WATTA ANNUAL REPORT 2012

Transcription

1 WATTA Notice of Eighteenth Annual General Meeting Statement Accompanying Notice of Annual General Meeting Corporate Information Chairman s Letter to Shareholders Profile of The Board of Directors Financial Highlights & Financial Indicators Corporate Governance Statement Additional Compliance Information Statement on Internal Control Audit Committee Report Group Structure Activities of Corporate Social Responsibilities Reports and Financial Statements List of Properties Analysis of Shareholdings Appendix I Form of Proxy

2 NOTICE OF EIGHTEENTH ANNUAL GENERAL MEETING (AGM) NOTICE IS HEREBY GIVEN THAT the Eighteenth Annual General Meeting of the Company will be held at Alhambra III & IV, Mezzanine Floor, Melia Hotel Kuala Lumpur, 16 Jalan Imbi, Kuala Lumpur on Friday, 29 March 2013 at 9.00 a.m. or at any adjournment thereof to transact the following business:- AGENDA ORDINARY BUSINESS 1. To receive the Audited Financial Statements for the financial year ended 30 September and the Reports of the Directors and Auditors thereon. 2. To re-elect the following Directors who retire by rotation pursuant to Article 106 of the Company s Articles of Association:- 2.1 Lee Foo San Resolution Teoh Lian Tin Resolution 2 3. To approve the payment of Directors fees of 126,000 in respect of the financial year ended 30 September 4. To re-appoint Messrs UHY as the Company s Auditors and to authorize the Directors to fix their remuneration. Resolution 3 Resolution 4 SPECIAL BUSINESS To consider and if thought fit, to pass, with or without modifications, the following Ordinary and Special Resolutions:- 5. ORDINARY RESOLUTION RETENTION OF MR GAN LENG SWEE AS INDEPENDENT DIRECTOR Resolution 5 THAT in accordance with the Malaysian Code on Corporate Governance ( MCCG ), Mr Gan Leng Swee be and is hereby retained as Independent Non-Executive Director of the Company and to hold office until the conclusion of the next Annual General Meeting. 6 ORDINARY RESOLUTION RETENTION OF TUAN HJ AHMAD BIN DARUS AS INDEPENDENT DIRECTOR Resolution 6 THAT in accordance with the MCCG, Tuan Hj Ahmad Bin Darus be and is hereby retained as Independent Non-Executive Director of the Company and to hold office until the conclusion of the next Annual General Meeting. 7 ORDINARY RESOLUTION AUTHORITY FOR DIRECTORS TO ISSUE SHARES THAT pursuant to Section 132D of the Companies Act, 1965, and subject to the Main Market Listing Requirements ( Listing Requirements ) of Bursa Malaysia Securities Berhad ( Bursa Securities ) and the approvals of the relevant governmental and/or regulatory authorities (if any), the Directors be and are hereby empowered to issue new shares in the Company at any time, to such person or persons, 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 ten per cent (10%) of the nominal value of the total issued and paid-up share capital of the Company at the time of issue AND THAT the Directors be and are also empowered to obtain the approval from Bursa Securities for the listing of and quotation for the additional shares so issued AND THAT such authority shall continue to be in force until the conclusion of the next Annual General Meeting ( AGM ) of the Company. 8 ORDINARY RESOLUTION PROPOSED RENEWAL OF SHAREHOLDER MANDATE FOR RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE ( PROPOSED RRPT MANDATE ) Resolution 7 Resolution 8 THAT subject always to the provisions of the Listing Requirements of Bursa Securities, approval be and is hereby given to the Company and its subsidiaries to enter into Recurrent Related Party Transactions of a revenue or trading nature as stated in Section 2.5 of the Circular to Shareholders dated 6 March 2013 ( Circular ) with the specified classes of related parties mentioned therein which are necessary for the Group s day-to-day operations and are carried out in the ordinary course of business and are on normal commercial terms which are not more favourable to the related parties than those generally available to the public and are not detrimental to the minority shareholders of the Company. 2

3 NOTICE OF EIGHTEENTH ANNUAL GENERAL MEETING THAT the approval shall continue to be in force until:- (i) the conclusion of the next AGM of the Company following the AGM at which such mandate was passed, at which time it will lapse, unless by a resolution passed at the AGM whereby the authority is renewed; (ii) the expiration of the period within which the next AGM of the Company is required to be held pursuant to Section 143(1) of the Companies Act, 1965 ( the Act ) (but must not extend to such extension as may be allowed pursuant to Section 143(2) of the Act); or (iii) revoked or varied by resolution passed by the shareholders in general meeting, whichever is earlier. AND THAT the Directors of the Company be and are hereby authorised to complete and do all such acts and things (including executing all such documents as may be required) as they may consider expedient or necessary or in the interests of the Company to give effect to the Proposed RRPT Mandate described in the Circular. 9 SPECIAL RESOLUTION PROPOSED AMENDMENTS TO THE COMPANY S ARTICLES OF ASSOCIATION THAT the amendments to the Articles of Association of the Company, more particularly set out in Appendix I attached to the Annual Report, be and is hereby approved. 10 To transact any other business of which due notice shall have been given in accordance with the Act and the Company s Articles of Association. Resolution 9 By Order of the Board WATTA HOLDING BERHAD YEOH CHONG KEAT (MIA 2736) LIM FEI CHIA (MAICSA ) Company Secretaries Kuala Lumpur 6 March 2013 Notes: 1. In respect of deposited securities, only members whose names appear in the Record of Depositors on 25 March 2013 shall be eligible to attend, speak and vote at this meeting. 2. A member entitled to attend and vote at the meeting is entitled to appoint a proxy or more (subject to a maximum of two (2) proxies) to attend and vote in his stead. A proxy may but need not be a member of the Company. The provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company. 3. Where a member appoints more than one (1) proxy, he shall specify the proportions of his shareholdings to be represented by each proxy. 4. Where a member of the Company is an authorised nominee, he may appoint at least one (1) proxy in respect of each securities account he holds with ordinary shares of the Company standing to the credit of the said securities account. 5. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one (1) securities account ( Omnibus Account ), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each Omnibus Account it holds. 6. The instrument appointing a proxy shall be in writing under the hand of the appointer or of his attorney duly authorised in writing or, if the appointer is a corporation, either under its common seal or under the hand of an officer or attorney duly authorised. 7. The original instrument appointing a proxy and the power of attorney or other authority (if any) under which it is signed or a notarially certified or office copy of such power or authority shall be deposited at the Registered Office of the Company at Suite 11.1A, Level 11, Menara Weld, 76 Jalan Raja Chulan, Kuala Lumpur not less than forty-eight (48) hours before the time set for holding this meeting or at any adjournment thereof. 3

