MCE HOLDINGS BERHAD (1158341-K) MCE HOLDINGS BERHAD (1158341-K) ANNUAL REPORT 2016
MCE HOLDINGS BERHAD
No. 2 & 4, Jalan Waja 7, Kawasan Perindustrian Pandan, 81100 Johor Bahru, Johor, Malaysia. Tel : +607-355 3787 Fax : +607-355 2869 www.multicode.com.my
ANNUAL REPORT 2016
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CONTENTS 02
Notice of Annual General Meeting
04
Corporate Information
06
5 Years Group Financial Highlights
08
Profile of Directors
10
Profile of Key Senior Management
11
Corporate Governance Statement
21
Audit Committee Report
25
Statement on Risk Management and Internal Control
28
Corporate Social Responsibility Statement
33
Statement of Directors’ Responsibility in Relation to the Financial Statements
34
Chairman’s Statement
36
Directors’ Report
39
Statement by Directors
39
Statutory Declaration
40
Independent Auditors’ Report
42
Statements of Financial Position
43
Statements of Profit or Loss and Other Comprehensive Income
44
Statement of Changes in Equity
46
Statements of Cash Flows
48
Notes to the Financial Statements
92
List of Properties
93
Analysis of Shareholdings
Proxy Form
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
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Notice of 1st Annual General Meeting NOTICE IS HEREBY GIVEN THAT the 1st Annual General Meeting of MCE Holdings Berhad will be held at the Hop Sing II Hall, Ponderosa Golf & Country Club, 10-C, Jalan Bumi Hijau Tiga, Taman Molek, 81100 Johor Bahru, Johor on Tuesday, the 20th day of December, 2016 at 9.30 am for the following purposes: AGENDA AS ORDINARY BUSINESS 1.
To receive the Audited Financial Statements for financial period ended 31 July 2016 together with (See Explanatory Note 1) the Reports of the Directors and Auditors thereon.
2.
To re-elect Directors retiring pursuant to Article 82 of the Company’s Articles of Association:i) Mr Tai Lam Shin ii) Dr Goh Kar Chun iii) Mr Loo Shen Chang iv) Mr Lim Ming Kee (Mr Lim has notified that he does not wish to seek re-election as a Director and accordingly will retire as a Director upon the conclusion of the AGM)
3.
To appoint Crowe Horwath as Auditors of the Company for the year ending 31 July 2017 and to authorise the Directors to fix their remuneration.
Ordinary Resolution 1 Ordinary Resolution 2 Ordinary Resolution 3
Ordinary Resolution 4
AS SPECIAL BUSINESS
To consider and if thought fit, to pass the following resolutions :-
4. 5.
ORDINARY RESOLUTION PROPOSED DIRECTORS’ FEE To approve the payment of Directors’ Fees of RM265,538 for the financial period ended 31 July 2016.
6. 7.
ORDINARY RESOLUTION PROPOSED RE-APPOINTMENT OF ENCIK SHAMSUDIN @ SAMAD BIN KASSIM “THAT pursuant to Section 129(6) of the Companies Act, 1965, Encik Shamsudin @ Samad bin Kassim who has attained the age of 70 years and retires pursuant to Section 129(2) of the Companies Act, 1965 be and is hereby re-appointed as a Director of the Company to hold office until the next annual general meeting of the Company.” ORDINARY RESOLUTION PROPOSED RETENTION OF INDEPENDENT DIRECTOR “THAT Mr. Tai Lam Shin who has served as an Independent Non-Executive Director for a cumulative term of more than 9 years be retained and remain as an Independent Director of the Company.”
Ordinary Resolution 5
Ordinary Resolution 6
Ordinary Resolution 7
To transact any other business for which due notice shall have been given in accordance with the Company’s Articles of Association and/or the Companies Act, 1965.
BY ORDER OF THE BOARD
LEE WEE HEE (MAICSA 0773340) POW JULIET (MAICSA 7020821) Secretaries Date : 28 November 2016
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
Notice of 1st Annual General Meeting (cont’d) NOTE : 1.
This Agenda item is meant for discussion only as the provision of Section 169(1) of the Companies Act, 1965 and the Company’s Articles of Association do not require a formal approval of the shareholders and hence, is not put forward for voting.
2.
A member entitled to attend and vote at the Meeting is entitled to appoint one or more proxies to attend and vote in his stead. A proxy may but need not be a member of the Company and the provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company. Notwithstanding this, a member entitled to attend and vote at the Meeting is entitled to appoint any person as his proxy to attend and vote instead of him at the Meeting. There shall be no restriction as to the qualification of the proxy. A proxy appointed to attend and vote at the Meeting shall have the same rights as the member to speak at the Meeting.
3.
Where a member appoints more than one (1) proxy, the appointment shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy.
4.
Where a member is an authorised nominee as defined under The Securities Industry (Central Depositories) Act, 1991, it may appoint at least one proxy in respect of each Securities Account it holds with ordinary shares of the Company standing to the credit of the said Securities Account. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one securities account (“omnibus account”) there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds.
5.
The instrument appointing a proxy shall be in writing under the hand of the appointer or of his attorney duly authorised in writing or, if the appointer is a corporation, either under Seal or under the hand of an officer or attorney duly authorised.
6.
To be valid, the form of proxy must be deposited at the Registered Office of the Company situated at Suite 5.11 & 5.12, 5th Floor, Menara TJB, No. 9, Jalan Syed Mohd. Mufti, 80000 Johor Bahru, Johor not less than 48 hours before the time for holding the meeting or any adjournment thereof or in the case of a poll, not less than 24 hours before the time appointed for the taking of the poll.
7.
In respect of deposited securities, only members whose names appear on the Record of Depositors on 14 December 2016, shall be eligible to attend the meeting or appoint proxy(ies) to attend and/or vote on his behalf.
Statement Regarding Effect Of Resolutions Under Special Business 8.
Directors’ Fees The Proposed Ordinary Resolution 5, if passed, will authorise the payment of Directors’ fees pursuant to Article 84 of the Articles of Association.
9.
Re-appointment of Director The proposed Ordinary Resolution 6, will result in the re-appointment of Encik Shamsudin @ Samad bin Kassim, a Director who has attained the age of 70 years to hold office until the next annual general meeting of the Company. Pursuant to Section 129(6) of the Companies Act, 1965, the resolution to re-appoint Encik Shamsudin @ Samad bin Kassim requires a majority of not less than three fourth of such members of the Company as being entitled so to do vote in person or by proxy.
10. Proposed Retention of Independent Director The proposed Ordinary Resolution 7, if passed, will allow Mr Tai Lam Shin to be retained and continue acting as an Independent Director to fulfill the requirements of Paragraph 3.04 of Bursa Malaysia’s Main Market Listing Requirements and in line with the recommendation No 3.2 of the Malaysian Code of Corporate Governance 2012. The full details of the Board’s justification and recommendations for the retention of Mr Tai Lam Shin as an Independent Director is set out on Page 14 of the Board’s Corporate Governance Statement in the 2016 Annual Report.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
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Corporate Information BOARD OF DIRECTORS Chairman
Shamsudin @ Samad Bin Kassim (Independent Non-Executive Director)
Group Managing Director
Goh Kar Chun (Non-Independent Executive Director)
Group Executive Director
Lim Ming Kee (Non-Independent Executive Director)
Directors
Tai Lam Shin (Senior Independent Non-Executive Director)
Loo Shen Chang (Independent Non-Executive Director)
AUDIT COMMITTEE Chairman
Loo Shen Chang (Independent Non-Executive Director)
Members
Tai Lam Shin (Senior Independent Non-Executive Director)
Shamsudin @ Samad Bin Kassim (Independent Non-Executive Director)
NOMINATION & REMUNERATION COMMITTEE Chairman
Tai Lam Shin (Senior Independent Non-Executive Director)
Members
Loo Shen Chang (Independent Non-Executive Director)
Shamsudin @ Samad Bin Kassim (Independent Non-Executive Director)
SECRETARIES Lee Wee Hee (MAICSA 0773340) Pow Juliet (MAICSA 7020821)
REGISTERED OFFICE Suite 5.11 & 5.12, 5th floor, Menara TJB, No. 9, Jalan Syed Mohd. Mufti, 80000 Johor Bahru, Johor, Malaysia. Tel : 07-224 2823 Fax : 07-223 0229
REGISTRAR Shareworks Sdn Bhd (229948-U) No. 2-1, Jalan Sri Hartamas 8, Sri Hartamas, 50480 Kuala Lumpur. Tel : 03-6201 1120 Fax : 03-6201 3121/6201 5959
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
Corporate Information (cont’d) AUDITORS Crowe Horwath (AF - 1018) E-2-3 Pusat Komersial Bayu Tasek Persiaran Southkey 1, Kota Southkey 80150 Johor Bahru, Johor, Malaysia.
PRINCIPAL PLACE OF BUSINESS No. 2 & 4, Jalan Waja 7, Kawasan Perindustrian Pandan, 81100 Johor Bahru, Johor, Malaysia.
PRINCIPAL BANKERS AmBank (M) Berhad HSBC Amanah Malaysia Berhad
SUBSIDIARY COMPANIES Multi-Code Electronics Industries (M) Bhd (193094-K) Beaucar Accessories (M) Sdn Bhd (102803-P) Multi-Code Technologies (M) Sdn Bhd (903828-P) Vantage Realm Sdn Bhd (1046342-M) Vantage Medical Centre Sdn Bhd (1110357-D) Multi-Code Electronics Industries (India) Private Limited (U74140HR2013PTC050859)
STOCK EXCHANGE LISTING Main Market of Bursa Malaysia Securities Berhad
WEBSITE www.multicode.com.my
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
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5 Years Group Financial Highlights
Multi-Code Electronics Industries (M) Berhad RESULTS Revenue Profit / (Loss) before tax Profit / (Loss) after tax Net profit/ (loss) attributable to owners of the parent
MCE Holdings Berhad
2012 (RM’000)
2013 (RM’000)
2014 (RM’000)
2015 (RM’000)
2016 (RM’000)
111,091 14,702 10,787
109,173 31,586 29,200
104,768 10,172 8,991
90,028 (229) (1,126)
76,901 (2,535) (2,192)
10,917
28,880
9,113
(1,075)
(2,287)
KEY CONSOLIDATED STATEMENTS OF FINANCIAL POSITION DATA Total assets 97,563 120,510 134,000 118,843 109,968 Shareholders’ equity 67,037 93,253 97,036 93,723 90,955 Share capital 44,405 44,405 44,405 44,405 44,405 Loans and receivables 31,769 56,268 41,934 32,559 27,633 Total borrowings 6,465 4,934 12,169 9,169 5,578 KEY FINANCIAL STATISTICS / INDICATORS Basic earning/ (loss) per share (sen) 24.58 65.04 20.52 (2.42) (5.15) Net dividend per share (sen) 6.00 12.00 8.00 - Net assets per stock unit attributable to ordinary equity holders of the Company (RM) 1.51 2.10 2.19 2.11 2.05 Return on shareholding equity (%) 16.29 30.97 9.39 (1.15) (2.51) Price earning ratio 4.96 2.77 7.60 N/A* N/A* Gearing ratio 0.10 0.05 0.13 0.10 0.06
* N/A - Not applicable
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
5 Years Group Financial Highlights Revenue [Multi-Code Electronics Industries (M) Bhd] Profit/ (loss) after tax [Multi-Code Electronics Industries (M) Bhd]
Revenue and Profit/(loss) after tax
Revenue [MCE Holdings Berhad]
RM'000 120,000
Profit/ (loss) after tax [MCE Holdings Berhad]
0 2012
2013
2014
(2,192)
76,901 (1,126)
20,000
8,991
10,787
40,000
29,200
60,000
90,028
104,768
80,000
109,173
111,091
100,000
2015
2016
Total assets [Multi-Code Electronics Industries (M) Bhd] Shareholders' equity [Multi-Code Electronics Industries (M) Bhd] Total assets [MCE Holdings Berhad]
Total assets and Shareholders' equity RM'000 140,000
40,000
90,955
109,968
93,723
118,843
67,037
60,000
97,036
80,000
93,253
97,563
100,000
120,510
120,000
134,000
Shareholders' equity [MCE Holdings Berhad]
20,000 0
2012
2013
2014
Basic earning/(loss) per share and Net Dividend per share Sen
Net dividend per share [Multi-Code Electronics Industries (M) Bhd] Basic earning/ (loss) per share [MCE Holdings Berhad]
24.58
20.00
20.52
12.00
10.00
8.00
6.00 2012
2013
2014
Net assets per stock unit attributable to ordinary equity holder of the Company
2.10
2.19
2.11
2.05
1.51
35.00
30.97
25.00 20.00
10.00
0.50
5.00
0
0.00
MCE HOLDINGS BERHAD
16.29
15.00
1.00
2012
2016
Multi-Code Electronics Industries (M) Bhd MCE Holdings Berhad
%
30.00
RM
1.50
2015
Return on shareholding equity
Multi-Code Electronics Industries (M) Bhd MCE Holdings Berhad
2.00
(5.15) -
(2.42) -
0
2.50
2016
Basic earning/ (loss) per share [Multi-Code Electronics Industries (M) Bhd] 65.04
70.00 60.00 50.00 40.00 30.00
2015
2013
2014
2015
2016
9.39
2012
2013
2014
(1.15)
(2.51)
2015
2016 ANNUAL REPORT 2016
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Profile of Directors ENCIK SHAMSUDIN @ SAMAD BIN KASSIM Encik Shamsudin @ Samad Bin Kassim, Malaysian, aged 70, is the Chairman of the Board and an Independent Non-Executive Director of the Company. He was appointed to the Board on 10th June 2016. He was on the Board of Multi-Code Electronics Industries (M) Berhad from 2009 to 2016. He is a member of the Nomination and Remuneration Committee and the Audit Committee. He holds a Bachelor of Economics from University of Malaya and a Master in Public and International Affairs (MPIA) from University of Pittsburg, USA. He started his career as an Assistant Secretary in Ministry of Works in 1970 and later as an Economist in the Highway Planning Unit in 1973. In 1974, he was appointed as Assistant Director of the Services Division in the Public Services Department. He left the Public Services Department in 1979 and took up the position of Senior Assistant Secretary in Ministry of International Trade and Industry (MITI). In 1989, he was posted to Vienna, Austria as the Trade Commissioner of MITI. In 1996, he was appointed as the Director of MITI (Industry Division) in Kuala Lumpur. In 2000, he was appointed as Chief Executive Officer of Small and Medium Industries Development Corporation (SMIDEC) until his retirement in 2001. He sits on the Board of Kinsteel Berhad, public company listed on Bursa Malaysia Securities Berhad. He also sits on the Board of Ingress Corporation Berhad and Master Tec Holdings Berhad, both non-listed public companies. He has no family relationship with any directors and/or major shareholders of the Company and does not have any conflict of interest with the Company. He has had no convictions for any offences within the past 10 years. He directly holds 100,000 ordinary shares of RM1.00 each in the Company.
MR. GOH KAR CHUN Mr. Goh Kar Chun, Malaysian, aged 40, is the Group Managing Director of the Company. He was appointed to the Board on 10th June 2016. He has been on the Board of Multi-Code Electronics Industries (M) Berhad since 2001. He holds a degree in Bachelor of Medicine, Bachelor of Surgery and Bachelor of Obstetrics from the Faculty of Medicine, University College Dublin, Ireland. Subsequently he obtained a Master of Business Administration from Victoria University, Australia. In year 2000, he worked as a medical doctor at ST. Vincent University Hospital, Ireland. He joined Multi-Code Electronics Industries (M) Berhad as a management staff responsible for marketing function in 2002. With his experience garnered in the automotive industry, he was appointed as Executive Director of Multi-Code Electronics Industries (M) Berhad in year 2008 primarily responsible for the overall group business development, marketing and sales. As at November 2010, his scope of work had been expanded to include direct responsibility on production, engineering and quality assurance functions. He does not hold any directorship in any other public Company. He has no family relationship with any directors of the Company and does not have any conflict of interest with the Company. He has had no convictions for any offences within the past 10 years. He is a major shareholder of the Company holding 9,997,240 ordinary shares of RM1.00 each and is a nephew of Mr. Goh Chai Siong, a major shareholder of the Company. He has deemed interest in 350,000 ordinary shares of RM1.00 each in the Company held by his spouse, Chuah Sai Ling, pursuant to Section 134 (12) (c) of the Companies Act 1965.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
Profile of Directors (cont’d) MR. LIM MING KEE Mr. Lim Ming Kee, Malaysian, aged 57, is the Group Executive Director of the Company. He was appointed to the Board on 10th June 2016. He has been on the Board of Multi-Code Electronics Industries (M) Berhad since 2008. He obtained his Bachelor of Management Studies degree majoring in Accounting and Finance from the University of Waikato, New Zealand in 1983. He is a Chartered Accountant of the Malaysian Institute of Accountants since 24th July 1987. Mr Lim, has over 30 years of experience in finance and accounting, manufacturing and corporate management garnered from public accounting firms, public listed companies and multinational corporations. In 1998, he together with his co-founders, successfully established a company producing plastic injection moulded parts and components for the audio-video, telecommunication, computer and office equipment sectors for the electrical and electronics industries. He sits on the Board of Cabnet Holdings Berhad, a non-listed public company. He has no family relationship with any directors and/or major shareholders of the Company and does not have any conflict of interest with the Company. He has had no convictions for any offences within the past 10 years. He directly holds 778,900 ordinary shares of RM1.00 each in the Company.
MR. TAI LAM SHIN Mr. Tai Lam Shin, Malaysian, aged 59, is an Independent Non-Executive Director of the Company. He was appointed to the Board on 10th June 2016. He was on the Board of Multi-Code Electronics Industries (M) Berhad from 2008 to 2016. He is the Chairman of the Nomination and Remuneration Committee and a member of the Audit Committee. He was identified by the Board as the Senior Independent Non-Executive Director of the Company. He is a Chartered Accountant of the Malaysian Institute of Accountants and Fellow of The Association of Chartered Certified Accountants, United Kingdom. He is experienced and exposed in areas of audit assurance, financial and corporate advisory, due diligence review and reporting accountants to public listed corporations, multinationals and private companies. He sits on the Board of Keck Seng (Malaysia) Berhad, a public company listed on Bursa Malaysia Securities Berhad. He has no family relationship with any directors and/or major shareholders of the Company and does not have any conflict of interest with the Company. He has had no convictions for any offences within the past 10 years. He directly holds 20,000 ordinary shares of RM1.00 each in the Company.
MR. LOO SHEN CHANG Mr. Loo Shen Chang, Malaysian, aged 51, is an Independent Non-Executive Director of the Company. He was appointed to the Board on 10th June 2016. He is the Chairman of the Audit Committee and the member of the Nomination and Remuneration Committee. He was on the Board of Multi-Code Electronics Industries (M) Berhad from 2015 to 2016. He is an accountant by profession and a member of Malaysian Institute of Certified Public Accountants and Malaysia Institute of Accountants. He began his career in 1986 as an articled clerk in an accounting firm and has since accumulated more than 25 years of post-qualifying experience in the field of accounting and corporate finance activities, having held senior positions in several private and public listed companies. Currently, he is the Chief Operating Officer of LYL Group of Companies, which has vast interest in property development activities and real estate investments. He does not hold any directorship in any other public company. He has no family relationship with any directors and/or major shareholders of the Company and does not have any conflict of interest with the Company. He has had no convictions for any offences within the past 10 years. He does not hold any shares of the Company.
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Profile of Key Senior Management ENCIK MOHD FARIDH BIN DOL Encik Mohd Faridh Bin Dol, Malaysian, aged 50, is the Head of Business Development and Marketing. He joined Multi-Code Electronics Industries (M) Berhad in December 2014. He obtained his Bachelor Business Administration (Accounting) from Pacific Lutheran University, Tacoma Washington USA. He has more than 25 years of working experience in automotive industry, both in Original Equipment Manufacturer (OEM) carmaker and automotive component makers.
MR. LIM CHERN TIN Mr. Lim Chern Tin, Malaysian, aged 49, is the Group Operations Manager of Multi-Code Electronics Industries (M) Berhad. He holds an engineering diploma from Federal Institute of Technology. He joined Multi-Code Electronics Industries (M) Berhad in August 1999 as its Quality Assurance (QA) Manager and was promoted to the position of Group Engineering and QA Manager in May 2008. He was subsequently re-designated to the position of Group Operations Manager in December 2015. He has more than 26 years of working experience in areas of quality assurance, engineering and production.
MS. GOH ANNE Ms. Goh Anne, Malaysian, aged 35, is the Group Financial Controller (Chief Financial Officer) of the Company. She joined MultiCode Electronics Industries (M) Berhad in July 2015. She obtained her Bachelor of Business from University of Technology Sydney, Australia. She is a Member of the Certified Practising Accountants, Australia and Malaysian Institute of Accountants. She has more than 11 years of working experience in finance and accounting garnered from a public accounting firm and public listed companies.
Save as disclosed, none of the Key Senior Management have:1. 2. 3. 4. 5.
any directorship in public companies and listed issuers; any family relationship with any directors and/or major shareholders of the Company; any conflict of interest with the Company; any conviction for offences within the past 5 years other than traffic offences, and any public sanction or penalty imposed by the relevant regulatory bodies during the financial year.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
Corporate Governance Statement MCE Holdings Berhad’s listing on 1st July 2016 was pursuant to an Internal Reorganisation, by way of a Members’ Scheme of Arrangement under Section 176 of the Companies Act 1965 undertaken by Multi-Code Electronics Industries (M) Berhad (‘MCEIB’) culminating in the transfer of the listing status of MCEIB to MCE Holdings Berhad (‘Internal Reorganisation of MCEIB’). Accordingly the disclosures in this Report cover the period when MCEIB was listed and up to the time its listing status was taken over by MCE Holdings Berhad (‘MCE’ or the ‘Company’) from 1st July 2016 onwards. The Board of Directors (‘the Board’) of MCE recognises the importance of good corporate governance and continues to be committed to ensure that high standards and appropriate practices are in place throughout the MCE Group to protect, enhance and support the business affairs and financial performance of the Group with the ultimate objective of safeguarding shareholders’ investment and enhancing shareholders’ value. On this note, the Board is pleased to report the manner in which the Board has applied the principles of corporate governance and the extent of its compliance with the recommendations set out in the Malaysian Code on Corporate Governance 2012 (‘the Code’) during the financial year.
THE BOARD OF DIRECTORS Board Composition The Code emphasises the importance of right board composition in enhancing the Board decision making process and the transparency of policies and procedures in selection and evaluation of board members. The present Board composition comprises Executive and Non-Executive Directors with a mix of suitably qualified and experienced professionals enabling the Board to carry out its responsibilities effectively. In accordance with Article 75 of the Company’s Articles, unless otherwise determined by General Meeting, the number of directors shall not be less than two (2) nor more than twelve (12). Presently, the Board consists of five (5) members, two (2) are Executive Directors and three (3) are Independent Non-Executive Directors which exceed the prescribed one-third (1/3) requirement. All Independent Non-Executive Directors are independent of management and have no family or business relationships with the Executive Directors and major shareholders which would interfere with the exercise of their independent judgement. The Chairman of the Board is an Independent Non-Executive Director while the number of independent directors maintained by the Board currently is above the prescribed composition and number of independent directors recommended in the Code and the Bursa Malaysia Securities Berhad (‘Bursa Malaysia’) Main Market Listing Requirements (‘Listing Requirements’). The positions of Chairman and Group Managing Director (‘GMD’) are separately held ensuring balance of power, accountability and division of roles and responsibilities of the Board and the Management of the Group’s business and operations. The Board has developed descriptions for responsibilities of the Board Chairman, GMD, the individual board members as well as the Group Financial Controller (Chief Financial Officer). The details of these responsibilities are articulated in the Board Charter which is accessible at www.multicode.com.my. Descriptions of the background of each director are presented on pages 8 and 9. The Board acknowledges the benefit of gender diversity in the Board and has set a policy that at least one (1) member of the Board will be of the female gender. The Board through the Nomination and Remuneration Committee will on a continuous basis source and review appropriate candidates identified, to ensure that Board’s policy on boardroom diversity is met by having at least one (1) female member on the Board.
