Annual Report 2015 - MalaysiaStock.Biz Proxy Form . Annual Report 2015 2 Except where the context otherwise requires, the following definitions shall apply throughout this Annual Report:-

Annual Report 2015 1

ContentsDefinitions 02

Corporate Information 03

Profile of Directors 04

Statement to Shareholders 06

Audit & Risk Management Committee Report 08

Corporate Governance Statement 12

Statement on Risk Management and Internal Control 26 Directors’ Report 29

Statements of Financial Position 33

Statements of Profit or Loss andOther Comprehensive Income 34

Statements of Changes in Equity 35

Statements of Cash Flows 37

Notes to the Financial Statements 40

Statement by Directors 97

Statutory Declaration 97

Independent Auditors’ Report 98

Information on Properties 100

Analysis of Shareholdings 106

Analysis of Warrants Holdings 108

Notice of Annual General Meeting 110

Statement Accompanying Notice of Annual General Meeting 113 Proxy Form


Except where the context otherwise requires, the following definitions shall apply throughout this Annual Report:-

“AGM” : Annual General Meeting

“ARMC” : Audit & Risk Management Committee

“Board” : Board of Directors

“Bursa Securities” : Bursa Malaysia Securities Berhad

“Code” : Malaysian Code on Corporate Governance 2012 and any subsequent amendments from time to time

“EPS” : Earnings per Share

“FMSB” : Fresh Melody Sdn Bhd (Company No. 590174-K), a wholly owned subsidiary of RSB

“Listing Requirements” : Main Market Listing Requirements of Bursa Securities

“NA” : Net Assets

“PESB” : Persiaran Eksklusif Sdn Bhd (Company No. 445587-U), a wholly owned subsidiary of RSB

“RCM” : Rapid Construction & Management Sdn Bhd (Company No. 99657-A), a wholly owned subsidiary of RSB

“RMSB” : Rapid Mall Sdn Bhd (Company No. 166934-V), a wholly owned subsidiary of RSB

“RM” : Ringgit Malaysia

“RPT” : Rapid Precision Technologies Sdn Bhd (Company No. 182561-T), a wholly owned subsidiary of RSB

“RRSB” : Rapid Retail Sdn Bhd (Company No. 968869-A) a wholly owned subsidiary of RSB

“RSB Group” or “Group” : RSB and its subsidiaries

“RSB” or “Company” : Rapid Synergy Berhad (Company No. 325935-U)

Definitions


Corporate Information

Board of Directors Dato’ Dr. Yu Kuan Chon, DIMP, PPT (Non-Independent and Non-Executive Director) Lee Chiew Hiang (Executive Director) Ding Ming Hea (Independent Non-Executive Director) Lee Chun Weng (Independent Non-Executive Director) Dato’ Yu Kuan Huat, DPMP, PMP, AMP, PPT (Alternate Director to Dato’ Dr. Yu Kuan Chon) Ching Nye Mi @ Chieng Ngie Chay (Independent Non-Executive Director) (Appointed on 15 February 2016) Dato’ Paduka Mahmud bin Hj. Ali, DPMT, AMP, PJK (Senior Independent Non-Executive Director) (Retired on 30 December 2015) Audit & Risk Management Lee Chun Weng (Chairman) Committee Ding Ming Hea (Member) Ching Nye Mi @ Chieng Ngie Chay (Member)

Nomination Committee Ding Ming Hea (Chairman) Lee Chun Weng (Member) Ching Nye Mi @ Chieng Ngie Chay (Member)

Remuneration Committee Ding Ming Hea (Chairman) Lee Chun Weng (Member) Ching Nye Mi @ Chieng Ngie Chay (Member) Dato’ Dr. Yu Kuan Chon, DIMP, PPT (Member)

Company Secretaries Tai Yit Chan (MAICSA 7009143) Ong Tze-En (MAICSA 7026537)

Share Registrar AGRITEUM Share Registration Services Sdn. Bhd. 2nd Floor, Wisma Penang Garden, 42, Jalan Sultan Ahmad Shah, 10050 Penang. Tel: 04-2282321 Fax: 04-2272391

Registered Office Suite 16-1 (Penthouse Upper) Menara Penang Garden, 42A, Jalan Sultan Ahmad Shah, 10050 Penang. Tel: 04-2294390 Fax: 04-2265860

Principal Place of Business 161 Jalan Sungai Keluang, Bayan Lepas FIZ, Phase I, 11900 Penang. Tel: 04-6439300 Fax: 04-6439311

Auditors KPMG (Firm No: AF: 0758) Level 18 Hunza Tower, 163E Jalan Kelawei, 10250 Penang.

Principal Bankers Public Bank Berhad (6463-H) Hong Leong Bank Berhad (97141--X) Stock Exchange Listing Main Market of Bursa Malaysia Securities Berhad Stock code: 7765 Stock name: Rapid

Website www.rapidsynergy.com.my


Profile of Directors

DATO’ DR. YU KUAN CHON, DIMP, PPT, aged 53, a Malaysian, is a Non-Independent and Non-Executive Director and was appointed to the Board of RSB on 23 November 1998. He was appointed as a member of the Remuneration Committee on 30 August 2001.

Dato’ Dr Yu is also a substantial shareholder of the Company. A medical doctor by profession, he started work as a houseman in Klang, Selangor after graduation in 1988 and continued as a medical officer a year later. In 1995, he left government service and started assisting in Kar Sin Berhad, the family business involved in property development. Kar Sin Berhad is now a wholly owned subsidiary of YNH Property Berhad (YNHP), a company listed on the Main Market of the Bursa Securities. He is presently the Executive Chairman of YNHP. He also sits on the Board of subsidiaries of RSB and other private limited companies.

He does not have any family relationship with any Director and/or substantial shareholders of RSB except for Dato’ Yu Kuan Huat, DPMP, PMP, AMP, PPT, who is his brother and Yu Neh Huat & Sons Sdn Bhd, a substantial shareholder of the Company. He is not involved in any conflict of interest with the Company and has not been convicted of any offence within the past 10 years.

DING MING HEA, aged 52, a Malaysian, is an Independent Non-Executive Director of RSB and was appointed to the Board on 4 December 2001. He was appointed as a member of the ARMC and Nomination Committee on 4 December 2001. He is the Chairman of the Remuneration Committee since 1 August 2009.

He obtained a Bachelor of Science in Mathematics from Universiti Kebangsaan Malaysia and a Degree in Law in the United Kingdom. He was called to the Bar of England and Wales by the Honourable Society of Gray’s Inn, London, United Kingdom in 1990 and was admitted as an advocate and solicitor of the High Court of Malaya in 1992. In 1993, he obtained a Master of Laws (LLM) in Corporate and Commercial Law from King’s College London, University of London, United Kingdom. Presently, he is a partner of a legal firm, Nor Ding & Co. He sits on the Board of a subsidiary of RSB and is also an Independent Non-Executive Director in YNHP.

He does not have any family relationship with any Director and/or substantial shareholders of RSB. He is also not involved in any conflict of interest with the Company and has not been convicted of any offence within the past 10 years.

LEE CHUN WENG, aged 60, a Malaysian, is an Independent Non-Executive Director and was appointed to the Board and Audit Committee on 17 June 2002. Mr Lee was appointed Chairman of the Audit & Risk Management Committee and a member of Remuneration Committee on 15 February 2016. He has been a member of Nomination Committee since 1 August 2009.

He has been in public practice upon completion of his professional accountancy studies in 1978. Mr Lee is a member of the Malaysian Institute of Accountants.

He does not hold directorship in other public companies and does not have any relationship with any Director and/or substantial shareholders of RSB. He is also not involved in any conflict of interest with the Company and has not been convicted of any offence within the past 10 years.


CHING NYE MI @ CHIENG NGIE CHAY, aged 69, a Malaysian, was appointed as Independent Non-Executive Director of RSB on 15 February 2016. On the same day, he was also appointed as a member of the ARMC as well as Nomination and Remuneration Committees.

Mr Ching holds a Bachelor of Arts (Econs) degree from University Malaya. He was a banker by profession and had spent more than 30 years in the industry. He last served as Branch Manager in Public Bank Berhad before his retirement in August 2002.

He does not hold any directorship in any other public listed company other than as Independent Non-Executive Director in YNHP.

He does not have any family relationship with any Director and/or substantial shareholders of RSB. He is not involved in any conflict of interest with the Company and has not been convicted of any offence within the past 10 years.

