(Company No: 412406-T) 2015 ANNUAL REPORT
CONTENTS CORPORATE INFORMATION 2 CORPORATE STRUCTURE 3 DIRECTORS PROFILE 4 CHAIRMAN S STATEMENT 10 STATEMENT ON CORPORATE GOVERNANCE 12 AUDIT COMMITTEE REPORT 21 STATEMENT ON RISK MANAGEMENT & INTERNAL CONTROL 27 ADDITIONAL COMPLIANCE STATEMENT 29 FINANCIAL STATEMENTS Directors Report 32 Statement by Directors and Statutory Declaration 36 Independent Auditors Report 37 Statements of Profit or Loss and Other Comprehensive Income 40 Statements of Financial Position 41 Consolidated Statement of Changes in Equity 42 Statement of Changes in Equity 43 Statements of Cash Flows 44 Notes to the Financial Statements 46 Supplementary Information 87 ANALYSIS OF SHAREHOLDINGS 88 NOTICE OF NINETEENTH ANNUAL GENERAL MEETING 90 PROXY FORM Enclosed 1 Annual Report 2015
CORPORATE INFORMATION BOARD OF DIRECTORS Ho Fook Meng Independent Non-Executive Chairman Dato Tan Seng Hu Managing Director Dato Abdul Latif Bin Abdul Rahim Non-Independent Non-Executive Director Leong Fook Heng Independent Non-Executive Director Mohd Fikry Bin Rahman Independent Non-Executive Director Tony Tan Han (Chen Han) Independent Non-Executive Director AUDIT COMMITTEE Leong Fook Heng - Chairman Independent Non-Executive Director Mohd Fikry Bin Rahman - Member Independent Non-Executive Director Ho Fook Meng Independent Non-Executive Director REGISTERED ADDRESS No: 149A, 149B, 151B Persiaran Raja Muda Musa 42000 Port Klang, Selangor Darul Ehsan. Tel : 603-3167 3830 Fax : 603-3168 3830 BUSINESS ADDRESS 3rd Floor, No: 66, Jalan Kampung Attap, 50460 Kuala Lumpur Tel : 603-2276 6664 Fax : 603-2276 6661 Website : www.raya.com.my PRINCIPAL BANKERS Public Bank Berhad CIMB Bank Berhad RHB Bank Berhad NOMINATION & REMUNERATION COMMITTEE Ho Fook Meng - Chairman Independent Non-Executive Director Dato Abdul Latif Bin Abdul Rahim Non-Independent Non-Executive Director Leong Fook Heng Independent Non-Executive Director COMPANY SECRETARIES Wan Haslinda Wan Yusoff MAICSA 7055478 Sangar Nallappan MACS 01413 AUDITORS STYL Associates AF 1929 No. 902, 9th Floor Block A Damansara Intan No: 1, Jalan SS20/27 47400 Petaling Jaya Tel : 603-7724 2128 / 7724 2130 / 7724 2136 Fax : 603-7733 2125 SHARE REGISTRAR Tricor Investor & Issuing House Services Sdn Bhd Unit 32-01, Level 32, Tower A, Vertical Business Suite, Avenue 3, Bangsar South, No. 8, Jalan Kerinchi 59200 Kuala Lumpur Wilayah Persekutuan Tel : 603-27839299 Fax : 603-27839222 Email: is.enquiry@my.tricorglobal.com STOCK EXCHANGE LISTING ACE Market of Bursa Malaysia Securities Berhad STOCK NAME - RAYA STOCK CODE - 0080 2 Annual Report 2015
CORPORATE STRUCTURE Raya International Berhad 412406-T 100% Envair Energy Sdn. Bhd. Quest Equipment & Services Sdn. Bhd. Quest Technology Sdn. Bhd. Raya Consumable Sdn. Bhd. Quest System & Engineering Sdn. Bhd. 70% Youbicom Malaysia Sdn. Bhd. 51% Selatan Bunker (M) Sdn. Bhd. 3 Annual Report 2015
DIRECTORS PROFILE HO FOOK MENG Independent Non-Executive Chairman Malaysian Male, aged 58, was appointed as an Independent Non-Executive Director of the Company on 24 March 2015 and he was re-designated as the Chairman of the Company on 17 August 2015. Qualifications & Working Experience and Occupation He graduated from the University of Malaya, Kuala Lumpur with a Bachelor of Economics (Honours) degree in 1981 and holds a Masters of Business Administration from Kent State University, Ohio, USA. Mr Ho started his career in the banking and financial services industry in 1981. He started as a Bank Officer at Bank of Commerce (M) Berhad in 1981. In 1993, he joined United Overseas Bank as a Team Leader in the Commercial Banking Department. Subsequently, Mr Ho joined AmBank (M) Berhad as a General Manager in the Business Banking Division from 2002 to 2014. Mr Ho has over 30 years experience in the banking and financial services industry of which he specialized in emerging mid-cap corporations. As a senior banker he is very often tapped for his expertise and wide ranging experience by his banking clients and investors in their growth and expansion strategies. He has established a very wide business network that was built over the years as banker and advisor to a wide range of his banking customers. Board Committees He was appointed as a Member of the Audit Committee and Nomination Committee on 24 March 2015 and re-designated as Chairman of the Nomination & Remuneration Committee on 26 February 2016. Family relationship with any director and / or major shareholder of the Company He has no family relationship with other Directors or major shareholders of the Company. Conflict of Interest with the Company He has no conflict of interest with the Company or its subsidiary companies. Directorship of Public Companies He does not hold any directorships in other public companies. Conviction of Offences Within the past 10 years, he has not been convicted for any offences (other than traffic offences). No. of Board Meetings Attended from 1 January 2015 to 31 December 2015 Since he was appointed on 24 March 2015, he had attended all five out of five meetings of the Board meetings held from April 2015 to December 2015. Shareholdings in the Company His shareholdings are disclosed on page 88 of the Annual Report. 4 Annual Report 2015
DIRECTORS PROFILE (Cont d) DATO TAN SENG HU Managing Director Malaysian, aged 40, was appointed as an Executive Director of the Company on 19 June 2014 and he was re-designated as the Managing Director on 30 June 2014. Qualifications & Working Experience and Occupation He graduated with a Bachelor of Arts, Business Administration, Human Resource and Personnel from the Washington State University in 2001 and obtained a Master of Science, Economics from the University of Idaho in 2003. He has been involved in the construction industry for more than eight years and is currently managing his own project management company since 2006. Board Committees He is not a member of any Board Committees of the Company. Family relationship with any director and / or major shareholder of the Company He has no family relationship with other Directors or major shareholders of the Company. Conflict of Interest with the Company He has no conflict of interest with the Company or its subsidiary companies. Directorship of Public Companies (if any) He is an Alternate Director to Dr Tan Cheng Kiat, a Founder Director of Bina Puri Holdings Bhd. Conviction of Offences Within the past 10 years, he has not been convicted for any offences (other than traffic offences). No. of Board Meetings Attended from 1 January 2015 to 31 December 2015 During the financial year, he attended six out of six meetings of the Board. Shareholdings in the Company His shareholdings are disclosed on page 88 of the Annual Report 5 Annual Report 2015