4 NOTICE OF EIGHTEENTH ANNUAL GENERAL MEETING Explanatory Notes on Special Business: 1. Resolution 5 Mr Gan Leng Swee was appointed as Independent Non-Executive Director of the Company on 16 October 1998 and has reached the nine (9) years term limit prescribed by the MCCG. In accordance with the MCCG, the Board of Directors of the Company, after having assessed the independence of Mr Gan, considers him to be independent based on amongst others, the following justifications and recommends that Mr Gan be retained as Independent Non-Executive Director of the Company:- i. He has confirmed and declared that he is an Independent Director as defined under Paragraph 1.01 of the Listing Requirements of Bursa Securities; ii. He does not have any conflict of interest with the Company and has not been entering/is not expected to enter into contract(s) especially material contract(s) with the Company and/or its subsidiary companies; iii. He is currently not sitting on the board of any other public and/or private companies having the same nature of business as that of the Company and its subsidiary companies; and iv. The Board is of the opinion that Mr. Gan Leng Swee is an important Independent Non-Executive Director of the Board in view of his many years on the Board with incumbent knowledge of the Company and the Group s activities and corporate history and has provided invaluable contributions to the Board in his role as an Independent Non-Executive Director. 2. Resolution 6 Tuan Hj Ahmad Bin Darus was appointed as Independent Non-Executive Director of the Company on 16 September 2004 and will reach the nine (9) years term limit prescribed by the MCCG prior to the convening of the next AGM of the Company in In accordance with the MCCG, the Board of Directors of the Company, after having assessed the independence of Tuan Hj Ahmad, considers him to be independent based on amongst others, the following justifications and recommends that Tuan Hj Ahmad be retained as Independent Non-Executive Director of the Company:- i. He has confirmed and declared that he is an Independent Director as defined under Paragraph 1.01 of the Listing Requirements of Bursa Securities; ii. He does not have any conflict of interest with the Company and has not been entering/is not expected to enter into contract(s) especially material contract(s) with the Company and/or its subsidiary companies; iii. He is currently not sitting on the board of any other public and/or private companies having the same nature of business as that of the Company and its subsidiary companies; and iv. The Board is of the opinion that Tuan Hj Ahmad is an important Independent Non-Executive Director of the Board in view of his many years on the Board with incumbent knowledge of the Company and the Group s activities and corporate history and has provided invaluable contributions to the Board in his role as an Independent Non-Executive Director. 3. Resolution 7 This proposed resolution, if passed, will renew the authority given to the Directors of the Company to issue and allot new shares in the Company at any time, to such person or persons, upon such terms and conditions and for such purposes as the Directors may, in their absolute discretion, deem fit ( General Mandate ), provided that the number of shares issued pursuant to this General Mandate, when aggregated with the nominal value of any such shares issued during the preceding twelve (12) months, does not exceed 10% of the nominal value of the total issued share capital of the Company at the time of issue. This renewed General Mandate, unless revoked or varied at a general meeting, will expire at the conclusion of the next AGM of the Company. The General Mandate approved in the preceding year which was not exercised by the Company during the year, will expire at the forthcoming Eighteenth AGM of the Company. With this renewed General Mandate, the Company will be able to raise funds expeditiously for the purpose of funding future investment, working capital and/or acquisition(s) without having to convene a general meeting to seek shareholders approval when such opportunities or needs arises. 4. Resolution 8 This proposed resolution, if passed, will authorise the Company and/or its subsidiaries to enter into recurrent related party transactions of a revenue or trading nature, particulars of which are as set out in the Circular to Shareholders of the Company dated 6 March 2013 despatched together with the Annual Report. This authority, unless revoked or varied by the Company in a general meeting, will expire at the next AGM of the Company. 5. Resolution 9 This proposed resolution, if passed, will streamline the Company s Articles of Association with the provisions of the Act, the Listing Requirements of Bursa Securities as well as for housekeeping purpose. Further information on the proposed amendments to the Company s Articles of Association is set out in Appendix I attached to the Annual Report. 4

5 STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING 1. Directors standing for re-election at the Eighteenth Annual General Meeting of the Company The Directors retiring pursuant to Article 106 of the Company s Articles of Association and seeking re-election are as follows:- (a) Lee Foo San; and (b) Teoh Lian Tin. The details of the abovenamed Directors standing for re-election are set out on pages 9 to 11 of this Annual Report while their securities holdings in the Company are set out on page 65 of this Annual Report. 5

6 BOARD OF DIRECTORS: 1. Lee Foo San (Group Executive Chairman) 2. Hj Ariffin Bin Abdul Aziz (Group Executive Director) 3. Teoh Lian Tin (Executive Director) 4. Gan Leng Swee (Senior Independent Non-Executive Director) 5. Hj Ahmad Bin Darus (Independent Non-Executive Director) 6. Ahmad Bin Khalid (Non-Independent Non-Executive Director) 7. Lee Tak Wing (Independent Non-Executive Director) COMPANY SECRETARIES: Yeoh Chong Keat (MIA 2736) Lim Fei Chia (MAICSA ) AUDITORS: UHY (AF 1411) REGISTERED OFFICE: Suite 11.1A, Level 11, Menara Weld 76 Jalan Raja Chulan Kuala Lumpur Wilayah Persekutuan Tel: Fax: PRINCIPAL BANKERS: AmBank (M) Berhad Hong Leong Bank Berhad United Overseas Bank (M) Berhad CORPORATE INFOATION SHARE REGISTRAR: Bina Management (M) Sdn Bhd Lot 10, The Highway Centre Jalan 51/205, Petaling Jaya Selangor Darul Ehsan Tel: Fax: STOCK EXCHANGE LISTING: Main Market of Bursa Malaysia Securities Berhad 6

7 CHAIAN S LETTER TO SHAREHOLDERS On behalf of the Board of Directors of Watta Holding Berhad ( WHB ), I am pleased to present the Annual Report and Financial Statements of Watta Group for the financial year ended 30 September. FINANCIAL PERFOANCE The performance of the group improved for the financial year ended 30 September with the achievement of Profit net of tax amounting 2,992,646 compared to 652,444 for the year ended 30 September. The improved performance were mainly due to the revaluation surplus arising from the revaluation of our subsidiary investment properties. The investment properties were previously classified as property, plant and equipment and the revaluation was performed upon the transfer of certain properties to investment properties. Net revaluation surplus amounted to 7,568,535. Resulting from the revaluation surplus our deferred taxation increased by 4,172,108 from 971,876 to 5,143,984 for financial year ended 30 September. Profits were achieved on a 15% drop in turnover amounting 24,362,630 compared to the previous year and a foreign exchange loss of 243,398 on our US Dollar trade exposures. Total equity increased as at 30 September to 56,868,551 from 46,307,370 in the previous year. OPERATIONAL REVIEW In the last financial year we were operating on a continued challenging global environment where growth is uneven and weak constraint by fiscal adjustments, sluggish labour market and impaired financial intermediation. However amid the challenging global economic growth the Malaysian economy recorded a steady growth mainly brought about by strong domestic demand despite of slower external demand. In the third quarter of Malaysia recorded a growth of 5.2%. Although the price of lead has continued to slide further over the last one year, the higher operating expenses of battery manufacturers due to increase in labour and electricity costs has forced the cost of batteries to increase. Battery prices purchased from manufacturers have increased in the financial year between 3% to 5% and this has resulted in a lower profit margin from our sale of batteries. In a stiff competition environment the selling price of batteries were unable to absorb the full increase in the cost of sale. Resulting from the improved profit net of tax earnings per share attributable to equity holders increased to 4.32 sen per share compared to 1.3 sen per share in the previous year. 7