DATO’ YU KUAN HUAT, DPMP, PMP, AMP, PPT, aged 57, a Malaysian, is the Alternate Director to Dato’ Dr Yu Kuan Chon, DIMP, PPT. He was appointed to the Board on 16 February 2011.

Dato’ Yu is a substantial shareholder of the Company. He was the Managing and Founder Director of Kar Sin Berhad, which is now a wholly owned subsidiary of YNHP. He has more than 2 decades of experience in property development, construction, money lending and aquaculture. He is presently the Managing Director of YNHP.

He does not have any family relationship with any Director and/or substantial shareholders of RSB except Dato’ Dr Yu Kuan Chon, DIMP, PPT, who is his brother and Yu Neh Huat & Sons Sdn Bhd, a substantial shareholder of the Company. He is not involved in any conflict of interest with the Company and has not been convicted of any offence within the past 10 years.

LEE CHIEW HIANG, aged 53, a Malaysian, is the Executive Director and was appointed to the Board of RSB on 25 May 2011. She leads the Senior Management team and is primarily responsible for strategic planning and daily operational management of RSB Group.

She held several key positions in RPT since 1990 with increasing responsibilities and seniority before assuming her present position.

She does not have any family relationship with any Director and/or substantial shareholders of RSB. She is not involved in any conflict of interest with the Company and has not been convicted of any offence within the past 10 years.

Profile of Directors (cont’d)


Statement to Shareholders

The Board of RSB is pleased to present the Annual Report and the Audited Financial Statements of the Company and the Group for the financial year ended 31 December 2015.

Overview of the industry and development

The precision tooling manufacturing sector remained competitive and faced margin pressure as customers stepped up cost rationalization efforts more so in light of slowdown in global economy and the semi-conductor industry particularly as well as continued weakening of Ringgit Malaysia against the US Dollar in 2015. Some customers opted to rework tooling parts rather than purchase new ones.

The decline in orders from customers for new tooling parts is a contributing factor to the marginal drop in revenue from the Group’s manufacturing division. The weakened Ringgit Malaysia had added cost pressure on the manufacturing activity as some of the raw materials consumed is priced in US Dollar. This has resulted in higher total manufacturing costs.

Taking cognizance of the above challenges faced by the manufacturing division, the management has taken steps to arrest the decline by increasing operational and human resource efficiency, cost rationalisation and improvement to delivery time.

Review of operations and financial results

For the financial year ended 31 December 2015, the Group reported loss before tax of RM15.0 million on the back of revenue totaling RM27.7 million. The Group reported revenue of RM28.6 million and corresponding profit before tax of RM12.4 million in the preceding financial year. The losses were mainly due to provision for impairment of investment based on independent valuation amounting to RM22.8 million in quoted securities, which are currently suspended. The impairment shall be reviewed after upliftment of suspension of said securities.

The manufacturing division recorded a revenue of RM10.9 million and loss before tax of RM0.1 million, a marginal contraction over revenue of RM10.9 million and loss before tax of RM1.4 million in the preceding financial year. The reduction in loss was mainly due to improvement in production efficiencies.

The investment holding division recorded a revenue of RM16.7 million compared to RM17.5 million in the previous financial year. During the year, the Group disposed of some investment properties. The disposal resulted in decrease in rental received but enabled management to unlock and realize capital appreciation value in those properties. The investment holding division recorded loss before tax of RM13.9 million compared to profit before tax of RM14.7 million in the previous financial year. The loss before tax was mainly due to provision for impairment of investment in quoted securities.

The restaurant division recorded a revenue of RM0.1 million and loss before tax of RM0.6 million compared to RM0.2 million and RM1.0 million respectively in the previous financial year.

On 27 November 2015, the manufacturing division successfully completed the environmental certification process and was awarded the ISO14001:2004 compliance certification by SGS. This is an important milestone achieved by the manufacturing division in addition to being awarded the Outstanding Supplier Performance by one of its major customers.


Prospect for the year 2016

Moving forward we expect the Group’s operating environment to be even more competitive with added strain to profit margin. The manufacturing division business is pressured to maintain or lower its selling price in order to avoid losing out to both local and international competitors as customers continued to drive their cost reduction programme. Purchase orders had also contracted for the first quarter of 2016. In order to improve the performance of the manufacturing business, management intends to expand the product range and customers.

As for the property investment division, the Group will continue to look out for opportunities to acquire properties with long term recurring rental income as well as capital appreciation potential. The Group will review, from time to time, its investment in selected properties which have appreciated in value.

Barring any unforeseen circumstances and through intensive marketing efforts, exploiting opportunities and increasing efficiencies, we expect the performance of the Group to be satisfactory for the year 2016.

Dividend

The Board is not recommending any dividend for the financial year ended 31 December 2015.

Acknowledgement

The Board of Directors would like to record our sincere appreciation to the management team and all employees for their steadfast commitment and dedication to the Group. We would also like to thank our valued shareholders, financiers, customers, suppliers and business associates for their continued confidence and support for the Group. The Board also wished to thank all regulatory authorities for their advice and guidance.

Dato’ Paduka Mahmud Bin Hj. Ali retired on 30 December 2015. The Board bid him farewell and take this opportunity to record our appreciation to him for his immense support and contribution to the Group during his tenure as Senior Independent Non-Executive Director.

Last but not least, the Board welcome Mr Ching Nye Mi @ Chieng Ngie Chay who joined the Board on 15 February 2016 as Independent Non-Executive Director. We trust that, Mr Ching with his extensive experience in banking and business, will be able to contribute positively to the Group.

The Board of Directors8 April 2016

Statement to Shareholders (cont’d)


Audit & Risk Management Committee Report

MEMBERS OF THE COMMITTEE

Name of Members Directorship DesignationLee Chun Weng Independent Non-Executive Chairman of Committee Ding Ming Hea Independent Non-Executive Committee MemberChing Nye Mi @ Chieng Ngie Chay Independent Non-Executive Committee MemberDato’ Paduka Mahmud bin Hj. Ali, DPMT, AMP, PJK Senior Independent Non-Executive Chairman of Committee(Retired on 30 December 2015)

Chairman of the ARMC, Dato’ Paduka Mahmud bin Hj. Ali, retired on 30 December 2015. The vacancy was filled on 15 February 2016 when the Board appointed Mr Ching Nye Mi @ Chieng Ngie Chay as member of the ARMC. On the same day, Mr Lee Chun Weng was re-designated as Chairman of the ARMC.

TERMS OF REFERENCE

Composition of the ARMC

An ARMC shall be appointed by the Board from among their numbers (pursuant to a resolution of the Board of Directors) and shall fulfil the following requirements:-

(a) the ARMC must be composed of not less than three (3) members;(b) all of the ARMC members must be non-executive directors with a majority of them being independent Directors;

and (c) at least one (1) member of the ARMC:- (i) must be a member of the Malaysian Institute of Accountants; or (ii) if he is not a member of the Malaysian Institute of Accountants, he must have at least three (3) years’

working experience and:- (aa) he must have passed the examinations specified in Part I of the 1st Schedule of the Accountants

Act 1967; or (bb) he must be a member of one of the association of accountants specified in Part II of the 1st

Schedule of the Accountants Act 1967; or (cc) fulfils such other requirement as prescribed or approved by the Bursa Securities.(d) Alternate Director is not allowed to become a member of the ARMC.

The ARMC shall elect a chairman from among its members who shall be an independent Director.

In the event of any vacancy in the ARMC resulting in the non-compliance of (a), (b) & (c) above, the Board must fill the vacancy within three (3) months.

The term of office and performance of the ARMC and each of its members shall be reviewed by the Board at least once every three years to determine whether the ARMC and its members have carried out their duties in accordance with their terms of reference.

Meetings

The ARMC shall hold at least four regular meetings per year and such additional meetings as the Chairman of the ARMC shall decide in order to fulfil its duties. In addition, the Chairman of the ARMC may call for a meeting of the ARMC if a request is made by any member of the ARMC, management, or the Board, or the internal or external auditors.

The quorum for a meeting of the ARMC shall be two members, majority of whom must be independent Directors.

The Company Secretary shall be the secretary of the ARMC. The Company shall ensure that the attendance of the other Directors and employees of the Company at any particular ARMC meeting is only at the ARMC’s invitation and is specific to the relevant meeting. The ARMC shall regulate its own procedures, in particular, the calling of meetings, the notice and agenda to be given of such meetings, the voting and proceeding of such meetings, the keeping of minutes and the custody, production and inspection of such minutes.