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ANNUAL REPORT 2016
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Corporate Governance Statement (cont’d) Supply of Information and Board Effectiveness It is recognised that the supply, timeliness and quality of the information affect the effectiveness of the Board to oversee the conduct of the business and to evaluate the Management performance of the Group. All information within the Group is easily accessible to the directors in furtherance of their duties. The Board affirms that they have unrestricted access to timely and appropriate information and access to the advice and services of the Company Secretary to enable it to discharge its duties. The Company Secretary together with the GMD and Group Financial Controller assist the Chairman of the Board and Chairmen of Board Committees to deal with the Board agenda and to provide the relevant information and documents to directors on a timely basis. In reviewing and analysing the quarterly interim financial results, the Board was provided with various corroborative information and data. This information was circulated to the Board members within seven (7) days prior to the Board meetings so as to provide the Directors with relevant and timely information to enable them to deliberate issues raised during Board meetings more effectively. The key business information and data cover budget, management report on operations, business development, performance of its subsidiaries, the Management’s quarterly risk assessment and its status of action plans undertaken by the Risk Management Committee. Additionally, Management was also invited to brief and report in meetings of the Board and Board Committees. The powers and duties of the Directors are as set out in the Articles of Association and as prescribed at law. The Board had devised the following schedule of matters reserved for its approval in its Board Charter: • • • • • • • • • •
Acquisition, divestment and disposal of business and investment; Overseas ventures; Corporate Finance and Proposals; Terms of key/main agreements not within the ordinary course of business; Acquisition and disposal of Properties and Motor Vehicles; Acquisition and disposal of fixed assets, other than properties and motor vehicles, for amounts RM100,000 and above; Disposal and write offs of current assets, for amounts RM100,000 and above; Material expenditure other than capital expenditure not within the ordinary course of business, for amounts RM100,000 and above; Bank borrowings and financing arrangements; and Placements/withdrawal of bank fixed deposits.
The Board was also kept informed progressively of the various requirements and updates issued by the various regulatory authorities. These requirements and updates were provided and briefed by the Management, the Company Secretary, external and internal auditors. The Management, external and internal auditors were invited to attend Board meetings to provide additional insights and professional advice on specific items on the meeting agenda. Procedurally, when external advices are necessary, the director who intends to seek such consultation or advice shall notify the Chairman for approval. Upon approval, the Chairman will facilitate obtaining such advice and, where appropriate, disseminate the advice to all Directors. The Board has the authority to conduct or direct any investigation required to fulfil its responsibilities and has the authority to retain at the Company’s expense, such legal, accounting or other services, consultants, advisers or experts as it considers necessary from time to time in the performance of its duties. Support of Company Secretary Both Company Secretaries of MCE are external secretaries attached with a professional services firm, qualified to act as Company Secretary under Section 139A of the Companies Act 1965, and are associate members of the Malaysian Institute of Chartered Secretaries & Administrators. The Company Secretaries provide the required support to the Board in carrying out its duties and stewardship role, providing the necessary advisory role with regards to the Company’s constitution, Board’s policies and procedures as well as compliance with regulatory requirements, codes, guidelines and legislations. The Board are of the view that the Company Secretaries have been competent and kept themselves abreast with the evolving regulatory changes and developments through continuous education programmes and attendance of relevant conferences, seminars and training programmes. The Board is satisfied with the performance and support rendered by the Company Secretaries to the Board. MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
Corporate Governance Statement (cont’d) Board Roles and Responsibilities It is the primary governance responsibilities of the Board to lead and control the Group. The Board plans the strategic direction, development and control of the Group and has taken initiatives to embrace the responsibilities listed in the Code, which facilitate the discharge of the Board’s stewardship responsibilities. When implementing the strategic plan, the Executive Directors are responsible for making and implementing operational and corporate decisions while the Non-Executive and Independent Directors ensure corporate accountability by providing unbiased and independent views, advice and judgement in safeguarding the interests of the shareholders. As explained in the earlier paragraph, the Board has defined the roles and responsibilities for the Board and its chief executive. In discharging its fiduciary responsibilities, the Board emphasises strongly during its Board meetings on the deliberation and review of the financial performance of the Group, the execution of strategic plan by GMD, the principal risks faced by the Group and effectiveness of management mitigation plan, the appraisal of executive Management and senior Management succession plans as well as the integrity of the management information and systems of internal control of the Group. The Board maintains specific Board Committees namely Audit Committee (‘AC’) and Nomination and Remuneration Committee (‘NRC’). These Committees ensure greater attention, objectivity and independence are provided in the deliberations of specific board agenda. The Board has defined the terms of reference for each Committee and the Chairman of these respective committees would report to the Board during the Board meetings on significant matters and salient matters deliberated in the Committees. The Board will review its Charter as and when the need arises in order to keep it current and relevant at all times. The Board Charter and policies to strengthen its board governance proceedings which include Corporate Disclosure Policy, Shareholders Communication Policy, Corporate Code of Conduct and Business Ethics and Continuing Education Policy were adopted on 30th June 2016 and are published under the caption of “Board Charter” in the Investor page of the Company’s corporate website. Whilst the Board has not specifically defined its whistleblowing policy, it has identified the GMD and Senior Independent NonExecutive Director for staff members and other stakeholders to report violations of the Code of Conduct and Business Ethics policy. In order to further uphold the principles in this code of conduct, the Group has also implemented annual procedure for declaration of compliance and interest for all staff members. Going forward, the Board will be looking into the adoption of a formal whistleblowing policy to enhance its governance practices. Board Independence Independence is important for ensuring objectivity and fairness in board’s decision making. The roles and responsibilities of the Chairman and GMD continue to be separated and the Chairman of the Board is an Independent Director. The Board has adopted the best practices for assessing the independence of independent directors annually and the tenure of an independent director should not exceed a cumulative term of nine (9) years. When the Board retains an independent director who has served in that capacity for more than nine (9) years, the Board would justify its decision and seek shareholders’ approval. The Board Charter provides that each director is expected to advise the Chairman immediately if he is no longer independent. Any director who have concern about the independence of a director shall immediately raise the issue during a Board meeting. The Company will make an immediate announcement to Bursa Malaysia when an independent director loses his independent status. As at the reporting date, there were no independent director’s tenure which is more than nine (9) years. However, Mr. Tai Lam Shin will reach his nine (9) years tenure as Independent Director on 29th January 2017. The Board through its NRC has conducted assessment of independence of all its Independent Directors and is satisfied that the Independent Directors have fulfilled the criteria under the definition of Independent Director as stated in the Listing Requirements of Bursa Malaysia and are able to provide objective and independent judgment in deliberation of the Board’s agenda. Based on the Board’s assessment, the Board had recommended to put forward a resolution in the forthcoming Annual General Meeting (‘AGM’) to retain Mr. Tai Lam Shin as an Independent Director. Both the NRC and the Board hold the view that a Director’s independence should not solely be determined by reference to a set period of time alone and believe that the Group will benefit from long serving independent directors who have proven and demonstrated their commitment, experience and continued independence.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
13
14
Corporate Governance Statement (cont’d) Board Independence (cont’d) The Board’s and NRC’s justification to retain Mr. Tai Lam Shin is premised on the following: • •
•
•
• •
Mr. Tai continues to fulfil the criteria and definition of an Independent Director as set out under Paragraph 1.01 of Bursa Malaysia Listing Requirements; During his tenure in office, Mr. Tai has not developed, established or maintained any significant personal or social relationship whether direct or indirect with the Executive Directors, major shareholders or Management of the Company (including their family members) other than normal engagements and interactions on a professional level consistent and expected of him to carry out his duties as the Senior Independent Non-Executive Director and Chairman of the NRC; During his tenure in office, Mr. Tai has never transacted or entered into any transactions with, nor provided any services to the Company and its subsidiaries, the Executive Directors, major shareholders or Management of the Company (including their family members) within the scope and meaning as set forth under Paragraph 5 of Practice Note 13 of the Listing Requirements; During his tenure in office as Independent Non-Executive Director in the Company, Mr. Tai has not been offered or granted any options by the Company. Other than directors’ fees and allowances paid which had been the norm and been duly disclosed in the annual reports, no other incentives or benefits of whatsoever nature had been paid to him by the Company; During his tenure in office, Mr. Tai, a Chartered Accountant by profession, has demonstrated consistently his integrity, commitment and contributed effectively to the Board’s decision making process; and During his tenure in office, Mr. Tai has gained significant and detailed understanding and insights into the business operations, and industry sectors in which the Group operates in. This includes an understanding of the peculiarities, strengths and weaknesses of the industry sectors thereby enabling him to offer a different perspective during the decision making process which a fresh appointee or a director holding office for a short length of time would not be able to offer.
Board Commitment The underlying factors of directors’ commitment to the Group are devotion of time and continuous improvement of knowledge and skillsets. The Board meets at least every quarter and on other occasions, as and when necessary, to inter-alia review and approve quarterly financial results, statutory financial statements, the annual report, business ventures as well as to review the performance of the Company and its operating subsidiaries, governance matters and other business development matters. A corporate calendar of all scheduled meetings and planned events for the financial year are furnished to all Directors and the Management by the Company Secretary normally at the 1st quarter Board meeting to aid and facilitate the Directors in scheduling and meeting their time commitments. All Directors are also required to inform the Board before accepting any other directorships in other listed companies or groups. During the financial year, six (6) Board meetings were held and these meetings were attended by members of the Board with the Company Secretary in attendance as follows: Name of Director
Position
Encik Shamsudin @ Samad Bin Kassim Mr. Goh Kar Chun Mr. Lim Ming Kee Mr. Tai Lam Shin Mr. Loo Shen Chang Mr. Chai Lai Koon*
Independent Non-Executive Director Non-Independent Executive Director Non-Independent Executive Director Senior Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director
Attendance 6/6 6/6 6/6 6/6 4/5 3/3
*retired as a Director on 20th January 2016
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
Corporate Governance Statement (cont’d) Audit Committee The composition requirement of the AC members is in accordance with the regulatory requirements. The AC Chairman has access to all the Executive Directors, senior Management, External and Internal Auditors. On a separate note, the Board is mindful of the Listing Requirements on the review of the terms of office and performance of the AC and each of its members. The review of the terms of office and performance of the AC and each of its members are carried out annually. In accordance with the review which was carried out in line with the assessment procedures adopted by the Board, by way of peer assessment in the form of evaluation questionnaires. Following the latest review, the NRC and the Board are of the opinion that the performance of the AC has been excellent and each member of the AC has carried out and discharged their responsibilities in accordance with the AC’s terms of reference. Further information on the constitution and summary of work of the AC are set out on pages 21 to 24 of this Annual Report. Nomination and Remuneration Committee The NRC was established on 13th June 2016 and is currently comprised wholly of Non-Executive Directors as follows:Chairman : Tai Lam Shin (Senior Independent Non-Executive Director) Members : Shamsudin @ Samad Bin Kassim (Independent Non-Executive Director) : Loo Shen Chang (Independent Non-Executive Director) The functions and responsibilities of this Committee are: In respect of nomination responsibilities To oversee the selection criteria and recruitment process and recommend to the Board, candidates for all directorships to be filled by the shareholders or the Board taking into consideration the candidates’:• • • •
competencies, commitment, contribution and performance; professionalism; integrity; and in the case of candidates for the position of Independent Non-Executive Directors, the candidates’ ability to discharge such responsibilities/functions as expected from Independent Non-Executive Directors including formalising its stand and approach to boardroom diversity.
Consider, in making its recommendations, candidates for directorships proposed by the GMD and, within the bounds of practicability, by any other senior executive or any director or shareholder. Recommend to the Board, directors to fill the seats on Board Committees. Reviewing on an annual basis, that the Board’s size, composition and balance are appropriate and in particular that the required mix of skills and experience and other qualities, including core competencies which Non-Executive Directors should bring to the Board are present. To oversee the development, maintenance and review of the criteria to be used in the recruitment process and the annual review and assessment of the effectiveness of the Board as a whole, the committees of the Board, and the contributions of each individual director, including an assessment of the independence of the Independent Non-Executive Directors and their length of tenure in office in line with the recommendations of the Code. To make assessment, consider justifications and make recommendations on the element of independence of an independent director should the Board wish to retain as an independent director, a person who has served in that capacity for more than nine (9) years. Review of Board’s succession plans and facilitate induction and training programmes.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
15
16
Corporate Governance Statement (cont’d) Nomination and Remuneration Committee (cont’d) In respect of remuneration responsibilities To establish, recommend and constantly review a formal and transparent remuneration policy framework and terms of employment for the Board to attract and retain directors which should be aligned with the business strategy and long term objectives of the Company taking into consideration that the remuneration of the Board should reflect the Board’s responsibilities, expertise and complexity of the Company’s activities. Director re-election provides an opportunity for shareholders to renew their mandate conferred to the Directors. The Articles of Association of the Company provides that all directors shall retire by rotation once in every three (3) years or at least one-third (1/3) of the Board shall retire but shall be eligible to offer themselves for re-election at the AGM. Directors who are of or over the age of seventy years (70) shall retire pursuant to Section 129 of the Companies Act 1965 and shall be re-appointed under the provision of Section 129(6) of the said Act annually. The above provisions are adhered to by the Board in every AGM. Information of directors standing for re-election are outlined in the Profile of Directors covering their details of profession, directorships in other public companies and shareholdings in the Company and their attendance of the Board meetings are set forth on page 14 of this Annual Report. The Board evaluation process is carried out by way of peer assessment, in the form of evaluation questionnaires to be reviewed and deliberated by the NRC before its findings and recommendations are tabled to the Board. The NRC had evaluated the Board’s current structure, size, composition and performance during the financial year and concluded that the Board’s dynamics are healthy and effective. The present members of the Board possess appropriate skills, experience and qualities to steer the Company forward. The NRC is also satisfied that the existing structure, size, composition, current mix of skills, competence, knowledge, experience and qualities of the existing Board members are appropriate to enable the Board to carry out its responsibility effectively. During the year the NRC also reviewed and recommended that Dr. Goh Kar Chun be designated and appointed as the GMD while Mr. Lim Ming Kee be designated and appointed as the Group Executive Director of MCE in line with succession plans agreed upon. Upon completion of the Internal Reorganisation of MCEIB which culminated with the listing of MCE, Dr. Goh Kar Chun was appointed as the GMD and Mr. Lim Ming Kee appointed as the Group Executive Director on 30th June 2016. The following current members of the Board who having been appointed as Directors on 10th June 2016, will retire as Directors pursuant to Article 82 of the Articles of Association at the forthcoming AGM: a) b) c) d)
Dr. Goh Kar Chun Mr. Tai Lam Shin Mr. Loo Shen Chang Mr. Lim Ming Kee
Dr. Goh Kar Chun, Mr. Tai Lam Shin and Mr. Loo Shen Chang being eligible, have offered themselves for re-election. Based on the annual evaluation assessment carried out, the NRC had recommended and the Board concurred to recommend the re-election of all the three retiring Directors at the forthcoming AGM. Mr. Lim Ming Kee, the Group Executive Director, has indicated his intention not to seek re-election at the forthcoming AGM and will retire as a Director at the conclusion of the forthcoming AGM. Encik Shamsudin @ Samad Bin Kassim who has attained the age of 70 as at the date of the forthcoming AGM will be vacating his office as a Director pursuant to Section 129 (2) of the Companies Act 1965. Encik Shamsudin @ Samad Bin Kassim has indicated that he will be seeking re-appointment as a Director pursuant to Section 129(6) of the Companies Act 1965 and the NRC and Board having assessed his performance and taking note of his significant and valued contributions to the Board and its Committees, are recommending that shareholders re-appoint Encik Shamsudin @ Samad Bin Kassim as a Director of the Company at the forthcoming AGM.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
Corporate Governance Statement (cont’d) Nomination and Remuneration Committee (cont’d) Separately, the NRC had also reviewed the board gender diversity policy, defined the additional criteria required during the year for new director as well as reviewed and proposed to the Board for the appointment of a new director. Following are the key criteria for evaluation and selection of new board candidate: • • • • •
Age; Industrial experience, skillsets and knowledge; Academic qualifications; Expected contributions to the existing and new businesses; and Expected enhancement to the board’s strength and network.
Upon appointment, an induction will be provided to new director in order to enable him/her to fit into the new board and to contribute and discharge his/her duties effectively. The underlying factors of directors’ commitment to the Group are devotion of time and continuous improvement of knowledge and skill sets. At minimum, all board members shall meet at least every quarter and on other occasions, as and when necessary, to approve quarterly financial results, statutory financial statements, the annual report as well as to review the performance of the company and its operating subsidiaries, governance matters and various matters reserved for the Board’s approval. Directors’ Trainings The Board has defined its training policy for its board members. Each Director is expected to attend at least one (1) full day continuing education programme each year. The extent and subject matter which may vary, is left to each individual director’s discretion. In order to encourage continuing director education, the Company will reimburse directors for all costs of attending two (2) programmes each financial year. However, directors with the consent of the Chairman of the NRC may at the Company’s expenses attend more than the two (2) programmes each year. Annually, the Chairman of the NRC is, based on the annual assessment of each director, authorised to make recommendations for each individual director’s continuing education requirements to meet the intentions and purposes of this policy. During the financial year, the directors had attended/participated the following trainings and briefings: Course Title
Director(s) Date attended
What’s Next for Private Entities - MPERS/MFRS Basic Module
Loo Shen Chang
Duration (No. of Days)
18.08.2015 & 19.08.2015
2
Workshop on Enhanced Understanding of Risk Management Goh Kar Chun and Internal Control for Chief Financial Officers, Internal Auditors and Risk Officers
06.10.2015
0.5
Board Chairman Series : Tone from the Chair and Establishing Boundaries
Shamsudin @ Samad Bin Kassim
22.10.2015
1
2016 Budget Seminar
Lim Ming Kee Tai Lam Shin
02.11.2015
1
Deloitte Tax Max
Goh Kar Chun
04.11.2015
1
Mandatory Accreditation Programme for Directors of Public Listed Companies
Loo Shen Chang
04.11.2015 & 05.11.2015
2
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
17
18
Corporate Governance Statement (cont’d) Directors’ Trainings (cont’d)
Course Title
Director(s) Date attended
Duration (No. of Days)
2016 Budget Seminar
Tai Lam Shin
26.11.2015
1
Strategic Workshop II - Sailing in the Storm
Lim Ming Kee Goh Kar Chun
01.12.2015
1
Corporate Governance Breakfast Series with Directors - How to Maximise Internal Audit
Tai Lam Shin
09.12.2015
0.5
The New Auditor’s Report Sharing the UK experience
Shamsudin @ Samad Bin Kassim
13.01.2016
1
Director Accreditation Program 125/2016 (Thailand)
Shamsudin @ Samad Bin Kassim
14.03.2016
1
An Overview of Latest Developments in MFRS
Tai Lam Shin
14.03.2016 & 15.03.2016
2
Amendments to BM Listing Requirements & GST updates
Tai Lam Shin
27.05.2016
0.5
Corporate Governance Breakfast Series : Future of Auditor Reporting - The Game Changer for Boardroom
Shamsudin @ Samad Bin Kassim
27.06.2016
0.5
BOARD REMUNERATION The executive remuneration is designed to link rewards to the Group’s performance whilst the remuneration of the Non-Executive Directors is determined in accordance with their experience and the level of responsibilities assumed. The review of the remuneration of all the Board members had been conducted by the NRC and recommendations made to the Board for approval during the financial year. The directors do not participate in decisions on their own remuneration. The number of directors whose annual income falls within the following bands is set out as follows: Remuneration Bands
Executive Directors
Non-Executive Directors
- - 1 1
2 2 -
RM0 – RM50,000 RM50,001 - RM100,000 RM800,001 – RM850,000 RM1,250,001 – RM1,300,000
The details of the total Group’s remuneration paid or payable to all directors of the Company for the financial year ended 31st July 2016 are further categorised into the following components: Fees (RM)
Salaries and other emoluments (RM)
Benefitsin-kind (RM)
Total (RM)
Company Executive Directors Non-Executive Directors
7,000 14,167
- -
- -
7,000 14,167
Group Executive Directors Non-Executive Directors
84,000 181,538
1,902,728 23,500
96,993 -
2,083,721 205,038
The proposed directors’ fees of RM84,000 for Executive Directors and RM181,538 for Non-Executive Directors for the financial year ended 31st July 2016 are subject to shareholders’ approval at the forthcoming AGM. MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
Corporate Governance Statement (cont’d) SHAREHOLDERS Corporate Disclosure The Board has adopted a Corporate Disclosure Policy which takes into consideration the Guidelines set out under Bursa Corporate Disclosure Guide issued in September 2011. The Board’s Corporate Disclosure Policy aims to ensure that all stakeholders are provided with comprehensive, accurate and quality information on a timely and even basis to all shareholders and investors. Currently, the Company’s information is disseminated through various disclosures and announcements made to Bursa Malaysia. This information is also published at Bursa Malaysia’s website at http://www.bursamalaysia.com. The Company also maintains its website at www.multicode.com.my containing business, investor and products information for access by the general public. Pursuant to Paragraph 9.21 of the Listing Requirements, the Board has leveraged on its corporate website to communicate, disseminate and add depth to its governance reporting. Shareholders and public investors can view the principal governance information such as board charter, board committees’ terms of reference, policies and codes in the corporate website. The Board recognises the need for transparency and accountability to the Company’s shareholders and regular communication with its shareholders, stakeholders and investors on the performance and major developments in the Group. On this note, the Board has defined its shareholders communication policy with the aim of empowering its shareholders through effective communication. In this policy the Board has set out the practices and means of the Company when communicating with its shareholders (both current and prospective) on the quarterly financial results, circulars, annual reports, corporate announcements and press releases in Bursa Malaysia’s website. These various announcements made are also available on the Company’s website at www.multicode.com.my. General meeting is an important avenue through which shareholders can exercise their rights. Effective 1st July 2016, Paragraph 8.29A of the Listing Requirements provides that any resolution set out in the notice of any general meeting, or in any notice of resolution which may properly be moved and is intended to be moved at any general meeting, shall be voted by poll. Also, at least one (1) scrutineer will be appointed to validate the votes cast at the General Meeting who must not be an officer of the Company or its related corporation, and must be independent of the person undertaking the polling process. Other than the Board Chairman and GMD, the shareholders may also convey any concerns that they may have to the Senior Independent Non-Executive Director, Mr. Tai Lam Shin.