8 PROSPECTS We expect the Malaysian economy to continue its respectable growth despite the world economy facing continued challenging task of addressing the underlying structural weaknesses that impedes economic recovery particularly in the US and European countries. Sale of batteries is expected to grow moderately in view of the large automobile population in the country that requires battery replacement. However we expect sales of new cars to drop slightly as forecasted by the Automobile Association in Malaysia. We expect our distribution of battery business will continue to be profitable in 2013 with our established network and experienced sales team. ACQUISITIONS OF MOBILE TECHNIC SDN BHD ( MT ) AND SEMS SERVICES SDN BHD ( SEMS ) On 20 September, WHB has entered into a Sale and Purchase agreement ( SPA ) with Mr Loo Kwong Yong and Mr Chan Soh Hwa for the proposed acquisition of the entire equity interest in MT and SEMS for a purchase consideration of 8.3 million. As you are aware at the EGM held on 6 December our shareholders have approved the acquisitions of MT and SEMS. We expect the acquisition to be completed by March Upon the completion the Group will be diversified to include the servicing of mobile telecommunication products. CORPORATE SOCIAL RESPONSIBILITY ( CSR ) The Group continues to place importance on CSR. We continuously look into the welfare of our employees to ensure that the working environment is conducive with special attention to their health and safety. The Watta Group is committed to be a good corporate citizen and we will continue with our activities to assist the less fortunate. APPRECIATION On behalf of the Board, I wish to place on record my sincere appreciations to our customers, financial institutions, business associates for their continuous support and good relationships with the Group. On a similar note, I wish to extend my appreciation to all our shareholders for their trust and confidence place upon the Board to lead the Group. Lastly I would like to thank my fellow board members for their invaluable advice, thoughts and experience in steering the Group and my credits to the management and staff of the Group for their effort and commitment in achieving the group results. Lee Foo San Group Executive Chairman 16 January 2013 CHAIAN S LETTER TO SHAREHOLDERS 8

9 PROFILE OF THE BOARD OF DIRECTORS LEE FOO SAN Lee Foo San, a Malaysian, aged 48, is the Group Executive Chairman and Chief Executive Officer of Watta Holding Berhad. He was appointed to the Board as an Executive Director on 21 May 1998 and was subsequently appointed as the Group Executive Chairman on 16 October He is a member of the Risk Assessment/Management Committee and Remuneration Committee. Lee Foo San is a self-made entrepreneur who has ventured into the business world since In 1998, he ventured into the automotive battery business. Over the years, he has been involved in the telecommunication and travel business and has gained vast exposure in the said fields. Lee Foo San also sits on the Board of all the Company s subsidiary companies and several other private limited companies. He does not have any other directorships in other public companies. Lee Foo San is the spouse of Madam Teoh Lian Tin who is an Executive Director of the Company. Lee Foo San is a substantial shareholder of the Company with direct shareholding of 27,707,730 ordinary shares of 0.50 each. He attended all the six (6) Board of Directors Meetings of the Company held during the financial year ended 30 September. Hj Ariffin Bin Abdul Aziz, a Malaysian, aged 59, is the Group Executive Director of Watta Holding Berhad. He was appointed to the Board on 16 October He is a member of Nomination Committee. He holds a Bachelor of Economics Degree with honours from University of Malaya in 1977 and a Diploma in Marketing. HJ ARIFFIN BIN ABDUL AZIZ Hj Ariffin Bin Abdul Aziz was formerly the General Manager of the banking division of AmInvestment Bank Berhad and the Founder Member and Vice President of the Association of Islamic Banking Malaysia. Apart from the banking industry, his experience covers a wide variety of industries including property development and manufacturing. Prior to joining the Watta Group he was advisor of Islamic Banking for HSBC Malaysia. Hj Ariffin Bin Abdul Aziz sits on the Board of all the Company s subsidiary companies. He does not have any other directorships in other public companies. Hj Ariffin Bin Abdul Aziz attended five (5) Board of Directors Meetings of the Company held during the financial year ended 30 September. 9

10 TEOH LIAN TIN Teoh Lian Tin, a Malaysian, aged 45, is an Executive Director of Watta Holding Berhad. She was appointed to the Board on 21 May She currently holds the position of Group Human Resource and Administration Director. Teoh Lian Tin also sits on the Board of all the Company s subsidiary companies and several other private limited companies. She does not have any other directorships in other public companies. Teoh Lian Tin is the spouse of Mr Lee Foo San, the Group Executive Chairman and a substantial shareholder of the Company. Teoh Lian Tin attended all the six (6) Board of Directors Meetings of the Company held during the financial year ended 30 September. Gan Leng Swee, a Malaysian, aged 62, is a Senior Independent Non-Executive Director of Watta Holding Berhad. He was appointed to the Board on 16 October He is the Chairman of the Audit Committee and Remuneration Committee and a member of the Risk Assessment/ Management Committee and Nomination Committee. GAN LENG SWEE Gan Leng Swee holds a Bachelor of Economics from University of Malaya in He began his career with Citibank in 1974 and progressed to the position of Assistant Vice President for Institutional Banking Group. From 1984 to 1986, he was the Asean Representative for Dow MBF Ltd. Hong Kong and concurrently General Manager of MBF Leasing Sdn Bhd. Prior to joining Overseas Union Bank, Singapore in 1987 as the head of the Credit Review Unit (Audit & Inspection), he was a Senior Credit Manager of Oriental Bank Berhad. From 1990 to 1991, he was the Dealer s Representative (Institutional Sales) with G.K. Goh (Stockbrokers) Pte. Ltd. He formed his private management consultancy practice named Citation Corporate Concepts Pte. Ltd. Singapore from 1991 till On a contract basis from November 1998 to November 1999, he was the Deputy President/Chief Operating Officer for Keppel Bank Phillipines. Gan Leng Swee does not have any other directorships in other public companies. Gan Leng Swee has a direct shareholding of 764,058 ordinary shares of 0.50 each in the Company. He attended all the six (6) Board of Directors Meetings of the Company held during the financial year ended 30 September. HJ AHMAD BIN DARUS Hj Ahmad Bin Darus, a Malaysian, aged 60, is an Independent Non-Executive Director of Watta Holding Berhad. He was appointed to the Board on 16 September He is the Chairman of the Risk Assessment/Management Committee and Nomination Committee and member of the Audit Committee and Remuneration Committee. Prior to his appointment as Director of WATTA, he had more than 10 years of working experience in the management of the financial affairs of corporations which he held the positions as Chief Executive Officer (CEO) and Managing Director. He was the CEO of Pernec Telecom Sdn. Bhd. in 1991 and the Managing Director of Alcatel Malaysia from 1994 to At both Pernec Telecom and Alcatel Malaysia, he was primarily responsible for the companies financial management including budgeting, financial planning, company s audit, tax planning, cash flow management, risks management and credit management. He retired from Alcatel Malaysia in 2002 to venture into his own business. Hj Ahmad Bin Darus does not have any other directorships in other public companies. Hj Ahmad Bin Darus attended all the six (6) Board of Directors Meetings of the Company held during the financial year ended 30 September. 10