DIRECTORS PROFILE (Cont d) DATO ABDUL LATIF BIN ABDUL RAHIM Non-Independent Non-Executive Director Malaysian, aged 58, is a Non-Independent Non-Executive Director of the Company. He was appointed to the Board on 1 October 2013. Qualifications & Working Experience and Occupation He holds a Diploma in Business Administration. Dato Abdul Latif began his career in year 1982 with Malaysian Tobacco as a senior executive. In year 1992, he joined Regal Marketing Sdn. Bhd. as Business Executive and worked until 1998. He is currently the General Manager of Azeera Management Consultant (M) Sdn Bhd which he has joined since year 1998. Board Committees He was appointed as Members of the Nomination and Remuneration Committee on 30 June 2014. Family relationship with any director and / or major shareholder of the Company He has no family relationship with other Directors or major shareholders of the Company. Conflict of Interest with the Company He has no conflict of interest with the Company or its subsidiary companies. Directorship of Public Companies He does not hold any directorships in other public companies. Conviction of Offences Within the past 10 years, he has not been convicted for any offences (other than traffic offences). Shareholdings in the Company He does not hold any shares in the Company. No. of Board Meetings Attended from 1 January 2015 to 31 December 2015 During the financial year, he attended six out of six meetings of the Board. 6 Annual Report 2015
DIRECTORS PROFILE (Cont d) MOHD FIKRY BIN RAHMAN Independent Non-Executive Director Malaysian, aged 30, is an Independent Non-Executive Director of the Company. He was appointed to the Board on 18 June 2014. Qualifications & Working Experience and Occupation He graduated with Bachelor of Engineering Technology in Supply Chain Management. He started his career at Seicom System Sdn Bhd as a Project Manager responsible in managing a project development from initiation stage to its closure. In September 2013 till todate, he is serving as Senior Procurement Executive at Halliburton Services (M) Sdn Bhd responsible in monitoring, processing and controlling all procurement activities. Board Committees He was appointed as a member of Audit Committee on 18 June 2014. Family relationship with any director and / or major shareholder of the Company He has no family relationship with other Directors or major shareholders of the Company. Conflict of Interest with the Company He has no conflict of interest with the Company or its subsidiary companies. Directorship of Public Companies He does not hold any directorships in other public companies. Conviction of Offences Within the past 10 years, he has not been convicted for any offences (other than traffic offences). Shareholdings in the Company He does not hold any shares in the Company. No. of Board Meetings Attended from 1 January 2015 to 31 December 2015 During the financial year, he attended six out of six meetings of the Board. 7 Annual Report 2015
DIRECTORS PROFILE (Cont d) LEONG FOOK HENG Independent Non-Executive Director Malaysian, aged 57, is an Independent Non-Executive Director of the Company. He was appointed to the Board on 17 August 2015. Qualifications & Working Experience and Occupation He is an Associate Member of the Institute of Chartered Secretaries and Administrators (United Kingdom) and Associate Member of Chartered Institute of Management Accountants (United Kingdom). He is also a Member of the Malaysian Institute of Accountants Mr Leong began his career as the Marketing Officer/Branch Manager at Arab Malaysian Credit Bhd and thereafter was appointed as Senior Manager, Head of Corporate Banking, Equipment Finance/SME at Arab Malaysian Finance Bhd from 1981 to 2001. From 2001 to 2003, he was appointed as Vice President and Head, Asset Based Finance Director at Citibank Bhd and Director, Citicorp Capital (Malaysia) Bhd. In 2003, he held a position as General Manager, Business Banking at AmBank (M) Bhd for 5 years. Subsequently, he was the Group Head, Risk Management at ICB Global Management Sdn Bhd overseeing 14 Countries and Regional CEO (2012 till July 2013) overseeing Indonesia and Albania. Currently, he is a Principal owner of FH Leong Management Services providing training services for AFLAM, Banks and leasing companies. Board Committees He was appointed as a member of Audit Committee and Nomination Committee on 17 August 2015 and re-designated as Chairman of the Audit Committee on 26 February 2016. Family relationship with any director and / or major shareholder of the Company He has no family relationship with other Directors or major shareholders of the Company. Conflict of Interest with the Company He has no conflict of interest with the Company or its subsidiary companies. Directorship of Public Companies He does not hold any directorships in other public companies. Conviction of Offences Within the past 10 years, he has not been convicted for any offences (other than traffic offences). Shareholdings in the Company He does not hold any shares in the Company. No. of Board Meetings Attended from 1 January 2015 to 31 December 2015 Since he was appointed on 17 August 2015, he had attended one out of two meetings of the Board meetings held from August 2015 to November 2015. 8 Annual Report 2015