ACCOUNTABILITY AND AUDIT Financial Reporting The AC has the responsibility to ensure the Group’s financial statements comply with applicable financial reporting standards. The integrity of financial reporting is influenced by the competency, quality and integrity of the Management in charge of the preparation of financial reports and the competency, suitability and independence of External Auditors. During the financial year, the audit fee and non-audit fees for services provided by the External Auditors to the Group and the Company respectively for the financial year ended 31st July 2016 were as follows:
Group
2016 Company
Statutory audit fees Non-audit fees
98,000 6,200
25,000 5,000
The present External Auditors were engaged in the current financial year. As part of the AC review processes, the AC has obtained written assurance from the External Auditors confirming that they are, and have been, independent throughout the conduct of the audit engagement in accordance with the terms of all relevant professional and regulatory requirements. Annually, the AC also reviews the appointment, performance and remuneration of the External Auditors before recommending them to the shareholders for re-appointment in the AGM.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
19
20
Corporate Governance Statement (cont’d) ACCOUNTABILITY AND AUDIT (cont’d) Risk Management and Internal Control The Board acknowledges that risk management and internal control are an integral part of good governance. Risk is inherent in all business activities. It is however, not the Group’s objective to eliminate risk totally but to provide structural means to identify, prioritise and manage the risks involved in all the Group’s activities and to balance between the costs and benefits of managing and treating risks, and the anticipated returns that will be derived from. Further details of the Group’s systems of risk management and internal control and the function of the Internal Auditors are reported in the Statement on Risk Management and Internal Control on pages 25 to 27. Compliance Statement The Board recognises and views that Corporate Governance is an ongoing process and is of the view that the Company has substantially complied with the recommendations of the Code and will take appropriate steps towards embracing the Principles and Recommendations under the Code at a pace and time frame consistent with the size, priority and dynamics of the Group. On 16th December 2015, Bursa Malaysia released its Analysis of Corporate Governance Disclosures in Annual Reports conducted on Annual Reports issued by listed issuers for 2013-2014. The review and analysis carried out by Bursa Malaysia were to assess the level and quality of the Corporate Governance Disclosures by listed issuers. MCEIB’s scores are tabulated below:
MULTI - CODE ELECTRONICS INDUSTRIES (M) BERHAD Score 100.0%
100.0% 90.0%
81.5%
80.0% 67.6%
66.7%
61.8%
70.0% 60.0%
45.5%
50.0% 40.0% 30.0% 20.0% 10.0%
Principle 1 Established Clear Goals & Responsibilities
Principle 2 Strengthen Composition
Principle 3 Reinforce Independence
Principle 4 Principle 5 Uphold Principle 6 Foster Integrity of Recognise and Commitment Financial Manage Risks Reporting
0.0%
MCEIB’s Corporate Governance Disclosures scores and a detailed report of Bursa Malaysia’s findings were tabled to the Board for noting and review. Going forward the Board will endeavour to enhance its disclosures on its governance practices. OTHER INFORMATION REQUIRED BY THE LISTING REQUIREMENTS OF BURSA MALAYSIA SECURITIES BERHAD In compliance with the Listing Requirements, the following additional information are provided: Utilisation of Proceeds There were no proceeds raised from any corporate proposals by the Company during the financial year. Material contracts To the best of the Board’s knowledge, there were no material contracts involving the Group with any of the directors, chief executive who is not a director and/or major shareholders during the financial year ended 31st July 2016. Contract relating to loan There were no contracts relating to loan by the Company and its subsidiaries in respect of the preceding item. MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
Audit Committee Report CONSTITUTION OF AUDIT COMMITTEE The Audit Committee (‘AC’) of MCE Holdings Berhad (‘MCE’) was established on 13th June 2016 prior to MCE’s listing on the Main Market of Bursa Malaysia Securities Berhad (‘Bursa Malaysia’) on 1st July 2016. MCE’s listing on 1st July 2016 was pursuant to an Internal Reorganisation, by way of a Members’ Scheme of Arrangement under Section 176 of the Companies Act 1965 undertaken by Multi-Code Electronics Industries (M) Berhad (‘MCEIB’) culminating in the transfer of the listing status of MCEIB to MCE Holdings Berhad (‘Internal Reorganisation of MCEIB’). Accordingly the disclosures in this Report cover the activities of the AC of MCEIB up to 30th June 2016 and MCE from 1st July 2016.
COMPOSITION OF AUDIT COMMITTEE The AC of MCE is comprised wholly of Independent Non-Executive Directors as follows: Loo Shen Chang (Chairman, Independent Non-Executive Director) Shamsudin @ Samad Bin Kassim (Member, Independent Non-Executive Director) Tai Lam Shin (Member, Independent Non-Executive Director) Mr. Loo Shen Chang, the Chairman, and Mr. Tai Lam Shin are both Chartered Accountants of the Malaysian Institute of Accountants while, Encik Shamsudin @ Samad Bin Kassim, an Economist by training is financially literate. Accordingly, MCE is in compliance with Paragraph 15.09 (1)(c)(i) of the Main Market Listing Requirements (‘Listing Requirements’). During the financial year ended 31st July 2016, Mr. Chai Lai Koon, the Chairman of the AC, retired as a Director of the Company at the MCEIB’s Annual General Meeting held in January 2016 and accordingly ceased to be Chairman of the AC. On 20th January 2016, Mr. Loo Shen Chang was appointed to the AC and elected as Chairman of the AC. The AC would like to place on record its gratitude and utmost appreciation to Mr. Chai Lai Koon for his past services as a Director and Chairman of the AC.
SECRETARY The secretary(ies) to the AC are the Company Secretary(ies) of the Company.
TERMS OF REFERENCE The detailed Terms of Reference of the AC outlining the composition, duties and functions, authority and procedures of the AC adopted on 13th June 2016 are published and available on the Company’s website at www.multicode.com.my During the 4th Quarter meeting on 28th September 2016, the AC reviewed its terms of reference and updated its terms of reference to be in line with amendments made to Paragraph 15.12(1)(g)(ii) of the Listing Requirements to enhance the role of the AC which came into effect on 1st July 2016. The AC is now required amongst others to review significant matters highlighted including financial reporting issues, significant judgements made by Management, significant and unusual events or transactions and how these matters are addressed.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
21
22
Audit Committee Report (cont’d) MEETINGS The attendance record of all members of the AC during the financial year ended 31st July 2016 at meetings of the AC, for MCEIB and MCE after assumption of the listing status of MCEIB are as follows: For MCEIB For MCE Number of Percentage Number of Percentage Name Meetings Attended of Attendance Meetings Attended of Attendance (%) (%) Mr. Loo Shen Chang Encik Shamsudin @ Samad Bin Kassim Mr. Tai Lam Shin Mr. Chai Lai Koon*
2/2 5/5 5/5 3/3
100 100 100 100
1/1 1/1 1/1 -
100 100 100 -
*Retired as a Director on 20th January 2016 The Agenda for meetings, the relevant reports and papers were furnished to AC members by the Secretary after consultation with the AC Chairman in advance to facilitate effective deliberation and decision making at the respective meetings. During its scheduled quarterly meetings, the AC reviewed the risk management and internal control processes (with the assistance of its outsourced Internal Audit Function), the interim and year-end financial reports, the internal and external audit plans and reports, Related Party Transaction (‘RPT’), and all other areas within the scope of responsibilities of the AC under its Terms of Reference. All issues and challenges were deliberated during AC meetings before arriving at any decisions, conclusions or recommendations and brought to the attention of the Board where necessary. The minutes of these deliberations and its resultant decisions, conclusions or recommendations at each AC meeting were properly recorded by the Company Secretary and subsequently elevated to the Board for review and notation. The Group Financial Controller (Chief Financial Officer) was invited to and attended all AC meetings to facilitate direct communication and interaction as well as provide clarifications on audit, financial and operational issues. The representatives of the outsourced Internal Audit Function attended the AC meetings to table their respective Internal Audit reports. The External Auditors of the Company represented by the Partner and Audit Manager leading the Audit attended AC meetings to present their Audit Plan, Audit Memorandum and Findings.
SUMMARY OF ACTIVITIES During the financial year ended 31st July 2016, the AC in discharging its duties and functions carried out activities which are summarised broadly as follows: a)
Internal Audit
The MCE Group has outsourced its internal audit function to a professional internal audit services company. The primary responsibility of this internal audit function is to assist the Board and the AC in reviewing and assessing whether the management systems of internal control procedures are effective and provide recommendations to strengthen these internal control procedures so as to foster a strong management control environment.
The Internal Auditors have organised its work in accordance to the principles of the internal auditing standards covering the conduct of the audit planning, execution, documentations, communication of findings and consultation with key stakeholders on the audit concerns.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
Audit Committee Report (cont’d) SUMMARY OF ACTIVITIES (cont’d) a)
Internal Audit (cont’d)
Annually, before the commencement of the internal audit reviews, an internal audit plan is produced and presented to the AC for approval. Upon approval by the AC, internal audit reviews would be carried in accordance with the approved internal audit plan. Thereafter during the quarterly meetings following the presentation of the Internal Audit Report, the AC also reviews with the Internal Auditors, the progress and coverage of the Internal Audit Plan to ensure that the audit direction remains relevant and is in line with the AC’s expectations. After considering the changes in the operating environment in the Group, the Internal Audit Plan was developed in consideration of the Group’s risk profile and the Board and Management concerns.
Prior to the presentation of reports and findings to the AC, comments from the Management were obtained and incorporated into the internal audit findings and reports. The internal audit reports also covered the follow-up by the Management on the implementation of recommendations in their earlier reports.
The Internal Auditors had attended four (4) AC meetings during the financial year. The functional areas and operating processes reviewed by the Internal Auditors were as follows: -
i. ii. iii. iv.
The total cost incurred during the current financial year for the internal audit function of the Group was RM77,452 (2015:RM68,620).
b)
Financial Reporting
In overseeing and discharging its responsibilities in respect of financial reporting by MCE Group, the AC:
Follow-up; Production function; Warehouse and inventory function; and Business development and marketing function.
i.
Reviewed the financial positions, quarterly interim financial reports and announcements for the respective financial quarters prior to submission to the Board for consideration and approval. The 1st, 2nd, 3rd and 4th Quarter Interim Financial Reports were tabled at the AC meetings held on 23rd December 2015, 28th March 2016, 22nd June 2016 and 28th September 2016; ii. The quarterly reports and Audited Financial Statements (‘AFS’) were prepared in compliance with the Malaysian Financial Reporting Standard (‘MFRS’) while the quarterly reports took into consideration Paragraph 9.22 including Appendix 9B of the Listing Requirements; iii. Reviewed the External Auditors’ Audit Planning Memorandum for the financial year ended 31st July 2016; iv. Reviewed the AFS and the External Auditors’ findings and recommendations for the financial year ended 31st July 2015 on 20th November 2015; v. Conducted independent meeting session with the External Auditors without the presence of executive board members and Management personnel on 28th September 2016 and 26th October 2016; vi. Reviewed the Budget for the financial year ending 31st July 2016 prepared by Management during its 1st Quarter meeting on 23rd December 2015 and ensured that the assumptions and estimates were reasonable and prudent; vii. Reviewed and revised the Budget for the year ending 31st July 2016 during its 3rd Quarter meeting on 22nd June 2016, taking into consideration the performance of the Group up to that date; viii. Considered the performance of External Auditors, reviewed the independence of External Auditors and recommended to the Board for re-appointment; ix. To ensure the integrity of the financial information, received assurance from the Group Managing Director (‘GMD’) and Group Financial Controller, that: - - - - - x.
Appropriate accounting policies had been adopted and applied consistently; The going concern basis applied in the Annual Consolidated Financial Statements was appropriate; Prudent judgements and reasonable estimates had been made in accordance with the requirements set out in the MFRSs; Adequate controls and processes were in place for effective and efficient financial reporting and relevant disclosures under MFRSs and Bursa Malaysia’s Listing Requirements; and The Annual Consolidated Financial Statements and the Quarterly Condensed Consolidated Financial Statements did not contain material misstatements and gave a true and fair view of the financial position.
Reviewed the Statement of Risk Management and Internal Control together with the Internal Auditors and External Auditors and received assurance from the GMD and Group Financial Controller that the Group’s risk management and internal control systems are operating adequately and effectively in all material aspects before recommending the Statement to the Board of Directors.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
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Audit Committee Report (cont’d) SUMMARY OF ACTIVITIES (cont’d) c)
External Audit
Prior to the completion of the Internal Reorganisation of MCEIB, the AC of MCEIB had determined that the External Auditors of the Company engaged had remained unchanged since its listing on Bursa Malaysia since 1997. In line with the Internal Reorganisation of MCEIB, the AC had recommended that a new External Auditors be appointed for MCE.
Messrs Crowe Horwath was accordingly appointed as the First External Auditors for MCE on 10th June 2016 and as External Auditors for all the subsidiaries in Malaysia on 13th July 2016. Upon completion of the Internal Reorganisation of MCEIB, Messrs Crowe Horwath led by their engagement partner, Mr. Piong Yew Peng, attended the first AC meeting for MCE on 22nd June 2016 and during presentation of their Audit Planning Memorandum for the financial year ended 31st July 2016, had declared and confirmed that they were independent and would be independent through their audit engagement.
Subsequent to the financial year ended 31st July 2016, the AC met with the External Auditors in the absence of Management on two (2) occasions during 28th September 2016 and 26th October 2016. The AC had the opportunity to assess the cooperation extended by the Management to the External Auditors, their attitude and readiness to provide documentation and explanations, as well as the adequacy of resources in the Group’s finance department.
There were no areas of major concerns raised by Messrs. Crowe Horwath that warranted escalation to the Board. The External Auditors were also informed by the AC that should there be any significant incidents or matters detected in the course of their audits or reviews which warrant their knowledge or intervention, it shall be reported to the AC accordingly.
At the same time Messrs Crowe Horwath had the opportunity to obtain feedback from the AC on their perspectives on the areas of major concerns, which they would like the External Auditors to look into.
The AC carried out an assessment of the performance and suitability of Messrs Crowe Horwath based on the quality of services, sufficiency of resources, adequate resources and trained professional staff assigned to the audit. The AC has been generally satisfied with the independence, performance and suitability of Messrs Crowe Horwath based on the assessment and are recommending to the Board and shareholders for approval for the re-appointment of Messrs Crowe Horwath as External Auditors for the financial year ending 31st July 2017.
CORPORATE GOVERNANCE PRACTICES Apart from discharging its duties with respect to the internal audit, financial reporting and external audit, the AC also reviewed the disclosures made in respect of the financial results and Annual Report of the Company in line with the principles and spirit set out in the Malaysian Code on Corporate Governance 2012, other applicable laws, rules, directives and guidelines. During the financial year under review, the AC took note and reviewed the 2015 Analysis of Corporate Governance Disclosures in Annual Reports conducted by Bursa Malaysia based on Annual Reports issued by listed issuers for 2013-2014. The review and analysis carried out by Bursa Malaysia were to assess the level and quality of the Corporate Governance Disclosures by listed issuers. MCEIB’s Corporate Governance Disclosures scores and a detailed report of Bursa Malaysia’s findings were tabled to the AC, reviewed and noted together with appropriate recommendations for the Board’s further action. In addition, before finalising the various governance disclosures in the Annual Report, the AC together with all other Board Members and Management had reviewed the Corporate Governance Statement, AC Report, Statement on Risk Management and Internal Control together with other compliance disclosures.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
Statement on Risk Management and Internal Control The Board of Directors (‘the Board’) is pleased to present its Statement on Risk Management and Internal Control for the financial year ended 31st July 2016. This Statement is prepared pursuant to Paragraph 15.26(b) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (‘Bursa Malaysia’) and guided by the latest “Statement on Risk Management and Internal Control – Guidelines for Directors of Listed Issuers” (‘the Guidelines’) endorsed by Bursa Malaysia. Risk Management The Board recognises that automotive industry is a highly competitive and dynamic industry. On this note, all Board Members acknowledge that it is imperative for the Group to have on-going process for identifying, evaluating and managing its principal risks and to maintain adequate and effective risk management and systems of internal control to manage its risks. One of the primary responsibilities of the Group Managing Director (‘GMD’) is to ensure that the Group has the appropriate risk management practices and policies. The Group has established its Risk Management Committee (‘RMC’) which is chaired and led by the GMD. The key mandates of the RMC are: a) b) c) d) e)
To formulate and carry out strategies and actions needed to manage risks; To promote organisational risk awareness associated in the delivery of products and services to customers; To ensure adequate knowledge, infrastructure, resources and systems are in place for risk management; To report to the Board periodically on the emerging risks and their impacts on operations, profitability and business plan and the status of Management actions to manage these risks; and To minimise high dependency areas and ensure business continuity.
The members of RMC are selected from the respective senior heads of department and other Management personnel as deemed appropriate and appointed by the GMD. With the appointment of key senior Management staff in RMC, the responsibilities on risk management are cascaded down and shared across Management personnel at operational level. The identification of risks, evaluation and management are an ongoing and continuous process. These processes are carried out from Board to line Management level. The Board deliberated strategic business issues and action plans in its periodic board meetings while various Management review meetings covering status of action plans were held. The objective of these meetings is to ensure risks are communicated, understood and managed effectively and at the same time to reinforce the monitoring and supervision controls at the line Management level. All issues deliberated in these meetings are recorded in minutes for reference in the future. In the annual management strategic meeting, the Group has identified the following key success factors for its automotive business. Any challenges to these key success factors are considered risks to the Group. • • • • • •
Research and Development covering the technical know-how, trainings, designs and supports; Product Range involving continuous design upgrading and enhancement to our products and services offered; Market Place pertaining to development of new domestic and export markets; Production Methodology requiring continuous improvement and re-engineering of production processes to achieve greater production efficiency and optimisation; Internal Work Culture relating to staff members commitment towards quality; and Suppliers Capability to offer, support and respond to the quality standards and expectations of the market.
Internal targets and objectives are set for these key success factors while challenges are identified and managed. Progressively, person in charge will report to the RMC on the status of actions taken as well as further actions needed to manage new challenges as the Group progresses. As part of the process in developing the internal audit plan, the Internal Auditors has taken into account the challenges and action plans identified in these key success factors. By doing so, the Internal Auditors will focus their review on key risk areas and provide relevant feedback to the Board through the Audit Committee (‘AC’) on the effectiveness of the Management’s risk management actions.
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ANNUAL REPORT 2016
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Statement on Risk Management and Internal Control (cont’d) Other Key Internal Controls The generic management controls including the Management reporting structure, authority and approval limits and procedures, segregation of duties, budgeting, Management review procedures as well as the periodic reporting and review of performance have been embedded in the business processes and activities. In addition, the manufacturing arm of the Group continues to be certified under the ISO 9001:2008 Quality Management System and ISO/TS 16949, the harmonised standard for automotive supply chain. These management systems formed the basis of operational procedures in the production processes. Internal quality audits are carried out on quarterly basis while annual surveillance audits are conducted by external certification body to provide assurance of compliance with the ISO/TS requirements. Management Responsibilities and Assurance In accordance to the Guidelines, Management is responsible to the Board for: • • •
identifying risks relevant to the business of the Group’s objectives and strategies implementation; designing, implementing and monitoring the risk management framework in accordance with the Group’s strategic vision and overall risk appetite; and identifying changes to risks or emerging risks, taking action as appropriate and promptly bringing these to the attention of the Board.
As reported under the Risk Management section above, Management has addressed the above responsibilities outlined in the Guidelines. Additionally, the Board has received assurance from the GMD and Group Financial Controller that, to the best of their knowledge the risk management and internal control systems of the Group are operating adequately and effectively, in all material aspects before producing this Statement. Board Review and Oversight Mechanism The Board recognises that the Group is operating in a dynamic business environment. Accordingly, the Board views that risk management and systems of internal control are integral parts of the Group and believes that the way it overseeing risk at the board is critical and will influence the tone and culture for effective risk management at Management level. Presently, the primary risk oversight role of the Group resides in the Board. When reviewing and deliberating risk issues in the Group, the Board is assisted by the AC and RMC in assessing whether the present systems of risk management and internal control provide reasonable assurance that risk is managed appropriately. Quarterly, the RMC will re-assess, summarise and report the existing and emerging risks and the management progress in managing risks to the Board. On the other hand, the AC is supporting the Board during its review of risk management by reporting to the Board the audit issues highlighted by the Internal and External Auditors. Based on evaluation of the information provided by the AC and RMC, the Board will then deliberate the actions and options needed and delegate the decided actions to GMD for execution. Management also supplements the Board consideration on effectiveness of the Group risk management systems when reporting their quarterly financial performance and results to the Board and AC. With Management inputs on the interim financial performance results, the Board and AC are able to cross examine the effectiveness of risk management and internal control systems as well as deliberate the integrity of the financial results.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
Statement on Risk Management and Internal Control (cont’d) The Board’s Conclusion Based on the review process undertaken, the Board is satisfied that there is an ongoing process for identifying, evaluating and managing significant risks faced by the Group and the existing level of systems of risk management and internal control are effective to enable the Group to achieve its business objectives. The Board also took cognisance that there were no reported material losses resulting from significant control weaknesses. The Board and Management will continue to ensure that risk management and internal control systems of the Group are continuously improved consistent with the evolving business development. Nonetheless, all stakeholders shall note that all systems of risk management and internal control are designed to manage rather than eliminate the risk threatening the achievement of business objectives. Hence, these systems can only provide reasonable but not absolute assurance against material misstatement and records, or against financial losses or fraud. Review of Statement on Risk Management and Internal Control by External Auditors Pursuant to Paragraph 15.23 of the Main Market Listing Requirements, the external auditors have reviewed this Statement on Risk Management and Internal Control for inclusion in the annual report for the financial year ended 31st July 2016. Their review was performed in accordance with Recommended Practice Guide 5 (RPG 5) issued by the Malaysian Institute of Accountants. Though RPG 5 does not require the external auditors to consider whether this statement covers all risks and controls or to form an opinion on the effectiveness of the Group’s risk management and internal control systems, the external auditors have reported to the Board that nothing has come to their attention that causes them to believe that this Statement is inconsistent with their understanding of the processes the Board has adopted in reviewing the adequacy and effectiveness of the risk management and internal control systems of the Group.