11 AHMAD BIN KHALID Ahmad Bin Khalid, a Malaysian, aged 62, is a Non-Independent Non-Executive Director of Watta Holding Berhad. He was appointed to the Board on 14 February. Ahmad Bin Khalid is a graduate in Accountancy from Universiti Teknologi Mara in He started his career in banking and subsequently moved to telecommunication industry. He has attended numerous professional courses and seminars both abroad and locally. Ahmad Bin Khalid has held various senior management position in both banking and telecommunication industries for the past thirty (30) years. Ahmad Bin Khalid currently sits on the Board of Formis Resources Berhad Group and he does not have any other directorships in other public companies. He attended five (5) Board of Directors Meetings of the Company held during the financial year ended 30 September. Lee Tak Wing, a Malaysian, aged 58, is an Independent Non-Executive Director of Watta Holding Berhad. He was appointed to the Board and as a member of the Audit Committee on 14 October. LEE TAK WING Lee Tak Wing holds a Diploma in Accounting and Business Studies from Goons College in 1974 and Diploma in Strategic Marketing Management from Singapore Institute of Management in He attended Wharton School of Business US Executive Program in Hong Kong in He had his first career in the banking industry where he spent 8 years in UMBC Bhd. He then moved into commercial sectors where he held various senior positions and roles. In 1990, he joined Nokia Mobile in Singapore as Regional Manager responsible for Hong Kong, Taiwan and Philippines markets. He was relocated to Hong Kong in 1991 and promoted to Sales General Manager responsible for China market. In 1996, he was relocated back to Malaysia and was promoted as Country Manager. He was appointed as Managing Director for Nokia Malaysia in In 2006, he ventures into consultancy services. Lee Tak Wing does not have any other directorships in other public companies. He attended five (5) Board of Directors Meetings of the Company held during the financial year ended 30 September. NOTES:- Save as abovementioned, none of the Directors have :- (i) any family relationship with any Director and/or major shareholder of the Company; (ii) any conflict of interest with the Company; and (iii) convicted any offences within the past ten (10) years other than traffic offences, if any. 11

12 FINANCIAL HIGHLIGHTS & FINANCIAL INDICATORS Financial Year Ended 30th September Financial Highlights of Income Statement Items () Revenue 28,814,700 21,865,490 29,886,482 28,771,707 24,362,630 Earnings Before Interest, Tax, Depreciation And Amortisation (1,459,153) 1,042,567 86,022 1,594,814 3,693,440 Profit Before Tax (2,325,962) 511,061 (413,134) 1,122,966 3,281,265 Profit After Tax (2,631,680) 29,288 (777,599) 652,444 2,992,646 Net Profit Attributable to Equity Holders (3,063,641) 193, ,145 1,098,130 11,211,214 Financial Highlights of Financial Position Items () Total Assets 51,843,500 60,102,274 55,277,391 55,829,225 72,074,716 Total Borrowings 783,000 3,055,000 3,495,000 3,993,000 6,157,000 Shareholders /equity 44,619,191 44,812,229 44,989,374 46,087,504 57,308,718 Financial Indicators Return Of Equity (0.07) Return on Total Assets (0.06) Gearing Ratio Interest Cover (6.56) 5.26 (2.03) Earnings Per Share (sen) (3.63) Net Asset Per Share () Gross Dividend Per Share NIL NIL NIL NIL NIL Price Earnings Ratio NA Gross Dividend Yield Per Share NA NA NA NA NA Share Price as at Financial Year End

13 CORPORATE GOVERNANCE STATEMENT The Board of Directors of Watta Holding Berhad takes cognisance of the Malaysian Code of Corporate Governance ( MCCG ) issued by the Securities Commission Malaysia (SC) and will moving towards adopting the MCCG. The MCCG will supersede the Malaysian Code on Corporate Governance [Revised 2007] ( the Code ). Prior to transiting to the principles and recommendations of MCCG (where appropriate), the Board of Directors of Watta Holding Berhad is committed to ensuring that the Principles and Best Practices of the Code are observed and practised as a fundamental part of discharging its responsibilities to protect and enhance shareholders value and financial performance of the Group. The Board is pleased to present the following report on the application of principles and compliance with best practices as set out in the Code during the financial year ended 30 September. A. BOARD OF DIRECTORS i. The Board The Board currently comprises three (3) Executive Directors (including the Chairman), three (3) Independent Non-Executive Directors and one (1) Non-Independent Non-Executive Director. The composition of the Board complies with Paragraph 15.02(1) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad. The Board is therefore of the opinion that the interests of shareholders of the Company are fairly represented through the current composition of the Board and its size constitutes an effective Board to the Company. The wide spectrum of knowledge, skills and experience of the Board members give added strength to the leadership which is necessary for the effective stewardship of the Group. The position of the Group Executive Chairman and Chief Executive Officer is held by Mr Lee Foo San. This is perceived as appropriate and of benefit to the Group for his extensive knowledge and experience in the Group s business, products, policies and administration matters. He is primarily responsible for the orderly conduct and effectiveness of the Board. Together with the Group Executive Director, Hj Ariffin Bin Abdul Aziz, they are responsible for the day-to-day running of the business operations of the Group, implementation of Board policies and decisions. Apart from the above, the Company practices a clear demarcation of responsibilities and a balance of power and authority. The Board as a whole has always imposed on itself compliance of all appropriate principles and best practices in respect of impartiality, shareholders and stakeholders interest and protection and good corporate governance. ii. Board Responsibilities The Board retains full and effective control of the Group and has established amongst others, corporate objectives and position descriptions including the limits to management s responsibilities, which the Executive Directors are aware and are responsible for meeting. The Board has an understanding of matters reserved to itself for decision, which include the overall Group strategy and direction, acquisition and divestment policy, approval for major capital expenditures, consideration of significant financial matters and review of the financial and operating performance of the Group. iii. Board Balance The three (3) Independent Non-Executive Directors of the Company who form more than one third (1/3) of the Board, provide the Board with a good mix of industry-specific knowledge plus broad business and commercial experience. They provide guidance, unbiased, fully balanced and independent views, advice and judgement to many aspects of the Group s strategy so as to safeguard the interests of minority shareholders and to ensure that the highest standards of conduct and integrity were maintained by the Group. The Board continues with the view that although with the representatives of major shareholders on the Board, its existing three (3) Independent Non-Executive Directors, with their extensive knowledge and experience would be able to represent the investment of the public and the minority shareholders. In the event of any vacancy in the Board of Directors of the Company, resulting in non-compliance with Paragraph (1) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, the Company shall fill the vacancy within three (3) months of that event. iv. Supply of information The Board meets on a quarterly basis with additional meetings held whenever necessary. There were six (6) Board of Directors Meetings held during the financial year ended 30 September and the details of attendance are set out as follows:- 13