The Company Secretary who acts as secretary of the ARMC shall circulate the minutes of each meeting to all members of the Board.


Audit & Risk Management Committee Report (cont’d)

Duties and Responsibilities

(a) To review the Company’s and the Group’s quarterly results and annual financial statements before submission to the Board, focusing on:

(i) Any changes in or implementation of accounting policies and practices; (ii) Major judgment areas; (iii) Significant adjustments arising from audit; (iv) Going concern assumption; (v) Compliance with accounting standards; (vi) Compliance with stock exchange and legal requirements; and (vii) Significant and unusual events

(b) To review with the external auditors their audit plan, scope and nature of audit for the Company and the Group, their evaluation of the system of internal control, their audit report, audit findings, their management letter and management’s response including previous audit findings and recommendations as well as the assistance given by the Company’s employees to the external auditors;

(c) To review the adequacy of the internal audit scope and plan, functions, competency and resources of the internal audit functions and that it has the necessary authority to carry out its work;

(d) To discuss problems and reservations arising from the interim and final audits, and any matters the external auditors may wish to discuss (in the absence of management where necessary);

(e) To perform the following, in relation to the internal audit function:

(i) Review the adequacy of the scope, functions, competency and resources of the internal audit function, and that it has the necessary authority to carry out its work;

(ii) Review the internal audit programme and results of the internal audit programme, processes or investigation undertaken and, where necessary, ensure that appropriate actions are taken on the recommendations of internal audit function;

(iii) Review the internal audit plan, consider the major findings of the internal audits, internal or fraud investigations and actions and steps taken by management in response to audit findings;

(iv) Review any appraisal or assessment of the performance of members of the internal audit function; (v) Approve any appointment or termination of senior staff members of the internal audit function; and (vi) Take cognisance of resignations/transfer of internal audit staff members and provide the resigning staff

member an opportunity to submit his reasons for resigning.

(f) To review any related parties transactions and conflict of interest situation that may arise within the Company and the Group including any transaction, procedure or course of conduct that raises questions or management integrity;

(g) To consider the appointment of the external auditors and to review whether there is reason (supported by grounds) to believe that the external auditors are not suitable for re-appointment, to consider the nomination of a person or persons as external auditors and the audit fees, the terms of reference of their appointment, and any question of resignation or dismissal;

(h) To review the assistance given by the Group’s officers to the auditors, and any difficulties encountered in the course of the audit work, including any restrictions on the scope of activities or access to required information;

(i) To verify the allocation of option granted pursuant to the Employee Share Option Scheme;

(j) To report to the Board its activities, significant results and findings;



(k) To review procedures in place to ensure that the Group is in compliance with the Companies Act 1965, Bursa Securities Listing Requirements and other legislative and reporting requirements;

(l) To promptly report such matter to the Bursa Securities if the ARMC is of the view that the matter reported by it to the Board of Directors has not been satisfactorily resolved resulting in a breach of the Listing Requirements;

(m) To discuss the contracts for the provision of non-audit services which can be entered into and procedures that must be followed by the external auditors. The contracts cannot be entered into should include management consulting, strategic decision, internal audit and standard operating policies and procedures documentation;

(n) To direct and where appropriate supervise any special projects or investigation considered necessary, and review investigation reports on any major defalcations, frauds and thefts;

(o) To review and recommend an appropriate risk management strategy so as to ensure that business risks are effectively addressed by the Group;

(p) To review the adequacy and completeness of the Group’s risk management process and recommending improvements where required; and

(q) To undertake any such responsibilities as may be agreed by the Committee and the Board.

Authority

The ARMC shall, wherever necessary and reasonable for the performance of its duties, in accordance with a procedure to be determined by the Board of Directors and at the cost of the Company:-

(a) Have authority to seek any information it requires from employees or investigate any activity within its terms of reference.

(b) Have the resources which are required to perform its duties.

(c) Have full and unrestricted access to all information, documents and officers of the Company and the Group for the purpose of discharging its functions and responsibilities.

(d) Have direct communications channels with the internal and external auditors and senior management of the Group and shall be able to convene meetings with the external auditors, the internal auditors or both, excluding the attendance of other directors and employees of the Company, whenever deemed necessary.

(e) Be able to obtain outside legal or other independent professional advice as it considers necessary at the expense of the Company.

ATTENDANCE OF MEETINGS

During the last financial year, four (4) meetings were held. The details of attendance of each member at the meetings held during the period from 1 January 2015 to 31 December 2015 are as follows:

ARMC Member Designation in RSB No. of meetings No. of meeting held during attended member’s tenure by members in office Dato’ Paduka Mahmud bin Hj. Ali, Senior Independent Non-Executive DPMT, AMP, PJK Director (Chairman) 4 1 (Retired on 30 December 2015)Ding Ming Hea Independent Non-Executive Director 4 4Lee Chun Weng Independent Non-Executive Director 4 4


SUMMARY OF ACTIVITIES

The main activities undertaken by the ARMC during the financial year ended 31 December 2015 were as follows:-

(a) Reviewed quarterly unaudited financial results and the annual audited financial statements of the Group as well as appropriate announcements to Bursa Securities before recommending to the Board of Directors for approval and for announcement to Bursa Securities;

(b) Reviewed the audit plan from the external auditors, the audit strategy, scope of work for the year and general extent of the auditors’ audit examinations;

(c) Reviewed the external audit results, audit reports, management letter (if any) and the response from the management;

(d) Reviewed the internal audit plan, systems of internal controls and its evaluation and risk management, its scope of work, functions, competency and that it has the necessary resources to carry out its work;

(e) Reviewed the internal audit reports, the audit issues therein, recommendations and management’s response;(f) Reviewed and recommended for approval of the Board of Directors the Statement on Risk Management and

Internal Control and the Audit Committee Report;(g) Reviewed the recurrent related party transactions of a revenue or trading nature and other related party

transactions entered into by the Group;(h) Discussed and approved draft circular to shareholders in relation to proposed renewal of shareholders’ mandate

for recurrent related party transactions of a revenue or trading nature;(i) Met twice with the external auditors without the presence of the Executive Director and management staff to

discuss issues of concern to the auditors;(j) Reviewed the performance and independence of the external auditors, considered and recommended their re-

appointment to the Board;(k) Reviewed the Investment Policy and recommended the same for approval by the Board and subsequent

implementation effective 1 January 2016; and(l) Evaluate the performance and functions of the internal auditors.

INTERNAL AUDIT FUNCTION

The ARMC is assisted by internal audit function which is outsourced to an independent consulting firm, Lefis Consulting Sdn Bhd. The expenses incurred for internal audit amounted to RM38,000 for the financial year ended 31 December 2015. The role of the internal audit team is to provide independent and objective reports on the state of internal control, risk management and compliance with policies and procedures. The internal auditor assists the Group in accomplishing its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance process.

It is the responsibility of the internal auditors to provide the ARMC with independent and objective reports on the state of internal control of the various operating units within the Group and the extent of compliance of the units with the Group’s established policies and procedures as well as relevant statutory requirements.

The summary of internal audit activities during the financial year under review is as outlined below:

(a) Presented a risk based internal annual plan for approval by ARMC. The internal audit plan covered key operational and financial activities that are significant to the overall performance of the Group and is developed to ensure adequate coverage of operational activities on a regular basis.

(b) Conducted assessment on the adequacy of internal controls, functional and operating process over the payroll function in the human resource department and repair and maintenance department;

(c) Performed follow-up review on production planning to monitor and ensure that corrective actions were implemented effectively;

(d) Reviewed the Investment Policy and recommended the same for consideration by ARMC and the Board and eventual implementation effective 1 January 2016.

(e) Presented internal audit reports to the ARMC on bi-annual basis. Audit recommendations and management responses in relation to findings on internal control weaknesses are incorporated into these reports which were also circulated to respective operational management teams.

(f) The resulting reports of the audits undertaken were issued to the management of the respective operating companies concerned, incorporating audit recommendations and management responses.



Corporate Governance Statement

The Board is committed to ensuring that good corporate governance is practiced throughout the Group as a fundamental part of discharging its responsibilities to protect and enhance shareholders’ value and the long-term financial performance of the Group. The Group has complied substantially with the relevant principles and recommendations of the Code and the provision of the Listing Requirements of Bursa Securities in so far as applicable and described herein.