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ANNUAL REPORT 2016
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28
Corporate Social Responsibility Statement Bursa Malaysia Securities Berhad defines Corporate Social Responsibility (‘CSR’) as “open and transparent business practices that are based on ethical values and respect for the community, employees, the environment, shareholders and other stakeholders and designed to deliver sustainable value to society at large”. Based on this philosophy, MCE Holdings Berhad and its subsidiaries(‘MCE’) is committed to continuously cultivate a positive corporate culture that emphasises good CSR and corporate citizenship. Environment Multi-Code Electronics Industries (M) Berhad (“MCEIB”), the immediate subsidiary of MCE, as an ISO 14001:2004 (the international specification for environment management system) accredited company, continues its efforts towards reducing environmental impact of its operations by adopting waste management, recycling programme and reducing usage of hazardous materials in its manufacturing process. Quality Assurance MCE has continued its drive to manufacture high quality products to cater to its esteemed customers’ requirements. MCE is committed in meeting its standards of excellence instilled through strong quality mindset and upholding best industry practices. MCE will continue its pursuit towards automatic manufacturing process in order to enhance production efficiency, quality consistency and product assurance as well as reduce dependence on human input and judgement. Workplace MCE advocates a corporate philosophy of happy, healthy and caring for its employees. Employees of different background, gender, age and ethnicity are given opportunities for career growth, fair performance evaluation and compensation programmes which commensurate with their rank and level of employment. In the year under review, 3S (Sort (Seiri), Set in order (Seiton) and Shine (Seiso)) activities were carried out and monitored by respective departments to improve process efficiency and productivity, maintain good control over the processes and ensure safety and cleanliness at workplace. Safety and Health MCE places great importance on safety and health aspects of its employees. Necessary precautions are in place and safety procedures take precedence in its daily operations. Besides having Emergency Response Teams to deal with emergencies, concerted efforts are made to prevent accidents and injuries at its workplace. An in-house Safety, Health and Environmental Committee (SHEC) oversees and ensures that safety and health are appropriately adhered to by all employees. Regular meetings and activities have been structured into MCE’s safety work schedules and are rigorously carried out and monitored by SHEC. During the year under review, staff participated in fire safety trainings conducted by Jabatan Bomba, Tebrau Branch and Lembah Klang Branch at Johor Bahru and Telok Gong premises respectively. Employees Welfare, Skill Development, Social and Community Activities MCE pursues and organises employees and community related practices covering the following areas: i) ii) iii) iv)
Sports activities, Employees welfare, Community related activities, and Employees’ development.
i)
Sports activities
To promote healthier lifestyle among employees, MCE sponsored weekly sporting activities such as badminton and futsal, and annual in-house sports competitions. Besides that, employees are encouraged to participate in half marathons and cash incentives are awarded to those who completed them.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
Corporate Social Responsibility Statement (cont’d) Employees Welfare, Skill Development, Social and Community Activities (cont’d) ii)
Employees welfare
MCE strives to create a happy and caring environment for our employees. As such Annual Dinner, Company Retreat and festive celebrations (Hari Raya and Christmas) are organised annually. In addition, monthly departmental activities and monthly birthday celebrations are organised to nurture a sense of togetherness and belongings.
MCE acknowledges the importance of healthy and balanced lifestyle of its employees. Employees are encouraged to take annual medical check-up which are substantially subsidised by MCE. Healthcare providers, both in Johor Bahru and Klang Valley were invited to give health talks on general health awareness and free basic health check to our employees.
iii)
Community related activities
During the year under review, MCE organised its annual blood donation campaign in collaboration with Hospital Sultan Ismail, Johor Bahru and Hospital Tengku Ampuan Rahimah, Klang.
In its 2015 Charity Drive, MCE reached out to less fortunate children at IQ70+Persatuan, Kebajikan Kanak-Kanak Terencat Akal Malaysia. MCE visited and donated food and basic necessities items to the association.
iv) Employees’ development
MCE believes that efficient, effective, knowledgeable and satisfied employees are essential for the growth of the organisation. Recognising the importance of human capital development, MCE continuously provides in-house trainings, external workshops and seminars to enhance their skills, knowledge and competencies. During the year under review, MCE had provided in-house and external trainings to its employees covering both soft and hard skills.
2015 Badminton Tournament (Aug 2015)
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
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Corporate Social Responsibility Statement
(cont’d)
2015 Making A Difference (MAD) Training (Oct 2015)
2015 Taman Negara Trip (Oct 2015)
2015 Blood Donation (Nov 2015) MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
Corporate Social Responsibility Statement (cont’d)
2015 Charity Drive (Nov 2015)
2015 Christmas Party (Dec 2015)
2016 Annual Dinner (Jan 2016)
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ANNUAL REPORT 2016
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Corporate Social Responsibility Statement
(cont’d)
2016 Bowling Tournament (Apr 2016)
Model Factory Opening Ceremony (Aug 2016)
Monthly Birthday Celebrations for Employees
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
Statement Of Directors’ Responsibility In Relation To The Financial Statements This statement is prepared as required by the Listing Requirements of Bursa Malaysia Securities Berhad. The directors are required by the Companies Act, 1965 (“the Act”) to prepare financial statements for each financial year so as to give a true and fair view of the financial position of the Group and of the Company and the results and cash flows of the Group and of the Company as at end of the financial year. During the preparation of the financial statements for the financial year ended 31 July 2016, the directors have ensured that : • the Group and the Company have adopted appropriate accounting policies and are consistently applied; • judgements and estimates that are prudent and reasonable have been used; • all applicable Malaysian Financial Reporting Standards and International Financial Reporting Standards in Malaysia have been complied with; • the accounting and other records required by the Act are properly kept and disclosed with reasonable accuracy at any time, the financial position of the Group and of the Company which enable them to ensure the financial statements comply with the Act; and • the financial statements have been prepared on the going concern basis. The directors have general responsibilities for taking such steps that are reasonably available to them to safeguard the assets of the Group, and to prevent and detect fraud and other irregularities and material misstatements, as described more fully in the corporate governance section of this report. Such system, by their nature, can only provide reasonable and not absolute assurance against material misstatement, loss and fraud.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
33
34
Chairman’s Statement On behalf of the Board of Directors, I take great pleasure to present the Annual Report and Audited Financial Statements of MCE Holdings Berhad (‘the Company’ or ‘Group’) for the financial year ended 31st July 2016. OPERATING ENVIRONMENT In 2015, the global economy grew moderately amid increased international financial market volatility. Throughout 2015, the global economy was affected by concerns over slowing momentum of global growth, sovereign debts in the euro region and fall in commodity prices. Economic growth across Asia was moderate due to weaker export performance as China growth remained moderate with slowing activity in sectors with excess capacity as well as weakness in the external sector. Despite the challenging economic environment, the Malaysian economy registered a growth of 5.0% in 2015, supported by continued expansion in domestic demand. (Source: Bank Negara Malaysia). In the second quarter of 2016, the Malaysian economy registered a growth of 4.0% (1Q 2016: 4.2%). Despite stronger growth in domestic demand, the growth was weighed down by continued decline in net exports and a significant drawdown in inventories. Moving forward, the Malaysian economy is expected to grow by 4.0 -4.5%. Domestic demand will continue to be the main driver of growth, supported primarily by private sector spending. Private consumption is expected to increase, underpinned by continued growth in wages and employment, as well as disposable income from Government initiatives. (Source: Bank Negara Malaysia). The Total Industry Volume (‘TIV’) of new motor vehicles registered in Malaysia for 2015 expanded to 666,674 units, an increase of 0.03% as compared with 666,487 units in 2014. However, it was nonetheless a new record achievement for the local automotive industry considering the tough economic conditions in 2015. The TIV achieved in 2015 was the sixth consecutive year in a row that the local automotive industry has surpassed the 600,000 mark. In the first half of 2016, the TIV of new motor vehicles was 275,459 units against 322,254 units registered in the corresponding period, representing a decrease of 14.5%. On quarterly basis, the TIV for the second quarter of 2016 was 144,204 units as compared with TIV of 131,255 units in the first quarter of 2016, an increase of 12,949 units. The higher sales volume can be attributed to the aggressive promotions in June 2016 prior to Hari Raya festive celebrations. (Source: Malaysia Automotive Association). FINANCIAL PERFORMANCE In the financial year under review, the Group achieved consolidated revenue of RM76.90 million which was approximately 14.58% lower than the preceding year. The decline in revenue was mainly attributable to decrease in demand for Original Equipment Manufacturers’ (‘OEM’) products in the current year. The Group recorded a loss after tax of RM2.19 million for the current year as compared to a loss after tax of RM1.13 million for the preceding year. The further drop in loss after tax was mainly contributed by lower revenue in the current year. CORPORATE DEVELOPMENTS Manufacture and supply of remote control auto alarms, central locks, power windows, reverse sensors, switches, key sets and automotive lightings will continue to be the Group’s core business and earning contributor for the financial year ending 31st July 2017. For the year under review, a proposed internal reorganisation by way of a members’ Scheme of Arrangement under Section 176 of the Companies Act, 1965 which effected the transfer of listing of Multi-Code Electronics Industries (M) Berhad to the Company, formed as an investment holding company. The internal reorganisation enables the Company to achieve ease and flexibility in the expansion to new business segments and streamlining of business segments as and when opportunities arises, separate from the current automotive operations. The transfer listing was completed with the assumption of the listing of the shares of the Company on the Main Market of Bursa Malaysia Securities Berhad on 1st July 2016. On 28th September 2016 the Board resolved to submit application to strike off Multi-Code Electronics Industries (India) Private Limited, a dormant indirect subsidiary of MCE incorporated in Republic of India as MCE together with its joint venture partner no longer have any intention to carry on the business or operation in the future as there has not been any progress of development arising from the Joint Venture. The striking-off of the aforesaid company will not have any material effect on the net assets and earnings per share of the Group for the financial year ending 31st July 2017.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
Chairman’s Statement (cont’d) PROSPECTS The Group continues to face the slowdown in demand from its OEM customers in tandem with the slowdown in overall domestic TIV. However, the recent launches of new models by the two national car makers are expected to contribute positively to the Group. The Group will continue its efforts to mitigate increasing costs through its various cost reduction initiatives among which covering improvements of production processes and productivity. The Board is cautious of the challenging operating conditions of the automotive sector.
APPRECIATION On behalf of the Board, I would like to express my sincere appreciation to the Management and staff for their hard work and dedication during the past year and all customers, suppliers, bankers, business associates and shareholders for their continued support and confidence to the Group. I would also like to take this opportunity to express our appreciation and gratitude to Mr. Lim Ming Kee who will retire as a Director in the forthcoming Annual General Meeting. Finally, I would like to thank my fellow Board members for their advice, commitment and guidance in the past year and look forward to their continued support in the future.
SHAMSUDIN @ SAMAD BIN KASSIM Chairman
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
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36
Directors’ Report
The directors hereby submit their report and the audited financial statements of the Group and of the Company for the financial period ended 31 July 2016. PRINCIPAL ACTIVITIES The Company is principally engaged in the business of investment holding. The principal activities of the subsidiaries are set out in Note 5 to the financial statements. There have been no significant changes in the nature of these activities during the financial period. RESULTS
The Group RM
The Company RM
Loss after taxation for the financial period
(2,191,610)
(142,339)
Attributable to:Owners of the Company Non-controlling interests
(2,287,205) 95,595
(142,339) -
(2,191,610)
(142,339)
DIVIDENDS No dividend was paid since the date of incorporation and the directors do not recommend the payment of any dividend for the current financial period. RESERVES AND PROVISIONS There were no material transfers to or from reserves or provisions during the financial period other than those disclosed in the statements of changes in equity and Note 25 to the financial statements. ISSUES OF SHARES AND DEBENTURES During the financial period:(a) the Company increased its authorised share capital from RM400,000 to RM100,000,000 by the creation of 99,600,000 new ordinary shares of RM1 each. (b) the Company increased its issued and paid-up share capital from RM2 to RM44,404,702 by way of an issuance of 44,404,700 new ordinary shares of RM1 each at par in exchange of the entire 44,404,700 issued and paid-up ordinary shares of RM1 each in Multi-Code Electronics Industries (M) Berhad.
The new ordinary shares issued rank pari passu in all respects with the existing ordinary shares of the Company.
(c) there were no issues of debentures by the Company. OPTIONS GRANTED OVER UNISSUED SHARES During the financial period, no options were granted by the Company to any person to take up any unissued shares in the Company. BAD AND DOUBTFUL DEBTS Before the financial statements of the Group and of the Company were made out, the directors took reasonable steps to ascertain that action had been taken in relation to the writing off of bad debts and the making of allowance for impairment losses on receivables, and satisfied themselves that there are no known bad debts and that no allowance for impairment losses on receivables is required. At the date of this report, the directors are not aware of any circumstances that would require the writing off of bad debts, or the allowance for impairment losses on receivables in the financial statements of the Group and of the Company.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
Directors’ Report
(cont’d)
CURRENT ASSETS Before the financial statements of the Group and of the Company were made out, the directors took reasonable steps to ascertain that any current assets other than debts, which were unlikely to be realised in the ordinary course of business, including their value as shown in the accounting records of the Group and of the Company, have been written down to an amount which they might be expected so to realise. At the date of this report, the directors are not aware of any circumstances which would render the values attributed to the current assets in the financial statements misleading. VALUATION METHODS At the date of this report, the directors are not aware of any circumstances which have arisen which render adherence to the existing methods of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate. CONTINGENT AND OTHER LIABILITIES At the date of this report, there does not exist:(a) any charge on the assets of the Group and of the Company that has arisen since the end of the financial period which secures the liabilities of any other person; or (b) any contingent liability of the Group and of the Company which has arisen since the end of the financial period. No contingent or other liability of the Group and of the Company has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial period which, in the opinion of the directors, will or may substantially affect the ability of the Group and of the Company to meet their obligations when they fall due. CHANGE OF CIRCUMSTANCES At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or the financial statements of the Group and of the Company which would render any amount stated in the financial statements misleading. ITEMS OF AN UNUSUAL NATURE The results of the operations of the Group and of the Company during the financial period were not, in the opinion of the directors, substantially affected by any item, transaction or event of a material and unusual nature. There has not arisen in the interval between the end of the financial period and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors, to affect substantially the results of the operations of the Group and of the Company for the financial period. DIRECTORS The directors who served since the date of incorporation are as follows:Goh Kar Chun (Appointed on 10 June 2016) Shamsudin @ Samad Bin Kassim (Appointed on 10 June 2016) Lim Ming Kee (Appointed on 10 June 2016) Loo Shen Chang (Appointed on 10 June 2016) Tai Lam Shin (Appointed on 10 June 2016) Muzafa Shah Bin Olan (First director since the date of incorporation, resigned on 10 June 2016) Wong Hooi Lee (First director since the date of incorporation, resigned on 10 June 2016)
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ANNUAL REPORT 2016
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38
Directors’ Report
(cont’d)
DIRECTORS’ INTERESTS According to the register of directors’ shareholdings, the interests of directors holding office at the end of the financial period in shares of the Company and its related corporations during the financial period are as follows: Number of Ordinary Shares of RM1 Each At Date of Internal Incorporation Reorganisation* Bought Sold Direct Interests In The Company Goh Kar Chun - 9,908,240 89,000 - Lim Ming Kee - 778,900 - - Shamsudin @ Samad Bin Kassim - 100,000 - - Tai Lam Shin - 20,000 - - Indirect Interest In The Company Goh Kar Chun - 350,000^ - -
At 31.7.2016
9,997,240 778,900 100,000 20,000
350,000^
The other director holding office at the end of the financial period had no interest in shares and options over shares of the Company or its related corporations during the financial period. *
Transfer listing and share exchange between the Company and Multi-Code Electronics Industries (M) Berhad by way of a members’ scheme of arrangement under section 176 of the Companies Act 1965 (“Internal Reorganisation”) were completed on 1 July 2016.
^
Deemed interested in shares held by spouse.
DIRECTORS’ BENEFITS Since the date of incorporation, no director has received or become entitled to receive any benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by directors as shown in the financial statements, or the fixed salary of a full-time employee of the Company) by reason of a contract made by the Company or a related corporation with the director or with a firm of which the director is a member, or with a company in which the director has a substantial financial interest. Neither during nor at the end of the financial period was the Group and the Company a party to any arrangements whose object is to enable the directors to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate. SIGNIFICANT EVENTS DURING THE FINANCIAL PERIOD The significant events during the financial period are disclosed in Note 37 to the financial statements. AUDITORS The auditors, Messrs. Crowe Horwath, have expressed their willingness to continue in office.
Signed in accordance with a resolution of the directors dated 26 October 2016.
Goh Kar Chun Shamsudin @ Samad Bin Kassim
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
Statement By Directors Pursuant to Section 169(15) of the Companies Act 1965
We, Goh Kar Chun and Shamsudin @ Samad Bin Kassim, being two of the directors of MCE Holdings Berhad, state that, in the opinion of the directors, the financial statements set out on pages 42 to 90 are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as of 31 July 2016 and of their financial performance and cash flows for the financial period ended on that date. The supplementary information set out in Note 39, which is not part of the financial statements, is prepared in all material respects, in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants and the directive of Bursa Malaysia Securities Berhad.
Signed in accordance with a resolution of the directors dated 26 October 2016.
Goh Kar Chun Shamsudin @ Samad Bin Kassim
Statutory Declaration Pursuant to Section 169(16) of the Companies Act 1965
I, Goh Anne, being the officer primarily responsible for the financial management of MCE Holdings Berhad, do solemnly and sincerely declare that the financial statements set out on pages 42 to 90 are, to the best of my knowledge and belief, correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act 1960.
Subscribed and solemnly declared by ) Goh Anne, at Johor Bahru in the State of Johor ) on this 26 October 2016. )
Goh Anne
Before me
Mohdzar Bin Khalid No. J204 Commissioner for Oaths Johor Bahru
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
39
40
Independent Auditors’ Report
To The Members Of MCE Holdings Berhad (Incorporated In Malaysia) Company No: 1158341-K Report on the Financial Statements We have audited the financial statements of MCE Holdings Berhad, which comprise the statements of financial position as at 31 July 2016 of the Group and of the Company, and the statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the financial period then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 42 to 90. Directors’ Responsibility for the Financial Statements The directors of the Company are responsible for the preparation of financial statements so as to give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 1965 in Malaysia. The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements give a true and fair view of the financial position of the Group and of the Company as of 31 July 2016 and of their financial performance and cash flows for the financial period then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 1965 in Malaysia. Report on Other Legal and Regulatory Requirements In accordance with the requirements of the Companies Act 1965 in Malaysia, we also report the following:(a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act. (b) We have considered the financial statements of the subsidiary of which we have not acted as auditors, which are indicated in Note 5 to the financial statements. (c) We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Company’s financial statements are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes. (d) The audit reports on the financial statements of the subsidiaries did not contain any qualification or any adverse comment made under Section 174(3) of the Act.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
Independent Auditors’ Report To The Members Of MCE Holdings Berhad (Incorporated In Malaysia) (cont’d)
Other Reporting Responsibilities The supplementary information set out in Note 39 on page 91 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the financial statements. The directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants (“MIA Guidance”) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad. Other Matters (a) The financial statements of the Group for the preceding year were audited by another firm of auditors whose report dated 20 November 2015, expressed an unqualified opinion on those statements. (b) This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.
