Contents Notice of Annual General Meeting 2 Statement Accompanying Notice of Annual General Meeting 4 Corporate Information 5 Group Financial Highlights 6 Profile of Directors 7 Chairman's Statement 11 Statement on Corporate Governance 14 Additional Compliance Information 20 Audit Committee Report 21 Statement of Internal Control 26 Annual Report and Financial Statements 27 Statement by Directors 91 Statutory Declaration 91 Analysis of Shareholdings 92 Group Properties 95 Proxy Form 97 1
NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN THAT the 34th Annual General Meeting of the Company will be held at Bunga Melati, 7th Floor, Renaissance Melaka Hotel, Jalan Bendahara, 75000 Melaka on Friday, 25 June 2010 at 10.30 a.m. for the following purposes: 1. To receive and adopt the Financial Statements for the financial year ended 31 January 2010 and the Reports of the Directors and Auditors thereon. 2. To approve the payment of a First and Final Dividend of 10% less 25% income tax for the financial year ended 31 January 2010 as recommended by the Directors. 3. To approve the payment of Directors' fees. 4. To re-elect the following Directors retiring under Article 94 of the Company's Articles of Association: (a) Yeo Kim Soon (b) Sari Bin Idris 5. To consider and if thought fit, pass the following resolution: That Yeo Ah Tee, who retires in accordance with Section 129 of the Companies Act 1965, be and is hereby re-appointed Director of the Company to hold office until the next Annual General Meeting. 6. To consider and if thought fit, pass the following resolution That Khor Kay Cham @ Koh Kay Cham, who retires in accordance with Section 129 of the Companies Act 1965, be and is hereby re-appointed Director of the Company to hold office until the next Annual General Meeting. Resolution 1 Resolution 2 Resolution 3 Resolution 4 Resolution 5 Resolution 6 Resolution 7 7. To re-appoint Messrs T. C. Liew & Co. as Auditors of the Company and to authorise the Directors to fix their remuneration Resolution 8 8. Special Business To consider and if thought fit, pass the following resolution as ordinary resolution: Proposed Renewal of Shareholders' Mandate for Recurrent Related Party Transactions THAT approval be and is hereby given to the Company and/or its subsidiaries to enter into recurrent related party transactions from time to time, which is necessary for its day-to-day operations as set out in section 2.4 of the Circular to Shareholders dated 3 June 2010 which is of a revenue or trading nature and in the ordinary course of business and is on terms not more favourable to the related parties than those generally available to the public and not to the detriment of minority shareholders, subject to compliance with the Listing Requirements of Bursa Malaysia Securities Berhad, Companies Act 1965 ( Act ), the Company's Memorandum and Articles of Association and all other applicable laws, guidelines, rules and regulations. Resolution 9 THAT such authority shall commence upon the passing of this resolution and shall continue to be in force until: 2
(a) (b) (c) the conclusion of the next Annual General Meeting ( AGM ), at which time it will lapse, unless by a resolution passed at the said AGM, such authority is renewed; 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 Act but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Act; or revoked or varied by resolution passed by the shareholders in a General Meeting; whichever is earlier. THAT the Directors of the Company be 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 to give effect to the Mandate. 9. To transact any other ordinary business of which due notice shall have been given. NOTICE OF DIVIDEND ENTITLEMENT NOTICE IS HEREBY GIVEN that the First and Final Dividend of 10% less 25% income tax for the financial year ended 31 January 2010, if approved by the shareholders, will be paid on 11 August 2010 to depositors registered in the Record of Depositors at the close of business on 28 July 2010. A depositor shall qualify for entitlement only in respect of: a) Shares transferred into the Depositors Securities Account before 12.30 p.m. on 28 July 2010 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 FOONG KAI MING Company Secretary Kuala Lumpur 3 June 2010 Notes: 1. A member of the Company entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote on his behalf. A proxy may but need not be a member of the Company. 2. The instrument appointing a proxy must be deposited at the Registered Office of the Company at Suite 729, 7th Floor, Sun Kompleks, Jalan Bukit Bintang, 55100 Kuala Lumpur not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof. 3
Statement Accompanying Notice of Annual General Meeting The Directors retiring at this Annual General Meeting and seeking for re-election are as follows: Article 94 of the Company's Articles of Association: Retirement by Rotation 1) Yeo Kim Soon 2) Sari Bin Idris Section 129 of the Companies Act 1965: Retirement due to attaining 70 years of age 1) Yeo Ah Tee 2) Khor Kay Cham @ Koh Kay Cham Details of the above Directors are set in the Profile of Directors appearing on pages 7 to 10 of this Annual Report. Their securities holdings in the Company and its subsidiaries are set out in the Directors' Shareholdings on page 31 of this Annual Report. 4
Corporate Information BOARD OF DIRECTORS Yeo Ah Tee Executive Chairman Sari Bin Idris Non-Independent Non-Executive Director Yeo Kim Swee Managing Director Khor Kay Cham @ Koh Kay Cham Independent Non-Executive Director Yeo Kim Soon Executive Director Goh Koong Yuen Independent Non-Executive Director Mazlan Bin Mohamad Executive Director COMPANY SECRETARY AUDITORS Foong Kai Ming T. C. Liew & Co. (AF 0047) (MACS 00121) Chartered Accountants 1st Floor, City House 166-1, Jalan Loke Yew 55200 Kuala Lumpur SHARE REGISTRAR REGISTERED OFFICE Bina Management (M) Sdn Bhd Suite 729, 7th Floor Lot 10, The Highway Centre Sun Kompleks Jalan 51/205 Jalan Bukit Bintang 46050 Petaling Jaya 55100 Kuala Lumpur Selangor Darul Ehsan Tel: 03-2142 2618 Tel: 03-7784 3922 Fax: 03-2141 0125 Fax: 03-7784 1988 STOCK EXCHANGE LISTING Main Market Bursa Malaysia Securities Berhad Stock Code: 5886 WEBSITE www.mintye.com 5