Principle 1: Establish Roles & Responsibilities

1.1 Clear functions of the Board and Management

The Board leads and controls the Group. As a collective body, the Board assumes the overall responsibility for the Group: determining strategic direction, overseeing the proper conduct of the Group’s business, identifying principal risk and ensuring the implementation of systems to manage risks, succession planning, developing investor relations programme, reviewing the adequacy and integrity of the Group’s internal control systems and management information systems, establishing goals for management and monitoring the achievement of these goals.

As part of the initiative to ensure effective discharge of its leadership role, specific powers are delegated by the Board to the Board Committees, the Executive Director and the Management.

The Board Committees refers to the ARMC, Remuneration Committee and Nomination Committee. These Committees operate within specific terms of reference that were drawn up in accordance with best practices in the Code and function principally to assist the Board in the execution of its duties and responsibilities towards improvement in operational and general management efficiencies. All deliberations and decisions reached at Board Committees are recorded with Chairman of the respective Committees reporting to the Board on the outcome of the Committees’ meetings. Minutes of the Board Committee meetings are circulated to the Board. The authority and terms of reference of the Board Committees are reviewed from time to time with the aim to ensure its relevance and enhance its efficacy.

Notwithstanding the delegation of specific powers, the Board retains full responsibility for the direction and control of the Company and the Group. The ultimate responsibility for decision-making on all matters lies with the Board.

The Board has established clear functions reserved for the Board and those delegated to Management. The Board is responsible for the overall business framework within which the Group operates. This is formalized into a schedule of events that is reserved for the Board and these included determining overall group strategy and direction to approving acquisitions and divestments, business plan, budgets, capital expenditures, quarterly and annual financial results as well as monitoring financial and operational performance against targets.

On the other hand, management is responsible for the execution of activities to meet corporate plans as well instituting various measures to ensure due compliance with various governing legislations.

The Company is currently led by a Board comprising five (5) persons; one (1) Executive Director whilst three (3) are Independent Non-Executive Directors and one (1) Non-Independent Non-Executive Director.

On 30 December 2015, the Board announced the retirement of Dato’ Paduka Mahmud bin Hj. Ali, one of the long serving Independent Non-Executive Director. The vacancy was filled on 15 February 2016 following the appointment of Mr Ching Nye Mi @ Chieng Ngie Chay. The Board complies with the best practice in Corporate Governance with more than one third of the Board consists of Independent Non-Executive Directors. The Board has reviewed the composition of its members and has decided to keep the Board members to five (5) having regards to the current level of business activities.


Corporate Governance Statement (cont’d)

1.2 Clear roles and responsibilities

The Executive Director leads management and is responsible for the day-to-day operational management of the Group. The Non-Executive Directors do not participate in daily management of the Group.

Presently, the Executive Director holds dual role within the Group as both the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”). There is no individual or group of individuals who dominate the Board’s decision-making as key decisions are tabled to the Board for deliberation as this enables the Board to provide clear and effective leadership to the Company. During meetings, the Non-Executive Directors participate fully during Board deliberations and fulfill crucial role in corporate accountability by providing independent and objective views, opinions and judgements to various aspects of the Company’s strategies and performance.

The Executive Director has overall responsibilities over the operating units, organizational effectiveness and implementation of Board policies and decisions. Although all the Directors have an equal responsibility for the Group’s operations, the role of these Independent Non-Executive Directors are particularly important as they provide unbiased and independent views, advice and judgment.

The Chairman provides leadership and governance of the Board in order to create a conducive condition geared towards building and growing Directors’ effectiveness and ensure that appropriate issues are discussed by the Board in a timely manner. At this juncture in time, the Board has yet to determine a permanent Chairman. Notwithstanding that, the Non-Executive Directors take turn to chair Board meeting thus giving each person an opportunity to experience and learn the roles and responsibilities expected from a Chairman.

1.3 Formalise ethical standards through a Code of Conduct and Ethics

There is in place Company Policies & Procedures to guide the conduct of behavior of employees.

During the year, the Board formalized a Code of Conduct and Code of Ethics aimed at governing the standards of good conduct and ethics expected from both Directors and employees. The Company Policies & Procedures covers, among others, general employment terms and conditions, compensation and benefits, proprietary information and sexual harassment.

The implementation of the Code of Conduct and Code of Ethics reflect the Board’s commitment and set the tone for proper ethical behaviour expected of the Directors and employees.

At this juncture, the Board does not see the need to establish a separate whistleblowing policy given the presence of the Whistleblower Protection Act which came into effect in 2010.

1.4 Strategies promoting sustainability

The Board is cognizant of the need for business sustainability over the long term vis a vis the environmental, governance and social context. To that end, the Board reviews strategic development and operational progress on a quarterly basis with due regard to changing business conditions and risk factors such as competition, raw material pricing, fluctuations in foreign exchange and changes to governmental policies. The Board and the Group firmly believe in a 3-pronged approach focused on high quality, effective cost rationalization and timely delivery as the guiding principles in conducting its business and operational activities.

During the year, the manufacturing arm of the Group was awarded the ISO14001:2004 environmental compliance certification by SGS in addition to the Outstanding Supplier Performance award by one of its major customers. This certification and tribute testified to the Group’s continued commitment to quality and responsible business practices.

The Board acknowledges its role in ensuring the well-being of its employees, community where the Group operates and surrounding environment. To that end, the Board support management’s initiative on human development as our employees are our greatest asset and that it is the employees who have significantly contributed to its continued success and growth.



The Group continuously promotes human capital development by encouraging and sponsoring the participation of the employees in training programmes and seminars to enhance their technical knowledge, general management and soft skills and competency. The training programmes, either conducted internally or through engagement of external training providers, covered diverse topics from ISO14001 Awareness on Legal Requirements, MasterCam IME, Understanding Labour Law and Root Cause Analysis.

As part of its community services, the Group also offer practical training for students from universities and polytechnics under its industrial internship training programme to train students and equip them with rudimentary working skills and knowledge.

The Board had also approved a Sustainability Policy as an overarching guide towards promotion of sustainability though-out its business operations.

1.5 Access to information and advice

The Board of Directors is satisfied that it is supplied, on a timely basis, information in a form and of quality sufficient to enable the Board to discharge its duties. The said information includes, amongst others, the performance report of the Group and major operational, financial and corporate issues.

The agenda and board papers for consideration are distributed in advance before each meeting to ensure that Directors have sufficient time to study them and be properly prepared for discussion and decision-making. However, board materials deemed sensitive would be embargoed for release only at time of meeting. In the event physical meeting could not be convened owing to timeliness, conference calls are set-up to facilitate Board’s understanding of the issues at hand and to receive approval for the same.

Verbal explanations are provided by the Executive Director, management personnel and or external consultants, as applicable, to further the Directors’ understanding of operational management and or matters tabled for Board’ deliberation.

Minutes are prepared for all Board and Board Committees’ proceedings and will be confirmed and signed by the respective Chairman at the subsequent meetings.

The Board has unhindered access to the advice and services of the Company Secretaries who are responsible for ensuring that all Board procedures are followed and that applicable rules and regulations are complied with. The Company Secretaries also act as the Company Secretaries for all the Board Committees. All Directors also have access to all information within the Group.

The Directors may seek the advice of Management on matters under discussion or request further information on the Group’s business activities.

The Board will review, consider and authorise the release of all corporate announcements to Bursa Securities.

The Board, whether as full Board or in their personal capacity, may upon approval from the Board, seek independent professional advice if required, in furtherance of their duty, at the Group’s expense.

1.6 Qualified and competent Company Secretaries

The Company Secretaries are competent, qualified and capable of providing the needful support to the Board in discharging its fiduciary duties. The Articles of Association of the Company provides that removal of the Company Secretary is a matter for the Board as a whole.

The Company Secretary, or her assistant, is present at all meetings to record deliberation, issues discussed and conclusions in discharging her duties and responsibilities and also provide advice in relation to relevant guides and legislations.



1.7 Board Charter

A Board Charter was finalized late last year to provide reference for Directors in relation to the Board’s role, powers, duties and functions. The Board Charter will be reviewed from time to time.

Principle 2: Strengthen composition

2.1 Nomination Committee

The current composition of the Nomination Committee are:-

Chairman : Ding Ming Hea Members : Lee Chun Weng Ching Nye Mi @ Chieng Ngie Chay

The Nomination Committee comprised of three (3) members, all of whom are Independent Non-Executive Directors. The Committee would meet at least once annually with additional meetings convened on needs basis.