DIRECTORS PROFILE (Cont d) CAPT TONY TAN HAN (CHEN HAN) Independent Non-Executive Director Singaporean, aged 40, is an Independent Non-Executive Director of the Company. He was appointed to the Board on 24 March 2015. Qualifications & Working Experience and Occupation He obtained his Diploma in Nautical Studies from Singapore Polytechnics in 1999. In 2009, he obtained a Specialist Diploma in workplace Safety and Health from Ngee Ann Polytechnics. Captain Tony Tan has a Certificate of Competency ( COC ) Class 1 Master Mariner (foreign-going) issued by the Maritime and Port Authority of Singapore and is also a Registered Safety Officer issued by the Ministry of Manpower in 2011. Captain Tony Tan started his career as a Marine Superintendent/Senior Marketing Executive with EZRA Marine Services Pte Ltd in 2007. He joined Hako Offshore Pte Ltd in 2010 as a Senior Safety Manager/ Designated Person Ashore. He established Skips Marine Services in Singapore in 2011 and is the Managing Director. Captain Tony Tan is well versed in the maritime industry and has over 18 years of professional marine experience in both sea-going and shore-based operations which include container, tanker, oil and gas, offshore fleet and ship management, ship operations and marine safety operations. He is also involved in audit, incident investigation as well as implementation of International Safety Management ( ISM ) appointments. Board Committees He is not a member of any Board Committee of the Company. Family relationship with any director and / or major shareholder of the Company He has no family relationship with other Directors or major shareholders of the Company. Conflict of Interest with the Company He has no conflict of interest with the Company or its subsidiary companies. Directorship of Public Companies (if any) He does not hold any directorships in other public companies. Conviction of Offences Within the past 10 years, he has not been convicted for any offences (other than traffic offences). Shareholdings in the Company He does not hold any shares in the Company. No. of Board Meetings Attended from 1 January 2015 to 31 December 2015 Since he was appointed on 24 March 2015, he had attended all five out of five meetings of the Board meetings held from April 2015 to December 2015. 9 Annual Report 2015
CHAIRMAN S STATEMENT Dear Shareholders, On behalf of the Board of Directors of Raya International Berhad ( Raya or the Company ), it gives me great pleasure to present the Annual Report and Audited Financial Statements of Raya and its subsidiaries ( the Group ) for the financial year ended ( FYE ) 31 December 2015. Overview For the financial year ended 31 December 2015, the Group has been busy carrying out corporate activities and reorganising its operations to implement a corporate turnaround of the Group. The Group s wholly-owned subsidiary Raya Consumable Sdn Bhd completed disposal of its Kota Kemuning factory cum warehouse in November 2015. The Group had in 2014, discontinued its loss making manufacturing operations and has since been mainly involved in trading and distribution of water filter components and fast moving consumer goods. During the FYE 2015, the Group embarked on definite steps to strengthen its financial position and diversify its trading activities. Financial Review I am pleased to share with you that for the FYE 2015, the Group s Revenue recorded a substantial increase of RM 11.5 million over the preceding year mainly due to a surge in the supply and general trading of fast moving consumer goods to the government for flood victims aid projects in early 2015. The Group recorded a lower loss of RM0.5 million for the current year as compared to RM1.5 million in the preceding year. The lower loss for the current year was mainly due to higher revenues generated, lower interest expense due to full settlement of bank borrowings, lower depreciation charges and gains from disposal of the factory cum warehouse during the financial year. Corporate Developments & Prospects The Group expects to continue to face challenges in its water filter trading activities for the coming financial year due to competition from cheaper products in the market. The management is also of the view that prospects for trading and distribution of fast consumer goods for flood aid victims is highly dependent on weather and availability of government aid programs, and is thus unpredictable and cannot be depended upon as a sustainable business. In building a long term sustainable business model, the Group intends to diversify its principal activities to include oil bunkering and trading in oil products to increase the revenue streams and enhance the prospects of the Group. In this respect, the Group had established a new 51% owned subsidiary, Selatan Bunker (M) Sdn Bhd, in September 2015 to initiate the above endeavor. The Group s strategy is to diversify into oil bunkering and trading of oil products which have consistent demand and growth prospects, instead of depending solely on its existing trading of water filtration components and fast consumer goods activities. I am also very pleased to inform that with the completion of the factory cum warehouse disposal, the Group has repaid all its bank borrowings as at FYE 2015. To further strengthen the Group s financial position and balance sheet, a share placement issue was carried out in December 2015, raising RM 1.96 million. On 29 December 2015, Selatan Bunker entered into a Collaboration Agreement with Tumpuan Megah Development Sdn Bhd, a Malaysian incorporated company involved in oil bunkering, to collaborate in carrying out oil bunkering activities. On 4 February 2016, the Group had announced its proposal to undertake a Proposed Diversification of its principal activities to include oil bunkering and trading of oil related products and a Proposed Special Bumiputra Issue of new shares. 10 Annual Report 2015
CHAIRMAN S STATEMENT (Cont d) The Group looks forward to carry out the Proposed Diversification and Proposed Special Bumiputra Issue in 2016 and barring any unforeseen circumstances, is optimistic of its prospects in the coming financial year. Appreciation On behalf of the Board of Directors of Raya, I wish to convey my heartfelt appreciation to the Management Team for their dedication, commitment and invaluable contributions. I also wish to sincerely thank my colleagues on the Board for their vision and immense contribution in providing the required counsel, direction and corporate oversight in helping to guide the Group through the challenges and embark on new avenues of opportunity. Last but not least, our utmost gratitude and sincere thanks to all our valued Shareholders, Customers, Business Associates, Financiers, Relevant Authorities and other Stakeholders for the confidence, support and trust in us. On behalf of your Board of Directors and the Management team, let us continue to hold hands together for a better future and better success in 2016. Thank you. Ho Fook Meng Chairman 11 Annual Report 2015