Group Financial Highlights 2010 2009 2008 2007 2006 RM 000 RM 000 RM 000 RM 000 RM 000 Turnover 51,212 53,383 52,734 51,424 55,869 Profit From Operating Activities 8,566 6,935 7,616 9,052 7,636 Profit Before Taxation 9,160 6,020 8,893 9,080 7,551 Profit After Taxation And Minority Interests 6,675 1,804 7,221 7,520 6,008 Paid Up Capital 60,800 60,800 60,800 60,800 60,800 Shareholders Fund 102,483 99,456 101,756 98,183 94,310 Earnings Per Share (Sen) 11 3 12 12 10 Dividends Paid Per 6.0 9.0 6.0 6.0 6.0 Share (%) (tax exempt) (less 25% (tax exempt) (tax exempt) (tax exempt) income tax) Net Assets Per Share (RM) 1.69 1.64 1.67 1.61 1.55 6
Profile of Directors Yeo Ah Tee Executive Chairman 82 years of age / Malaysian Yeo Ah Tee is the founder and Executive Chairman of Mintye. He was appointed to the Board of the Company on 23 March 1976. He is a member of the Mintye Board's Remuneration Committee. He has more than 50 years of experience in the sales, financing, spare parts and servicing of the automotive industries. His experience, among other things, also include manufacturing and trading of polyvinyl chloride resin, compound, leather and sheeting; management of oil palm, rubber and cocoa plantations; real estate dealings and property development. Yeo Ah Tee is the father of Yeo Kim Swee and Yeo Kim Soon who are also Directors of the Company. He is deemed to be interested in the shares of Mintye by virtue of his shareholdings in Yatee & Sons Sdn Bhd and Yatee Holdings Sdn Bhd, both are substantial shareholders of Mintye. He does not have any conflict of interest other than those disclosed under the Recurrent Related Party Transactions, which appears on pages 83 and 84 in this Annual Report. He also sits on the Board of Directors of a number of other private limited companies. He attended all the five Board meetings of the Company held during the financial year and has not been convicted for any offences within the past 10 years. Yeo Kim Swee Managing Director 57 years of age / Malaysian Yeo Kim Swee was appointed to the Board of the Company on 23 March 1976 and has since then served as its Managing Director. He oversees the Group's general management as well as overall financial affairs. He graduated from the University of Monash in Australia with a Bachelor of Economics degree. He is also a member of the Malaysian Institute of Management (M.I.M.). He has gained vast experience in business and financial management, having served as Executive Director of several trading, manufacturing and plantation companies, for more than 20 years. Yeo Kim Swee is the son of Yeo Ah Tee and the brother of Yeo Kim Soon who are also Directors of the Company. He is deemed to be interested in the shares of Mintye by virtue of his shareholdings in Yatee & Sons Sdn Bhd and Yatee Holdings Sdn Bhd, both are substantial shareholders of Mintye. He does not have any conflict of interest other than those disclosed under the Recurrent Related Party Transactions, which appears on pages 83 and 84 in this Annual Report. He also sits on the Board of Directors of a number of other private limited companies. He attended all the five Board meetings of the Company held during the financial year and has not been convicted for any offences within the past 10 years. 7
Yeo Kim Soon Non-Independent Executive Director 54 years of age / Malaysian Yeo Kim Soon was appointed to the Board of the Company as Executive Director on 22 January 1979. He is currently in charge of the marketing affairs of the Group. He also oversees the Group's motorcycles' drive chains manufacturing under Eurochain Manufacturer Sdn Bhd. He holds a Bachelor of Economics (Honours) degree from the University of Monash in Australia. He has acquired wide experience and intimate knowledge on both the domestic and overseas market for friction materials. Yeo Kim Soon is the son of Yeo Ah Tee and the brother of Yeo Kim Swee who are also Directors of the Company. He is deemed to be interested in the shares of Mintye by virtue of his shareholdings in Yatee & Sons Sdn Bhd and Yatee Holdings Sdn Bhd, both are substantial shareholders of Mintye. He does not have any conflict of interest other than those disclosed under the Recurrent Related Party Transactions, which appears on pages 83 and 84 in this Annual Report. He also sits on the Board of Directors of a number of other private limited companies. He attended all the five Board meetings of the Company held during the financial year and has not been convicted for any offences within the past 10 years. Mazlan Bin Mohamad Non-Independent Executive Director 59 years of age / Malaysian Mazlan Bin Mohamad was appointed to the Board of the Company on 17 August 1988 as an Executive Director. He holds a Master in Business Administration (MBA) degree from the University of Multimedia, majoring in General Management. He is also a member of the Malaysian Institute of Management (M.I.M) and the Research Institute of Investment Analysts Malaysia (RIIAM). Prior to joining Mintye, he was attached to an established local financial institution for over 20 years where he last served as a Branch Assistant Manager. Mazlan Bin Mohamad has no family relationship with any Director and/or major shareholder of Mintye and no conflict of interest with the Company. He is deemed to be interested in the shares of Mintye by virtue of his shareholdings in Alidin Sendirian Berhad, a substantial shareholder of Mintye. He also sits on the Board of Directors of a number of other private limited companies. He attended all the five Board meetings of the Company held during the financial year and has not been convicted for any offences within the past 10 years. 8