2.2 Develop, maintain and review criteria for recruitment and annual assessment of Directors

The Nomination Committee operates within approved scope of engagement as approved by the Board as part of Policy Documentation on book basis.

The Nomination Committee’s duties encompassed the following:

(a) To make recommendations to the Board with regard to any appointment of Directors considering their skills, knowledge, education, qualities, expertise and experience; professionalism; integrity, time commitment, contribution, Boardroom diversity and other factors that will best qualify a nominee to serve on the Board; and for the position of Independent Non-Executive Directors, the ability to discharge such responsibilities/ functions as expected;

(b) To consider, in making its recommendations, candidates for Directorships proposed by the Group CEO and within the bounds of practicability, by any other senior executive or any other Director or shareholder;

(c) To assist the Board to review regularly the Board structure, size and composition and the required mix of skills and experience and other qualities including core competencies which Non-Executive Directors should bring to the Board;

(d) To assess the effectiveness of the Board, any other committees of the Board and the contributions of each individual Director, including the independence of Independent Non-Executive Directors, as well as the Group CEO and Group CFO (where these positions are not Board members), based on the process and procedures laid out by the Board; and to provide the necessary feedback to directors in respect of their performance;

(e) To ensure proper documentation of all assessments and evaluations so carried out; (f) To recommend to the Board, the Directors to fill the seats on any committees of the Board; (g) To propose to the Board the responsibilities of non-executive directors, including membership and

Chairmanship of Board Committees; (h) To recommend to the Board for continuation or discontinuation in service of Directors as an Executive

Director or Non-Executive Director; (i) To recommend to the Board, Directors who are retiring by rotation to be put forward for re-election; (j) To evaluate training needs for directors annually; (k) To arrange induction programmes for newly appointed directors to familiarize themselves with the

operations of the Group through briefings by the relevant management teams; and (l) To recommend to the Board the employment of the services of such advisers as it deems necessary to fulfil

the Board’s responsibilities.



During the year under review, one (1) meeting was held where the Committee met to deliberate on the following:

(a) Reviewed the composition, mix of skills and experience and other qualities, including core competencies as well as contribution of each individual Director and the effectiveness of the Board as a whole and the Board Committees drawing upon the guidance in Directors Performance Assessment Policy with the aim of achieving balance of views on the Board.

(b) Reviewed the level of independence of the Independent Non-Executive Directors. (c) Discussed the character, experience, integrity and competence of the Directors, Chief Executive or chief

financial officer and to ensure they have the time to discharge their respective roles. (d) Reviewed and discussed on Independent Non-Executive Directors who have served the Company for a

cumulative term of more nine years or more, for re-appointment at the Company’s AGM. (e) Discussed and recommended for the re-election / re-appointment of Directors at AGM.

In accordance with the Articles of Association of the Company provide that an election of Directors shall take place each year and, at the Annual General Meeting, one-third of the Directors for the time being or, if their number is not three (3) or a multiple of three (3), then the number nearest to one-third shall retire from office and be eligible for re-election. All the Directors shall retire from office once at least in three (3) years but shall be eligible for re-election. The Directors to retire in each year shall be those who have been longest in office since their appointment or reappointment. A retiring Director is eligible for re-appointment. This provides an opportunity for shareholders to renew their mandates. The re-election of each Director is voted on separately.

In accordance with Section 129(6) of the Companies Act, 1965, Directors who are over seventy (70) years of age are required to seek shareholders’ approval for re-appointment annually.

The director who is subject to re-election and/or re-appointment at next AGM is assessed by the Nomination Committee before recommendation is made to the Board and shareholders for re-election and / or re-appointment. Appropriate assessment and recommendation by the Nomination Committee is based on the annual assessment conducted.

All assessments and evaluations carried out by the Nomination Committee in the discharge of all its functions are documented. The Company Secretary will ensure that all appointments are properly effected with the necessary legal and regulatory obligations duly met.

Whilst acknowledging the recommendation of the Code on gender diversity, the Board is of the collective opinion that there was no necessary to adopt a formal gender diversity policy as the Group is committed to provide fair and equal opportunities and nurturing diversity within the Group. The sole Executive Director on the Board, who is a lady, is testimony to the Group’s commitment on gender diversity.

The evaluation of the suitability of candidates is based on the candidates’ competency, character, time commitment, integrity, performance and experience to bring value and expertise to the Board. The Nomination Committee will, however, continue to take steps to ensure suitable women candidates are sought as part of its recruitment exercise.

2.3 Remuneration Policy

The Remuneration Committee is populated as follows:

Chairman : Ding Ming Hea Members : Lee Chun Weng Ching Nye Mi @ Chieng Ngie Chay Dato’ Dr Yu Kuan Chon

The Committee comprised majority Independent Non-Executive Directors and is chaired by an Independent Non-Executive Director.



The Committee met once during the year to consider the remuneration package for the Executive Director as well as Directors’ fees for the Board. The Directors’ fees reflect the broad based role and responsibilities as well as time commitment to the Group that go with Board membership.

All deliberations of the Remuneration Committee are properly documented in the minutes of Committee meetings and recommendations are reported by the Remuneration Committee Chairman at Board meetings.

The duties of the Committee included the following:

(a) To determine and recommend to the Board the framework or board policy for the remuneration structure, in all forms, of the Executive Director and/or any other persons as the Committee is designated to consider by the Board, drawing from outside advice as necessary;

(b) To determine and recommend to the Board any performance related pay schemes for the Executive and/or any other persons as the Committee is designated to consider by the Board;

(c) To implement/ maintain a reward system for Executive Director based on their performance against the Company’s results. The following factors shall be taking into consideration in determining the quantum of remuneration: position and scope of work, long term objectives of the Group, complexities of Group activities, individual performance, length of service, experience and mark-to-market salary;

(d) To review and recommend the entire individual remuneration packages for Executive Director; and (e) To recommend to the Board the appointment of the services of such advisers or consultants as it deems

necessary to fulfil its responsibilities.

The Board determines the remuneration of each Director. It is the Board and Remuneration Committee’s duty to ensure that the level of remuneration is sufficient to attract, motivate and retain the Executive Director needed to run the Group successfully. The Executive Director played no part in deciding her own remuneration and the respective Board members shall abstain from all discussion pertaining to their remuneration.

The fees for Directors are endorsed by the Board of Directors for approval by the shareholders at the AGM prior to payment to the Directors. In addition, the Directors are also paid meeting allowances for attendance at meetings.

The details of the remuneration for Directors of the Company received/receivable for the financial year ended 31 December 2015 by category and in bands of RM50,000 are as described below:-

No. of Directors No. of Directors Range of remuneration per annum Executive Non-Executive

Less than RM50,000 - 1 RM50,000 to RM100,000 1 - 3 RM250,000 to RM300,000 1 -

The details of the remuneration received by the Directors for the financial year ended 31 December 2015 are as follows:

Salaries & Fees Gratuity Emoluments2 Total Directorate (RM’000) (RM’000) (RM’000) (RM’00)

Executive - - 255 255 Non-Executive1 151 80 - 231

Note: 1 The remuneration paid and payable in respect of financial year ended 31 December 2015 is inclusive of

gratuity paid to an Independent Non-Executive Director who retired during the financial year. 2 Salaries and Emoluments include bonus as well as statutory contributions.

The Board is of the opinion that the above disclosures are sufficient as it considers disclosure of each Director’s remuneration sensitive.



Principle 3: Reinforce Independence

3.1 Annual assessment of Independent Non-Executive Directors

The Independent Non-Executive Directors are assessed annually by the Nomination Committee on behalf of the Board. Following an assessment carried out for financial year ended 31 December 2015, the Board is satisfied with the level of independence demonstrated by the Independent Non-Executive Directors and their ability to provide unbiased impartial opinion and act in the best interest of the Company during decision-making.

The concept of independence as adopted by the Board is consistent with definition of Independent Non-Executive Director outlined in para 1.01 and Practice Note 13 of the Listing Requirements. The key elements for fulfilling the criteria are the appointment of Directors who are not members of management and who are free of any relationship which could interfere with the exercise of independent judgment or the ability to act in the best interest of the Company.

3.2 Tenure of Independent Non-Executive Directors

The Board is mindful of the recommendation of the Code for the tenure of an Independent Non-Executive Director not exceed a cumulative term of nine (9) years. The nine (9) years could be consecutive service or cumulative service with intervals. However, an Independent Non-Executive Director who had exceeded the prescribed nine (9) may continue to serve in the Board subject to his re-designation as Non-Independent Non-Executive Director. As at to-date, two (2) Independent Non-Executive Directors have served for more than nine (9) years.