14 CORPORATE GOVERNANCE STATEMENT Name of Directors Lee Foo San Hj Ariffin Bin Abdul Aziz Teoh Lian Tin Gan Leng Swee Hj Ahmad Bin Darus Ahmad Bin Khalid Lee Tak Wing Attendance 6 out of 6 meetings 5 out of 6 meetings 6 out of 6 meetings 6 out of 6 meetings 6 out of 6 meetings 5 out of 6 meetings 5 out of 6 meetings The Company Secretary was present at all Board of Directors meetings held during the financial year ended 30 September. Prior to Board meetings, the agenda together with relevant documents and information are distributed to all Directors to ensure that Directors have sufficient time to review and be prepared for discussion. The Group Executive Director and/or other relevant Board members will provide information and clarification on relevant issues and management s recommendations for deliberation and discussion by the Board prior to decision-making. Proceedings of Board meetings are recorded and signed by the Chairman of the meeting. Apart from the above, the Board members are updated on the Company s activities and its operations on a regular basis. All Directors whether as a full board or in their individual capacity have access to all information of the Company on a timely basis in an appropriate form and quality necessary to enable them to discharge their duties and responsibilities. All Directors have access to the advice and services of the Company Secretary and are entitled to seek independent professional advice, whenever necessary, at the expense of the Group. The appointment and removal of Company Secretary are matters for the Board as a whole. v. Directors Training The Directors of the Company had attended the following training:- Name of Directors Date of Training Subject Lee Foo San 28 September Corporate Governance Hj Ariffin Bin Abdul Aziz 28 September Corporate Governance Teoh Lian Tin 28 September Corporate Governance Gan Leng Swee 28 September Corporate Governance Hj Ahmad Bin Darus 28 September Corporate Governance Ahmad Bin Khalid 28 September Corporate Governance Lee Tak Wing 28 September Corporate Governance The Board acknowledges the fact that continuous education is vital for the Board members to gain insight into the state of economy, manufacturing, technological advances in the core business, latest regulatory developments and management strategies. The Board will evaluate their own training needs on a continuous basis and to determine the relevant programmes, seminar and briefings that will enhance their knowledge and enable them to discharge their duties effectively. vi. Appointment to the Board Appointment to the Board is based on the recommendations of the Nomination Committee established by the Board, the activities of which are described below. Nomination Committee In cognizance of the recommendations of the Code, a Nomination Committee has been established by the Board comprising the following members:- 14

15 CORPORATE GOVERNANCE STATEMENT (a) Hj Ahmad Bin Darus Chairman, Independent Non-Executive Director (b) Gan Leng Swee Member, Senior Independent Non-Executive Director (c) Hj Ariffin Bin Abdul Aziz Member, Group Executive Director The functions of the Nomination Committee include:- Assess the effectiveness of the Board and the contribution of each individual Director. Assess the size of the Board and review the mix of skills and experience and other qualities required for the Board to function completely and efficiently. Assess and recommend new nominees for appointment to the Board. Assess and recommend the re-election of Directors retiring in accordance with the Company s Articles of Association. Assess independence of Independent Directors for recommendation to the shareholders for approval at the Company s general meeting in line with the MCCG. The Company Secretary will ensure that all appointments are properly made and that all necessary information is obtained from the Directors. The best practice of the Code recommends the Nomination Committee to compose exclusively of non-executive directors, a majority of whom are independent. The Board is of the opinion that the Group Executive Director should serve as a member on the Committee as he is able to advise on the suitability and capability of the new appointment to the Board due to his extensive knowledge and experience in the Group. The Nomination Committee had met once during the financial year ended 30 September to review the existing Board structure, size and composition, review and assess the effectiveness and performance of the Board and Board Committees, and to deliberate on the proposed re-election of the retiring Directors at the Annual General Meeting of the Company. vii. Re-election In accordance with the provisions of the Company s Articles of Association, all Directors including the managing director are required to submit themselves for re-election once at least in each three (3) years but shall be eligible for re-election. At each Annual General Meeting, one-third (1/3) of the Directors shall retire from office and be eligible for re-election. viii. Board Committees The Board has set up Committees to delegate specific powers and responsibilities, all of which have their own written constitutions and terms of reference. The Chairman of the Committees report to the Board the outcomes and recommendations thereon and minutes of such Committee meetings will be tabled for the Board s notation. The ultimate responsibility for the final decision on all matters of Board Committees lies with the entire Board. The Committees are as follows:- Audit Committee Details of the Audit Committee are set out on pages 22 to 24 of this Annual Report. Nomination Committee Details of the Nomination Committee are set out on pages 14 to 15 of this Annual Report. Remuneration Committee Details of the Remuneration Committee are set out on pages 15 to 16 of this Annual Report. Risk Assessment/Management Committee Details of the Risk Assessment/Management Committee are set out on page 20 of this Annual Report. B. DIRECTORS REMUNERATION The objective of the Group is to ensure that the Group attracts and retains Directors of the calibre needed to run the Group successfully. The Executive Directors are to be appropriately rewarded giving due regard to the corporate and individual performance. In the case of Non-Executive Directors, the level of remuneration reflects the experience and level of responsibilities undertaken by the Non-Executive Directors concerned. The remuneration of the Executive Directors is performance related which are if not higher are compatible to the market rate in order to attract, motivate and retain them to run the Company. The Company also reimburses reasonable expenses incurred by Directors where required, in the course of carrying out their duties as Directors. The determination of remuneration packages of Non-Executive Directors should be a matter of the Board as a whole. Remuneration Committee The Remuneration Committee comprises of three (3) members namely:- 15

16 CORPORATE GOVERNANCE STATEMENT (a) Gan Leng Swee Chairman, Independent Non-Executive Director (b) Hj Ahmad Bin Darus Member, Senior Independent Non-Executive Director (c) Lee Foo San Member, Group Executive Director The Remuneration Committee is authorised by the Board to establish a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual Directors. The Chairman of the Committee may request for a meeting as and when deemed necessary. The remuneration of Directors shall be the ultimate responsibility of the full Board after considering the recommendations of the Remuneration Committee. The functions of the Remuneration Committee include:- Recommend to the Board the framework of executive remuneration and its cost and the remuneration package for each Executive Director, taking into account the performance of the individual, the inflation price index and information from independent sources on the rates of salary for similar jobs in a selected group of comparable companies. Review and recommend the bonus scheme for the executive directors depending on various performance measurements of the Group. Review and recommend other benefits-in-kind for the Executive Directors. Review annually the Executive Directors service contracts, if relevant. The best practice of the Code recommends the Remuneration Committee to compose wholly or mainly of non-executive directors. The Board is of the opinion that the Group Executive Chairman should be entrusted to carry out the duties of the Remuneration Committee in view of his extensive knowledge and experience in the Company s business operations and industry. The Remuneration Committee met once during the financial year ended 30 September to review and consider the annual bonuses and remuneration packages of the Executive Directors. Directors will abstain from discussion and voting on decisions in respect of their own remuneration. The aggregate annual Directors fees are to be approved by shareholders at the Annual General Meeting based on recommendations of the Board. Details of Directors remuneration for the financial year ended 30 September are set out below:- Remuneration Executive Directors () Non-Executive Directors () Total () Directors fees 126,000 72, ,000 Salaries and other emoluments 803, ,830 Benefits-in-kind 44,898-44, Total 974,728 72,000 1,046,728 The number of Directors whose total remuneration for the financial year ended 30 September fall within the respective bands is as follows:- Number of Directors Range of Remuneration Executive Non-Executive 1 to 50, ,001 to 100, ,001 to 150, ,001 to 200, ,001 to 250, ,001 to 300, ,001 to 350, ,001 to 400, Total 3 4