Sari Bin Idris Non-Independent Non-Executive Director 64 years of age / Malaysian Sari Bin Idris was appointed to the Board of the Company on 20 August 1993 as a Non-Independent Non- Executive Director. He is a member of the Board's Audit Committee and Nomination Committee. He is a businessman and has been operating a contract waste disposal business since 1989. Sari Bin Idris has no family relationship with any Director and/or major shareholder of Mintye and no conflict of interest with the Company. He is deemed to be interested in the shares of Mintye by virtue of his shareholdings in Alidin Sendirian Berhad, a substantial shareholder of Mintye. He is also a Director of a number of other private limited companies. He attended all the five Board meetings of the Company held during the financial year and has not been convicted for any offences within the past 10 years. Khor Kay Cham @ Koh Kay Cham Independent Non-Executive Director 71 years of age / Malaysian Khor Kay Cham @ Koh Kay Cham was appointed to the Board of the Company on 4 October 1994 as an Independent Non-Executive Director. He is the Chairman of the Audit Committee and Nomination Committee; and a member of the Remuneration Committee. He is a Company Secretary and Tax Consultant by profession. He graduated from Nanyang University, in Singapore, with a Bachelor of Art (Economics) degree. He is a member of the Malaysian Association of Company Secretaries and a Fellow Member of the Chartered Tax Institute of Malaysia (formerly known as Malaysian Institute of Taxation). He has more than 20 years of experience in managing business and financial management of companies which involve in manufacturing, business tax consulting and investment holding. Khor Kay Cham @ Koh Kay Cham has no family relationship with any Director and/or major shareholder of Mintye and no conflict of interest with the Company. He also sits on the Board of Directors of a number of other private limited companies. He attended all the five Board meetings of the Company held during the financial year and has not been convicted for any offences within the past 10 years. 9
Goh Koong Yuen Independent Non-Executive Director 56 years of age / Malaysian Goh Koong Yuen was appointed to the Board of the Company on 30 April 1998 as an Independent Non- Executive Director. He is the Chairman of the Remuneration Committee; and a member of the Audit Committee and Nomination Committee. He is a Company Secretary and an approved Tax Agent. He is a member of the Malaysian Institute of Chartered Secretaries and Administrators; and the Chartered Tax Institute of Malaysia (formerly known as Malaysian Institute of Taxation). Currently, he is the proprietor of a secretarial and tax consultancy firm, Syarikat K.Y. Goh. Goh Koong Yuen has no family relationship with any Director and/or major shareholder of Mintye and no conflict of interest with the Company. He also sits on the Board of Directors of a number of other private limited companies. He attended all the five Board meetings of the Company held during the financial year and has not been convicted for any offences within the past 10 years. 10
Chairman s Statement On behalf of the Board of Directors, I am pleased to present the Annual Report of Mintye Industries Bhd. for the financial year ended 31 January 2010. Overview During the second half year of 2008, the world economy was shaken by the United States' banking crisis as a result of the subprime loans problem which had also precipitated the worst financial and economic crisis recorded since the last Great Depression in the 1930s. During the period, the global economy experienced a sudden major downturn and was under tremendous recessionary pressure. Malaysia, as an exporting country, was not spared from the impact of the crisis which saw the severe weakening of our domestic consumption and export demand. However, the timely introduction of fiscal stimulus packages and monetary policies to revive the banking sector by the various governments across the world especially the United States, Japan and the Europe, had helped to stabilize the situation. In Malaysia, for example, the government had introduced the Mini Budget with the intention to pump prime Malaysian economy out of the recession. Financial Performance For the financial year under review, the Group recorded a lower turnover of RM51.212 million compared to RM53.383 million in the previous financial year. The decrease in turnover was mainly attributable to the slowdown of global economy that resulted in the weakening of customers' demand and spending. Despite the drop in turnover, profit from operating activities increased by 24% to RM8.566 million compared to RM6.935 million in the previous financial year mainly due to the gain on transaction of foreign currencies exchange made during the financial year under review. Profit before taxation increased by 52% to RM9.160 million, a significant increase of RM3.140 million from the last financial year of RM6.020 million. This was mainly due to the reversal of allowance for diminution in value of quoted investments, in addition to the abovementioned gain from foreign currencies exchange. The Group's profit after taxation also increased by almost 3-folds to RM6.744 million from previous financial year's RM2.248 million due to lower taxation payable in this financial year as compared to previous financial year, which had accounted for the prior years' under-provision of taxation. 11
At the Company level, turnover decreased to RM41.862 million compared to RM44.275 million in previous financial year mainly due to the aforesaid reasons. However, profit from operating activities increased by 47% to RM6.184 million compared to previous financial year of RM4.198 million mainly due to improved profit margin as a result of product mix and cost saving measures undertaken by the Company throughout the financial year. Profit before taxation doubled to RM6.778 million from RM3.275 million made previously as a result of the reversal of allowance for diminution in value of quoted investments. Similarly, profit after taxation sharply increased to RM5.016 million from RM0.160 million in previous financial year due to current year's lower taxation payable of RM1.762 million compared to previous year's RM3.115 million which had included the prior years' under-provision of taxation. Outlook Although there are signs of economic recovery in Malaysia, your Board, however, view this with caution as we believe that the business environment that we are operating remains tough and challenging in the year ahead. Your Board will monitor the economic development closely and continue to strive for the attainment of better operational efficiency in order to meet the challenges ahead. Thus, barring unforeseen circumstances, your Board is confident that the result of the coming financial year will remain satisfactory. Dividend For the financial under review, your Board is pleased to recommend a first and final dividend of 10% less 25% tax per ordinary share of RM1.00 each. The proposed dividend is subject to approval by the shareholders at the forthcoming Annual General Meeting. Corporate Social Responsibility The Board recognises the importance of being a socially responsible corporate citizen that practices accountability, honesty and transparency not only in its conduct of business but also to the general community and society as a whole. 1. Human Capital The Group acknowledges the importance of employees as the most valuable asset. The Group also constantly enhances employees' job-related skills 12