STATEMENT ON CORPORATE GOVERNANCE The Board of Directors ( the Board ) of Raya International Berhad ( Raya ) recognises the importance of practising good corporate governance and is fully committed to ensuring that the Group practices the highest standard of corporate governance and transparency in line with the Malaysian Code on Corporate Governance 2012 ( Code ) to achieve the Group s governing objective of enhancing shareholders value. It demonstrates the Board s emphasis to show the manner in which the Company has applied the Principles and the Recommendations of the MCCG 2012. This statement also serves as a compliance with Rule 15.25 of the ACE Market Listing Requirements ( ACE LR ) of Bursa Malaysia Securities Berhad ( Bursa Securities ). The application of the Code by Raya and the extent of compliance with the prescribed recommendations are reported with exceptions stated herein. A. DIRECTORS i. THE BOARD ESTABLISH CLEAR ROLES AND RESPONSIBILITIES The Company is controlled and led by a dynamic and experienced Board, with high personal integrity, business acumen and management skills, which is primarily responsible for the strategic directions of the Company. In line with the Code, the roles and responsibilities of the Chairman and Managing Director are separated. The responsibility of Chairman is primarily to ensure that the conduct and working of the Board is in an orderly and effective manner whilst the Managing Director manages the daily running of business and implementation of Board policies. There is a separation of the role of Managing Director and Chairman to ensure that there is an appropriate balance of power and authority with clear divisions of responsibilities and accountability. The Managing Director is accountable for the operation and strategic development of the Group, and obliged to refer major matters to the Board. In addition, the Board also oversees the conduct of the Company s business, whereby it devises and puts in place adequate systems of control, focuses primarily on the mitigation of any foreseeable or potential risk besetting the Company. The Board understands the Board s philosophy, principles, ethics, mission and vision and reflects this understanding on key issues throughout the year. The Management s function is conducted by, or under the supervision of the Managing Director, the sole Executive Director on the Board of Directors and by other officers to whom management function is properly delegated by Managing Director. The Managing Director is expected to keep the Board informed on all matters which may materially affect the Company and its business. Where possible, the Managing Director shall invite relevant key management personnel from time to time to attend the Board Meeting, to brief the Board on the management issue under their purview. ii. STRENGTHEN COMPOSITION OF THE BOARD The Board is satisfied with its current composition which comprises a balanced mix of skills, knowledge and experience in the business and management fields which are relevant to enable the Board to carry out its responsibilities in an effective and efficient manner. 12 Annual Report 2015
STATEMENT ON CORPORATE GOVERNANCE (Cont d) The current Board has six (6) directors comprising one (1) Executive Director, one (1) Non- Independent Non-Executive Director and four (4) Independent Non-Executive Directors. The majority of the Board comprises Independent Directors who are essential in providing unbiased and independent opinion, advice and judgement thus play a key role in corporate accountability. All Independent Directors act independently of Management and are not involved in any other relationship with the Group that may impair their independent judgement and decision-making. The profile of each member of the current Board is set out in the Directors profile of this Annual Report. iii. REINFORCE INDEPENDENCE In line with the Code, the tenure of an Independent Director shall not exceed nine (9) years consecutively. Upon completion of the nine (9) years, an Independent Director may continue to serve on the Board subject to his re-designation as a Non-Independent Non-Executive Director should an Independent Director be retained after 9 years, his retention must be approved by the shareholders. SENIOR INDEPENDENT DIRECTOR The Board has not appointed a Senior Independent Director as there is no combination or overlapping of roles between the current Chairman who is an Independent Non-Executive Director and the Managing Director of the Company as these two (2) positions are held by separate individuals. The roles of the Independent Non-Executive Chairman and the Managing Director are separated with clear division of responsibilities and the decision making process of the Board is based on collective decisions without any individual exercising any considerable concentration of power or influence. To ensure that no one person dominates the Board, the Board s composition is comprised of six (6) directors comprising one (1) Executive Director, one (1) Non-Independent Non-Executive Director and four (4) Independent Non-Executive Directors. The Board takes note that the Code recommends that the Chairman of the Nomination Committee should be the Senior Independent Director identified by the Board, which will from time to time review the recommendation and make the necessary appointment as and when it deems fit. iv. The Company also adopts non-discriminatory policy in employing talents to fulfill its human resource needs at all levels including Board especially in ensuring gender diversity. Presently, the Board is of the opinion that the current size and composition of the Board is appropriate to commensurate the group s business skill requirement and effective decision making. SUCCESSION PLANNING The Board recognises that succession planning is an ongoing process designed to ensure that the Group identifies and develops a talent pool of employees through mentoring, training and job rotation for high level management positions that become vacant due to retirement, resignation, death or disability and/or new business opportunities. 13 Annual Report 2015