17 CORPORATE GOVERNANCE STATEMENT C. SHAREHOLDERS i. Dialogue between Company and Investors In recognizing the importance of timely dissemination of information to shareholders and other stakeholders, the Board is committed to ensuring that the shareholders and other stakeholders are well informed of major developments of the Company and the information is communicated to them through the following channels:- (a) the Annual Report; (b) the various disclosures and announcements made to Bursa Malaysia Securities Berhad including the quarterly results and annual results. Information relating to the Group is also available via the Company s website at ii. The Annual General Meeting The Company uses the Annual General Meeting as the principal platform for dialogue with shareholders. The Group Executive Chairman and Board members as well as the Auditors of the Company are present to respond to all questions raised by the shareholders at the meeting. Status of all resolutions proposed at the General Meetings will be announced to Bursa Malaysia Securities Berhad at the end of the meeting day. Apart from contacts at General Meetings, currently there is no other formal program or schedule of meetings with investors, shareholders, stakeholders and the public generally. However, the management has the option of calling for meetings with investors/analysts if it deems necessary. Thus far, the management is of the opinion that the existing arrangement has been satisfactory to all parties. The Board had appointed Mr Gan Leng Swee as the Senior Independent Non-Executive Director, to whom any queries and concerns with regards to the Group, may be conveyed via the Company Secretary. D. ACCOUNTABILITY AND AUDIT i. Financial reporting The Directors are responsible to present a true and fair assessment of the Group s position and prospects in the annual reports and quarterly reports. The quarterly financial results were reviewed by the Audit Committee and approved by the Board of Directors prior to the submission to Bursa Malaysia Securities Berhad. ii. Directors Responsibility Statement in respect of the Audited Financial Statements for the financial year ended 30 September The Board is responsible to ensure that the financial statements are properly drawn up in accordance with the provisions of the Companies Act, 1965 and approved accounting standards in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as of financial year ended 30 September and of their financial performance and cash flows for the financial year then ended. The Directors are satisfied that in preparing the financial statements of the Group for the year ended 30 September, the Group has adopted suitable accounting policies and applied them consistently, prudently and reasonably. The Directors also consider that all applicable approved accounting standards have been followed in the preparation of the financial statements, subject to any material departures being disclosed and explained in the notes to the financial statements. The financial statements have been prepared on the going concern basis. The Directors are responsible for ensuring that the Group keeps sufficient accounting records to disclose with reasonable accuracy; the financial position of the Group and which enable them to ensure that the financial statements comply with the Companies Act, iii. Internal Control The Group s Internal Control Statement is set out on pages 20 to 21 of this Annual Report. iv. Relationship with Auditors The Board has established a formal and transparent arrangement for maintaining appropriate relationships with the external auditors in seeking professional advice and ensuring the compliance with the appropriate accounting standards. The Audit Committee met with the external auditors to discuss and review the audit plan, audit findings and the annual financial statements. 17

18 ADDITIONAL COMPLIANCE INFOATION 1. Utilisation of Proceeds There were no proceeds raised from any corporate proposals during the financial year ended 30 September. 2. Options, Warrants or Convertible Securities No options, warrants or convertible securities had been issued in respect of the financial year ended 30 September. 3. Share Buy-Back The Company does not have a share buy-back programme in place. 4. Depository Receipt Programme The Company did not sponsor any Depository Receipt Programme in the financial year ended 30 September. 5. Material Contracts There were no material contracts subsisting at the end of the financial year or entered into since the end of the previous financial year by the Company or its subsidiaries, which involved the interest of the Directors and major shareholders other than contracts entered into in the normal course of business. 6. Imposition of Sanctions and / or Penalties During the financial year under review, there were no sanctions and/or penalties imposed on the Company and/or its subsidiary companies, directors or management by the relevant regulatory bodies. 7. Non-Audit Fees The amount of non-audit fees paid and payable to the external auditors, Messrs UHY by the Group for the financial year ended 30 September amounted to 3, Variation in Results There was no significant variance between the Group s audited results for the financial year ended 30 September and the unaudited results previously announced. 9. Profit Guarantee The Company is not subject to any profit guarantee. 10. Recurrent Related Party Transactions of a Revenue or Trading Nature ( RRPT ) The breakdown of the aggregate value of the RRPT conducted pursuant to the shareholders mandate obtained at the Annual General Meeting held on 30 March is as follows:- 18

19 ADDITIONAL COMPLIANCE INFOATION Type of the RRPT Companies in the Watta Group involved in the RRPT Purchases of Watta Battery airline tickets, tour Industries Sdn Bhd arrangements and ( Watta Battery ) accommodation bookings Watta Energy (M) Sdn Bhd ( Watta Energy ) Syarikat Perniagaan Leko Sdn Bhd ( Leko ) Related Parties Z tronic Holidays Sdn Bhd ( Z tronic ) Relationship of the Related Parties with Watta Group Mr Lee Foo San, the Group Executive Chairman and a substantial shareholder of Watta, is a Director and substantial shareholder of Z tronic. Madam Teoh Lian Tin, the Executive Director of Watta, is the spouse of Mr Lee Foo San. Mr Lee Fook Sin is the brother of Mr Lee Foo San. He is also a shareholder of Watta and a Non-Executive Director of both Leko and Watta Battery. Actual aggregate value transacted from 30 March to 6 February 2013 () 132,530 Mr Lee Foo Hock is the brother of Mr Lee Foo San. He is also a Director of Leko, Watta Battery, Watta Energy and Z tronic. En Ahmad Bin Khalid is a Director of Watta. He is also the Director of Zitron and Watta Energy and a substantial shareholder of Z tronic. Ms Lee Li Yen is an Alternate Director to Mr Lee Foo San in Z tronic. She is also the sister of Mr Lee Foo San. Lease of office premises Watta Holdings Berhad ( Watta ) Zitron Enterprise (M) Sdn Bhd ( Zitron ) Mr Lee Foo San, the Group Executive Chairman and a substantial shareholder of Watta, is a Director and substantial shareholder of Zitron. 240,000 Madam Teoh Lian Tin, the Executive Director of Watta, is a Director and substantial shareholder of Zitron. She is the spouse of Mr Lee Foo San. Mr Lee Fook Sin is the brother of Mr Lee Foo San. He is also a shareholder of Watta and a Non-Executive Director of both Leko and Watta Battery. Mr Lee Foo Hock is the brother of Mr Lee Foo San. He is also a Director of Leko, Watta Battery and Watta Energy. En Ahmad Bin Khalid is a Director of Watta. He is also a Director of Zitron and Watta Energy. 19