knowledge and experience via various in-house and external training programmes. The Board always believes that continuous learning and human capital development will ultimately benefit the Group as a result of improved productivity. 2. Workplace The Group is also committed to ensure that the safety and health of employees are paramount at all times. This is done by providing a safety and healthy conducive working environment for its employees. Preventive measures and safety training programmes are conducted from time to time to create a high level of safety awareness among the employees. 3. Environment The Group undertook several initiatives as part of its commitment to preserve the environment. An example of these initiatives is recycling of waste materials back to production if they are reusable or otherwise, sell to others who might be able to use them, for example, the scrap collectors. Acknowledgements On behalf of the Board of Directors, I would like to extend our appreciation to the management and staff of the Group for their dedication and commitment throughout the year. I would also like to express our heartfelt gratitude to all our valued shareholders, customers, business associates, financiers and various government authorities for their unwavering support and confidence in the Group. Thank you. Yeo Ah Tee Executive Chairman 28 April 2010 13
Statement on Corporate Governance The Board of Directors ( the Board ) of Mintye Industries Bhd. ( the Company ) remains committed in ensuring the high standards of corporate governance as prescribed in the Malaysian Code of Corporate Governance ( the Code ), are practiced throughout the Group to protect and enhance the shareholders' value and the financial performance of the Group. The following statement describes the manner which the Group has applied the principles and the extent of its compliance to the best practices of the Code during the financial year under review. Any areas where the Group has not complied with are indicated herein. DIRECTORS The Board The Company is controlled and led by a Board of Directors, which has the overall responsibility for the corporate governance, strategic business directions and overseeing the investments of the Company and its subsidiaries. The Directors are from diverse professional backgrounds with vast knowledge, skills and experience in a wide range of related and unrelated industries that are vital for the success and effectiveness of the Board's performance. Board Composition The Company has a well-balanced Board of Directors. The Board, led by the Executive Chairman, has seven (7) members, comprising four (4) Executive Directors, one (1) Non-Independent Non-Executive Director and two (2) Independent Non-Executive Directors. The profile of each director is set out on pages 7 to 10 of this Annual Report. The roles and responsibilities of the Executive Chairman and Managing Director are clearly distinct and separated in ensuring a balance of power and authority. The Executive Chairman is responsible for ensuring Board effectiveness and conduct, whereas the Managing Director is primarily responsible for the day-to-day operations of the Group. The Independent Non-Executive Directors do not participate in the day-to-day management of the Group; instead their presence is essential in providing the necessary independent views and advices, in ensuring a balance and impartial Board's decision. 14
The Board has identified Khor Kay Cham @ Koh Kay Cham as the Senior Independent Non-Executive Director to whom concerns may be conveyed. Board Meetings Board meetings are held quarterly with additional meetings convened when necessary. There were five (5) Board meetings held during the financial year ended 31 January 2010. Every Director attended all the Board meetings and thus complied with the attendance requirement at Board Meetings as stipulated by the Listing Requirements of Bursa Malaysia Securities Berhad ( Bursa Securities ). During the Board meetings, the Board reviews and approves the Group's quarterly and annual financial results before submitting to the Bursa Securities. Matters pertaining to the Group's operations and compliance with various laws and regulations were also discussed during the meetings. Supply of Information Directors are provided with notices of meeting which set out the agenda as well as relevant reports and documents for the perusal of the Board, on a timely basis. The Directors have full and unrestricted access to the Group's information. Where necessary, senior management staff may be invited to attend the Board meetings for their comments and advice on the relevant matters discussed. All Directors also have access to the advice and services of the Company Secretary and may seek independent professional advice at the Company's expense, if required, in furtherance of their duties. Appointment to the Board The Nomination Committee is responsible for assessing and recommending new appointments and candidates for directorships to the Board for its consideration and approval. Retirement and Re-election of Directors In accordance with the Company's Articles of Association, at least one-third (1/3) of the Board, including the Managing Director, shall retire from office, by rotation, at least once in every three (3) years, but shall be eligible for re-election. Directors who are appointed to the Board during the financial year are subject to reelection by shareholders at the annual general meeting following their appointment. 15