STATEMENT ON CORPORATE GOVERNANCE (Cont d) Notwithstanding the above, the Board noted that the Company currently maintains a lean management structure which dispensed with the requirement of a chief executive officer as well as chief financial officer. In consequent thereto, the Managing Director is required to provide strong leadership and to turnaround the Group while keeping a lean Board composition. Until such time when the financial health of the Group be restored, the Board shall not consider any succession issue with respect to the position of the chief executive officer or chief financial officer. v. COMMITMENT BY THE BOARD To ensure that the Raya Group is managed properly, the current Board is scheduled to meet at least four (4) times a year, with additional meetings being convened when necessary. Besides that, the Board also approves matters through the circulation of Director Circular Resolution in accordance with the Articles of Association of the Company. During the financial year ended 31 December 2015, the Board met six (6) times. The details of the Director s attendances at the Board Meetings during their tenure in office are set out below:- No Name of Directors No of Meetings attended during the time the Directors hold office % 1. Ho Fook Meng 5/5 100 Independent Non-Executive Director (Appointed on 24 March 2015) 2. Dato Izham Bin Yusoff 1/4 25 Independent Non-Executive Director (Resigned on 14 August 2015) 3. Dato Tan Seng Hu 6/6 100 Managing Director 4. Md Yaakob Bin Md Shariff 1/1 100 Independent Non-Executive Director (Resigned on 23 March 2015) 5. Mohd Fikry Bin Rahman 6/6 100 Independent Non-Executive Director 6. Chen Hian Loong 3/6 50 Executive Director (Resigned on 7 January 2016) 7. Yee Chee Seng @ Yee Yen 4/4 100 Non-Independent Non-Executive Director (Appointed on 27 January 2015 and subsequently Resigned on 14 August 2015) 14 Annual Report 2015
STATEMENT ON CORPORATE GOVERNANCE (Cont d) No Name of Directors No of Meetings attended during the time the Directors hold office % 8. Capt Tony Tan Han (Chen Han) 5/5 100 Independent Non-Executive Director (Appointed on 24 March 2015) 9. Dato Abdul Latif Bin Abdul Rahim 6/6 100 Non-Independent Non-Executive Director 10. Leong Fook Heng 1/2 50 Independent Non-Executive Director (Appointed on 17 August 2015) vi. Supply of Information and Access to Advice In ensuring an effective functioning of the Board, all Directors have individual and independent access to the advice and support services of the Company Secretaries and External Auditors and, may seek advice from the Management on issues under their respective purview. All directors have unrestricted access to the advice and services of the Company Secretary. The Board is provided with comprehensive board papers on a timely manner prior to board meetings. This is to ensure and enable the members of the Board to discharge their duties and responsibilities competently in a well-informed manner All directors have the right and duty to make further enquiries where they consider necessary. In most instances, members of Senior Management are invited to be in attendance at Board meetings to provide insight and to furnish clarification on issues that may be raised by the Board. Every Director also has unrestricted access to all information with regard to the activities of the Raya Group. vii. Continuing Education and Training of Directors The Company made relevant training programmes available for Directors continuing education as the Board recognises the importance of continuing education for its Directors to ensure they are continually equipped with the necessary skills and knowledge to meet the challenges of the Board from time to time. All members of the Board have attended the Mandatory Accreditation Programme as prescribed by the ACE LR of Bursa Securities. In addition, the Directors also attended development and training programmes and other professionally conducted seminars relevant to the Company s business and/ or their respective skills during the year. The Directors will continue to attend training programmes endorsed by Bursa Securities to keep abreast of industry developments and trends. Some of the training/courses attended by the Directors during the FYE 2015 is as follows:- Management Discussion and Analysis Statement (MD&A) Training 15 Annual Report 2015
STATEMENT ON CORPORATE GOVERNANCE (Cont d) viii. Re-election of Directors In accordance with the Company s Articles of Association, one-third (1/3) of the directors shall retire from office and be eligible for re-election at each Annual General Meeting and all directors shall retire from office at least once in every three (3) years but shall be eligible for re-election. Directors appointed during the year will be subject to retirement and re-election by shareholders in the Annual General Meeting. Directors over seventy (70) years of age are required to retire and submit themselves for re-appointment annually in accordance with Section 129(6) of the Companies Act, 1965. B. BOARD COMMITTEES The Board has also delegated specific responsibilities to other Board Committees, which operate within clearly defined terms of reference. The Committees of the Board include the Audit Committee and Nomination & Remuneration Committee. The Board receives reports at its meetings from the Chairman of each committee on current activities and it is the general policy of the Company that all major decisions be considered by the Board as a whole. The Board has set up the following Committees to assist the Board in discharging their duties and decision making:- (a) Audit Committee The existing Audit Committee comprises three (3) members as follows:- Chairman : Leong Fook Heng Independent Non-Executive Director Member : Mohd Fikry Bin Rahman Independent Non-Executive Director : Ho Fook Meng Independent Non-Executive Director The Audit Committee Report is set out on page 21 to 26 of this Annual Report. (b) Nomination and Remuneration Committee The Nomination and Remuneration Committee comprises the following members:- Chairman : Ho Fook Meng Independent Non-Executive Director Members : Dato Abdul Latif Bin Abdul Rahim Non- Independent Non-Executive Director Leong Fook Heng Independent Non-Executive Director 16 Annual Report 2015