20 STATEMENT ON INTERNAL CONTROL Pursuant to Paragraph (b) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, the Board of Directors of Watta Holding Berhad is pleased to present the following Statement of Internal Control of the Group for the financial year ended 30 September which has been prepared in accordance with the Statement on Internal Control (Guidance for Directors of Public Listed Companies). Responsibility for Risk and Internal Control The Board of Directors recognizes the importance of a sound internal control system and effective risk management practices to safeguard shareholders investments and the Group s assets. The Board also affirms its overall responsibility for the Group s system of internal control and risk management, and for reviewing the adequacy and integrity of the Group s internal control system. In view of the limitations inherent in any internal control system, it is recognized that such system is designed to manage rather than eliminate risk. Evaluation and implementation of the system can only provide reasonable assurance of the Group achieving its objectives. The system will not provide absolute assurance against any material misstatement or loss. Risk Management Framework In ensuring its ongoing review process for identifying, evaluating and managing the significant risks affecting the Group, the internal control procedures with clear lines of accountability and delegated authority were established through a series of standard operating practice manuals. The Audit Committee and Board of Directors had strengthened their efforts to improve and monitor the effectiveness and adequacy of internal control and risk management implementation with regular review and updates through the Risk Assessment / Management Committee ( RAMC ). The RAMC comprises of three (3) members namely:- (a) Hj Ahmad Bin Darus Chairman, Independent Non-Executive Director (b) Gan Leng Swee Member, Senior Independent Non-Executive Director (c) Lee Foo San Member, Group Executive Chairman The functions of RAMC shall include amongst others, the following:- i. Ensuring the process of identifying and documenting principal risks is in place and on an ongoing basis. ii. Ascertaining internal competency levels to manage the identified risks. iii. Ensuring the implementation of appropriate systems and procedures to manage risks and assigning of accountability. iv. Reviewing the adequacy and the integrity of the Group s internal control systems. v. Taking actions to rectify control failures or weaknesses and determine disciplinary actions for non-compliance. The Chairman of the RAMC may request for a meeting as and when deemed necessary to review the risk exposures and control actions and to deal with any other matters within its terms of reference. The Chairman of the Committee will directly report to the Board on a timely basis. During the year, the RAMC has prepared Group risk management reports with recommendations to improve current risk control system to further strengthen the integrity and effectiveness of the internal control mechanism within the Group. Other key elements of internal control Apart from risk management and internal audit, the other key elements of the Group s internal control systems are described below:- i. The battery segment of the Group has set up internal control and operation procedures with clear lines of accountability established through a series of standard operating practice manuals in compliance with the ISO 9001: 2000 requirements. Conformance to the system and procedures is further ensured by periodic internal quality audit and surveillance audit. ii. Clearly defined delegation of responsibilities to the management executive and business segments, including authorization level for all aspects of the business. iii. Regular and comprehensive information provided to Management, covering financial performance as well as key business indicators such as customers satisfaction level, sales analysis and operating cost analysis. These performance reports are benchmarked against the pre-set objectives. iv. Regular visits to business operation units by members of the Board and the Management team. v. Quarterly review of the Group s related party transactions by the Audit Committee and Board of Directors. 20

21 STATEMENT ON INTERNAL CONTROL Internal Audit Function The Group had outsourced its internal audit function to an independent professional consultancy firm who provides the Audit Committee and the Board with the assurance on the adequacy and effectiveness of the internal control system of the Group. The internal audit function, led by the outsourced Internal Auditors, performed reviews on key processes within the Group and assessed the effectiveness and adequacy of the internal control system. The Audit Committee is kept informed of the audit process, from the approved annual audit plan to the audit findings and reporting at the scheduled quarterly meetings, and would thereafter report and make recommendation to the Board of Directors. The Senior Management is responsible for ensuring that corrective actions are taken within the stipulated time frame on the reported weaknesses. The Company has incurred approximately 24, for the internal audit work conducted within the Group for the financial year ended 30 September. Weaknesses in internal controls that result in material losses During the year under review, nothing has come to the attention of the Board which would result in any material losses, contingencies or uncertainties that would require separate disclosure in this annual report. Nevertheless, the Board and Management will continue to take proactive measures to strengthen the internal control environment within the Group. Review of the Statement by External Auditors The External Auditors have reviewed this Statement on Internal Control for inclusion in this annual report and reported to the Board that nothing has come to their attention that causes them to believe that the statement is inconsistent with their understanding of the process adopted by the Board in reviewing the adequacy and effectiveness of the system of internal controls. 21

22 AUDIT COMMITTEE REPORT MEMBERS 1. Gan Leng Swee Chairman, Senior Independent Non-Executive Director 2. Hj Ahmad Bin Darus Member, Independent Non-Executive Director 3. Lee Tak Wing Member, Independent Non-Executive Director TES OF REFERENCE 1. Constitution The Board of Directors has constituted and established an Audit Committee of the Board to be known as the Audit Committee. 2. Composition (a) The Committee shall be appointed by the Board of Directors from amongst their number and shall consist of not less than three (3) members. (b) All the Audit Committee members must be non-executive directors, with a majority of them being Independent Directors. (c) At least one (1) member of the Committee:- (i) must be a member of the Malaysian Institute of Accountants; or (ii) if he/she is not a member of the Malaysian Institute of Accountants, he/she must have at least three (3) years working experience and:- he/she must have passed the examinations specified in Part I of the 1st Schedule of the Accountants Act, 1967; or he/she must be a member of one of the associations of accountants specified in Part II of the 1st Schedule of the Accountants Act 1967; or fulfils such other requirements as prescribed or approved by the Exchange. (d) No Alternate Director is to be appointed as a member of the Committee. (e) The members of the Committee shall elect a Chairman from among their number who shall be an Independent Director. (f) If a member of the Committee resigns, dies or for any other reason ceases to be a member with the result that the number of members is reduced below three (3), the Board of Directors shall, within three (3) months of that event, appoint such number of new members as may be required to make up the minimum number of three (3) members. (g) The term of office and performance of the Committee and each of its members shall be reviewed by the Board of Directors at least once every three (3) years to determine whether such Committee and its members have carried out their duties in accordance with their terms of reference. 3. Authority (a) The Committee is authorised by the Board of Directors to investigate any matter within its terms of reference and to seek any information it requires from the external auditors and internal auditors as well as any employee and all employees are directed to co-operate with any request made by the Committee. (b) The Committee shall have the resources which are required to perform its duties. (c) The Committee shall have full and unrestricted access to any information pertaining to the Company. (d) The Committee shall have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity. (e) The Committee is authorised to obtain independent professional or other advice if it considers necessary. (f) The Committee shall be able to convene meetings with the external auditors, the internal auditors or both, excluding the attendance of other directors and employees of the Company, whenever deemed necessary, in order to enable the Committee and the external auditors or the internal auditors or both, to discuss problems and reservations and any other matter the external auditors or internal auditors may wish to bring up to the attention of the Committee. 4. Functions and Duties The functions and duties of the Committee shall be:- I. To review the following and report the same to the Board of Directors of the Company:- 22