The Executive Chairman, Yeo Ah Tee; and the Independent Non-Executive Director, Khor Kay Cham @ Koh Kay Cham, both being over seventy years of age, retire in accordance with Section 129(2) of the Companies Act 1965 but shall be eligible for re-appointment pursuant to Section 129(6) of the said Act. Directors Training All Directors have attended and completed the Mandatory Accreditation Programme ( MAP ) conducted by a body approved by Bursa Securities. During the financial year, the Directors have participated in in-house training workshops and seminars to stay abreast with the latest issues and developments. The Company Secretary also circulates the relevant updates on statutory and regulatory requirements from time to time to the Directors and briefs the Board members again during the Board meetings. The Board will on a continuous basis, evaluate and determine the training needs of its Directors that will enhance their knowledge and assist them to discharge their duties and obligations effectively. Board Committees The Board has delegated certain responsibilities to several committees with clearly defined terms of reference. 1. Audit Committee The Audit Committee assists the Board in its responsibility in respect of financial reporting as well as overseeing the internal control function. The terms of reference of the Audit Committee are set out on pages 21 to 25 of this Annual Report. 2. Nomination Committee The Nomination Committee is made entirely of Non-Executive Directors, of whom two-third (2/3) are independent. The Committee comprises the following directors: i) Khor Kay Cham @ Koh Kay Cham - Chairman Independent Non-Executive Director ii) iii) Sari Bin Idris Non-Independent Non-Executive Director Goh Koong Yuen Independent Non-Executive Director 16
The Committee is responsible for reviewing and identifying the desired mix of skills, experience and competencies for an effective Board; and recommending to the Board on re-election and re-appointment of retiring Directors and any Director who has reached the age of seventy (70). In addition, it also assesses the performance of the Board as a whole, its committees as well as individual member. The Committee has met once during the financial year ended 31 January 2010 to review the effectiveness of the Board and recommend to the Board for the continuation of service of the directors who are retiring by rotation as well as two directors who are over seventy (70) years of age. 3. Remuneration Committee The Remuneration Committee is made up of one (1) Executive Director and two (2) Independent Non- Executive Directors, comprising the following members: i) Goh Koong Yuen - Chairman Independent Non-Executive Director ii) iii) Yeo Ah Tee Executive Chairman Khor Kay Cham @ Koh Kay Cham Independent Non-Executive Director The Remuneration Committee is responsible for providing assistance to the Board in developing and reviewing the remuneration policy and packages for the Board members, in order to attract and retain Directors of caliber and with sufficient experiences and talents in contributing to the Group's success. Ultimately, it is the Board as a whole that determine the remuneration packages of the Directors with the interested Directors abstaining from discussing and deciding with regards to their own remuneration. During the financial year under review, the committee has met once and reviewed the remuneration packages for Executive Directors and Non-Executive Directors. The aggregate remuneration of Directors for the financial year ended 31 January 2010 is as follows: Executive Non-Executive Category of remuneration Directors Directors RM RM Directors fees 63,000 45,000 Salaries, bonuses and EPF 995,686 Allowances 6,000 4,500 Other emoluments 66,583 Total 1,131,269 49,500 17
The number of Directors whose remuneration falls within the following bands is: Number of Directors Range of remuneration Executive Non-Executive Below RM50,000 3 RM100,001 RM150,000 1 RM300,001 RM350,000 3 The Board has considered the disclosure of detailed directors' remuneration on individual director basis and is of the opinion that the transparency and accountability in respect of the directors' remuneration have been appropriately dealt with by the band disclosure as required by the Main Market Listing Requirements of Bursa Securities. SHAREHOLDERS Relationship with Shareholders and Investors The Board recognises the importance of timely communication and thorough dissemination of information to the shareholders and various stakeholders, on major business developments and performance of the Group via appropriate channels of communication. Dissemination of information includes the release of Quarterly and Annual Reports, relevant circulars and announcement made to the Bursa Securities. The Annual General Meetings are the principal forum for dialogue between shareholders and the Board. Shareholders are encouraged to attend and participate at these meetings where they may seek clarifications and comment from the Board on the Group's business and financial performance. All investors are encouraged to visit the Company's website at www.mintye.com for detailed information about the Group. All announcements released to Bursa Securities are also available on Bursa Securities' website at www.bursamalaysia.com. ACCOUNTABILITY AND AUDIT Financial Reporting The Group's financial statements are prepared in accordance to the Companies Act 1965 and applicable approved accounting standards in Malaysia. The Board is committed to deliver a balanced and understandable assessment of the Group's financial performance when presenting the Quarterly and Annual Reports. The Audit Committee assists the Board in ensuring the accuracy and adequacy of the financial reports. 18
