without the presence of management. (d) Risk Management (i) Reviewed and deliberated on the risk assessment reports from the operating companies of the Group with requests for further actions where appropriate. 16 Annual Report

18 AUDIT COMMITTEE REPORT Internal Audit Function The Company has an in-house Internal Audit Unit which provides support to the Audit Committee in discharging its duties and responsibilities. The functions and responsibilities of the Internal Audit Unit are embodied in the Internal Audit Charter. The main role of the Internal Audit Unit is to undertake independent assessments of the adequacy and effectiveness of the Group s system of internal control, compliance with operational procedures and risk management procedures. The Internal Audit Unit reports directly to the Chairman of the Audit Committee. During the financial year under review, the Internal Audit Unit conducted audits on operating subsidiaries based on the internal audit plan approved by the Audit Committee. The total cost incurred by the Internal Audit Unit during the financial year ended 30 th June amounted to approximately 98,000. The following were the activities carried out by the Internal Audit Unit: (i) (ii) Prepared internal audit plan for the approval of the Audit Committee. Reviewed and appraised the adequacy, effectiveness and efficiency of internal control in the Group. (iii) Ascertained the extent to which the companies within the Group comply with established policies, procedures and statutory requirements. (iv) Reviewed the effectiveness of the risk management system. (v) Prepared Internal Audit reports on audit findings and recommendations for improvements to the existing system of internal control and work procedures/processes. (vi) Conducted follow-up reviews to assess if appropriate actions have been taken to address issues raised in the previous audit. (vii) Performed special audit upon the request of management. (viii) Prepared quarterly reports and update the Audit Committee on progress of internal audit work at Audit Committee meetings. Annual Report 17

19 CORPORATE GOVERNANCE STATEMENT The Board of Directors of Hexza Corporation Berhad ("Board") remains committed to ensure that good corporate governance is practised throughout the Group in enhancing shareholder value and the financial performance of the Group. The Board acknowledges its responsibility for compliance with the Bursa Malaysia Securities Berhad Main Market Listing Requirements ( Listing Requirements ), the Malaysian Code on Corporate Governance 2012 ( the Code ) and all other statutory requirements. The following paragraphs describe the extent to which the principles and recommendations as outlined in the Code were applied throughout the financial year ended 30 th June. This statement is made in accordance with a resolution of the Board of Directors dated 30 th September. 1. ESTABLISHED CLEAR ROLES AND RESPONSIBILITIES Principal Roles The Board is responsible for the corporate governance practices of the Group. It guides and monitors the affairs of the Group on behalf of the shareholders and retains full and effective control over the Group. The key responsibilities include the primary responsibilities recommended by the Code. These cover a review of the strategic direction for the Group, setting out short term and long term plans, overseeing the business operations of the Group, and evaluating whether these are being properly and effectively managed. Board Composition and Balance The Board currently has six (6) members, comprising four (4) Independent Directors, one (1) Non-Independent Non- Executive Director and one (1) Executive Director. This complies with the Listing Requirements of Bursa Malaysia Securities Berhad that one third of its Board consists of Independent Directors. The presence of four (4) Independent Directors fulfills an important role in corporate accountability. The role of the Independent Directors is particularly important as they provide independent and unbiased views, advice and judgment. The Board comprises a mixture of businessmen and professionals. The current composition of the Board brings the required mix of skills and experience required for the Board to function effectively. A brief write-up of the background of the Board members as at the date of this statement is set out in the Directors profile section of this Annual Report. Roles and Responsibilities The roles of the Chairman and the Group Chief Executive are combined and are currently held by Datuk Dr. Foong Weng Sum due to his invaluable experience and knowledge of the Group businesses. The Board is mindful of the combined roles which is not in line with the recommendation of the Code but is of the view that there are a majority of Independent Directors who are professionals of credibility and repute who demonstrate independence of judgment and objectivity in the Board s deliberations and provide the necessary check and balance. The Board had delegated the management of the Group to the Group Chief Executive and his management team. The Group Chief Executive is responsible for implementing the policies and decisions of the Board, overseeing the day to day operations as well as coordinating the development and implementation of business and corporate strategies. The Non-Executive Directors contribute significantly in areas such as policy and strategy, performance monitoring, allocation of resources as well as improving governance and controls. The Board of Directors regularly review the strategic direction of the Company and the progress of the Group s operations taking into account the changes in business environment and risk factors. 18 Annual Report