STATEMENT ON CORPORATE GOVERNANCE (Cont d) The Nomination and Remuneration Committee comprising a majority of Independent Non-Executive Directors, is tasked with the responsibility to identify and select potential new Directors and to make recommendations to the Board for the appointment of Director The Committee is responsible for reviewing candidates for appointment to the Board Committees, and making recommendations to the Board for approval. The review is conducted on an annual basis, and as and when the need arises, such as when a new Director is appointed. The Company has an established framework of principles to evaluate performance and reward for executive directors. Remuneration packages for the executive directors are formulated to be competitive and realistic, emphasis being placed on performance, with aims to attract, motivate and retain executive directors of high caliber to the Group. For nonexecutive directors, the level of remuneration commensurate with the level of responsibilities undertaken by them for the Company. The Committee is responsible for making recommendation to the Board on the eligibility of the Directors to stand for re-election at the AGM. The terms of reference of the Nomination and Remuneration Committee are as follows:- To regularly review the Board structure, size and composition. To recommend candidates for the approval of the Board to fill vacancies in the Board. To annually review the required mix of skills and experience and other qualities and competencies which non-executive directors should bring to the Board. To annually assess the effectiveness of the Board as a whole, the committee of the Board and contributions of each individual director of the Board. Identifying and recommending directors who are to be put forward for retirement by rotation Consider gender diversity generally when making appointments to the Board. To review and determine, at least once annually, adjustments to the remuneration package including benefits-in-kind of each executive director, taking into account the performance of the individual, the inflation price index and where necessary, information from independent sources on remuneration packages for the equivalent jobs in the industry. To review and determine the quantum of performance related bonuses, benefits-in-kind and Employee Share Options, if available, to be given to the executive directors. To consider and execute the renewal of the service contract of executive directors as and when due, as well as the service contracts and remuneration packages for newly appointed executive directors prior to their appointments. 17 Annual Report 2015
STATEMENT ON CORPORATE GOVERNANCE (Cont d) C. DIRECTORS REMUNERATION The Board of Directors had resolved to waive the directors fee for FYE 2015. D. RELATIONSHIP WITH SHAREHOLDERS The Company communicates regularly with shareholders and investors through annual reports, quarterly financial reports and various announcements made via Bursa LINK as the Board acknowledges the importance of accurate and timely dissemination of information to its shareholders, potential investors and the public in general. The Annual General Meeting also provides an opportunity for the shareholder to seek and clarify any issues relevant to the Company. Shareholders are encouraged to meet and communicate with the Board at Annual General Meeting and to vote on all resolutions. At the commencement of the AGM after the calling of the meeting to order, the Chairman would remind the shareholders, proxies and corporate representatives on their rights to demand for a poll in accordance with the provisions of the Articles of Association of the Company for any resolutions. The Chairman is also aware that he could demand for a poll for substantive resolution to be tabled at the shareholders meetings. The Company s Share Registrar is well equipped to conduct poll should the need arises. E. ACCOUNTABILITY AND AUDIT i. Financial Reporting The Board aims to provide a balanced and understandable assessment of the Group s financial position and prospects through the annual report as well as quarterly financial results to its shareholders. It is the Board s responsibility to ensure that the financial statements are prepared in accordance with the Companies Act, 1965 and the applicable approved accounting standards set by Malaysian Accounting Standard Board so as to present a balanced and fair assessment of the Group s financial position and prospects. The Board through the Audit Committee endeavors to provide and present a balanced and meaningful assessment of the Group s financial performance and prospects to shareholders, primarily through the annual reports, quarterly announcements of the Group s results and other price-sensitive public reports. The Board is assisted by the Audit Committee in overseeing the Group s financial reporting processes and the accuracy, consistency and appropriateness of the use and application of accounting policies and standards, as well as the reasonableness and prudence in making estimates, statements and explanations. The Company maintains a formal and transparent and professional relationship with the Auditors. On a yearly basis, the Audit Committee would meet with the External Auditors to go through the Audit Planning Memorandum prior to the commencement of the audit. 18 Annual Report 2015