Crowe Horwath Firm No: AF 1018 Chartered Accountants
Piong Yew Peng Approval No: 3070/06/17(J) Chartered Accountant
26 October 2016 Johor Bahru
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
41
42
Statements Of Financial Position At 31 July 2016
Note
2016 RM
The Group 2015 RM
The Company 2016 RM
- 61,552,439 2,007,236 1,084,402 246,142
- 62,891,921 2,023,618 2,172,723 -
90,910,855 -
64,890,219
67,088,262
90,910,855
CURRENT ASSETS Inventories 10 Trade receivables 11 Other receivables, deposits and prepayments 12 Short term investment 13 Cash and bank balances Current tax assets
16,634,544 14,250,359 882,337 9,255,665 3,579,681 475,162
18,284,538 18,205,386 973,694 8,734,402 4,937,896 618,767
18,108 10,002 -
45,077,748
51,754,683
28,110
TOTAL ASSETS
109,967,967
118,842,945
90,938,965
44,404,702 46,549,942
44,404,700 49,317,857
44,404,702 46,363,816
Equity attributable to owners of the Company Non-controlling interests 5
90,954,644 8,938
93,722,557 (86,657)
90,768,518 -
TOTAL EQUITY
90,963,582
93,635,900
90,768,518
317,686 2,997,522 -
517,694 5,060,910 364,734
-
3,315,208
5,943,338
-
CURRENT LIABILITIES Trade payables Other payables and accruals Amount owing to a director of a foreign subsidiary Amount owing to a subsidiary Hire purchase payables Term loans Provision for warranties
7,756,920 3,344,471 - - 200,008 2,063,477 2,324,301
7,948,862 4,477,674 25,075 - 190,565 3,399,951 3,221,580
80,356 90,091 -
15,689,177
19,263,707
170,447
TOTAL LIABILITIES
19,004,385
25,207,045
170,447
TOTAL EQUITY AND LIABILITIES
109,967,967
118,842,945
90,938,965
ASSETS NON-CURRENT ASSETS Investments in subsidiaries Property, plant and equipment Investment properties Intangible assets Deferred tax assets
EQUITY Share capital Reserves
5 6 7 8 9
14 15
NON-CURRENT LIABILITIES Hire purchase payables Term loans Deferred tax liabilities
16 17 9
18 19 20 21 16 17 22
The annexed notes form an integral part of these financial statements MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
Statements of Profit or Loss and Other Comprehensive Income For The Financial Period Ended 31 July 2016
The Group 2016 2015 NOTE RM RM REVENUE 23 OTHER INCOME CHANGES IN INVENTORIES OF FINISHED GOODS AND WORK-IN-PROGRESS RAW MATERIAL AND CONSUMABLES USED PURCHASE OF TRADING INVENTORIES DEPRECIATION AND ARMOTISATION EMPLOYEE BENEFITS 24 OTHER OPERATING EXPENSES
The Company 9.9.2015 to 31.7.2016 RM
76,900,680 579,009
90,028,362 812,749
-
(918,205) (49,134,137) (51,156) (5,814,228) (16,932,230) (6,707,489)
(1,639,771) (56,658,310) (192,520) (5,722,433) (18,079,079) (8,156,337)
(7,000) (135,336)
(LOSS)/PROFIT FROM OPERATIONS FINANCE COST
(2,077,756) (457,534)
392,661 (622,036)
(142,336) (3)
LOSS BEFORE TAXATION TAX INCOME/(EXPENSE)
(2,535,290) 343,680
(229,375) (896,851)
(142,339) -
LOSS AFTER TAXATION
(2,191,610)
(1,126,226)
(142,339)
OTHER COMPREHENSIVE EXPENSE Items that may be reclassified subsequently to profit or loss Foreign currency translation differences
(2,382)
(18,859)
-
TOTAL COMPREHENSIVE EXPENSE FOR THE FINANCIAL YEAR/PERIOD
(2,193,992)
(1,145,085)
(142,339)
(LOSS)/PROFIT AFTER TAXATION ATTRIBUTABLE TO:- Owners of the Company - Non-controlling interests
(2,287,205) 95,595
(1,074,962) (51,264)
(142,339) -
(2,191,610)
(1,126,226)
(142,339)
TOTAL COMPREHENSIVE (EXPENSES)/INCOME ATTRIBUTABLE TO:- Owners of the Company - Non-controlling interests
(2,289,587) 95,595
(1,093,821) (51,264)
(142,339) -
(2,193,992)
(1,145,085)
(142,339)
25 26
LOSS PER SHARE (SEN) 27 Basic
(5.15)
(2.42)
Diluted
N/A
N/A
The annexed notes form an integral part of these financial statements MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
43
MCE HOLDINGS BERHAD
Balance as at 31.7.2015
654,456
352,000
(19,964)
48,331,365
The annexed notes form an integral part of these financial statements
44,404,700
45,565,832
93,722,557
90,954,644
(86,657)
97,001,220
(22,346)
Balance as at 1.8.2014 44,404,700 654,456 352,000 (1,105) 51,626,562 97,036,613 (35,393) Loss after taxation for the financial year - - - - (1,074,962) (1,074,962) (51,264) Other comprehensive expense for the financial year: - Foreign currency translation differences - - - (18,859) - (18,859) - Total comprehensive expenses for the financial year - - - (18,859) (1,074,962) (1,093,821) (51,264) Dividend 28 - - - - (2,220,235) (2,220,235) -
352,000
90,963,582
654,456
8,938
44,404,702
Balance as at 31.7.2016
93,635,900
(1,145,085) (2,220,235)
(18,859)
(1,126,226)
(2,382)
(2,191,610)
2 (478,328)
(2,193,992)
93,635,900
Total Equity RM
Balance as at 1.8.2015 44,404,700 654,456 352,000 (19,964) 48,331,365 93,722,557 (86,657) Contribution from and distribution to owners of the company:- - Arising from internal reorganisation 2 - - - - 2 - - Transaction cost for internal reorganisation - - - - (478,328) (478,328) - (Loss)/Profit after taxation for the financial year: - - - - (2,287,205) (2,287,205) 95,595 Other comprehensive expense for the financial year: - Foreign currency translation differences - - - (2,382) - (2,382) - Total comprehensive (expense)/income for the financial year - - - (2,382) (2,287,205) (2,289,587) 95,595
The Group
Non-distributable Distributable Foreign Attributable Exchange to Owners Non- Share Share Share Translation Retained of the controlling Capital Premium Buy-back Reserve Profits Company Interest Note RM RM RM RM RM RM RM
44
Statements Of Changes In Equity
For The Financial Period Ended 31 July 2016
ANNUAL REPORT 2016
Statements Of Changes In Equity For The Financial Period Ended 31 July 2016 (cont’d)
Non-Distributable Share Capital Capital Reserve RM RM
Accumulated Loss RM
Total Equity RM
-
2
The Company At 9.9.2015
2
-
(at the date of incorporation) Loss after taxation/Total comprehensive expenses for the financial period
-
-
(142,339)
(142,339)
Contributions by and distribution to owners of the Company: 44,404,700
46,027,827
-
90,432,527
- Transaction cost for internal reorganisation - Balance at 31.7.2016 44,404,702
- Issuance of shares pursuant to internal reorganisation
478,328
-
478,328
46,506,155
(142,339)
90,768,518
The annexed notes form an integral part of these financial statements MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
45
46
Statements Of Cash Flows
For The Financial Period Ended 31 July 2016
The Group 2016 2015 NOTE RM RM
The Company 9.9.2015 to 31.7.2016 RM
CASH FLOWS FROM OPERATING ACTIVITIES Loss before taxation
(2,535,290)
(229,375)
(142,339)
Adjustments for:Amortisation of intangible assets Amortisation of golf club membership Depreciation of property, plant and equipment Depreciation for investment properties (Gain)/Loss on disposal of property, plant and equipment Gain on disposal of investment properties (Gain)/Loss on foreign exchange - unrealised Inventories written down to net realisable value Inventories written off Property, plant and equipment written off Provision of warranties Reversal of impairment losses on investment properties Short term accumulated compensated absences Interest income Interest expense
1,088,321 1,941 4,707,584 16,382 (528) - (1,656) 111,233 460,501 17,122 1,292,617 - 119,190 (306,807) 420,742
1,088,321 1,941 4,627,932 4,239 200,355 (14,709) 21,145 72,563 71,947 43,949 1,904,626 (40,000) 127,375 (438,978) 585,338
-
Operating profit/(loss) before working capital changes Decrease in inventories Decrease/(Increase) in trade and other receivables (Decrease)/Increase in trade and other payables Warranty paid
5,391,352 1,078,260 4,044,443 (1,468,259) (2,189,896)
8,026,669 2,833,959 4,313,966 (6,820,196) (3,751,562)
(142,339) (18,108) 80,356 -
CASH FROM/(FOR) OPERATIONS
6,855,900
4,602,836
(80,091)
Interest paid Income tax paid Income tax refunded
(420,742) (950,274) 826,683
(585,338) (1,529,179) 54,119
-
NET CASH FROM/(FOR) OPERATING ACTIVITIES/ BALANCE CARRIED FORWARD
6,311,567
2,542,438
(80,091)
The annexed notes form an integral part of these financial statements MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
Statements Of Cash Flows For The Financial Period Ended 31 July 2016 (cont’d)
The Group 2016 2015 NOTE RM RM BALANCE BROUGHT FORWARD
The Company 9.9.2015 to 31.7.2016 RM
6,311,567
2,542,438
(80,091)
Interest income received Issuance of shares Purchase of property, plant and equipment 29 Proceeds from disposal of property, plant and equipment Proceeds from disposal of investment property
306,807 2 (3,385,346) 756 -
438,978 - (3,409,658) 312,823 1,110,470
2 -
NET CASH (FOR)/FROM INVESTING ACTIVITIES
(3,077,781)
(1,547,387)
2
CASH FLOWS (FOR)/FROM FINANCING ACTIVITIES Transaction cost incurred for internal reorganisation Dividends paid on ordinary shares Amount due to a subsidiary Repayment of hire purchase obligations Repayment of term loans
(478,328) - - (190,565) (3,399,862)
- (2,220,235) - (366,701) (3,432,788)
90,091 -
NET CASH (FOR)/FROM FINANCING ACTIVITIES
(4,068,755)
(6,019,724)
90,091
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS
(834,969)
(5,024,673)
10,002
CASH FLOWS (FOR)/FROM INVESTING ACTIVITIES
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE FINANCIAL YEAR/DATE OF INCORPORATION EFFECT OF EXCHANGE RATE TRANSLATION
CASH AND CASH EQUIVALENTS AT END OF THE FINANCIAL YEAR/PERIOD
30
13,672,298
18,713,071
-
(1,983)
(16,100)
-
12,835,346
13,672,298
10,002
The annexed notes form an integral part of these financial statements MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
47
48
Notes to the Financial Statements For The Financial Period Ended 31 July 2016
1.
GENERAL INFORMATION
The Company is a public company limited by shares and is incorporated under the Companies Act 1965 in Malaysia. The domicile of the Company is Malaysia. The registered office and principal place of business are as follows:-
Registered office :
Suite 5.11 & 5.12 5th Floor, Menara TJB No.9, Jalan Syed Mohd Mufti 80000 Johor Bahru Johor
Principal place of business :
No. 2 & 4, Jalan Waja 7 Kawasan Perindustrian Pandan 81100 Johor Bahru Johor
The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directors dated 26 October 2016.
2.
PRINCIPAL ACTIVITIES
The Company is principally engaged in the business of investment holding. The principal activities of the subsidiaries are described in Note 5 to the financial statements. There have been no significant changes in the nature of these activities during the financial period.
3.
BASIS OF PREPARATION
The financial statements of the Group are prepared under the historical cost convention and modified to include other bases of valuation as disclosed in other sections under significant accounting policies, and in compliance with Malaysian Financial Reporting Standards (“MFRSs”), International Financial Reporting Standards and the requirements of the Companies Act 1965 in Malaysia. 3.1 No new accounting standards and interpretations (including the consequential amendments) have been adopted by the Group during the current financial year. 3.2 The Group has not applied in advance the following applicable accounting standards (including the consequential amendments, if any) that have been issued by the Malaysian Accounting Standards Board (MASB) but are not yet effective for the current financial year:-
MFRSs (Including The Consequential Amendments) MFRS 9 Financial Instruments (IFRS 9 issued by IASB in July 2014) MFRS 15 Revenue from Contracts with Customers MFRS 16 Leases Amendments to MFRS 2: Classification and Measurement of Share-based Payment Transactions Amendments to MFRS 10 and MFRS 128: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture Amendments to MFRS 11: Accounting for Acquisitions of Interests in Joint Operations Amendments to MFRS 10, MFRS 12 and MFRS 128: Investment Entities - Applying the Consolidation Exception Amendments to MFRS 15: Effective Date of MFRS 15 Amendments to MFRS 15: Clarifications to MFRS 15 ‘Revenue from Contracts with Customers’ Amendments to MFRS 101: Disclosure Initiative Amendments to MFRS 107: Disclosure Initiative Amendments to MFRS 112: Recognition of Deferred Tax Assets for Unrealised Losses Amendments to MFRS 116 and MFRS 138: Clarification of Acceptable Methods of Depreciation and Amortisation Amendments to MFRS 127 (2011): Equity Method in Separate Financial Statements Annual Improvements to MFRSs 2012 – 2014 Cycle
Effective Date 1 January 2018 1 January 2018 1 January 2019 1 January 2018 Deferred until further notice 1 January 2016 1 January 2016 1 January 2018 1 January 2018 1 January 2016 1 January 2017 1 January 2017 1 January 2016 1 January 2016 1 January 2016
The adoption of the above accounting standards (including the consequential amendments, if any) is expected to have no material impact on the financial statements of the Group and the Company upon their initial application.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
Notes to the Financial Statements For The Financial Period Ended 31 July 2016 (cont’d)
4.
SIGNIFICANT ACCOUNTING POLICIES
4.1 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements are continually evaluated by the directors and management and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The estimates and judgements that affect the application of the Group’s accounting policies and disclosures, and have a significant risk of causing a material adjustment to the carrying amounts of assets, liabilities, income and expenses are discussed below:(a) Depreciation of Property, Plant and Equipment
(b) Income Taxes
When the recoverable amount of an asset is determined based on the estimate of the value in use of the cashgenerating unit to which the asset is allocated, the management is required to make an estimate of the expected future cash flows from the cash-generating unit and also to apply a suitable discount rate in order to determine the present value of those cash flows.
(d) Write-down of Inventories
There are certain transactions and computations for which the ultimate tax determination may be different from the initial estimate. The Group recognises tax liabilities based on its understanding of the prevailing tax laws and estimates of whether such taxes will be due in the ordinary course of business. Where the final outcome of these matters is different from the amounts that were initially recognised, such difference will impact the income tax and deferred tax balances in the year in which such determination is made.
(c) Impairment of Non-Financial Assets
The estimates for the residual values, useful lives and related depreciation charges for the property, plant and equipment are based on commercial factors which could change significantly as a result of technical innovations and competitors’ actions in response to the market conditions. Changes in the expected level of usage and technological development could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised.
Reviews are made periodically by management on damaged, obsolete and slow-moving inventories. These reviews require judgement and estimates. Possible changes in these estimates could result in revisions to the valuation of inventories.
(e) Classification between Investment Properties and Owner occupied Properties
Some properties comprise a portion that is held to earn rentals or for capital appreciation and another portion that is held for use in the production or supply of goods or services or for administrative purposes. If these portions could be sold separately (or leased out separately under a finance lease), the Group accounts for the portions separately. If the portions could not be sold separately, the property is an investment property only if an insignificant portion is held for use in the production or supply of goods or services or for administrative purposes.
Judgement is made on an individual property basis to determine whether ancillary services are so significant that a property does not qualify as investment property.
(f) Impairment of Trade and Other Receivables
An impairment loss is recognised when there is objective evidence that a financial asset is impaired. Management specifically reviews its loan and receivables financial assets and analyses historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in the customer payment terms when making a judgment to evaluate the adequacy of the allowance for impairment losses. Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics. If the expectation is different from the estimation, such difference will impact the carrying value of receivables.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
49
50
Notes to the Financial Statements For The Financial Period Ended 31 July 2016 (cont’d)
4.
SIGNIFICANT ACCOUNTING POLICIES (cont’d)
4.1 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (cont’d)
(g) Classification of Leasehold Land
(h) Provision for warranty
The classification of leasehold land as a finance lease or an operating lease requires the use of judgement in determining the extent to which risks and rewards incidental to its ownership lie. Despite the fact that there will be no transfer of ownership by the end of the lease term and that the lease term does not constitute the major part of the indefinite economic life of the land, management considered that the present value of the minimum lease payments approximated to the fair value of the land at the inception of the lease. Accordingly, management judged that the Group has acquired substantially all the risks and rewards incidental to the ownership of the land through a finance lease.
Judgement is involved in estimating the extent of the Group’s liability on products under warranty. Factors considered include historical levels of warranty claims, stability of production process and product defect rate. The warranty provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. Such adjustments will impact the profit or loss in the period in which the estimates are revised.
4.2 BASIS OF CONSOLIDATION
The consolidated financial statements include the financial statements of the Company and its subsidiaries made up to the end of the reporting period.
Subsidiaries are entities (including structured entities, if any) controlled by the Group. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Potential voting rights are considered when assessing control only when such rights are substantive.
Subsidiaries are consolidated from the date on which control is transferred to the Group up to the effective date on which control ceases, as appropriate.
Intragroup transactions, balances, income and expenses are eliminated on consolidation. Intragroup losses may indicate an impairment that requires recognition in the consolidated financial statements. Where necessary, adjustments are made to the financial statements of subsidiaries to ensure consistency of accounting policies with those of the Group.
The consolidated financial statements of the Group for the previous financial year are presented using the values from the consolidated financial statements of the acquiree group, Multi-Code Electronics Industries (M) Berhad as if the internal reorganisation, as disclosed in Note 37, had been effected throughout the current and previous financial year. Any resulting difference between the cost of acquisition and the aggregate carrying value of assets and liabilities of the acquiree group is recognised directly to equity.
(a) Business Combinations
Acquisitions of businesses are accounted for using the acquisition method. Under the acquisition method, the consideration transferred for acquisition of a subsidiary is the fair value of the assets transferred, liabilities incurred and the equity interests issued by the Group at the acquisition date. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs, other than the costs to issue debt or equity securities, are recognised in profit or loss when incurred.
In a business combination achieved in stages, previously held equity interests in the acquiree are remeasured to fair value at the acquisition date and any corresponding gain or loss is recognised in profit or loss.
Non-controlling interests in the acquiree may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the fair value of the acquiree’s identifiable net assets at the date of acquisition. The choice of measurement basis is made on a transaction-by-transaction basis.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
Notes to the Financial Statements For The Financial Period Ended 31 July 2016 (cont’d)
4.
SIGNIFICANT ACCOUNTING POLICIES (cont’d)
4.2 BASIS OF CONSOLIDATION (CONT’D)
(b) Non-controlling Interests
(c) Changes in Ownership Interests in Subsidiaries Without Change of Control
Non-controlling interests are presented within equity in the consolidated statement of financial position, separately from the equity attributable to owners of the Company. Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance.
All changes in the parent’s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. Any difference between the amount by which the non-controlling interest is adjusted and the fair value of consideration paid or received is recognised directly in equity of the Group.
(d) Loss of Control
Upon the loss of control of a subsidiary, the Group recognises any gain or loss on disposal in profit or loss which is calculated as the difference between:(i)
the aggregate of the fair value of the consideration received and the fair value of any retained interest in the former subsidiary; and
(ii) the previous carrying amount of the assets (including goodwill), and liabilities of the former subsidiary and any non-controlling interests.
Amounts previously recognised in other comprehensive income in relation to the former subsidiary are accounted for in the same manner as would be required if the relevant assets or liabilities were disposed of (i.e. reclassified to profit or loss or transferred directly to retained profits). The fair value of any investments retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under MFRS 139 or, when applicable, the cost on initial recognition of an investment in an associate or a joint venture.
4.3 FUNCTIONAL AND FOREIGN CURRENCIES
(a) Functional and Presentation Currency
The individual financial statements of each entity in the Group are presented in the currency of the primary economic environment in which the entity operates, which is the functional currency.
The consolidated financial statements are presented in Ringgit Malaysia (“RM”), which is the Company’s functional and presentation currency.
(b) Transactions and Balances
Transactions in foreign currencies are converted into the respective functional currencies on initial recognition, using the exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities at the end of the reporting period are translated at the rates ruling as of that date. Non-monetary assets and liabilities are translated using exchange rates that existed when the values were determined. All exchange differences are recognised in profit or loss.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
51
52
Notes to the Financial Statements For The Financial Period Ended 31 July 2016 (cont’d)
4.
SIGNIFICANT ACCOUNTING POLICIES (cont’d)
4.3 FUNCTIONAL AND FOREIGN CURRENCIES (cont’d)
(c) Foreign Operations
Assets and liabilities of foreign operations are translated to RM at the rates of exchange ruling at the end of the reporting period. Income, expenses and other comprehensive income of foreign operations are translated at exchange rates ruling at the dates of the transactions. All exchange differences arising from translation are taken directly to other comprehensive income and accumulated in equity; attributed to the owners of the Company and non-controlling interests, as appropriate.
In the consolidated financial statements, when settlement of an intragroup loan is neither planned nor likely to occur in the foreseeable future, the exchange differences arising from translating such monetary item are considered to form part of a net investment in the foreign operation and are recognised in other comprehensive income.
4.4 FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are recognised in the statements of financial position when the Group has become a party to the contractual provisions of the instruments.
Financial instruments are classified as financial assets, financial liabilities or equity instruments in accordance with the substance of the contractual arrangement. Interest, dividends, gains and losses relating to a financial instrument classified as a liability, are reported as an expense or income. Distributions to holders of financial instruments classified as equity are charged directly to equity.
Financial instruments are offset when the Group has a legally enforceable right to offset and intends to settle either on a net basis or to realise the asset and settle the liability simultaneously.
A financial instrument is recognised initially at its fair value. Transaction costs that are directly attributable to the acquisition or issue of the financial instrument (other than a financial instrument at fair value through profit or loss) are added to/deducted from the fair value on initial recognition, as appropriate. Transaction costs on the financial instrument at fair value through profit or loss are recognised immediately in profit or loss.
Financial instruments recognised in the statements of financial position are disclosed in the individual policy statement associated with each item.
(a) Financial Assets
On initial recognition, financial assets are classified as either financial assets at fair value through profit or loss, held-to-maturity investments, loans and receivables financial assets, or available-for-sale financial assets, as appropriate. (i)
Financial Assets at Fair Value through Profit or Loss
Financial assets are classified as financial assets at fair value through profit or loss when the financial asset is either held for trading or is designated to eliminate or significantly reduce a measurement or recognition inconsistency that would otherwise arise. Derivatives are also classified as held for trading unless they are designated as hedges.
Financial assets at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognised in profit or loss. Dividend income from this category of financial assets is recognised in profit or loss when the Group’s right to receive payment is established.
Financial assets at fair value through profit or loss could be presented as current assets or non-current assets. Financial assets that are held primarily for trading purposes are presented as current assets whereas financial assets that are not held primarily for trading purposes are presented as current assets or non-current assets based on the settlement date.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
Notes to the Financial Statements For The Financial Period Ended 31 July 2016 (cont’d)
4.
SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
4.4 FINANCIAL INSTRUMENTS (CONT’D)
(a) Financial Assets (Cont’d)
(ii) Held-to-maturity Investments
(iii) Loans and Receivables Financial Assets
As at the end of the reporting period, there were no financial assets classified under this category.
(b) Financial Liabilities
All financial liabilities are initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method other than those categorised as fair value through profit or loss.
Fair value through profit or loss category comprises financial liabilities that are either held for trading or are designated to eliminate or significantly reduce a measurement or recognition inconsistency that would otherwise arise. Derivatives are also classified as held for trading unless they are designated as hedges.
Financial liabilities are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.
(c) Equity Instruments
Trade receivables and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables financial assets. Loans and receivables financial assets are measured at amortised cost using the effective interest method, less any impairment loss. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.
(iv) Available-for-sale Financial Assets
As at the end of the reporting period, there were no financial assets classified under this category.
Equity Instruments are classified as equity are measured at cost and are not remeasured subsequently. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from proceeds. Dividends on ordinary shares are recognised as liabilities when approved for appropriation.
(d) Derecognition
A financial asset or part of it is derecognised when, and only when, the contractual rights to the cash flows from the financial asset expire or the financial asset is transferred to another party without retaining control or substantially all risks and rewards of the asset. On derecognition of a financial asset, the difference between the carrying amount and the sum of the consideration received (including any new asset obtained less any new liability assumed) and any cumulative gain or loss that had been recognised in equity is recognised in profit or loss.
A financial liability or a part of it is derecognised when, and only when, the obligation specified in the contract is discharged or cancelled or expires. On derecognition of a financial liability, the difference between the carrying amount of the financial liability extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
53
54
Notes to the Financial Statements For The Financial Period Ended 31 July 2016 (cont’d)
4.
SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
4.4 FINANCIAL INSTRUMENTS (CONT’D)
(e) Financial Guarantee Contracts
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specific debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument.
Financial guarantee contracts are recognised initially as liabilities at fair value, net of transaction costs. Subsequent to initial recognition, financial guarantee contracts are recognised as income in profit or loss over the period of the guarantee or, when there is no specific contractual period, recognised in profit or loss upon discharge of the guarantee. If the debtor fails to make payment relating to a financial guarantee contract when it is due and the Group, as the issuer, is required to reimburse the holder for the associated loss, the liability is measured at the higher of the best estimate of the expenditure required to settle the present obligation at the end of the reporting period and the amount initially recognised less cumulative amortisation.
4.5 INVESTMENTS IN SUBSIDIARIES
Investments in subsidiaries are stated at cost in the statement of financial position of the Company, and are reviewed for impairment at the end of the reporting period if events or changes in circumstances indicate that the carrying values may not be recoverable. The cost of the investments includes transaction costs.
On the disposal of the investments in subsidiaries, the difference between the net disposal proceeds and the carrying amount of the investments is recognised in profit or loss.
4.6 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, other than freehold land are stated at cost less accumulated depreciation and impairment losses, if any. Freehold land is stated at cost less impairment losses, if any and is not depreciated.
Depreciation is charged to profit or loss (unless it is included in the carrying amount of another asset) on the straightline method to write off the depreciable amount of the assets over their estimated useful lives. Depreciation of an asset does not cease when the asset becomes idle or is retired from active use unless the asset is fully depreciated. The principal annual rates used for this purpose are:-
Leasehold land Buildings Moulds Plant and machinery Motor vehicles Equipment, air-conditioner, signboard and furniture and fittings Renovation Electrical installation Computer and loose tools
95 years 2% 6% - 25% 7% - 20% 20% 2% - 50% 2% - 20% 2% - 10% 10% - 50%
Capital work-in-progress included in property, plant and equipment are not depreciated as these are not yet available for use.
The depreciation method, useful lives and residual values are reviewed, and adjusted if appropriate, at the end of each reporting period to ensure that the amounts, method and periods of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of the property, plant and equipment.
When significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
Notes to the Financial Statements For The Financial Period Ended 31 July 2016 (cont’d)
4.
SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
4.6 PROPERTY, PLANT AND EQUIPMENT (CONT’D)
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when the cost is incurred and it is probable that the future economic benefits associated with the asset will flow to the Group and the cost of the asset can be measured reliably. The carrying amount of parts that are replaced is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred. Cost also comprises the initial estimate of dismantling and removing the asset and restoring the site on which it is located for which the Group is obligated to incur when the asset is acquired, if applicable.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising from derecognition of the asset, being the difference between the net disposal proceeds and the carrying amount, is recognised in profit or loss.
4.7 INVESTMENT PROPERTIES
Investment properties are properties held either to earn rental income or for capital appreciation or for both. Investment properties are stated at cost less accumulated depreciation and impairment losses, if any.
Depreciation is charged to profit or loss on the straight-line method to write off the cost of each asset to its residual value over the estimated useful lives of the investment property. The buildings are depreciated at annual rate of 2%.
Investment properties are derecognised when they have either been disposed of or when the investment property is permanently withdrawn from use and no future benefit is expected from its disposal.
On the derecognition of an investment property, the difference between the net disposal proceeds and the carrying amount is recognised in profit or loss.