20 CORPORATE GOVERNANCE STATEMENT Board Charter and Code of Ethics The Board has adopted a Board Charter which sets out the role, functions, composition, operations and processes of the Board. The Charter provides guidance to the Board in relation to the Board s role, duties and responsibilities and authority. The Directors have also approved a Code of Conduct for Directors and employees which governs the standards of ethics and good conduct expected of Directors and employees. The Code of Conduct includes principles relating to fair dealings, confidentiality of information, conflict of interest, compliance with laws and regulations and sexual harassment. In addition, the Group s Whistle-Blowing Policy and Procedures provide an avenue for stakeholders to report concerns about malpractices, unethical behaviour, misconduct or failure to comply with regulatory requirements without fear or reprisal. The Board Charter and the Code of Ethics are posted in our website at www. hexza.com.my Supply of Information The Board has unrestricted access to timely and accurate information, necessary in the furtherance of their duties. The Chairman ensures that all relevant issues requiring the Board s deliberation and approval are on the agenda and senior management is invited to the Board meetings to present the relevant issues. The Agenda and a full set of Board papers are distributed at least three (3) days prior to the Board meeting to allow Directors sufficient time to review the Board papers for effective deliberation at the meeting proper. All proceedings of Board meetings are minuted and signed by the Chairman. All Directors have access to the advice and services of the Company Secretary and senior management in carrying out their duties. There is a formal procedure sanctioned by the Board for Directors, whether as a full Board or in their individual capacity, to take independent professional advice at the Group s expense, where necessary in furtherance of their duties. Appointment to the Board The Board has established a Nominating Committee, consisting of three (3) Non-Executive Directors. The Committee is responsible for the appointment of new Directors to the Board. The Committee reviews the required mix of skills and experience of the Directors of the Board, and determines the appropriate Board balance and number of Non- Executive Directors. The Committee has established the procedures and processes towards an annual assessment of the effectiveness of the Board as a whole and the contribution of each individual Director. The Board is supportive of gender diversity in the boardroom as recommended by the Code; the Board will ensure that gender diversity will be taken into consideration in nominating and selecting new Directors for appointment on the Board. Corporate Social Responsibility (CSR) The Board of Directors is aware of its corporate social responsibility commitments to its various stakeholders and endeavors to operate ethically, paying attention to environmental, social and governance aspects of business. s mission is to enhance value for all stakeholders whilst taking into consideration our continued social obligations. is mindful of its social responsibilities and will continue to support its CSR activities. Annual Report 19

21 CORPORATE GOVERNANCE STATEMENT (continued) 2. STRENGTHEN COMPOSITION The Company strives to have a balanced Board comprising members with suitable qualifications, skills, expertise and exposures. Board Committees The Board has established the following Committees to assist the Board to discharge its fiduciary duties: (a) Audit Committee The Audit Committee comprises three (3) Independent Directors and one (1) Non-Independent Non- Executive Director. A full report of the Audit Committee with details of its membership, terms of reference and a summary of the activities during the financial year are set out in the Audit Committee Report of this annual report. (b) Nominating Committee The membership of the Nominating Committee comprises exclusively Non-Executive Directors as follows: 1. Dato Richard Ong Guan Seng (Independent Non-Executive Director) 2. Mr. Leong Keng Yuen (Independent Non-Executive Director) 3. Dr. Foong Weng Cheong (Non-Independent Non-Executive Director) The role of the Nominating Committee, set out in its terms of reference, includes among others, the following: (i) To identify, assess, consider and recommend suitable candidates for directorship. (ii) To determine the appropriate Board balance and number of Non-Executive Directors. (iii) To review the required mix of skills, experience and other qualities, including the contributions each of the Directors bring to the Board. (iv) To assess annually the effectiveness of the Board as a whole, including its size, and composition and the Committees of the Board. (v) To review the training needs of the Directors. The Nominating Committee had two (2) meetings in the financial year under review and all the members attended the meetings. The Nominating Committee carried out the following activities during the financial year ended 30 th June : (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) Revised the Terms of Reference of the Committee to include its responsibilities under the Code. Revised the evaluation forms which include the criteria used in the annual evaluation of individual Directors, the Board and the various Committees of the Board. Reviewed and assessed the Board balance and composition of the Directors, the Directors contribution and the effectiveness of the Board as a whole. Reviewed succession planning of the Chief Executive Officer and senior executives. Reviewed the training attended by the Directors. Reviewed the re-election of Directors retiring at the next Annual General Meeting of the Company. Assessed the independence of the Independent Directors. Assessed, justified and made recommendation to the Board for the retention of Independent Directors who have exceeded a cumulative term of nine (9) years. 20 Annual Report

22 CORPORATE GOVERNANCE STATEMENT (c) Remuneration Committee The Remuneration Committee comprises a majority of Non-Executive Directors as follows: 1. Mr. Leong Keng Yuen (Independent Non-Executive Director) 2. Datuk Dr. Foong Weng Sum (Executive Director) 3. Dato Richard Ong Guan Seng (Independent Non-Executive Director) 4. Dr. Foong Weng Cheong (Non-Independent Non-Executive Director) The Remuneration Committee is responsible for recommending the remuneration package for all Directors. The individual Directors play no part in deciding their own remuneration. The policy practised on Directors remuneration by the Remuneration Committee is to provide the remuneration packages according to the skills, level of responsibilities, experience and performance of the Directors in order to attract, retain and motivate Directors of the quality required to lead and guide the business of the Company. The remuneration of the Non-Executive Directors is determined by the Board as a whole. In addition, Non- Executive Directors are paid a meeting allowance for each meeting attended. The Remuneration Committee had one (1) meeting during the financial year under review and all the committee members attended the meeting. Directors Remuneration The details of the Directors remuneration (including benefits-in-kind) from the Group for the financial year ended 30 th June are as follows: 000 Salary Fees Bonus Other Emoluments Benefitsin-kind Total Executive Director Datuk Dr. Foong Weng Sum ,123 Non-Executive Directors Dr. Foong Weng Cheong Dato Richard Ong Guan Seng Mr. Leong Keng Yuen Tuan Haji Mohd Mohd Jalil Bin Sany Mr. Ooi Ying Hong Total ,478 The number of Directors whose remuneration (including benefits-in-kind) falls into the following bands is as follows: Band Executive Director Non-Executive Directors 50,000 to 100, ,100,001 to 1,150, The fees payable to the Directors by the Company will be recommended by the Board for approval by shareholders at the forthcoming Annual General Meeting scheduled to be held on 22 nd November. Currently, there is no contract of service between any Director and the Company or its subsidiaries. Annual Report 21