STATEMENT ON CORPORATE GOVERNANCE (Cont d) In addition, the Audit Committee would also meet with the External Auditors to discuss with the External Auditors on their report to the Audit Committee following the completion of their audit. The External Auditors would share with the Audit Committee on any significant issues on the financial statements and regulatory updates. The Audit Committee would obtain the confirmation of the External Auditors with regard to the Company s compliance with the applicable financial reporting standards. ii. Relationships with Auditors The Board has established a formal and transparent relationship with the auditor, Messrs. STYL Associates appointed by the Company. The Audit Committee, has been accorded the authority to communicate directly with the external auditors. The auditors in turn are able to highlight matters which require the attention of the Board effectively to the Audit Committee in terms of compliance with the accounting standards and other related regulatory requirements. iii. Statement of Directors Responsibility in respect of the Financial Statements The Malaysian Company Law requires the Directors to prepare financial statements for each financial year, which give a true and fair view of the state of affairs of the Company and the results and cash flow of the Company for that period. In preparing those financial statements, the Directors are required to:- a) Select suitable accounting policies and then apply them consistently; b) State whether applicable accounting standards have been followed; c) Make judgments and estimates that are reasonable and prudent; and d) Prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for keeping proper accounting records, which disclose with reasonable accuracy, at any time, the financial position of the Company. The Directors are also responsible for safeguarding the assets of the Company and for taking reasonable steps for the prevention and detection of fraud and irregularities. iv. Policies and procedures to assess suitability and independence of External Auditors The Audit Committee has in place an assessment of the External Auditors and would assess them on an annual basis and report to the Board its recommendation for the reappointment of the External Auditors at the annual general meeting. The External Auditors assures the Audit Committee that they were independent throughout the conduct of the audit engagement in accordance with the terms of all relevant professional and regulatory requirements. v. Internal Control The Directors are responsible for the Group s system of internal controls and its effectiveness. The principal aim of the system of internal controls is the management of financial and business risks that are significant to the fulfilment of the Company s business objectives, which is to enhance the value of shareholders investment and safeguarding the Group s assets. 19 Annual Report 2015
STATEMENT ON CORPORATE GOVERNANCE (Cont d) The Board acknowledges its overall responsibility for maintaining a sound system of internal control, which encompasses risk management, financial, organisational, operational and compliance controls necessary for the Group to achieve its objectives within an acceptable risk profile to safeguard shareholders investment and the Group s assets. However, the Board recognises that such system is structured to manage rather than eliminate the possibility of encountering risk of failure to achieve corporate objectives. During the financial period ended 31 December 2015, based on the audit plan approved by the Audit Committee, the outsourced internal auditors carried out review of selected key processes of the Group, covering internal control framework, investment procedures, and risk management. The Group has appointed an independent professional service provider to carry out the internal audit function, namely Chung Wan Ling & Co (CWL). The outsourced Internal Auditors report directly to the Audit Committee, providing the Board with a reasonable assurance of adequacy of the scope, functions and resources of the Internal Audit function. The purpose of the Internal Audit function is to provide the Board, through the Audit Committee, assurance of the effectiveness of the system of internal control in the Group. The internal controls are tested for effectiveness and efficiency by CWL. The report of the Internal Audit is tabled for the Audit Committee s review and comments, and the audit findings will then be communicated to the Board. Details of the internal control system are set out in the Statement on Risk Management and Internal Control of this Annual Report. F. ENSURE TIMELY AND HIGH QUALITY DISCLOSURE The Company recognises the value of transparent, consistent and coherent communications with investment community consistent with commercial confidentiality and regulatory considerations. The Board has yet to formalise a corporate disclosure policy. Nonetheless, the Board is committed to ensuring that communications to the investing public regarding the business, operations and financial performance of the Company are accurate, timely, factual, informative, consistent, broadly disseminated and where necessary, information filed with regulators is in accordance with applicable legal and regulatory requirements. G. CORPORATE SOCIAL RESPONSIBILITIES Whilst pursuing its corporate goals, the Group recognises and acknowledges the importance of a corporate culture that emphasises on being a good corporate citizen. In this regard, the Group is committed and endeavours on an ongoing basis, to integrate corporate social responsibility ( CSR ) practices into its day-to-day business operations. The Company did not undertake any corporate social responsibility activities or practices during the financial year under review. This Statement on Corporate Governance is made in accordance with a resolution of the Board of Directors dated 20 April 2016 20 Annual Report 2015