Transfers are made to or from investment property only when there is a change in use. All transfers do not change the carrying amount of the property reclassified.
4.8 INTANGIBLE ASSETS
Research expenditure is recognised as an expense when it is incurred. Development expenditure is recognised as an expense except that costs incurred on development projects are capitalised as non-current assets to the extent that such expenditure is expected to generate future economic benefits. Development expenditure is capitalised if, and only if, an entity can demonstrate all of the following:(a) (b) (c) (d) (e)
its ability to measure reliably the expenditure attributable to the asset under development; the product or process is technically and commercially feasible; its future economic benefits are probable; its intention to complete and the ability to use or sell the developed asset; and the availability of adequate technical, financial and other resources to complete the asset under development.
Capitalised development expenditure is measured at cost less accumulated amortisation and impairment losses, if any. Development expenditure initially recognised as an expense is not recognised as assets in the subsequent period.
The development expenditure is amortised on a straight-line method over a period of 5 years when the products are ready for sale or use. In the event that the expected future economic benefits are no longer probable of being recovered, the development expenditure is written down to its recoverable amount.
The amortisation method, useful life and residual value are reviewed, and adjusted if appropriate, at the end of each reporting period.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
55
56
Notes to the Financial Statements For The Financial Period Ended 31 July 2016 (cont’d)
4.
SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
4.9 IMPAIRMENT
(a) Impairment of Financial Assets
All financial assets (other than those categorised at fair value through profit or loss), are assessed at the end of each reporting period whether there is any objective evidence of impairment as a result of one or more events having an impact on the estimated future cash flows of the asset.
An impairment loss in respect of loans and receivables financial assets is recognised in profit or loss and is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the financial asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.
(b) Impairment of Non-financial Assets
An impairment loss is recognised in profit or loss. When there is a change in the estimates used to determine the recoverable amount, a subsequent increase in the recoverable amount of an asset is treated as a reversal of the previous impairment loss and is recognised to the extent of the carrying amount of the asset that would have been determined (net of amortisation and depreciation) had no impairment loss been recognised. The reversal is recognised in profit or loss immediately.
4.10 ASSETS UNDER HIRE PURCHASE
The carrying values of assets, other than those to which MFRS 136 - Impairment of Assets does not apply, are reviewed at the end of each reporting period for impairment when an annual impairment assessment is compulsory or there is an indication that the assets might be impaired. Impairment is measured by comparing the carrying values of the assets with their recoverable amounts. When the carrying amount of an asset exceeds its recoverable amount, the asset is written down to its recoverable amount and an impairment loss shall be recognised. The recoverable amount of the assets is the higher of the assets’ fair value less costs to sell and their value-in-use, which is measured by reference to discounted future cash flow using a pre-tax discount rate. Where it is not possible to estimate the recoverable amount of an individual asset, the Group and the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Assets acquired under hire purchase are capitalised in the financial statements as property, plant and equipment and the corresponding obligations are treated as hire purchase payables. The assets capitalised are measured at the lower of the fair value of the leased assets and the present value of the minimum lease payments and are depreciated on the same basis as owned assets. Each hire purchase payment is allocated between the liability and finance charges so as to achieve a constant periodic rate of charge on the hire purchase outstanding. Finance charges are recognised in profit or loss over the period of the respective hire purchase agreements.
4.11 INVENTORIES
Inventories are stated at the lower of cost and net realisable value. Cost of raw material is determined on the weighted average basis and comprises the purchase price and incidentals incurred in bringing the inventories to their present location and condition. Cost of finished goods and work-in-progress includes costs of materials and labour and an appropriate proportion of production overheads based on normal operating capacity.
Net realisable value represents the estimated selling price less the estimated costs of completion and the estimated costs necessary to make the sale.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
Notes to the Financial Statements For The Financial Period Ended 31 July 2016 (cont’d)
4.
SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
4.12 CASH AND CASH EQUIVALENTS
4.13 PROVISIONS
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of past events, when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and when a reliable estimate of the amount can be made. Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. Where the effect of the time value of money is material, the provision is the present value of the estimated expenditure required to settle the obligation. The unwinding of the discount is recognised as interest expense in profit or loss.
4.14 OPERATING LEASE
Cash and cash equivalents comprise cash in hand, bank balances, demand deposits, and short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value with original maturity periods of three months or less.
Leases in which the Group does not assume substantially all the risks and rewards of ownership are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line method over the lease period.
4.15 EMPLOYEE BENEFITS
(a) Short-term Benefits
(b) Defined Contribution Plans
Wages, salaries, paid annual leave and sick leave, bonuses and non-monetary benefits are measured on an undiscounted basis and are recognised in profit or loss in the period in which the associated services are rendered by employees of the Group.
The Group’s contributions to defined contribution plans are recognised in profit or loss in the period to which they relate. Once the contributions have been paid, the Group and the Company has no further liability in respect of the defined contribution plans.
4.16 INCOME TAXES
Income tax for the reporting period comprises current tax and deferred tax.
Current tax is the expected amount of income taxes payable in respect of the taxable profit for the reporting period and is measured using the tax rates that have been enacted or substantively enacted at the end of the reporting period.
Deferred tax liabilities are recognised for all taxable temporary differences other than those that arise from goodwill or excess of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over the business combination costs or from the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit.
Deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that future taxable profits will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised. The carrying amounts of deferred tax assets are reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient future taxable profits will be available to allow all or part of the deferred tax assets to be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on the tax rates that have been enacted or substantively enacted at the end of the reporting period.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
57
58
Notes to the Financial Statements For The Financial Period Ended 31 July 2016 (cont’d)
4.
SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
4.16 INCOME TAXES (CONT’D)
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same taxable entity and the same taxation authority.
Deferred tax relating to items recognised outside profit or loss is recognised in correlation to the underlying transactions either in other comprehensive income or directly in equity and deferred tax arising from a business combination is adjusted against goodwill or excess of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over the business combination costs.
4.17 RELATED PARTIES
A party is related to an entity (referred to as the “reporting entity”) if:(a) A person or a close member of that person’s family is related to a reporting entity if that person:-
(i) has control or joint control over the reporting entity; (ii) has significant influence over the reporting entity; or (iii) is a member of the key management personnel of the reporting entity or of a parent of the reporting entity.
Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the reporting entity.
(b) An entity is related to a reporting entity if any of the following conditions applies:(i)
The entity and the reporting entity are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others). (ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member). (iii) Both entities are joint ventures of the same third party. (iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity. (v) The entity is a post-employment benefit plan for the benefit of employees of either the reporting entity or an entity related to the reporting entity. If the reporting entity is itself such a plan, the sponsoring employers are also related to the reporting entity. (vi) The entity is controlled or jointly controlled by a person identified in (a) above. (vii) A person identified in (a)(i) above has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity). (viii) The entity, or any member of a group of which it is a part, provides key management personnel services to the reporting entity or to the parent of the reporting entity.
Related parties also include key management personnel defined as those persons having authority and responsibility for planning, directing and controlling the activities of the reporting entity either directly or indirectly, including its director (whether executive or otherwise) of that entity.
4.18 OPERATING SEGMENT
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. An operating segment’s operating results are reviewed regularly by the chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
Notes to the Financial Statements For The Financial Period Ended 31 July 2016 (cont’d)
4.
SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
4.19 EARNINGS PER ORDINARY SHARE
4.20 BORROWING COSTS
Basic earnings per ordinary share is calculated by dividing the consolidated profit or loss attributable to ordinary shareholders of the Group by the weighted average number of ordinary shares outstanding during the reporting period, adjusted for own shares held.
Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method.
4.21 FAIR VALUE MEASUREMENT
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using a valuation technique. The measurement assumes that the transaction takes place either in the principal market or in the absence of a principal market, in the most advantageous market. For non-financial asset, the fair value measurement takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
For financial reporting purposes, the fair value measurements are analysed into level 1 to level 3 as follows:-
Level 1:
Inputs are quoted prices (unadjusted) in active markets for identical assets or liability that the entity can access at the measurement date;
Level 2:
Inputs are inputs, other than quoted prices included within level 1, that are observable for the asset or liability, either directly or indirectly; and
Inputs are unobservable inputs for the asset or liability.
Level 3:
The transfer of fair value between levels is determined as of the date of the event or change in circumstances that caused the transfer.
4.22 REVENUE AND OTHER INCOME
(a) Sale of Goods
(b) Interest Income
Revenue is measured at fair value of the consideration received or receivable and is recognised upon delivery of goods and customers’ acceptance and where applicable, net of returns, cash and trade discounts.
Interest income is recognised on an accrual basis using the effective interest method.
(c) Rental Income
Rental income is accounted for on a straight-line method over the lease term.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
59
60
Notes to the Financial Statements For The Financial Period Ended 31 July 2016 (cont’d)
5.
INVESTMENTS IN SUBSIDIARIES
Unquoted shares, at cost
The details of the subsidiaries are as follows:-
Principal Place of Name of Subsidiary Business
Effective Equity Interest 2016 2015 % %
The Company 2016 RM 90,910,855
Principal Activities
Multi-Code Electronics Industries (M) Malaysia 100 100 Berhad (“MCE”) Subsidiaries of Multi-Code Electronics Industries (M) Berhad Beaucar Accessories (M) Sdn. Bhd. Malaysia 100 100
Investment holding, manufacture and assembly of automotive parts
Multi-Code Technologies (M) Sdn. Bhd. Malaysia 100 100
Manufacture and assembly of automotive lightings
Investment holding and provide healthcare services
Vantage Realm Sdn. Bhd. (“VR”) Malaysia 100 100
Multi-Code Electronics Industries (India) India 60 Pvt Ltd (“MCE India”)^ Subsidiary of Vantage Realm Sdn. Bhd. Vantage Medical Centre Sdn. Bhd. Malaysia 100 ^
Trading in auto accessories
60
Dormant
100
Dormant
On 28 September 2016, Board of Directors of the Company resolved to apply to strike off MCE India. The financial statements of MCE India were not audited as it is in the process of striking off and it does not have material impact on the Group’s earnings and net assets.
(a) During the previous financial year, MCE acquired additional ordinary shares in VR for a cash consideration of RM29,099,998 and contributed the share subscription money amounting to RM884,090 for the subscription of the ordinary shares of VR. The shares of RM884,090 has been issued in current financial year. The acquisition did not have impact on the Group’s revenue and profit for the previous financial year. (b) During the previous financial year, VR, a wholly-owned subsidiary of the MCE, incorporated a wholly-owned subsidiary Vantage Medical Centre Sdn. Bhd., with an authorised capital of RM400,000 divided into 400,000 ordinary shares of RM1 each and an issued and paid up capital of RM2 comprised 2 ordinary shares of RM1 each fully paid. (c) The non-controlling interests at the end of the reporting period comprise the following:
MCE India
MCE HOLDINGS BERHAD
Effective Equity Interest 2016 2015 % % 40
40
The Group 2016 2015 RM RM 8,938
(86,657)
ANNUAL REPORT 2016
Property, plant and equipment
MCE HOLDINGS BERHAD
-
(228)
(1,983,618)
(513,178)
(43,949)
(4,627,932)
4,209,658
65,850,274
- (27,284) (311,764) - (3,181,061) (279,354) (828,469)
Written Depreciation Off Charge RM RM
(17,122)
2015 Net book value Freehold land 35,246,000 - (1,200,000) - - Leasehold land 2,487,398 - - - - Buildings 12,117,711 - (783,618) - - Capital work-in-progress 252,331 1,570,409 - - - Moulds, plant and machinery 10,923,080 271,872 - (93,862) - Motor vehicles 1,051,632 1,312,177 - (404,679) - Other assets* 3,772,122 1,055,200 - (14,637) (43,949)
Reclassification At To Invesment 1.8.2014 Additions Property Disposal RM RM RM RM
3,385,346
(4,707,584)
62,891,921
Written Depreciation Off Charge RM RM
- (27,284) (295,382) - (3,197,028) (330,377) (857,513)
2016
At 1.8.2015 Additions Reclassification Disposal RM RM RM RM
Net book value Freehold land 34,046,000 53,395 853,590 - - Leasehold land 2,460,114 - - - - Buildings 11,022,329 - - - - Capital work-in-progress 1,822,740 1,691,175 (853,590) - - Moulds, plant and machinery 7,920,029 877,942 - - - Motor vehicles 1,679,776 - - - - Other assets* 3,940,933 762,834 - (228) (17,122)
The Group
6.
666
- - - - - - 666
Exchange Difference RM
106
- - - - - - 106
Exchange Difference RM
62,891,921
34,046,000 2,460,114 11,022,329 1,822,740 7,920,029 1,679,776 3,940,933
At 31.7.2015 RM
61,552,439
34,952,985 2,432,830 10,726,947 2,660,325 5,600,943 1,349,399 3,829,010
At 31.7.2016 RM
Notes to the Financial Statements
For The Financial Period Ended 31 July 2016 (cont’d)
ANNUAL REPORT 2016
61
62
Notes to the Financial Statements For The Financial Period Ended 31 July 2016 (cont’d)
6.
Property, plant and equipment (CONT’D)
At Cost The Group RM
Accumulated Depreciation and Impairment Losses RM
Net book value RM
2016 Freehold land 35,372,985 Leasehold land 2,587,440 Buildings 12,365,910 Capital work-in-progress 2,660,325 Moulds, plant and machinery 27,061,627 Motor vehicles 2,295,280 Other assets* 14,313,409
(420,000) (154,610) (1,638,963) - (21,460,684) (945,881) (10,484,399)
34,952,985 2,432,830 10,726,947 2,660,325 5,600,943 1,349,399 3,829,010
96,656,976
(35,104,537)
61,552,439
2015 Freehold land 34,466,000 Leasehold land 2,587,440 Buildings 12,365,911 Capital work-in-progress 1,822,740 Moulds, plant and machinery 26,246,091 Motor vehicles 2,295,279 Other assets* 13,730,881
(420,000) (127,326) (1,343,582) - (18,326,062) (615,503) (9,789,948)
34,046,000 2,460,114 11,022,329 1,822,740 7,920,029 1,679,776 3,940,933
(30,622,421)
62,891,921
93,514,342
* Other asset comprise of air-conditioner, equipment, furniture and fittings, renovation, electrical installation, signboard, computers and loose tools. (a) Included in the assets of the Group at the end of the reporting period were motor vehicles with a total net book value of RM721,767 (2015 - RM938,297), which were acquired under hire purchase terms. These leased assets have been pledged as security for the related finance lease liabilities of the Group. (b) The freehold land and buildings of the Group have been pledged to licensed banks as security for banking facilities granted to the Group: Leasehold land Freehold land Buildings
MCE HOLDINGS BERHAD
The Group 2016 2015 RM RM 2,432,830 3,940,000 10,073,755
2,460,114 3,940,000 10,330,771
16,446,585
16,730,885
ANNUAL REPORT 2016
Notes to the Financial Statements For The Financial Period Ended 31 July 2016 (cont’d)
7.
INVESTMENT PROPERTIES
Group 2016 RM
2015 RM
Cost:At beginning of the financial year Disposal Reclassified from property, plant and equipment
2,057,140 - -
2,067,530 (2,067,530) 2,057,140
At end of the financial year
2,057,140
2,057,140
Accumulated depreciation and impairment losses:At beginning of the financial year Depreciation during the financial year Disposal Reclassified from property, plant and equipment Reversal of allowance for impairment loss
(33,522) (16,382) - - -
(967,530) (4,239) 971,769 (73,522) 40,000
At end of the financial year
(49,904)
(33,522)
2,007,236
2,023,618
Represented by:Freehold land Buildings
1,240,000 767,236
1,240,000 783,618
At end of the financial year
2,007,236
2,023,618
Fair value
2,450,000
2,200,000
Recognised in profit or loss:Rental income Direct operating expenses - income generating investment properties
75,000
91,000
24,857
34,560
(a) The freehold land and buildings have been pledged to a licensed bank as securities for banking facilities granted to the Group. (b) The fair values of the investment properties are within level 2 of the fair value hierarchy and are arrived at by reference to market evidence of transaction prices for similar properties and are performed by registered valuers having appropriate recognised professional qualification and recent experience in the locations and category of properties being valued.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
63
64
Notes to the Financial Statements For The Financial Period Ended 31 July 2016 (cont’d)
8.
INTANGIBLE ASSETS
2016 RM
Group 2015 RM
Cost:At beginning of the financial year/end of the financial year
5,441,602
5,441,602
Accumulated amortisation:At beginning of the financial year Amortisation for the financial year
(3,268,879) (1,088,321)
(2,180,558) (1,088,321)
At end of the financial year
(4,357,200)
(3,268,879)
1,084,402
2,172,723
The intangible assets represent development costs which were incurred in respect of new automotive lighting projects secured from a major customer and amortised over the estimated useful life of five years. Their amortisation charges are recognised in profit or loss under the “Depreciation and Amortisation” line item.
The intangible assets have remaining useful life of 0.5 years to 1.9 years (2015: 1.5 to 2.9 years)
9.
DEFERRED TAX ASSETS/(LIABILITIES)
At 1.8.2015 The Group RM
Recognised in Profit or Loss (Note 26) RM
At 31.7.2016 RM
2016
Deferred Tax Assets
Provisions Unabsorbed capital allowance Unused tax losses Unrealised foreign exchange
1,091,828 351,979 - 3,785
(316,876) 502,521 77,300 (3,785)
774,952 854,500 77,300 -
1,447,592
259,160
1,706,752
Deferred Tax Liabilities
Intangible assets Property, plant and equipment Unrealised foreign exchange
(521,453) (1,290,873) -
261,196 93,420 (2,900)
(260,257) (1,197,453) (2,900)
(1,812,326)
351,716
(1,460,610)
(364,734)
610,876
246,142
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
Notes to the Financial Statements For The Financial Period Ended 31 July 2016 (cont’d)
9.
DEFERRED TAX ASSETS/(LIABILITIES) (CONT’D)
At 1.8.2014 The Group RM
Recognised in Profit or Loss (Note 26) RM
At 31.7.2015 RM
2015
Deferred Tax Assets
Provisions Unabsorbed capital allowance Unused tax losses Unrealised foreign exchange
1,729,341 - 68,272 -
(637,513) 351,979 (68,272) 3,785
1,091,828 351,979 3,785
1,797,613
(350,021)
1,447,592
Deferred Tax Liabilities
Intangible assets Property, plant and equipment Unrealised foreign exchange
(244,578) (1,215,592) (34,691)
(276,875) (75,281) 34,691
(521,453) (1,290,873) -
(1,494,861)
(317,465)
(1,812,326)
302,752
(667,486)
(364,734)
10. INVENTORIES
The Group 2016 2015 RM RM
Raw materials Work-in-progress Finished goods Trading goods Goods-in-transit
11,320,204 58,091 3,408,701 151,254 1,696,294
12,532,176 131,437 4,248,222 156,591 1,216,112
16,634,544
18,284,538
68,273,402 460,501 111,233
78,298,291 71,947 72,563
Recognised in profit or loss:Inventories recognised as cost of sales Inventories written off Amount written down to net realisable value
11. TRADE RECEIVABLES
The Group’s normal trade credit terms range from 30 to 90 days (2015 -30 to 90 days).
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
65
66
Notes to the Financial Statements For The Financial Period Ended 31 July 2016 (cont’d)
12. OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS
2016 RM
The Group 2015 RM
The Company 2016 RM
Other receivables:Third parties Former directors
237,290 -
334,186 13,409,540
-
Deposits Prepayments
237,290 310,096 334,951
13,743,726 347,279 292,229
18,108
Accumulated impairment losses
882,337 -
14,383,234 (13,409,540)
18,108 -
882,337
973,694
18,108
Accumulated impairment losses:At beginning of the financial year Written off during the financial year
13,409,540 (13,409,540)
13,409,540 -
-
At end of the financial year
-
13,409,540
-
13. SHORT TERM INVESTMENT
This represents the Group’s investment in a fund managed by a local financial institution which invests in money market and other fixed income instruments. The weighted average effective interest rate at the end of the reporting period was 3.19% (2015: 3.16%). There is no maturity period for the invested fund as these money are callable on demand.
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MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
Notes to the Financial Statements For The Financial Period Ended 31 July 2016 (cont’d)
14. SHARE CAPITAL
The Group 2016 2015 Number of shares
2016 RM
2015 RM
Ordinary Shares Of RM 1 Each:-
AUTHORISED At beginning of the financial year Arising from internal reorganisation
50,000,000 50,000,000
50,000,000 -
50,000,000 50,000,000
50,000,000 -
At end of the financial year
100,000,000
50,000,000
100,000,000
50,000,000
ISSUED AND FULLY PAID-UP At beginning of the financial year Arising from internal reorganisation
44,404,700 2
44,404,700 -
44,404,700 2
44,404,700 -
At end of the financial year
44,404,702
44,404,700
44,404,702
44,404,700
The Company 2016 Number of shares RM
Ordinary Share Of RM 1 Each:-
AUTHORISED At the date of incorporation Addition
400,000 99,600,000
400,000 99,600,000
At end of the financial period
100,000,000
100,000,000
ISSUED AND FULLY PAID-UP At the date of incorporation Issuance of shares pursuant to internal reorganisation
2 44,404,700
2 44,404,700
At end of the financial period
44,404,702
44,404,702
The holders of ordinary shares are entitled to receive dividends as and when declared by the Company, and are entitled to one vote per ordinary share at meetings of the Company. (a) the Company increased its authorised share capital from RM400,000 to RM100,000,000 by the creation of 99,600,000 new ordinary shares of RM1 each. (b) the Company increased its issued and paid-up share capital from RM2 to RM44,404,702 by way of an issuance of 44,404,700 new ordinary shares of RM1 each at par by exchange of the entire 44,404,700 issued and paid-up ordinary shares of RM1 each in Multi-Code Electronics Industries (M) Berhad.
The new ordinary shares issued rank pari passu in all respects with the existing ordinary shares of the Company.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
67
68
Notes to the Financial Statements For The Financial Period Ended 31 July 2016 (cont’d)
15. RESERVES
2016 RM
The Group 2015 RM
The Company 2016 RM
Non-distributable reserves - Share premium - Share buy back reserves - Foreign exchange translation reserve - Capital reserve
654,456 352,000 (22,346) -
654,456 352,000 (19,964) -
46,506,155
984,110
986,492
46,506,155
Distributable reserve - Retained profits/(Accumulated loss)
45,565,832
48,331,365
(142,339)
46,549,942
49,317,857
46,363,816
15.1 SHARE PREMIUM The share premium reserve represents the premium paid on subscription of ordinary shares in the Group over and above the par value of the shares issued, net of transaction costs (if any). The share premium reserve is not distributable by way of dividends and may be utilised in the manner set out in Section 60(3) of the Companies Act 1965. 15.2 SHARE BUY-BACK RESERVES The share buy-back reserves arose from the the purchase of own shares by the subsidiary namely Multi-Code Electronics Industries (M) Berhad in the previous financial year when it was listed on Bursa Malaysia. 15.3 FOREIGN EXCHANGE TRANSLATION RESERVE The foreign exchange translation reserve arose from the translation of the financial statements of foreign subsidiary. 15.4 CAPITAL RESERVE The capital reserve arose from the internal reorganisation as disclosed in Note 37.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
Notes to the Financial Statements For The Financial Period Ended 31 July 2016 (cont’d)
16. HIRE PURCHASE PAYABLES (SECURED)
The Group 2016 2015 RM RM
Minimum hire purchase payments: - not later than 1 year - later than 1 year and not later than 5 years
219,288 328,900
219,288 548,188
Less: Future finance charges
548,188 (30,494)
767,476 (59,217)
Present value of hire purchase payables
517,694
708,259
Current Not later than 1 year
200,008
190,565
Non-Current Later than 1 year and not later than 5 years
317,686
517,694
517,694
708,259
(a) The hire purchase payables of the Group are secured by the Group’s motor vehicles under hire purchase. (b) The hire purchase payables of the Group at the end of the reporting period bore effective interest rates ranging at 4.58% (2015 - 4.58%). The interest rates are fixed at the inception of the hire purchase arrangements.