Statement of Directors Responsibility The Directors are required under the Companies Act 1965 to prepare financial statements for each financial year which have been made out in accordance with the provisions of the Companies Act 1965 and applicable Financial Reporting Standards in Malaysia so as to give a true and fair view of the state of affairs of the Group and Company at the end of the financial year and of the results and cash flows for the Group and Company for the financial year. In preparing the financial statements, the Directors have: 1. used appropriate accounting policies and applied them consistently; 2. made judgements and estimates that are prudent and reasonable; 3. ensured that all applicable accounting standards have been followed during the preparation of the financial statements; 4. ensured that the Company keeps accounting records which disclose with reasonable accuracy the financial position and performance of the Group and Company and which enable them to ensure that the financial statements complied with the Companies Act 1965; 5. overall responsibility for taking reasonable steps to safeguard the assets of the Group, and to detect and prevent fraud as well as other irregularities; and 6. prepared financial statements on the going concern basis as the Directors have a reasonable expectation, having made enquiries, that the Group and Company have adequate resources to continue in operational existence for the foreseeable future. Internal Control The Board recognises the importance of a sound system of internal control that covers all business processes and is designed to safeguard the Group's business operations and assets as well as shareholders' interest. The information of the Group's internal control is presented in the Statement of Internal Control set out on page 26 of this Annual Report. Relationship with the Auditors The Board has established a formal and transparent professional relationship with the Group's internal and external auditors. Full assistance is extended to ensuring they are able to discharge their duties effectively. 19
Additional Compliance Information 1. Status of Utilisation of Proceeds Raised from Corporate Proposals There were no corporate proposals during the financial year. 2. Share Buybacks No share buybacks scheme was in place during the financial year. 3. Exercise of Options, Warrants or Convertible Securities There were no options, warrants or convertible securities issued and exercised during the financial year. 4. American Depository Receipt ( ADR )/Global Depository Receipt ( GDR ) During the financial year, the Company did not sponsor any ADR or GDR programme. 5. Sanctions and/or Penalties imposed on the Company and Its Subsidiaries, Directors or Management by the Relevant Regulatory Bodies There were no sanctions or penalties imposed on the Company and its subsidiaries, directors and management by the relevant regulatory bodies for the financial year. 6. Non-audit Fees The amount of non-audit fees paid to external auditors by the Company and its subsidiaries for the financial year is RM13,950 (2009: RM10,000). 7. Variation of Results There were no material variances between the results for the financial year and the unaudited results previously announced. 8. Material Contracts There were no material contracts entered into by the Company and its subsidiary companies involving directors and major shareholders during the financial year. 9. Profit Forecast/Guarantee The Company did not issue any profit forecast or guarantee for the financial year. 10. Revaluation Policy The Company does not have a revaluation policy on its landed properties. 20
Audit Committee Report The Audit Committee comprises the following three (3) directors: Chairman Khor Kay Cham @ Koh Kay Cham Independent Non-Executive Director Members Goh Koong Yuen Independent Non-Executive Director Sari Bin Idris Non-Independent Non-Executive Director TERMS OF REFERENCE Objectives The objective of the Audit Committee is to assist the Board of Directors in fulfilling its statutory duties and responsibilities relating to accounting and reporting practices of the Company and its subsidiaries. In addition, the Committee shall: i. oversee and appraise the quality of the audits conducted by the Company's internal and external auditors; ii. iii. maintain open lines of communication between the Board of Directors, senior management, internal auditors and external auditors; and determine the quality, adequacy and effectiveness of the Group's control environment. Membership The Audit Committee shall be appointed by the Board from amongst its members and fulfill the following requirements:- i. the Audit Committee shall comprise of no fewer than three (3) members of whom a majority shall be independent directors; and 21
ii. at least one (1) member of the committee:- a) must be member of the Malaysian Institute of Accountants; or b) if he is not a member of the Malaysian Institute of Accountants, he must have at least 3 years' working experience and:- he must have passed the examinations specified in Part I of the 1st Schedule of the Accountants Act 1967; or he must be a member of one of the associations of accountants specified in Part II of the 1st Schedule in the Accountants Act 1967; or fulfills such other requirements as prescribed by the Bursa Securities. The members of the Audit Committee shall elect a Chairman from among their members who shall be an independent director. In the event that a member of the Audit Committee for any reason ceases to be a member with the result that the number of members is reduced below three (3), the Board shall, within three (3) months of that event, appoint such number of discrepancy as may be required in compliance with (i) above. No alternate director can be a member of the Audit Committee. The Board shall review the term of office and performance of the Audit Committee and each of its members at least once every three (3) years to determine whether the Committee and members have carried out their duties in accordance with the terms of reference. Duties and Responsibilities i. To consider the appointment or re-appointment of the external auditor, the audit fee and any questions of resignation and dismissal; ii. iii. iv. To discuss with the external auditor before the audit commences, the nature and scope of the audit, and review the external auditor's management letter and management's responses; To review the external auditor's audit reports, areas of concern arising from the audit and any other matters the auditor may wish to discuss (in the absence of management where necessary); To review the quarterly unaudited condensed financial statements and annual financial statements of the Group before submission to the Board, focusing on: any change in accounting policies and practices; any significant issue and events arising from the audit; the going concern assumption; and compliance with accounting standards and other legal requirements. v. To consider the major findings of internal investigations and management's responses; 22