The presence of Independent Non-Executive Directors are to ensure that issues of strategies, performance and resources proposed by the Management are objectively evaluated, taking into consideration the long-term interests of shareholders, employees, customers, and other communities in which the Group conducts its business.

Following the assessment and deliberation by the Nomination Committee and the Board, the Board recommended Mr Lee Chun Weng and Mr Ding Ming Hea, both who had served the Board as an Independent Non-Executive Director of the Company since 17 June 2002 and 4 December 2001, to continue as Independent Non-Executive Director subject to shareholders’ approval at the forthcoming AGM. Key justifications for their recommended continuance as Independent Non-Executive Director are as follows:

(a) They have remained objective and independent in expressing their views during deliberation and decision-making of the Board and the Board Committees. Their judgment is not clouded by familiarity.

(b) They had fulfilled the criteria on independence as prescribed by Bursa Securities and therefore able to bring element of objectivity that provide check and balance to the executive team.

(c) They had carried their duties diligently and had participated actively during deliberations of both Board and Board Committees and decision-making.

(d) They understand the business and operations of the Group as they has been with the Company for a long period of time. Therefore, they are able to participate effectively during meetings.

3.3 Shareholders’ Approval for retaining Independent Non-Executive Directors

In the event the Board intends to retain a Director as Independent Non-Executive Director after the latter has served a cumulative term of 9 years, the Board must justify the decision and seek shareholders’ approval at AGM. In justifying the decision, the Board had assessed the candidates’ suitability to continue as Independent Non-Executive Directors.

At the AGM held on 26 June 2015, the shareholders had approved the retention of Mr Lee Chun Weng and Mr Ding Ming Hea as Independent Non-Executive Directors of the Company until the next AGM.



3.4 Separation of position of Chairman and CEO

The Board has always made the distinction that the position of the Chairman and Chief Executive Officer/Executive Director (“CEO”) does not reside with the same person. There is a clear and separate division of responsibility in the roles and duties of the Chairman and Executive Director. At this juncture in time, the Board has yet to determine a permanent Chairman.. Ms Lee Chiew Hiang is the sole Executive Director who also take on the role of CEO and CFO of the Group.

The Board will determine and fill, at a later stage, the vacancy for Chairman.

3.5 Composition of the Board

The Board comprised of five (5) members, one (1) Executive Director, one (1) Non-Independent Non-Executive Director and three (3) Independent Non-Executive Directors as at the date of this Annual Report. The current composition of the Board is as follows:

Directorate Director(s)

Non-Independent Non-Executive Director Dato’ Dr. Yu Kuan Chon, DIMP, PPT

Independent Non-Executive Directors Ding Ming Hea Lee Chun Weng Ching Nye Mi @ Chieng Ngie Chay

Executive Director Lee Chiew Hiang

Brief profile of each Director is detailed under Profile of Directors in this Annual Report. The Directors, with their diverse background and specialization, collectively, bring with them a wealth of experience and expertise in areas such as general management and operations, law, commercial, finance and accounting, corporate affairs, manufacturing, sales and marketing and property development.

In the past, the Senior Independent Non-Executive Director was the person to whom concerns regarding the Group could be conveyed. As all concerns regarding the Group can be conveyed to any one of the Directors and or will be deliberated by all Directors during Board meetings, there is no immediate need to consider the appointment of a Senior Independent Non-Executive Director.

The present composition of the Board is in compliance with Chapter 15.02 of the Listing Requirements of Bursa Securities, which requires that at least two (2) Directors or one-third of the Board of the Company, whichever is the higher, are Independent Directors.



Principle 4: Fostering Commitment

4.1 Time Commitment

The Board of Directors meets at least four (4) times a year at quarterly intervals with additional meetings convened as necessary. During the financial year ended 31 December 2015, six (6) Board meetings were held where the Board deliberated upon and considered a variety of matters including the Group’s quarterly operation and financial results, major investments and strategic decisions, implementation of investment policy, business plan and any other strategic issues that may affect the Group’s business.

The listing of the Board members and their attendance at the six (6) Board meetings held during the financial year under review is as tabulated below:

Directorate Director(s) Attendance at meetings

Independent Non-Executive Chairman Dato’ Paduka Mahmud bin Hj. Ali 2/6 (retired on 30 December 2015)

Non-Independent Non-Executive Director Dato’ Dr. Yu Kuan Chon, DIMP, PPT 5/6 Independent Non-Executive Directors Ding Ming Hea 6/6 Lee Chun Weng 6/6

Executive Director Lee Chiew Hiang 6/6

Board meetings are scheduled ahead to enable the Directors to plan and adjust their schedule to ensure good attendance and the expected degree of attention to the Board meeting agenda. Management personnel and external consultants are also invited to attend the Board meetings as and when required in order to present and advise the members with information and clarification on certain meeting agenda to facilitate informed decision-making.

The Board members will notify the Board or the Chairman upon acceptance of new Directorship in other public listed companies. The number of Directorship held by each Director complied with the Listing Requirements of Bursa Securities.

4.2 Directors’ Training

The Board is cognisant of the need to ensure that its members undergo continuous trainings to enhance their knowledge, expertise and professionalism in discharging their duties. As at the date of this statement, the Directors have attended and successfully completed the Mandatory Accreditation Programme (“MAP”).

The Directors will continue to attend various seminars and training programmes necessary to enhance and keep abreast with relevant changes, development and updates affecting industries that the Group operates in as well as regulatory requirements. The Directors are regularly updated by the Company Secretaries on any changes to new statutory, corporate and regulatory developments relating to Directors’ duties and responsibilities or the discharge of their duties as Directors of the Company.

The Board had, through the Nomination Committee, undertake an assessment of the training needs of the Directors and concluded that the Directors are to determine their training needs as they are in the better position to assess their areas of concern.



Director Seminar / Workshop / Course Date

Dato’ Paduka Mahmud Did not attend any training due to ill health Bin Haji Ali

Dato’ Dr Yu Kuan Chon In-house training • Summaryof2015budgetproposals 25February2015 • Updatesofthe2014and2015IFRS 27May2015 compliant MFR and preparing of MFRS-compliant financial statement in 2014, 2015 and thereafter • GSTfordevelopersandcontractors 27August2015 • Overcomingcorporategovernancechallenges 30November2015 in boardroom Dato’ Yu Kuan Huat In-house training • Summaryof2015budgetproposals 25February2015 • Updatesofthe2014and2015IFRS, 27May2015 compliant MFR and preparing of MFRS-compliant financial statement in 2014, 2015 and thereafter • GSTfordevelopersandcontractors 27August2015 • Overcomingcorporategovernancechallengesi In boardroom 30 November 2015

Lee Chun Weng Seminar Percukaian Kebangsaan 2015 29 October 2015 2016 Budget Seminar 5 November 2015 2016 Budget Seminar 9 December 2015

Ding Ming Hea In house training • Summaryof2015budgetproposals 25February2015 • Updatesofthe2014and2015IFRS, 27May2015 compliant MFR and preparing of MFRS-compliant financial statement in 2014, 2015 and thereafter AIBIM Law Seminar - Islamic Financial Services Act 2013 In house training 15 & 16 June 2015 • GSTfordevelopersandcontractors 27August2015 Risk Management & Internal Control for Audit 8 September 2015 Committee members In house training • Overcomingcorporategovernancechallenges 30November2015 in boardroom

Lee Chiew Hiang GST Implementation 9 March 2015 Risk Management & Internal Control :Workshop for 8 September 2015 Audit Committees Annual Budgeting Process with Advance Technique 21 September 2015 MFRS/FRS Update 2015/2016 Seminar 21 October 2015

The Company facilitates the organisation of training programs for Directors and maintain a record of the trainings

attended by the Directors.



Principle 5: Uphold Integrity in Financial Reporting

5.1 Compliance with Applicable Financial Reporting Standards

The Company’s financial statements are prepared in accordance with the requirements of the applicable approved accounting standards in Malaysia and the provisions of the Companies Act, 1965. The Board is responsible to ensure that the financial statements of the Company present a balanced and understandable assessment of the state of affairs of the Company and the Group. The ARMC assists the Board to scrutinizing information for disclosure to ensure accuracy and adequacy. In this respect, it is the Board’s policy to ensure the accurate and timely dissemination of financial and corporate announcements for greater accountability and transparency. Such announcements are made to the Bursa Securities promptly upon the Board’s approval.