17. TERM LOANS
The Group 2016 2015 RM RM
Current Not later than 1 year
2,063,477
3,399,951
Non-Current Later than 1 year and not later than 2 years Later than 2 years and not later than 5 years
2,182,045 815,477
2,063,482 2,997,428
2,997,522
5,060,910
5,060,999
8,460,861
(a) The term loans are secured by:(i)
first party first and second fixed legal charges over leasehold land and factory buildings of the Group as disclosed in Note 6 to the financial statements; and
(ii) corporate guarantee provided by the subsidiary.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
69
70
Notes to the Financial Statements For The Financial Period Ended 31 July 2016 (cont’d)
17. TERM LOANS (CONT’D) (b) The interest rate profile of the term loans is summarised below: Effective interest rate % Floating rate term loans 5.40%
The Group 2016 2015 RM RM 5,060,999 8,460,861
18. TRADE PAYABLES
The normal trade credit term granted to the Group ranging from 30 to 90 days (2015 - 30 to 90 days).
19. OTHER PAYABLES AND ACCRUALS
2016 RM
The Group 2015 RM
The Company 2016 RM
Other payables GST payable Deposits Accruals
829,890 110,902 165,734 2,237,945
910,578 163,066 21,500 3,382,530
8,069 72,287
3,344,471
4,477,674
80,356
20. AMOUNT OWING TO A DIRECTOR OF A FOREIGN SUBSIDIARY
The amount owing to a director of a foreign subsidiary is unsecured, interest-free and repayable on demand.
21. AMOUNT OWING TO A SUBSIDIARY
The non-trade balances are unsecured, interest-free and repayable on demand.
22. PROVISION FOR WARRANTIES
The Group 2016 2015 RM RM
At beginning of the financial year Addition during the financial year Warranty claimed during the financial year
3,221,580 1,292,617 (2,189,896)
5,068,517 1,904,626 (3,751,563)
At end of the financial year
2,324,301
3,221,580
23. REVENUE
Revenue is measured at fair value of the consideration received or receivable and is recognised upon delivery of goods and customers’ acceptance and where applicable, net of returns, cash and trade discounts.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
Notes to the Financial Statements For The Financial Period Ended 31 July 2016 (cont’d)
24. EMPLOYEE BENEFITS The Group 2016 2015 RM RM
The Company 9.9.2015 to 31.7.2016 RM
Salaries, allowance and bonuses Contribution to a defined contribution plan Social security contributions Short term compensated absences Directors’ fee - executive directors Others
14,735,765 1,618,167 145,090 119,190 84,000 230,018
15,977,581 1,647,208 136,174 127,375 84,000 106,741
7,000 -
16,932,230
18,079,079
7,000
Included in employee benefits is key management personnel compensation as disclosed in Note 31 to the financial statements.
25. LOSS BEFORE TAXATION The Group 2016 2015 RM RM
Loss before taxation for the financial year/period is arrived at after charging:-
Amortisation of intangible assets 1,088,321 1,088,321 Amortisation of golf club membership 1,941 1,941 Audit fees - current financial year/period 98,000 87,408 - overprovision in the previous financial year (502) - Depreciation on investment properties 16,382 4,239 Depreciation on property, plant and equipment 4,707,584 4,627,932 Inventories written off 460,501 71,947 Inventories written down to net realisable value 111,233 72,563 Interest expense on financial liabilities not at fair value through profit or loss 420,742 585,338 Loss on disposal of property, plant and equipment - 200,355 Loss on foreign exchange - realised 201,347 143,817 - unrealised - 21,145 Property, plant and equipment written off (Note 6) 17,122 43,949 Provision for warranties (Note 22) 1,292,617 1,904,626 Rental expenses - premises 26,400 26,400 - hostel 37,340 48,199 Short term accumulated compensated absences 119,190 127,375
MCE HOLDINGS BERHAD
The Company 9.9.2015 to 31.7.2016 RM
25,000 -
ANNUAL REPORT 2016
71
72
Notes to the Financial Statements For The Financial Period Ended 31 July 2016 (cont’d)
25. LOSS BEFORE TAXATION (CONT’D) The Group 2016 2015 RM RM
Loss before taxation for the financial year/period is arrived at after crediting:- Interest income Gain on disposal of investment property Gain on disposal of property, plant and equipment Gain on foreign exchange - unrealised Rental income from investment properties Reversal of impairment loss on investment properties
The Company 9.9.2015 to 31.7.2016 RM
(306,807) - (528)
(438,978) (14,709) -
-
(1,656) (75,000) -
- (91,000) (40,000)
-
The Group 2016 2015 RM RM
The Company 9.9.2015 to 31.7.2016 RM
26. TAX (INCOME)/EXPENSE
Current tax expense:- current year - under/(over) provision in the previous financial year
266,208 988
300,834 (71,469)
-
267,196
229,365
-
Deferred tax (Note 9):- originating and recognition of temporary differences - (over)/under provision in the previous financial year
(602,150) (8,726)
(68,262) 735,748
-
(610,876)
667,486
-
(343,680)
896,851
-
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
Notes to the Financial Statements For The Financial Period Ended 31 July 2016 (cont’d)
26. TAX (INCOME)/EXPENSE (CONT’D)
A reconciliation of tax (income)/expense applicable to the loss before taxation at the statutory tax rate to tax (income)/ expense at the effective tax rate of the Group and the Company is as follows:-
The Group 2016 2015 RM RM
The Company 9.9.2015 to 31.7.2016 RM
Loss before taxation
(2,535,290)
(229,375)
(142,339)
Tax at the statutory tax rate of 24% (2015 - 25%) Tax effects of:Non-deductible expenses Non-taxable income Effect of different tax rate in foreign jurisdiction Under/(Over) provision of income tax in the previous financial year (Over)/Under provision of deferred tax in the previous financial year
(608,470)
(57,344)
(34,161)
333,099 (60,571) -
464,508 (168,184) (6,408)
34,161 -
988
(71,469)
-
(8,726)
735,748
-
Tax (income)/expense for the financial year
(343,680)
896,851
-
27. LOSS PER SHARE
The Group 2016 2015 RM RM
Basic
Net loss attributable to owners of the Company (RM)
(2,287,205)
(1,074,962)
Weighted average number of ordinary shares in issue (RM)
44,404,700
44,404,700
Basic loss per share (Sen)
(5.15)
(2.42)
No disclosure on diluted loss per share as there were no dilutive potential ordinary shares outstanding at the end of the reporting period.
28. DIVIDEND
Second interim single-tier dividend of 5 sen per share in respect of the previous financial year
MCE HOLDINGS BERHAD
The Group 2016 2015 RM RM
-
2,220,235
ANNUAL REPORT 2016
73
74
Notes to the Financial Statements For The Financial Period Ended 31 July 2016 (cont’d)
29. PURCHASE OF PROPERTY, PLANT AND EQUIPMENT
The Group 2016 2015 RM RM
Cost of property, plant and equipment purchased (Note 6) Amount financed through hire purchase
3,385,346 -
4,209,658 (800,000)
Cash disbursed for purchase of property, plant and equipment
3,385,346
3,409,658
30. CASH AND CASH EQUIVALENTS
For the purpose of the statements of cash flows, cash and cash equivalents comprise the following:-
2016 RM
The Group 2015 RM
The Company 2016 RM
Short term investment Cash and bank balances
9,255,665 3,579,681
8,734,402 4,937,896
10,002
12,835,346
13,672,298
10,002
31. KEY MANAGEMENT PERSONNEL COMPENSATION
The key management personnel of the Group and of the Company include executive directors and non-executive directors of the Group and of the Company and certain members of senior management of the Group and of the Company.
The key management personnel compensation during the financial period are as follows:-
The Group 2016 2015 RM RM
The Company 9.9.2015 to 31.7.2016 RM
Directors Of The Company Executive directors: Short-term employee benefit - Fees - Salaries and bonuses and other benefits
84,000 1,598,977
84,000 1,941,642
7,000 -
Defined contribution plan Benefits-in-kind
1,682,977 303,751 96,993
2,025,642 369,011 85,616
7,000 -
2,083,721
2,480,269
7,000
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
Notes to the Financial Statements For The Financial Period Ended 31 July 2016 (cont’d)
31. KEY MANAGEMENT PERSONNEL COMPENSATION (CONT’D)
The Group 2016 2015 RM RM
The Company 9.9.2015 to 31.7.2016 RM
Non-Executive directors: - Fee - Other emoluments
181,538 23,500
170,000 18,000
14,167 -
205,038
188,000
14,167
Total directors’ remuneration
2,288,759
2,668,269
21,167
Other Key Management Personnel Short-term employee benefit
894,992
1,364,722
-
The number of the Company’s directors with total remuneration falling in bands of RM50,000 are as follows:-
Executive Directors: RM800,001 - RM850,000 RM950,001 - RM1,000,000 RM1,250,001 - RM1,300,000 RM1,500,001 - RM1,550,000
2016 2015 Number of Directors
1 - 1 -
1 1
Non-executive Directors:Below RM50,000 RM50,001 - RM100,000
2 2
3
6
5
32. SIGNIFICANT RELATED PARTY DISCLOSURES (a) Identities of Related Parties
Parties are considered to be related to the Group if the Group or the Company has the ability, directly or indirectly, to control or jointly control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group or the Company and the party are subject to common control.
(b) Significant Related Party Transactions and Balances
The Group and the Company did not carry out any other significant transactions with the related parties during the financial period.
The outstanding balances of the related parties together with their terms and conditions are disclosed in the respective notes to the financial statements.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
75
76
Notes to the Financial Statements For The Financial Period Ended 31 July 2016 (cont’d)
33. OPERATING SEGMENTS
Operating segments are prepared in a manner consistent with the internal reporting provided to the Board of Directors and Group Financial Controller as its chief operating decision maker in order to allocate resources to segments and to assess their performance. For management purposes, the Group is organised into business units based on their products and services provided.
The Group is organised into 2 main reportable segments as follows:- -
Automotive parts - involved in manufacturing and trading of automotive parts. Healthcare services - involved in providing health care services.
The healthcare services segment has yet to commence business. (a) The Board of Directors and Group Financial Controller assesses the performance of the reportable segments based on their profit before interest expense and tax. The accounting policies of the reportable segments are the same as the Group’s accounting policies.
Investment-related activities are managed on a group basis and not allocated to reportable segments.
(b) Each reportable segment assets is measured based on all assets of the segment. (c) Each reportable segment liabilities is measured based on all liabilities of the segment. (d) Assets, liabilities and expenses which are common and cannot be meaningfully allocated to the reportable segments are presented under unallocated items. Unallocated items comprise mainly corporate assets and head office expenses.
Transfer prices between operating segments are at arm’s length basis in a manner similar to transactions with third parties. The effects of such inter-segment transaction are eliminated on consolidation.
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MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
Notes to the Financial Statements For The Financial Period Ended 31 July 2016 (cont’d)
33. OPERATING SEGMENTS (CONT’D)
BUSINESS SEGMENTS
Automotive Parts RM
Healthcare Services RM
Group RM
76,900,680
-
76,900,680
(1,631,808)
(340,401)
(1,972,209)
Interest expenses Unallocated expenses Consolidated loss before tax
(420,742) (142,339)
2016
Revenue
External and consolidated revenue
Results
Segment loss before interest and tax
Segment loss before interest and tax includes the followings:- Gain on disposal of property, plant and equipment 528 - Gain on foreign exchange - unrealised 1,656 - Interest income 306,807 - Amortisation of intangible assets (1,088,321) - Amortisation of golf club membership (1,941) - Depreciation on investment properties (16,382) - Depreciation on property, plant and equipment (4,698,254) (9,330) Inventories written off (460,501) - Inventories written down to net realisable value (111,233) - Loss on foreign exchange - realised (201,347) - Property, plant and equipment written off (17,122) - Provision for warranties (1,292,617) -
Assets
Segment assets
110,611,903
32,252,640
Unallocated assets: - assets for head office purposes Consolidation adjustments Consolidated total assets Additions to non-current assets other than financial instruments are: Property, plant and equipment 1,640,776 1,744,570
(2,535,290)
528 1,656 306,807 (1,088,321) (1,941) (16,382) (4,707,584) (460,501) (111,233) (201,347) (17,122) (1,292,617)
142,864,543
28,110 (32,924,686) 109,967,967
3,385,346
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
77
78
Notes to the Financial Statements For The Financial Period Ended 31 July 2016 (cont’d)
33. OPERATING SEGMENTS (CONT’D)
BUSINESS SEGMENTS (CONT’D)
Liabilities Segment liabilities
Automotive Parts RM
Healthcare Services RM
Group RM
18,718,983
3,039,640
21,758,623
Unallocated liabilities - liabilities for head office purposes Consolidation adjustments Consolidated total liabilities
2015 Revenue External and consolidated revenue Results Segment profit/(loss) before interest and tax
170,447 (2,924,685) 19,004,385
90,028,362
-
90,028,362
748,739
(392,776)
355,963
Interest expenses Consolidated loss before tax Segment profit/(loss) before interest and tax includes the followings:-
(585,338)
Gain on disposal of investment property 14,709 Interest income 438,978 Reversal of impairment loss on investment properties 40,000 Amortisation of intangible assets (1,088,321) Amortisation of golf club membership (1,941) Depreciation on investment properties (4,239) Depreciation on property, plant and equipment (4,618,767) Inventories written off (71,947) Inventories written down to net realisable value (72,563) Loss on disposal of property, plant and equipment (200,355) Loss on foreign exchange - realised (143,817) - unrealised (21,145) Interest expense (585,338) Property, plant and equipment written off (43,949) Provision for warranties (1,904,626)
(229,375)
- - - - - - (9,165) - - -
14,709 438,978 40,000 (1,088,321) (1,941) (4,239) (4,627,932) (71,947) (72,563) (200,355)
- - - - -
(143,817) (21,145) (585,338) (43,949) (1,904,626)
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
Notes to the Financial Statements For The Financial Period Ended 31 July 2016 (cont’d)
33. OPERATING SEGMENTS (CONT’D)
BUSINESS SEGMENTS (CONT’D)
Automotive Parts RM
Healthcare Services RM
Group RM
2015 Assets Segment assets
118,355,802
30,474,873
148,830,675
Consolidation adjustments Consolidated total assets Additions to non-current assets other than financial instruments are: Property, plant and equipment 2,638,150 1,571,508
(29,987,730)
Liabilities Segment liabilities
24,273,303
118,842,945
4,209,658
1,821,472
26,094,775
Consolidation adjustments Consolidated total liabilities
(887,730) 25,207,045
GEOGRAPHICAL INFORMATION The Group operates predominantly in Malaysia. Accordingly, the information by geographical segments is not presented. MAJOR CUSTOMERS The following are major customers with revenue equal to or more than 10% of the Group’s total revenue: Customer A Customer B Customer C
MCE HOLDINGS BERHAD
Revenue 2016 RM 35,495,120 24,195,370 4,947,639
Segment 2015 RM
48,659,968 25,202,164 3,843,524
Automotive parts Automotive parts Automotive parts
ANNUAL REPORT 2016
79
80
Notes to the Financial Statements For The Financial Period Ended 31 July 2016 (cont’d)
34. CAPITAL COMMITMENT
The Group 2016 2015 RM RM
Contracted But Not Provided For Purchase of property, plant and equipment 30,719
104,919
35. OPERATING LEASE COMMITMENTS 35.1 LEASES AS LESSOR
The Group leases out its investment properties under non-cancellable operating leases. The leases have remaining lease periods of 3 years.
The future minimum lease receivable under the non-cancellable operating leases are as follows:-
The Group 2016 2015 RM RM
Not more than 1 year Later than 1 year and not later than 5 years
132,000 288,000
31,250 -
420,000
31,250
35.2 LEASES AS LESSEE
The Group leases staff hostel and office under non-cancellable operating leases.
The future minimum lease payments under the non-cancellable operating leases are as follows:-
The Group 2016 2015 RM RM
Not more than 1 year Later than 1 year and not later than 5 years
26,400 24,200
34,950 -
50,600
34,950
36. FINANCIAL INSTRUMENTS
The Group’s activities are exposed to a variety of market risk (including foreign currency risk, interest rate risk and equity price risk), credit risk and liquidity risk. The Group’s overall financial risk management policy focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
MCE HOLDINGS BERHAD
6,957
Financial Assets Trade receivables Other receivables Cash and bank balances
Currency Exposure
6,957
-
- -
Financial Liabilities Trade payables Other payables
4,366 - 2,591
2016
(1,116,028)
1,519,494
1,377,260 142,234
403,466
- 92,179 311,287
(135,343)
135,386
134,782 604
43
- - 43
(1,238,739)
1,246,058
1,246,058 -
7,319
- - 7,319
EUR RM
(259,074)
259,074
259,074 -
-
- - -
CNY RM
(715,576)
716,921
716,921 -
1,345
- - 1,345
TWD RM
4,587
-
-
4,587
4,587
Others RM
Foreign Currency Exposure
SGD RM
The Group’s exposure to foreign currency risk (a currency which is other than the functional currency of the entities within the Group) that based on the carrying amounts of the financial instruments at the end of the reporting period is summarised below:-
USD RM
The Group is exposed to foreign currency risk on transactions and balances that are denominated in currencies other than the respective functional currency of entities within the Group. The currencies giving rise to this risk are primarily Australia Dollar (“AUD”), United States Dollar (“USD”), Singapore Dollar (“SGD”), Euro Dollar (“EUR”), Chinese Yuan (“CNY”) and New Taiwan Dollar (“TWD”). Foreign currency risk is monitored closely on an ongoing basis to ensure that the net exposure is at an acceptable level. Where appropriate and cost efficient, the Group enters into forward foreign currency contracts to hedge against its foreign currency risk.The Group also holds cash and cash equivalents denominated in foreign currencies for working capital purposes.
AUD RM
Foreign Currency Risk
(i)
(a) Market Risk
The Group’s policies in respect of the major areas of treasury activity are as follows:-
The Group
36.1 FINANCIAL RISK MANAGEMENT POLICIES
36. FINANCIAL INSTRUMENTS (CONT’D)
Notes to the Financial Statements
For The Financial Period Ended 31 July 2016 (cont’d)
ANNUAL REPORT 2016
81
MCE HOLDINGS BERHAD
Foreign Currency Exposure (Cont’d)
938,402 (928,823)
Currency Exposure
938,402 -
Financial Liabilities Trade payables Other payables
9,579
Financial Assets Trade receivables Other receivables Cash and bank balances
7,223 - 2,356
2015
AUD RM
The Group
Foreign Currency Risk (Cont’d)
(i)
(a) Market Risk (Cont’d)
36.1 FINANCIAL RISK MANAGEMENT POLICIES (CONT’D)
36. FINANCIAL INSTRUMENTS (CONT’D)
(1,605,735)
1,786,704
1,786,704 -
180,969
- 140,579 40,390
USD RM
(121,746)
121,893
120,618 1,275
147
- - 147
SGD RM
(920,177)
926,940
926,940 -
6,763
- - 6,763
EUR RM
1,311
-
- -
1,311
- - 1,311
CNY RM
(369,979)
371,252
371,252 -
1,273
- - 1,273
TWD RM
5,395
-
-
5,395
5,395
Others RM
82
Notes to the Financial Statements
For The Financial Period Ended 31 July 2016 (cont’d)
ANNUAL REPORT 2016
Notes to the Financial Statements For The Financial Period Ended 31 July 2016 (cont’d)
36. FINANCIAL INSTRUMENTS (CONT’D)
36.1 FINANCIAL RISK MANAGEMENT POLICIES (CONT’D)
(a) Market Risk (Cont’d)
(i)
Foreign Currency Risk (Cont’d) Foreign Currency Risk Sensitivity Analysis The following table details the sensitivity analysis to a reasonably possible change in the foreign currencies at the end of the reporting period, with all other variables held constant:-
The Group 2016 2015 RM RM
Effects On Loss After Taxation
AUD/RM - strengthened by 12% (2015: 7%) 716 - weakened by 12% (2015: 7%) (716) USD/RM - strengthened by 16% (2015: 21%) (121,758) - weakened by 16% (2015: 21%) 121,758 SGD/RM - strengthened by 12% (2015: 12%) (12,342) - weakened by 12% (2015: 12%) 12,342 EUR/RM - strengthened by 19% (2015: 10%) (164,799) - weakened by 19% (2015: 10%) 164,799 CNY/RM - strengthened by 17% (2015: 20%) (33,429) - weakened by 17% (2015: 20%) 33,429 TWD/RM - strengthened by 12% (2015: 17%) (59,713) - weakened by 12% (2015: 17%) 59,713
(52,013) 52,013
(256,770) 256,770
(10,833) 10,833
(71,033) 71,033
262 (262)
(47,094) 47,094
Any reasonably possible change in the foreign currency exchange rates other than disclosed above, at the end of the reporting period against the respective functional currency of the entities within the Group does not have material impact on the loss after taxation and other comprehensive income.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
83
84
Notes to the Financial Statements For The Financial Period Ended 31 July 2016 (cont’d)
36. FINANCIAL INSTRUMENTS (CONT’D)
36.1 FINANCIAL RISK MANAGEMENT POLICIES (CONT’D)
(a) Market Risk (Cont’d)
(ii) Interest Rate Risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s exposure to interest rate risk arises mainly from long-term borrowings with variable rates. The Group’s policy is to obtain the most favourable interest rates available by maintaining a balanced portfolio of mix of fixed and floating rate borrowings.
The Group’s exposure to interest rate risk based on the carrying amounts of the financial instruments at the end of the reporting period is disclosed in Note 17 to the financial statements.
Interest Rate Risk Sensitivity Analysis
The following table details the sensitivity analysis to a reasonably possible change in the interest rates at the end of the reporting period, with all other variables held constant:-
The Group 2016 2015 RM RM
Effects on Loss After Taxation Increase of 25 (2015: 25)(basis points) (12,860) Decrease of 25 (2015: 25)(basis points) 12,860
(18,813) 18,813
Any reasonably possible change in the foreign currency exchange rates other than disclosed above, at the end of the reporting period against the respective functional currency of the entities within the Group does not have material impact on the loss after taxation and other comprehensive income.
(iii) Equity Price Risk
The Group does not have any quoted investments and hence, is not exposed to equity price risk.
(b) Credit Risk
The Group’s exposure to credit risk, or the risk of counterparties defaulting, arises mainly from trade and other receivables. For other financial assets (including cash and bank balances), the Group minimises credit risk by dealing exclusively with high credit rating counterparties. (i)
Credit Risk Concentration Profile
The Group’s major concentration of credit risk relates to the amount owing by 3 (2015: 3) groups of customers which constituted approximately 91% (2015: 92%) of its trade receivables (including its supplier) at the end of the reporting period.