AUDIT COMMITTEE REPORT The Audit Committee was established with the primary objective to provide assistance to the Board in fulfilling its fiduciary responsibilities relating to the corporate governance and practices for the Group,to improve the business efficiency and enhance the independent role of external and internal auditors. 1. Composition of Audit Committee The existing Audit Committee comprises three (3) members as follows:- Chairman Member : Leong Fook Heng Independent Non-Executive Director : Mohd Fikry Bin Rahman Independent Non-Executive Director : Ho Fook Meng Independent Non-Executive Director The Audit Committee Chairman, Mr. Leong Fook Heng is a member of the Malaysian Institute of Accountants (MIA) and Associate Member of Chartered Institute of Management Accountants (United Kingdom). In this respect, the Company complies with Rule 15.09(1)(c)(i) of the ACE Listing Requirements. The performance of the Audit Committee and its members are assessed by the Board through a board committee effectiveness evaluation. The Board is satisfied that the Audit Committee members are able to discharge their functions, duties and responsibilities in accordance with the Terms of Reference of the Audit Committee, thereby supporting the Board in ensuring appropriate Corporate Governance standards within the Group. 2. Terms Of Reference Composition The Audit Committee shall be appointed by the Board from amongst their members, who fulfils the following requirements:- a) The Audit Committee must be composed of no fewer than three (3) members. In the event of any vacancy in the Audit Committee resulting in the non-compliance of the above, the Company must fill the vacancy within three (3) months. b) All the Audit Committee members must be non-executive directors, with a majority of them being independent directors. c) All the Audit Committee members must be financially literate, with at least one member :- must be a member of the Malaysian Institute of Accountants; or if he is not a member of the Malaysian Institute of Accountants, he must have at least three (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 21 Annual Report 2015
AUDIT COMMITTEE REPORT (Cont d) he 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 shall be appointed as a member of the Audit Committee. e) The member of the Audit Committee shall elect a Chairman from among themselves who shall be an Independent Director. The Chairman of the Audit Committee should engage on a continuous basis with senior management, the head of internal audit and the external auditors in order to be kept informed of matters affecting the Company. All members of the Audit Committee, including the Chairman, will hold office only so long as they serve as Directors of the Company. The Board must 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 Audit Committee has carried out its duties in accordance with its terms of reference. Secretary of the Audit Committee The Company Secretary of the Company shall be the Secretary of the Audit Committee. Duties and Responsibilities of the Audit Committee The following are the main duties and responsibilities of the Audit Committee collectively:- (a) Review the following and report the same to the Board of the Company:- (i) oversee the Company s internal control; (ii) with the external auditors, the audit plan; (iii) with the external auditors, his evaluation of the system of internal controls; (iv) with the external auditors, his audit report; (v) the assistance given by the employees of the Company to the external auditors and the internal auditors; (vi) 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 (vii) 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; (viii) the quarterly results and year end financial statements, prior to the approval by the Board, focusing particularly on :- changes in or implementation of major accounting policy changes; significant and unusual events; and compliance with accounting standards and other legal requirements; (ix) 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; (x) any letter of resignation from the external auditors and any questions of resignation or dismissal; and (xi) whether there is reason (supported by grounds) to believe that the Company s external auditor is not suitable for re-appointment; 22 Annual Report 2015
AUDIT COMMITTEE REPORT (Cont d) (b) (c) (d) (e) (f) (g) (h) Oversee the Company s internal control structure to ensure operational effectiveness and efficiency, reduce risk of inaccurate financial reporting, protect the Company s assets from misappropriation and encourage legal and regulatory compliance; Assist the Board in identifying the principal risks in the achievement of the Company s objectives and ensuring the implementation of appropriate systems to manage these risks; Recommend to the Board on the appointment and re-appointment of the external auditors and their audit fee, after taking into consideration the independence and objectivity of the external auditors and the cost effectiveness of the audit; Discuss with the external auditors before the audit commences the nature and scope of the audit and ensure co-ordination where more than one audit firm is involved; Discuss problems and reservations arising from the audits and any matter the auditors may wish to discuss in the absence of the management where necessary; Review the external auditor s management letter and management s response therein; In relation to the internal audit function:- a. review the adequacy of the scope, functions and resources of the internal audit function and that it has the necessary authority to carry out its work; b. review the internal audit programme and results of the internal audit process and, where necessary, ensure that appropriate actions are taken on the recommendations of the internal audit function; c. review any appraisal or assessment of the performance of members of the internal audit function; d. approve any appointment of termination of senior staff members of the internal audit function; and e. take cognisance of resignations of internal audit staff members and provide the resigning staff member an opportunity to submit his reasons for resigning; (i) (j) Consider the major findings of internal investigations and management s response; To review the effectiveness of the internal controls and risk management processes of the Company; and (k) Consider other matters as defined by the Board. Rights of the Audit Committee In carrying out its duties and responsibilities, the Audit Committee will:- have the authority to investigate any matter within its terms of reference; have the resources which are required to perform its duties; have full and unrestricted access to any information pertaining to the Company; have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity; 23 Annual Report 2015