vi. To do the following, in relation to the internal audit function:- review the adequacy of the scope, functions and resources of the internal audit functions and that it has the necessary authority to carry out its work; review the internal audit programme and results of the internal audit process and, when necessary, ensure that appropriate actions are taken on the recommendations of the internal audit function; review any appraisal or assessment of the performance of members of the internal audit function; approve any appointment or termination of senior staff members of the internal audit function; and take cognisance of resignations of internal audit staff members and provide the resigning staff member an opportunity to submit his reasons for resigning. vii. To monitor any related party transaction and conflict of interest situation that may arise within the Group including any transaction, procedure or course of conduct that raises questions of management integrity; and viii. To consider and examine such other matters as the Board considers appropriate. Authority Whenever necessary and reasonable for the performance of its duties, the Audit Committee shall:- i. have the authority to investigate any matter within its terms of reference; ii. iii. have the necessary resources required to perform its duties; have full and unrestricted access to any information pertaining to the company's activities; iv. have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity as well as with the senior management of the Company and its subsidiaries; v. obtain external legal or independent professional advice if it considers necessary; and vi. convene meetings with the external auditors without the presence of executive director(s) present, whenever deemed necessary. Meetings The Audit Committee shall meet at least four (4) times a year and additional meetings may be conducted at the Chairman's discretion. The Audit Committee has the discretion to invite any member of the management, employees, the external auditors and internal auditors to be present at its meetings. 23
The Company Secretary shall act as secretary of the Audit Committee and shall be responsible for drawing up the agenda and circulating it to the Committee members prior to each meeting; and preparing the minutes of meeting. The minutes shall be circulated to the members of the Committee and the Board. The quorum for each meeting shall be two (2) members and majority of members present must be Independent Directors. There were five (5) Audit Committee meetings held during the financial year ended 31 January 2010. The details of the attendance of each Audit Committee member are as follows:- Name of Audit Committee Member Attendance Percentage of attendance Khor Khay Cham @ Koh Kay Cham 5/5 100 Goh Koong Yuen 5/5 100 Sari Bin Idris 5/5 100 SUMMARY OF ACTIVITIES During the financial year ended 31 January 2010, the Audit Committee had considered, reviewed and evaluated the following:- i. unaudited quarterly financial results of the Group and audited financial statements for the financial ended 31 January 2010 prior to the Board of Directors' approval and subsequent release to the Bursa Securities; ii. iii. iv. the Internal Audit reports, which highlighted the audit issues, recommendations and management's responses; and ensured that all corrective actions were taken by the management on audit findings; the performance of external auditors and recommended to the Board of Directors on their reappointment and audit fees; the Group's compliance and discussed updates and new developments on accounting standards as well as new guidelines and requirements announced by the Bursa Securities and other regulatory bodies; and v. the related party transactions entered into by the Company and the Group. INTERNAL AUDIT FUNCTION The internal audit function is undertaken by the Internal Audit Department with the objective to provide independent regular and systematic reviews on internal control systems, so as to provide the Audit Committee with independent and objective feedbacks and reports that such systems continue to operate satisfactorily and effectively. 24
The activities undertaken by the Internal Audit Department included the following: i. monitored and reviewed the adequacy and effectiveness of policy and procedures of major operational departments within the Group; ii. iii. reported to the Audit Committee on the results of the internal audit reviews at their quarterly meetings and followed up on the implementation of audit recommendation and management action plans; and recommended and developed appropriate improvement measures to further strengthen the internal control systems. The total costs incurred for the financial year ended 31 January 2010 amounted to approximately RM100,000. 25
Statement of Internal Control The Board recognises the importance of maintaining a sound system of internal control to safeguard the shareholders' investments and Group's assets, and also to ensure compliance with the Malaysian Code of Corporate Governance. In compliance with the Main Market Listing Requirements of Bursa Securities, the Board is pleased to provide the following statement on the state of internal control of the Group for the financial year ended 31 January 2010. BOARD OF DIRECTORS RESPONSIBILITY The Board is committed to maintaining; and reviewing the adequacy and integrity of the internal control system that would provide reasonable assurance in monitoring the effectiveness and efficiency of operations, reliability of financial reporting and compliance with applicable laws and regulations. The Board also recognises that reviewing the adequacy of the internal control system is a continuous process and it is