(ii) Exposure to Credit Risk
At the end of the reporting period, the maximum exposure to credit risk is represented by the carrying amount of each class of financial assets recognised in the statement of financial position of the Group after deducting any allowance for impairment losses.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
Notes to the Financial Statements For The Financial Period Ended 31 July 2016 (cont’d)
36. FINANCIAL INSTRUMENTS (CONT’D)
36.1 FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) (b) Credit Risk (Cont’d)
(iii) Ageing Analysis
The ageing analysis of trade receivablesis as follows:-
The Group
Gross Amount RM
Individual Impairment RM
Carrying Value RM
2016 Not past due 9,807,862 -
9,807,862
Past due: - less than 3 months - 3 to 6 months - more than 6 months - more than 1 year
4,029,573 389,806 9,098 14,020
- - - -
4,029,573 389,806 9,098 14,020
14,250,359
-
14,250,359
2015
Not past due
12,882,474
-
12,882,474
Past due: - less than 3 months - 3 to 6 months - more than 6 months - more than 1 year
5,174,026 131,579 - 17,307
- - - -
5,174,026 131,579 17,307
18,205,386
-
18,205,386
The Group believes that no impairment allowance is necessary in respect of trade receivables that are past due but not impaired because they are companies with good collection track record and no recent history of default.
(c) Liquidity Risk
Liquidity risk arises mainly from general funding and business activities. The Group and the Company practises prudent risk management by maintaining sufficient cash balances and the availability of funding through certain committed credit facilities.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
85
86
Notes to the Financial Statements For The Financial Period Ended 31 July 2016 (cont’d)
36. FINANCIAL INSTRUMENTS (CONT’D)
36.1 FINANCIAL RISK MANAGEMENT POLICIES (CONT’D)
(c) Liquidity Risk (Cont’d)
Maturity Analysis
The following table sets out the maturity profile of the financial liabilities at the end of the reporting period based on contractual undiscounted cash flows (including interest payments computed using contractual rates or, if floating, based on the rates at the end of the reporting period):-
The Group
Contractual Contractual Interest Carrying Undiscounted Within Rate Amount Cash Flows 1 Year % RM RM RM
2016
Non-derivative Financial Liabilities Hire purchase payables Term loans Trade payables Other payables and accruals
4.58% 5.40% - -
1–5 Years RM
517,694 5,060,999 7,756,920 3,233,569
548,188 5,389,356 7,756,920 3,233,569
219,288 2,283,852 7,756,920 3,233,569
328,900 3,105,504 -
16,569,182
16,928,033
13,493,629
3,434,404
2015
Non-derivative Financial Liabilities Hire purchase payables Term loans Trade payables Other payables and accruals Amount owing to a director of a foreign subsidiary
4.58% 5.60% - -
708,259 8,460,861 7,948,862 4,314,608
767,476 9,154,330 7,948,862 4,314,608
219,288 3,765,074 7,948,862 4,314,608
548,188 5,389,256 -
-
25,075
25,075
25,075
-
21,457,665
22,210,351
16,272,907
5,937,444
Contractual Carrying Undiscounted Amount Cash Flows The Company RM RM
Within 1 Year RM
2016
Non-derivative Financial Liabilities Other payables and accruals Amount owing to a subsidiary
80,356 90,091
80,356 90,091
80,356 90,091
170,447
170,447
170,447
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
Notes to the Financial Statements For The Financial Period Ended 31 July 2016 (cont’d)
36. FINANCIAL INSTRUMENTS (CONT’D) 36.2 CAPITAL RISK MANAGEMENT
The Group manages its capital to ensure that entities within the Group will be able to maintain an optimal capital structure so as to support its businesses and maximise shareholders value. To achieve this objective, the Group may make adjustments to the capital structure in view of changes in economic conditions, such as adjusting the amount of dividend payment, returning of capital to shareholders or issuing new shares.
The Group manages its capital based on gearing ratio that complies with debt covenants and regulatory, if any. The gearing ratio is calculated as net debt divided by total equity plus net debt. The Group includes within net debt, loans and borrowings, trade and other payables less cash and cash equivalents. Capital includes equity attributable to the owners of the Company.
The gearing ratio of the Group at the end of the reporting period was as follows:-
Hire purchase payables (Note 16) Term loans (Note 17) Trade payables (Note 18) Other payables and accruals (Note 19) Amount owing to a director of a foreign subsidiary (Note 20) Provisions of warranties (Note 22) Less: Cash and cash equivalents (Note 30) Net debt Equity attributable to the owners of the Company Capital and net debt
Gearing ratio
The Group 2016 2015 RM RM 517,694 5,060,999 7,756,920 3,344,471
708,259 8,460,861 7,948,862 4,477,674
- 2,324,301
25,075 3,221,580
19,004,385 (12,835,346)
24,842,311 (13,672,298)
6,169,039
11,170,013
90,954,644
93,722,557
97,123,683
104,892,570
6.35%
10.65%
As the Company has insignificant debt, the gearing ratio may not provide a meaningful indicator of the risk of borrowings. There was no change in the Group’s approach to capital management during the financial year.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
87
88
Notes to the Financial Statements For The Financial Period Ended 31 July 2016 (cont’d)
36. FINANCIAL INSTRUMENTS (CONT’D)
36.3 CLASSIFICATION OF FINANCIAL INSTRUMENTS
The Group 2015 RM
The Company 2016 RM
18,205,386 681,465 4,937,896
10,002
23,824,747
10,002
9,255,665
8,734,402
-
2016 RM
Financial Assets Loans and Receivables Financial Assets Trade receivables (Note 11) 14,250,359 Other receivables and deposits (Note 12) 547,386 Cash and bank balances 3,579,681 18,377,426
Fair Value through Profit or Loss: Held for Trading Short term investment (Note 13)
Financial Liabilities
Other Financial Liabilities Hire purchase payables (Note 16) Term loans (Note 17) Trade payables (Note 18) Other payables and accruals (Note 19) Amount owing to a director of a foreign subsidiary (Note 20) Amount owing to a subsidiary (Note 21)
517,694 5,060,999 7,756,920 3,233,569 - -
708,259 8,460,861 7,948,862 4,314,608 25,075 -
80,356 90,091
16,569,182
21,457,665
170,447
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
Notes to the Financial Statements For The Financial Period Ended 31 July 2016 (cont’d)
36. FINANCIAL INSTRUMENTS (CONT’D) 36.4 FAIR VALUE INFORMATION
The fair values of the financial assets and financial liabilities of the Group that maturing within the next 12 months approximated their carrying amounts due to the relatively short-term maturity of the financial instruments.
As the Group does not have any financial instruments carried at fair value, the following table sets out the fair value profile of financial instruments that are carried at fair value and those not carried at fair value at the end of the reporting period:-
Fair Value Of Financial Instruments Not Carried At Fair Value Level 1 Level 2 Level 3 The Group RM RM RM
Total Fair Value RM
Carrying Amount RM
2016 Financial Liabilities Hire purchase payables - 513,920 - 513,920 Term loans - 5,060,999 - 5,060,999
517,694 5,060,999
2015 Financial Liabilities Hire purchase payables - 708,259 - 708,259 Term loans - 8,460,861 - 8,460,861
708,259 8,460,861
(a) Fair Value of Financial Instruments not Carried at Fair Value
The fair values, which are for disclosure purposes, have been determined using the following basis:(i)
The fair values of hire purchase payables and term loans are determined by discounting the relevant cash flows using discount rate that reflect the Group’s borrowing rate at the end of the reporting period. The interest rates used to discount the estimated cash flows are as follows:-
Term loans Hire purchase payables
MCE HOLDINGS BERHAD
The Group 2016 2015 % % 5.40 5.06
5.60 4.58
ANNUAL REPORT 2016
89
90
Notes to the Financial Statements For The Financial Period Ended 31 July 2016 (cont’d)
37. SIGNIFICANT EVENTS DURING THE FINANCIAL PERIOD
During the financial period, the Company entered into a scheme of arrangement under Section 176 of the requirements of the Companies Act,1965 involving internal reorganisation by Multi-Code Electronics Industries (M) Berhad (“MCE”) comprising the followings: (a) exchange of the entire 44,404,700 issued and fully paid-up ordinary shares of RM1 each in MCE (“MCE Share”) with 44,404,700 new ordinary shares of RM1 each in the Company (“MHB Share”) on the basis of one (1) MHB Share for every one (1) existing MCE Share held as at an entitlement date of 23 June 2016 (“Share Exchange”); and (b) assumption of the listing status of MCE by the Company and the admission of the Company to and withdrawal of MCE from Official List of Bursa Malaysia Securities Berhad (“Bursa Securities”) with the listing of and quotation for new MHB Shares on the Main Market of Bursa Securities (“Transfer of Listing”).
On 29 June 2016, all the MCE shares have been transferred to the Company and all the CDS accounts of the entitled shareholders have been duly credited with the MHB shares. Accordingly the Share Exchange was completed.
On 1 July 2016, the Transfer of Listing was completed following the de-listing of MCE and listing of the Company. MCE is now a wholly-owned subsidiary of the Company.
38. COMPARATIVE FIGURES 38.1 In view of the completion of the internal reorganisation as disclosed in Note 37, the comparative amounts in the Group’s financial statements are presented using the principles as set out in Note 4.2 as if the entities or businesses had been combined at the begining of the previous financial year. 38.2 There were no comparative figures for the Company as it was incorporated on 9 September 2015.
38.3 The following figures have been reclassified to conform with the presentation of the current financial year:-
The Group 2015 2015 As As Previously Restated Reported RM RM Statement of Financial Position (Extract):- Other receivables, deposits and prepayments 973,694 989,144 Short term investment 8,734,402 Cash and bank balances 4,937,896 13,672,298 Other payables and accruals (4,477,674) (4,518,199) Amount owing to a director of a foreign subsidiary (25,075) Statement of Profit or Loss and Other Comprehensive Income (Extract):- Other income Changes in inventories of finished goods and work-in-progress Raw materials and consumables used Depreciation and amortisation Other operating expenses Finance costs
812,749 (1,639,771) (56,658,310) (5,722,433) (8,156,337) (622,036)
771,873 (2,978,468) (55,319,613) (4,632,171) (9,242,421) (585,338)
Statement of Cash Flows (Extract):- Cash flows from operating activities Increase in trade and other payables Warranty paid
(6,820,196) (3,751,562)
(10,571,758) -
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
Notes to the Financial Statements For The Financial Period Ended 31 July 2016 (cont’d)
39. SUPPLEMENTARY INFORMATION – DISCLOSURE OF REALISED AND UNREALISED PROFITS
The breakdown of the retained profits of the Group and of the Company at the end of the reporting period into realised and unrealised profits/(losses) are presented in accordance with the directive issued by Bursa Malaysia Securities Berhad and prepared in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants, as follows:-
Total retained profits/(accumulated losses) of the Company and its subsidiaries: - realised - unrealised Less: Consolidation adjustments At 31 July
MCE HOLDINGS BERHAD
2016 RM
The Group 2015 RM
The Company 2016 RM
48,734,403 (2,090,694)
52,701,829 (3,619,316)
(142,339) -
46,643,709 (1,077,877)
49,082,513 (751,148)
(142,339) -
45,565,832
48,331,365
(142,339)
ANNUAL REPORT 2016
91
92
List Of Properties
Tenure (approximate age of building) Location
Description
Area in Square Metres (approximate)
Existing Use
Net Book Value as at Date of last Registered 31.07.2016 revaluation/ purchase (RM) Owner
No. 2, Jalan Waja 7, Kawasan Perindustrian Pandan, 81100 Johor Bahru, Johor Darul Takzim.
Freehold (22 years)
2-storey semidetached factory
1,441 (Floor area)
Factory
Multi-Code Electronics Industries (M) Berhad
1,890,350
31 July 2012
No. 4, Jalan Waja 7, Kawasan Perindustrian Pandan, 81100 Johor Bahru, Johor Darul Takzim.
Freehold (22 years)
2-storey semidetached factory
1,647 (Floor area)
Factory
Multi-Code Electronics Industries (M) Berhad
1,871,053
31 July 2012
No. 6, Jalan Waja 7, Kawasan Perindustrian Pandan, 81100 Johor Bahru, Johor Darul Takzim.
Freehold (24 years)
1½ -storey semidetached factory
1,474 (Floor area)
Factory
Multi-Code Electronics Industries (M) Berhad
1,395,622
31 July 2012
No. 8, Jalan Waja 7, Kawasan Perindustrian Pandan, 81100 Johor Bahru, Johor Darul Takzim.
Freehold (24 years)
1½ -storey semidetached factory
1,474 (Floor area)
Factory
Multi-Code Electronics Industries (M) Berhad
2,007,236
31 July 2016
No. 7, Jalan Waja 8, Kawasan Perindustrian Pandan, 81100 Johor Bahru, Johor Darul Takzim.
Freehold (24 years)
2-storey semidetached factory
1,984 (Floor area)
Factory
Multi-Code Electronics Industries (M) Berhad
2,047,391
31 July 2012
No. 9, Jalan Waja 8, Kawasan Perindustrian Pandan, 81100 Johor Bahru, Johor Darul Takzim.
Freehold (24 years)
2-storey semidetached factory
1,984 (Floor area)
Factory
Multi-Code Electronics Industries (M) Berhad
1,774,043
31 July 2012
HS(D) 158583 / PTD 4397 Mukim of Tebrau, District of Johor Bahru, State of Johor.
Freehold
Vacant industrial land
1,431 (Land area)
Car park for employees
Multi-Code Electronics Industries (M) Berhad
630,000
31 July 2012
No. 33, Jalan Permatang 21, Taman Desa Jaya, 81100 Johor Bahru, Johor Darul Takzim.
Freehold (24 years)
2-storey terrace house
159 (Floor area)
Hostel
Multi-Code Electronics Industries (M) Berhad
134,974
31 July 2012
Lot 68745, Canang Emas 7, Off Jalan Telok Gong, 42000 Klang, Selangor Darul Ehsan.
1-storey factory Leasehold (6 years) cum 3-storey office building
5,608 (Floor area)
Factory
Multi-Code Technologies (M) Sdn Bhd
Freehold Vacant commercial land
13,262 (Land area)
Vacant
Vantage Realm Sdn Bhd
HS(D) 264382, PT 26533, Mukim Bukit Raja, Daerah Petaling, Selangor Darul Ehsan.
MCE HOLDINGS BERHAD
8,906,344 13 June 2013
29,462,985
22 Nov 2013
ANNUAL REPORT 2016
Analysis Of Shareholdings
SHARE CAPITAL AS AT 20 OCTOBER 2016 Authorised capital Issued and paid up capital Class of shares Voting rights
: : : :
RM100,000,000-00 divided into 100,000,000 ordinary shares of RM1-00 each RM44,404,702-00 divided into 44,404,702 ordinary shares of RM1-00 each Ordinary shares of RM1-00 each One (1) vote per ordinary share
DISTRIBUTION OF SHAREHOLDERS ACCORDING TO STATISTICAL SUMMARY OF THE RECORD OF DEPOSITORS AS AT 20 OCTOBER 2016 No. of shareholders
Size of shareholdings
No. of shares held
%
11 231 1,464 279 37 1
Less than 100 shares 100 to 1,000 shares 1,001 to 10,000 shares 10,001 to 100,000 shares 100,001 to less than 5% of issued shares 5% and above of issued shares
243 138,832 4,843,178 8,143,900 21,328,209 9,950,340
0.0005 0.3126 10.9069 18.3402 48.0315 22.4083
2,023
TOTAL
44,404,702
100
LIST OF 30 LARGEST SHAREHOLDERS ACCORDING TO THE RECORD OF DEPOSITORS AS AT 20 OCTOBER 2016 No.
Name of shareholders
No. of shares held
%
1
GOH KAR CHUN
9,950,340
22.41
2
CHUAH SAI WEI
1,959,100
4.41
3
CHANG CHOON CHENG @ CHANG CHU CHEN
1,657,500
3.73
4
GOH CHAI SIONG
1,452,639
3.27
5
LIM KIAN HUAT
1,240,100
2.79
6
ENG SAM TIANG
1,154,700
2.60
7
KWANG KING CHUAN
1,109,000
2.50
8
TAN JIN TUAN
1,081,000
2.43
9
CHUAH SAI YEE
1,018,100
2.29
10
GOH CHAI SIONG
1,000,000
2.25
11
GOH WAN SING
950,000
2.14
12
FEDERLITE HOLDINGS SDN BHD
862,400
1.94
13
LIM MING KEE
778,900
1.76
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
93
94
Analysis Of Shareholdings (cont’d)
LIST OF 30 LARGEST SHAREHOLDERS ACCORDING TO THE RECORD OF DEPOSITORS AS AT 20 OCTOBER 2016 (cont’d) No.
Name of shareholders
No. of shares held
%
14
GOH TONG HUAT
696,673
1.57
15
GAN KHO @ GAN HONG LEONG
591,200
1.33
16
AMBANK (M) BERHAD
514,000
1.16
PLEDGED SECURITIES ACCOUNT FOR ONG TENG KEK (SMART)
17
LEE SIEW HONG
438,900
0.99
18
KENANGA NOMINEES (TEMPATAN) SDN BHD
PLEDGED SECURITIES ACCOUNT FOR LEE PUAY HENG
406,900
0.92
19
CHEE AH NGOH
390,000
0.89
20
PUBLIC NOMINEES (TEMPATAN) SDN BHD
360,497
0.81
PLEDGED SECURITIES ACCOUNT FOR GOH CHAI SIONG (E-TSA)
21
CHUA SAI LING
350,000
0.79
22
SIOW CHIN HOW
325,500
0.73
23
LIM CHIAU HENG
316,300
0.71
24
TAN AI LENG
292,000
0.66
25
CHENG, PAO-YUAN
281,600
0.63
26
CONTRARIAN HOLDINGS SDN BHD
262,800
0.59
27
ABUL HASAN BIN MOHAMED RASHID
219,800
0.50
28
TEO KWEE HOCK
208,400
0.47
29
MAYBANK NOMINEES (TEMPATAN) SDN BHD
200,300
0.45
GAR TI WEI
30
HLB NOMINEES (TEMPATAN) SDN BHD
173,800
0.39
PLEDGED SECURITIES ACCOUNT FOR ANG POH ENG
TOTAL
30,242,449
68.11
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
Analysis Of Shareholdings (cont’d)
SUBSTANTIAL SHAREHOLDERS AS AT 20 OCTOBER 2016 (As per Register of Substantial Shareholders) No. of shares held Direct Deemed No. Name of shareholder Interest % Interest 1 2
DR. GOH KAR CHUN MR. GOH CHAI SIONG
9,997,240 2,813,136
22.51 6.34
%
- -
-
No. of shares held in MCE Holdings Berhad Direct Deemed No. Name of Director Interest % Interest
%
DIRECTORS’ SHAREHOLDINGS AS AT 20 OCTOBER 2016 (As per Register of Directors’ Shareholdings)
1. 2. 3. 4 5 @
MR. TAI LAM SHIN MR. LIM MING KEE DR. GOH KAR CHUN EN. SHAMSUDIN @ SAMAD BIN KASSIM MR. LOO SHEN CHANG
20,000 778,900 9,997,240 100,000 -
0.05 1.76 22.51 0.23 -
- - 350,000 @ - -
0.79 -
Deemed interested in shares held by spouse.
MCE HOLDINGS BERHAD
ANNUAL REPORT 2016
95
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MCE Holdings Berhad (1158341-K) (Incorporated in Malaysia)
I/We
(Nric No.
)
(Nric No.
)
of (full address) a member / members of MCE HOLDINGS BERHAD hereby appoint (full name) of (full address)
or
failing him,
(Nric No.
)
of (full address) as *my/our proxy to vote for *me/us and on *my/our behalf at the 1st Annual General Meeting of the Company to be held on Tuesday, the 20th day of December, 2016 at 9.30 am and at every adjournment thereof to vote as indicated below in respect of the following Resolutions:ORDINARY BUSINESS
FOR
Ordinary Resolution 1
Re-election of Mr Tai Lam Shin
Ordinary Resolution 2
Re-election of Dr Goh Kar Chun
Ordinary Resolution 3
Re-election of Mr Loo Shen Chang
Ordinary Resolution 4
Appointment of Auditors
AGAINST
SPECIAL BUSINESS Ordinary Resolution 5 Ordinary Resolution 6 Ordinary Resolution 7
Approval of Directors’ fees Re-appointment of En Shamsudin @ Samad bin Kassim Retention of Mr Tai Lam Shin as Independent Director
(Please indicate with an "X" in the space provided above on how you wish your vote to be cast. If you do not do so, the proxy will vote or abstain from voting at his discretion.) ** The proportion of my/our shareholding to be represented by my/our proxies are as follows:Proxy
Name
Address
NRIC/Passport No.
Proportion of shareholdings
Total shares held ** To be completed in the event the member wishes to appoint more than one (1) proxy (see note 2 below)
Dated this No. of shares held :
day of
2016 Signature of member/s
Notes: 1. A member entitled to attend and vote at the Meeting is entitled to appoint one or more proxies to attend and vote in his stead. A proxy may but need not be a member of the Company and the provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company. Notwithstanding this, a member entitled to attend and vote at the Meeting is entitled to appoint any person as his proxy to attend and vote instead of him at the Meeting. There shall be no restriction as to the qualification of the proxy. A proxy appointed to attend and vote at the Meeting shall have the same rights as the member to speak at the Meeting. 2. Where a member appoints more than one (1) proxy, the appointment shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy. 3. Where a member is an authorised nominee as defined under The Securities Industry (Central Depositories) Act, 1991, it may appoint at least one proxy in respect of each Securities Account it holds with ordinary shares of the Company standing to the credit of the said Securities Account. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one securities account (“omnibus account”) there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds. 4. The instrument appointing a proxy shall be in writing under the hand of the appointer or of his attorney duly authorised in writing or, if the appointer is a corporation, either under Seal or under the hand of an officer or attorney duly authorised. 5. To be valid, the form of proxy must be deposited at the Registered Office of the Company situated at Suite 5.11 & 5.12, 5th Floor, Menara TJB, No. 9, Jalan Syed Mohd. Mufti, 80000 Johor Bahru, Johor not less than 48 hours before the time for holding the meeting or any adjournment thereof or in the case of a poll, not less than 24 hours before the time appointed for the taking of the poll. 6. In respect of deposited securities, only members whose names appear on the Record of Depositors on 14 December 2016, shall be eligible to attend the meeting or appoint proxy(ies) to attend and/or vote on his behalf.
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The Company Secretary
MCE Holdings Berhad (1158341-K)
Suite 5.11 & 5.12, 5th floor, Menara TJB No. 9, Jalan Syed Mohd. Mufti 80000 Johor Bahru Johor, Malaysia
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MCE HOLDINGS BERHAD (1158341-K) MCE HOLDINGS BERHAD (1158341-K) ANNUAL REPORT 2016
MCE HOLDINGS BERHAD
No. 2 & 4, Jalan Waja 7, Kawasan Perindustrian Pandan, 81100 Johor Bahru, Johor, Malaysia. Tel : +607-355 3787 Fax : +607-355 2869 www.multicode.com.my
ANNUAL REPORT 2016