5.2 Statement of Directors’ Responsibilities in respect of the Audited Financial Statements

The Board is responsible for ensuring that the financial statements give a true and fair view of the state of affairs of the Group and of the Company as at the end of the financial year / period and of the results and cash flows for the year / period then ended.

The Directors consider that in preparing the financial statements:

(a) the Group and the Company have used appropriate accounting policies that are consistently applied; (b) reasonable and prudent judgments and estimates have been made; and (c) all applicable approved accounting standards in Malaysia have been adhered to.

The Directors are responsible for ensuring that the Company maintains accounting records that disclose with reasonable accuracy the financial position of the Group and of the Company, and that the financial statements comply with the requirements of the Companies Act, 1965.

The Directors have general responsibility for taking such steps as are reasonable open to them to safeguard the assets of the Group and of the Company and to prevent and detect fraud and other irregularities.

5.3 Assessment of Suitability and Independence of External Auditors by the Audi Committee

The ARMC undertakes an annual assessment of the suitability and independence of the external auditors and is satisfied with the technical competency and independence of the external auditors. The ARMC meets with the external auditors at least twice a year to discuss their audit plan, audit findings and the Company’s financial statements. At least once a year and whenever necessary, the ARMC met with the external auditors without the presence of executive Board members or management personnel, to allow the ARMC and the external auditors to exchange independent views on matters which require the ARMC’s attention.

The ARMC considered the non-audit services provided by the external auditors during the financial year ended 31 December 2015 and concluded that the provision of these services did not compromise the external auditors’ independence and objectivity. The amount of fees paid for these services was not significant when compared to the total fees paid to the external auditors.

The external auditors have confirmed to the ARMC that they are, and have been, independent throughout the conduct of the audit engagement in accordance with the independence rules of the Malaysian Institute of Accountants.

A summary of activities of the ARMC during the financial period under review is set out in the ARMC in this Annual Report.



Principle 6: Recognise and Manage RIsks

6.1 Sound Framework to Manage Risks

The Board of Directors recognises the importance of sound internal controls and risk management practices to good corporate governance. In this respect, the Board affirms its overall responsibility for the Group’s systems of internal controls and risk management, and for reviewing the adequacy and integrity of those systems.

The Statement on Risk Management and Internal Control in this Annual Report provides an overview on the state of internal controls and risk management within the Group.

6.2 Internal Audit Function

The internal audit function is independent of the operations of the Group and provides reasonable assurance that the Group’s system of internal control and risk management is satisfactory and operating effectively. The internal auditors adopt a risk-based approach towards the planning and conduct of their audits, and this is consistent with the Group’s approach in designing, implementing and monitoring its internal control system.

The activities of the internal auditors during the financial period are set out in the ARMC Report in this Annual Report.

Principle 7: Ensure Timely and High Quality Disclosure

7.1 Corporate Disclosure Policy

Group recognises the value of transparent, consistent and coherent communications with the investment community consistent with commercial confidentiality and regulatory considerations. The Group aims to build long-term relationships with shareholders and potential investors through appropriate channels for disclosure of information.

Investors are provided with sufficient business, operational and financial information on the Group to enable them to make informed investment decisions.

All announcements are reviewed and endorsed by the Board prior to release to the public through Bursa Securities. In addition, all financial related announcements are pre-approved by the Executive Director before these are submitted to the ARMC and Board for approval.

7.2 Leverage on Information Technology for Effective Dissemination of Information

The Group has established a corporate website at www.rapidsynergy.com.my which shareholders can access for information pertaining to the Group. The website incorporates an Investor Relations section which provides all relevant information on the Company which is accessible to the public and include all announcements made by the Company and its annual reports. The quarterly financial results are also announced via Bursa LINK immediately after the Board’s approval. This is important in ensuring equal and fair access to information by the investing public.



Principle 8: Strengthen Relationship between Company and Shareholders

8.1 Shareholder’s Participation at General Meetings

The Board encourages shareholders’ participation and as such, the AGM is an important event as the Board is given the opportunity to have a dialogue with the shareholders following presentation of annual audited financial results and to address any questions that may arise.

The notice of AGM is sent at least twenty-one (21) days before meeting date to shareholders and published in a major local newspaper. Items of special business included in the Notice of Annual General Meeting will be accompanied by an explanation of the proposed resolution. Separate resolutions are proposed for substantially separate issues at the meeting. All suggestions and comments put forth by shareholders will be noted by the Board for consideration. The Directors attend the AGM to answer any such questions that may arise as shareholders may seek more information than what is available in the Annual Report and/or circulars.

8.2 Encourage Poll Voting

The Chairman at every general meeting will inform shareholders of their right to demand a poll vote at the commencement of all general meetings.

8.3 Effective Communication and Proactive Engagement

The Directors recognises the importance of accountability to its shareholders and investors through proper communication and acknowledges that shareholders should be informed of all material business matters which influence the Group. Circulars to shareholders, distribution of annual reports, announcements and release of financial results on a quarterly basis provide the shareholders and the investing public with an overview of the Group’s performance and operations. The timely dissemination of these information is a part of the Company’s efforts to ensure transparency and good governance. These are also available on the Bursa Securities’ website and provides an avenue to its shareholders to receive information about the Group electronically.

At all times, shareholders may contact the Company through the Company Secretaries for information.

Additional Compliance Information

1. Share Buy-backs During the year under review, there were no share buy-backs by the Company.

2. Options, Warrants or Convertible Securities There was no issuance of options, warrants or convertible securities during the financial year under review. There

were conversions of detachable warrants as detailed in the Notes to the Audited Financial Statements.

3. American Depository Receipt (“ADR”) or Global Depository Receipt (“GDR”) Programme The Company did not sponsor any ADR and GDR programme during the financial year under review.

4. Sanctions and/or Penalties During the financial year ended 31 December 2015, there were no public sanctions and/or penalties imposed

on the Rapid Group, its Directors or management by the relevant regulatory bodies.

5. Non-audit fees During the year the non-audit fees incurred by the Company and its subsidiaries for services rendered by the

external auditors of the Company and its affiliated firms totaled approximately RM32,500 (2014: RM32,300).



6. Variation in results There were no material variances between audited results for the financial year ended 31 December 2015 and

the unaudited results released for the financial quarter ended 31 December 2015.

7. Profit Guarantee There were no profit guarantee given by the Company during the financial year under review.

8. Material contracts During the financial year ended 31 December 2015 there were no material contracts entered into by the

Company and/or its subsidiaries which involved the interest of Directors or substantial shareholders that have not been reflected in the financial statement.

9. Recurrent Related Party Transactions of a Revenue Nature (“RRPT”) During the financial year ended 31 December 2015 there were no material contracts entered into by the

Company and/or its subsidiaries which involved the interest of Directors or substantial shareholders that have not been reflected in the audited financial statement.

The Corporate Governance Statement is issued in accordance with a resolution of the Board of Directors dated 8 April 2016.


Statement on Risk Managementand Internal Control

Introduction

The Malaysian Code on Corporate Governance 2012 (“MCCG 2012”) requires public listed companies to maintain a sound system of risk management and internal control to safeguard shareholders’ investments and company’s assets. Under the provisions of the paragraph 15.26(b) in the Bursa Securities Listing Requirements, Directors of public listed companies are required to produce a statement on the state of the company’s internal control in their Annual Report.

In compliance with the Listing Requirements and the Statement of Risk Management and Internal Control (Guidelines for Directors of Listed Issuers) (“Internal Control Guidelines”), the Board is pleased to provide the following statement which outlines the nature and scope of risk management and internal control of the Group during the financial year in review and up to the point of issuance of this statement.

Roles and Responsibility

BoardThe Board affirms its overall responsibility for the Group’s systems of internal control and for reviewing the effectiveness and efficiency of those systems to ensure its viability. The systems of internal control cover risk management and financial, organizational, operational and compliance controls. It should be noted, however, that such systems are designed to manage, rather than eliminate, risks of failure to achieve corporate objectives. As such, it can only provide reasonable and not absolute assurance against material misstatement or loss.

Audit and Risk Management CommitteeThe Audit Committee was reorganized as Audit and Risk Management Committee in February 2016 following expansion of its role to include reviewing and recommending an appropriate risk management strategy so as to ensure that business risks are effectively addressed by the Group as well as reviewing the adequacy and completeness of the Group’s risk management process and recommending improvements where required.