23 AUDIT COMMITTEE REPORT II. a. with the external auditor, the audit plan; b. with the external auditor, his audit report; c. the assistance given by the employees of the Company to the external auditor; d. the internal audit function:- i. 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; ii. iii. 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; with the external auditors, his evaluation of the system of internal controls; e. To ensure the internal audit function of the Company reports directly to the Committee; f. the quarterly results and year end financial statements, prior to the approval by the Board of Directors, focusing particularly on:- changes in or implementation of major accounting policy changes; significant and unusual events; compliance with accounting standards, regulatory and other legal requirements; significant adjustments arising from the audit; the going concern assumption; and major judgmental areas. g. 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; h. any letter of resignation from the external auditors of the Company; i. whether there is reason (supported by grounds) to believe that the Company s external auditor is not suitable for reappointment; and j. matters arising from the interim and final audit with the external auditor including any report or management letter thereon including management report. To recommend the nomination of a person or persons as external auditors and the audit fee. III. To verify the allocation of options pursuant to a share scheme for employees at the end of each financial year and to prepare a statement verifying such allocation in the annual reports. IV. To carry out such other functions as may be agreed to by the Audit Committee and Board of Directors. 5. Meetings a. Meetings shall be held not less than four (4) times in a financial year. The Chairman of the Audit Committee or the external auditors may request a meeting by notifying the Secretary if they consider it necessary. b. A quorum shall be two (2) members and the majority of members present must be Independent Directors. c. The Financial Controller, the internal auditor and a representative of the external auditors shall normally be entitled to attend any meeting of the Committee. Other Board members and employees may also attend any particular Audit Committee meeting upon the invitation of the Committee. d. The Secretary or such other persons authorised by the Board of Directors shall be the Secretary of the Committee and will prepare and circulate the minutes of the meetings to the Committee members, the rest of the Board of Directors and external auditor. e. All minutes of meetings of the Committee are to be circulated to all members of the Board and the Company Secretary for permanent filing. SUMMARY OF ACTIVITIES A total of six (6) Audit Committee meetings were held during the financial year ended 30 September. Details of attendance are as follows:- Name of Directors Gan Leng Swee Hj Ahmad Bin Darus Lee Tak Wing Company Secretary Attendance 6 out of 6 meetings 6 out of 6 meetings 5 out of 6 meetings 6 out of 6 meetings 23

24 AUDIT COMMITTEE REPORT During the financial year ended 30 September, the Audit Committee in the discharge of its duties and functions carried out the following activities:- 1. Reviewed the unaudited quarterly financial results prior to the Board of Directors approval for submission to Bursa Malaysia Securities Berhad ( Bursa Securities ); 2. Reviewed the annual audited financial statements of the Group with the external auditors prior to the Board of Directors approval for submission to Bursa Securities; 3. Reviewed and discussed with the External Auditors on their audit approach, the areas of audit emphasis, reporting and deliverables, as well as new developments on accounting standards and regulatory requirements; 4. Reviewed the External Auditors audit findings, results and reports; 5. Reviewed the assistance provided by Management to the External Auditors during the course of their audit; 6. Reviewed and discussed the re-appointment of the External Auditors and the audit fees; 7. Reviewed the recurrent related party transactions; 8. Reviewed the internal audit planning memorandum to ensure the adequacy of the scope and resources of the internal audit function; 9. Reviewed the internal audit reports, audit recommendations made and management responses to these recommendations; 10. Reviewed the Audit Committee Report and Statement on Internal Controls for inclusion in the Annual Report; and 11. Reviewed and discussed the risk assessment and management in the Group. INTERNAL AUDIT FUNCTION The Company has outsourced its internal audit function to an independent professional consultancy firm with the aim of providing independent and systematic reviews on the systems of internal control. The Internal Audit function provides an independent and objective feedback to the Audit Committee and the Board on the adequacy, effectiveness and efficiency of the internal control system within the Group. Throughout the financial year, the audit assignments were carried out in accordance with the approved annual internal audit plan. On quarterly basis, the Internal Auditors report to the Audit Committee on their audit findings, their recommendations of the corrective actions to be taken by the management together with the management s responses in relation thereto. Periodically, the Internal Auditors will follow up to determine the extent of their recommendations that have been implemented by the management. During the financial year, there was no material internal control failure that was reported that would have resulted in any significant loss to the Group. The activities carried out on the subsidiaries of the Group namely Watta Battery Industries Sdn Bhd and Syarikat Perniagaan Leko Sdn Bhd by the Internal Auditors during the financial year under review were as follows:- 1. Reviewed and reported on Sales; 2. Follow-up review on Information Technology Management; 3. Reviewed and reported on Claims; 4. Reviewed and reported on Invoicing; and 5. Reviewed and reported on Warehousing. 24

25 GROUP STRUCTURE Watta Holding Berhad ( A) Syarikat Perniagaan Leko Sdn Bhd (72846-A) (100 % owned) Watta Energy (M) Sdn Bhd ( U) (51 % owned) Watta Battery Industries Sdn Bhd (18880-U) (100 % owned) Mega Meranti Sdn Bhd ( A) (100 % owned) CORPORATE OFFICE Watta Holding Berhad ( A) 12th Floor, Menara BGI, Plaza Berjaya, Jalan Imbi, Kuala Lumpur. OPERATIONS ADDRESS Lot 8, Jalan Satu, Kawasan Perusahaan Balakong, Cheras Jaya, Selangor Darul Ehsan. Tel: Fax: Website: marketing@watta.com.my BRANCHES Kelantan Branch Lot P.T. 251 & 258, Seksyen 46, Kampung Chempaka, Jalan Dusun Raja, Kota Bharu, Kelantan. Kuantan Branch B6 & 8, Lorong Padang Lallang 9, Kawasan Perindustrian Padang Lallang, Kuantan, Pahang. Malacca Branch No. 10 & 12, Jalan MJ 46, Taman Merdeka Jaya, Batu Berendam, Melaka. 25

26 ACTIVITIES OF CORPORATE SOCIAL RESPONSIBILITIES As indicated in pages 7 to 8 of the Chairman s Letter to Shareholders, WATTA Group is committed to be good corporate citizen by organising activities to assist the needy. The management and staff had visited Rumah Sayangan situated at Taman Billion, Cheras, Kuala Lumpur on 8 September. The management and staff have provided lunch meals for the children and distributed gifts and presents to them. 26

27 REPORTS AND FINANCIAL STATEMENTS DIRECTORS REPORT 28 STATEMENT BY DIRECTORS & STATUTORY DECLARATION INDEPENDENT AUDITORS REPORT TO THE MEMBERS STATEMENTS OF FINANCIAL POSITION STATEMENTS OF COMPREHENSIVE INCOME STATEMENTS OF CHANGES IN EQUITY 35 STATEMENTS OF CASH FLOWS 36 NOTES TO THE FINANCIAL STATEMENTS SUPPLEMENTARY INFOATION ON THE DISCLOSURE OF REALISED AND UNREALISED PROFITS OR LOSSES FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 SEPTEMBER 27