designed to manage rather than eliminate the risk and failure to achieve business objectives; and can only provide reasonable but not absolute assurance against any material misstatement or loss. RISK MANAGEMENT The Board affirms the importance of effective risk management in assisting the Group to achieve its business objectives. In this respect, the Executive Directors and senior management, who comprise of vast experience personnel, meet regularly to highlight and discuss issues involving the day-to-day operations and changes in the business environment. This has enabled various major business risks to be easily identified. As a result, appropriate internal controls and corrective actions could be promptly taken to mitigate and manage these risks. KEY ELEMENTS OF INTERNAL CONTROL The key elements of internal control system in ensuring its adequacy and integrity are as follows: 1. clearly defined policies and procedures; 2. clearly defined delegation of duties and responsibilities; organisation structure and appropriate authorisation levels for both the Board and management; 3. review of monthly financial performance by the management and quarterly meetings for the Board to deliberate on the Group's financial performance and business development; and 4. on-going review and monitoring process by the internal audit function to assess the effectiveness of the control environment and to highlight significant risks as well as areas for improvement. CONCLUSION The Board is pleased to report that there were no significant breakdowns or weaknesses in the Group's internal control system that could have resulted in material losses during the financial year under review. However, taking into account the changing environment and circumstances, the effectiveness of internal control system may vary over time. Therefore, the Board, by working together with the management, will continually evaluate and take precautionary measures and steps to further strengthen the control environment. 26
ANNUAL REPORT AND FINANCIAL STATEMENTS for the financial year ended 31 January 2010 Directors' Report 28-32 Independent Auditors Report to the Members 33 & 34 Group Income Statement 35 & 36 Group Balance Sheet 37 & 38 Income Statement 39 Balance Sheet 40 & 41 Group Shareholders' Equity Statement 42 Shareholders' Equity Statement 43 Group Cash Flow Statement 44 & 45 Cash Flow Statement 46 & 47 Notes to the Financial Statements 48-90 Statement by Directors 91 Statutory Declaration 91 27
DIRECTORS' REPORT for the financial year ended 31 January 2010 The directors have pleasure in submitting their annual report to the members together with the audited financial statements of the Group and the Company for the financial year ended 31 January 2010. OPERATIONS Principal Activities The Company is involved in the business operating activities of the manufacture of automotive and industrial friction materials, namely brake linings, disc brake pads and bonded brake shoes. The principal activities of the subsidiaries are disclosed in Note 16.1 to the financial statements. There has been no significant change in the nature of the principal activities of the Company and its subsidiaries during the financial year. Results Group Company RM RM The profit after taxation amounted to 6,743,622 5,015,852 Amount attributable to minority interests (68,490) 6,675,132 5,015,852 To which must be added accumulated profits brought forward from the previous financial year of 37,867,016 21,026,777 Resulting in an amount of accumulated profits available for appropriation of 44,542,148 26,042,629 From which must be deducted: First and final dividend of 6% tax exempt, paid (3,648,000) (3,648,000) Leaving an amount of accumulated profits to be carried forward to the next financial year of 40,894,148 22,394,629 28
Items of an unusual nature The results of the operations of the Group and the Company for the financial year were not, in the opinion of the directors, substantially affected by any item, transaction or event of a material and unusual nature other than the results from investing activities as disclosed in the income statements. There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors, to affect substantially the results of the operations of the Group and the Company for the current financial year. Dividends During the financial year, a first and final dividend of 6% tax exempt amounting to RM3,648,000 in respect of the previous financial year ended 31 January 2009 was paid on 11 August 2009 by the Company. The directors recommend a first and final dividend of 10% less 25% income tax amounting to RM4,560,000 for the current financial year ended 31 January 2010 to be paid on 11 August 2010 subject to approval of the shareholders at the forthcoming annual general meeting. Reserves and provisions There were no material transfers to or from reserves or provisions during the financial year other than as disclosed in the Shareholders' Equity Statements. Bad and doubtful debts Before the income statements and balance sheets of the Group and the Company were made out, the directors took reasonable steps to ascertain that action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and that all known bad debts had been written off and adequate allowance had been made for doubtful debts. At the date of this report, the directors of the Group and the Company are not aware of any circumstances that would render the amount written off for bad debts or the amount of allowance for doubtful debts in the Group and the Company inadequate to any substantial extent. Current assets Before the income statements and balance sheets of the Group and the Company were made out, the directors took reasonable steps to ascertain whether any current assets, other than debts, were unlikely to realise in the ordinary course of business their values as shown in the accounting records of the Group and the Company and to the extent so ascertained were written down to an amount that they might be expected so to realise. At the date of this report, the directors are not aware of any circumstances that would render the values attributed to the current assets in the financial statements of the Group and the Company misleading. 29