The ARMC maintains risk and audit oversight within the Group. The ARMC acts on behalf of the Board in reviewing with the management the actions taken in respect of issues identified in the internal audit reports. In reviewing the internal audit reports, the ARMC is able to assess the adequacy and effectiveness of the Group’s internal control system.

ManagementManagement is accountable to the Board for the implementation of strategies, policies and procedures in identifying, evaluating, monitoring and reporting to achieve an effective risk management framework and systems of internal control.

Key Elements of Internal Control & Risk Management

During the year under review and up to the date of this Statement, the Group has been proactive in its management of risks and control issues as demonstrated by the existence of policies, procedures and strategies as illustrated below:

1. The Group has put in place an organizational structure that supports operational requirements, with clearly defined levels of responsibilities, lines of accountability and delegated authority with appropriate reporting procedures.

2. Documented guidelines on operating procedures have been adopted under the ISO 9001:2008 quality system certification for the manufacturing subsidiary and internal quality audits are conducted to ensure compliance with quality system.

3. Documented guidelines on environmental control procedures have been adopted under the ISO 14001:2004 environment certification for the manufacturing subsidiary and internal quality audits are conducted to ensure compliance with environmental management system.

4. Documented policies and procedures which supports the operational requirements of the manufacturing division and is subject to review and improvements when necessary.


Statement on Risk Managementand Internal Control (cont’d)

5. The Executive Director is involved in the day-to-day business operations of the Group with accountability to monitor the performance of all business units.

6. Scheduled operational and management meetings are held with senior management to identify, discuss and resolve business and operational issues. Significant matters identified during these meetings are highlighted to the Board.

7. Annual budget of the Group is reviewed and approved by the Board.8. Quarterly review by the Board on financial performance. Significant risks relevant to the operating segments are

reviewed in these meetings. 9. Formalised documentation to provide criteria and document process flow for investment activities through

implementation of an Investment Policy.10. The internal audit function conducts review of business processes and in doing so, provides an independent

assurance to management on the adequacy and effectiveness of internal controls. Appropriate remedial actions are taken by management to improve the systems of internal controls and processes within agreed timelines.

11. Code of conduct and ethics are established and adhered to by all Directors and employees to ensure high standards of conduct and ethical values in all business practices.

12. The Board reviews all areas of significant financial risk and approves all significant capital projects and investments after careful review and deliberation.

13. Standard operating procedures and policies to meet operational needs and provide guidance to employee.14. Scheduled internal audits are carried out at least bi-annually covering defined areas of concern with reports

presented to ARMC for deliberation and follow through actions.15. Management reports are produced on a quarterly basis to review the financial and operational performance of

the Group.

Internal Audit

The Group’s internal audit function is an independent unit that is outsourced to Lefis Consulting Sdn Bhd (“Lefis”), an internal audit and risk management consulting firm. As per the annual audit plan approved by the ARMC, Lefis undertakes at least, bi-annually review of the Group’s operations and systems of internal controls by adopting the International Standards for the Professional Practice of Internal Auditing issued by the Institute of Internal Auditors as well as established auditing guidelines in discharging its function to enhance its competency and proficiency.

RSB adopts a risk-based approach to develop its annual internal audit plan to ensure adequate scope and coverage of internal audit activites and key risk areas are adequately identified and covered.

The outsourced internal audit function reports to the ARMC and assists the Board in monitoring and managing risks, internal controls and governance processes so as to provide reasonable assurance that such systems continue to operate effectively and efficiently in compliance with the Group policies and procedures. All audit findings were discussed at management level and actions are agreed in response to recommendations from internal audit teams. The resulting internal audit reports, which incorporated management responses and audit recommendations, are issued to the ARMC which then reviews through all findings and management responses and assesses the adequacy and effectiveness of internal controls. The ARMC will refer any significant risk issues to the Board for consideration.

During the current financial year, the internal audit team carried out the following activities on Company’s operations:(a) Conducted assessment on the adequacy of internal controls in the human resource-payroll process and repair

and maintenance activities.(b) Followed up on review of controls as per previous audit carried out on production planning. (c) Reviewed the Investment policy and recommended the same to the ARMC and Board for implementation with

effect from 1 January 2016.

The total cost incurred for internal audit function for the financial year ended 31 December 2015 amounted to RM38,000.


Statement on Risk Managementand Internal Control (cont’d)

Risk Management

The Board recognizes that identification, evaluation and management of significant risks faced by the Group is an ongoing process. The Board reviews internal control issues identified by the management and internal auditors and evaluates the adequacy and effectiveness of the Group’s risk management and internal control system.

Whistleblowing Policy

At this juncture, the Board does not see the need to establish a separate whistleblowing policy given the presence of the Whistleblower Protection Act which came into effect in 2010.

Review of Adequacy and Effectiveness

The Executive Director, who in her dual roles as the Chief Executive Officer and Chief Financial Officer, has given the assurance to the Board that the Group’s risk management and internal control have been operating adequately and effectively in all material aspects during the year and up to the date of this Statement. Taking this assurance into consideration, the Board is of the view that the systems of internal control and the risk management is considered adequate for the Group’s business operations. Throughout the year, the Board has ensured that necessary actions have been or are being taken to address weaknesses identified during the year.

The Board and management seek regular assurance on the continuity and effectiveness of the system internal control through independent appraisals by the internal auditors.

Review of this Statement by the external auditors

The external auditors have reviewed this Statement on Risk Management and Internal Control pursuant to the scope set out in Recommended Practice Guide (“RPG”) 5 (Revised), Guidance for Auditors on Engagements to Report on the Statement on Risk Management and Internal Control included in the Annual Report issued by the Malaysian Institute of Accountants (“MIA”) for inclusion in the annual report of the Group for the year ended 31 December 2015 and reported to the Board that nothing has come to their attention that cause them to believe that the statement intended to be included in the annual report of the Group, in all material respects:

a) has not been prepared in accordance with the disclosures required by paragraphs 41 and 42 of the Statement on Risk Management and Internal Control: Guidelines for Directors of Listed Issuers, or

b) is factually inaccurate.

RPG 5 (Revised) does not require the external auditors to consider whether the Directors’ Statement on Risk Management and Internal Control covers all risks and controls, or to form an opinion on the adequacy and effectiveness of the Group’s risk management and internal control system including the assessmnt and opinion by the Board of Direcors and management thereon. The external auditors are also not required to consider whether the processes described to deal with material internal control aspects of any significant problems disclosed in the annual report will, in fact, remedy the problems.

This Statement on Risk Management and Internal Control is made in accordance with a resolution of the Board dated 8 April 2016.


Directors’ Reportfor the year ended 31 December 2015

The Directors hereby submit their report and the audited financial statements of the Group and of the Company for the financial year ended 31 December 2015.

Principal activities

The Company is an investment holding company.

The principal activities of the subsidiaries are as stated in note 6 to the financial statements.

There has been no significant change in the nature of these activities during the financial year.

Results

Group Company RM’000 RM’000 Loss for the year attributable to owners of the Company 16,600 23,198

Reserves and provisions

There were no material transfers to or from reserves and provisions during the financial year under review, except as disclosed in the financial statements.

Dividend

Since the end of the previous financial year, no dividend was paid during the year and the Directors do not recommend any dividend to be paid for the financial year under review.

Directors of the Company

Directors who served since the date of the last report are :

Director

Dato’ Dr. Yu Kuan Chon, DIMP, PPT Dato’ Yu Kuan Huat, DPMP, PMP, AMP, PPT (Alternate Director to Dato’ Dr. Yu Kuan Chon, DIMP, PPT) Ding Ming Hea Lee Chun Weng Lee Chiew Hiang Dato’ Paduka Mahmud bin Hj. Ali, DPMT, AMP, PJK (Retired on 30.12.2015) Ching Nye Mi @ Chieng Ngie Chay (Appointed on 15.2.2016)


Directors’ Reportfor the year ended 31 December 2015 (cont’d)

Directors’ interests in shares The interests and deemed interests in the ordinary shares and warrants of the Company and of its related corporation (other than wholly-owned subsidiaries) of those who were Directors at financial year end as recorded in the Register of Directors’ Shareholdings are as follows:

Number of ordinary shares of RM1 each At At 1.1.2015 Bought Sold 31.12.2015Interest in the Company: Dato’ Dr. Yu Kuan Chon - Direct interest

Documents

Annual Report 2015 - MalaysiaStock.Biz Proxy Form . Annual Report 2015 2 Except where the context otherwise requires, the following definitions shall apply throughout this Annual Report:-