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Recognizing the importance of good governance as a fundamental part of discharging their responsibilities, the Board of Directors (“Board”) has taken steps to evaluate and implement the Group’s corporate governance policies and procedures. The Board is committed to ensure that good corporate governance is practiced and complied with throughout the Group within the framework as expounded by the principles and recommendations promoted by the Malaysian Code on Corporate Governance 2012 (“MCCG 2012”) to enhance shareholders’ value.

This statement sets out the manner in which the Group has applied the principles and recommendations of MCCG 2012 and the Board will continue to further take measures to improve compliance with principles and recommended best practices in the ensuing years.

ESTABLISH CLEAR ROLES AND RESPONSIBILITIES OF THE BOARD AND MANAGEMENT

1.1 Clear functions of the Board and Management

The Group acknowledges the pivotal role played by the Board in the stewardship of its directions and operations, and ultimately the enhancement of long-term shareholders’ value. To fulfill this role, the Board is responsible for the overall corporate governance of the Group, including its strategic direction, establishing goals for management and monitoring the achievement of these goals.

The Board is guided by a Board Charter which sets out the duties and responsibilities of the Board. The Board Charter further defines the respective roles of the Chairman of the Board, the Managing Director/Chief Executive Officer (“MD/CEO”) and the Board.

The MD/CEO together with the Executive Directors, supported by the Management staff, are closely involved in the Company’s day-to-day operations and ensure that shareholders’ long-term interests are served. Through oversight, review and counsel, the Board establishes and promotes the Group’s business and organizational objectives, provides leadership to the Group, oversees business affairs and integrity, works with the Management to determine the Group’s mission and long-term strategy.

Collectively, the Board brings a balance of skills and experience appropriate to the business owing to their diverse background in business, finance, political and commercial field.

To assist in the discharge of its responsibilities, the Board has established the following Board Committees to perform certain of its functions and to provide recommendations and advice:

• Nomination Committee (“NC”).
• Remuneration Committee (“RC”).
• Audit Committee (“AC”).
• Risk Management Committee (“RMC”).

Each Committee operates its functions within their approved terms of reference by the Board which are periodically reviewed by the Board and the Board appoints the Chairman and members of each Committee.

The respective Committees report to the Board on matters considered and their recommendations thereon. The ultimate responsibility for the final decision on all matters, however, lies with the Board.

The Board may form other Committees delegated with specific authorities to act on their behalf. These Committees
operate under approved terms of reference or guidelines, whenever required.

All Board Committees have written terms of reference which is approved by the Board. The respective Chairman of the NC, RC, AC and RMC report to the Board accordingly subsequent to the respective Committee meetings.

A brief description of each Director is presented in the profile of Directors on pages 11 to 14 of the Annual Report.

1.2 Clear roles and responsibilities

The Board has the overall responsibility for corporate governance, strategic direction, formulation of policies,
implementing an appropriate system of risk management, ensuring the adequacy and integrity of the Group’s
system of internal control, overseeing the investment and addressing the sustainability of the business of the
Group. The Board’s responsibilities include:-

(a) Reviewing and adopting a strategic plan for the Group, including setting performance objectives and ensuring that the strategies promote sustainability.

The Management will propose the strategic plan to the relevant Committee of the Board for review and thereafter the same shall be recommended by the Committee to the Board for approval.

(b) Monitoring the Company’s performance and building sustainable value for shareholders in accordance with any duties and obligations imposed on the Board by law and within a framework of prudent and effective controls which enables risk to be assessed and managed.

(c) Overseeing the conduct of the Group’s business to evaluate whether the businesses are being properly managed.

The Board is kept informed of key strategic initiatives, significant operational issues and the Company’s performance through the periodic meetings.

(d) Reviewing the procedures in order to identify principal risks and ensuring the implementation of appropriate internal controls and mitigation measures.

(e) Establishing proper succession planning, including appointing, assessing, training, fixing the compensation of, and where appropriate, replacing Board and Key Management.

The Company has adopted a Succession Planning Policy to ensure that the Group is prepared with a plan to support operation and service continuity when the MD/CEO, Senior Management or Key Business Leaders leave their positions.

(f) Developing and implementing a Corporate Disclosure Policy (including an investor relations programme or shareholder communications policy) for the Group.

The Company has established a Corporate Disclosure Policy and Procedures to provide guidance and structure in disseminating corporate information.

(g) Reviewing the adequacy and the integrity of our Group’s internal control systems and management information systems, including systems for compliance with applicable laws, regulations, rules, directives and guidelines.

The AC regularly reviews and scrutinises the audit report by the Internal Auditors and conducts annual assessment on the adequacy of the Department’s scope of work and resources.

The AC discussed on a summary of internal audit’s findings together with the Management’s responses to ensure that the Management undertakes the agreed remedial actions by the Internal Auditors.

(h) Monitoring and reviewing management processes aimed at ensuring the integrity of financial and other reporting.

The Board is ultimately responsible for the adequacy and integrity of the Group’s internal control system. Details pertaining to the Group’s internal control system and its effectiveness are available in the Statement on Risk Management and Internal Control of this Annual Report.

(i) Ensuring that the Company’s financial statements are true and fair and conform with the accounting standards.

(j) Ensuring that the Company adheres to high standards of ethics and corporate behavior.

1.3 Formalised ethical standards through Code of Conduct

Code of Conduct

The Company has established a Code of Conduct (“the Code”), which has been incorporated into the Board Charter to promote the corporate culture which engenders ethical conduct that permeates throughout the Company. The Code is based on principles in relation to trust, integrity, responsibility, excellence, loyalty, commitment, dedication, discipline, diligence and professionalism.

The Code promotes the following spirits for Directors to perform their duties:-

• Human Rights.
• Health And Safety.
• Environment.
• Gifts And Business Courtesies.
• Company Records And Internal Controls.
• Company Assets.
• Conflict of Interest.
• Integrity And Professionalism.
• Confidential Information.
• Fair Dealing.

The details information can be found in the Company’s website at www.masteel.com.my/Investor Relations/Board Charter.

Whistle Blower Policy

As part of the Company’s continuous effort to ensure that good corporate governance practices are being adopted, the Company has established a Whistle Blower Policy to provide a clear line of communication and reporting of concerns for employees at all levels, and provides alternative lines of communication depending on the person(s) who is/are the subject of such concerns.

The Company’s Whistle Blower Policy fosters an environment in which integrity and ethical behaviour are maintained through protocols which allow for the exposure of any violations or improper conduct or wrongdoing within the Company.

Managers, officers and employees in supervisory roles shall report directly to the Head of Internal Auditors or Audit Committee Chairman on any allegations of suspected improper activities – whether received as a protected disclosure, including those relating to financial reporting, unethical or illegal conduct whereas any employment related concerns can be reported to the Head of Human Resources or the MD/CEO. The disclosure can be verbal or in writing and forwarded in a sealed envelope, reported by their subordinates in the ordinary course of performing their duties, or discovered in the course of performing their own duties.

The AC is committed to investigate and address all cases of reported misconduct and determine the channel for investigation and follow-up action.

The details information can be found in the Company’s website at www.masteel.com.my/Investor Relations/ Whistle Blower Policy.

1.4 Strategies promoting sustainability

The Board acknowledges that sustainability is an important aspect of its business and continues to undertake responsible practices that impact the society and environment in a positive manner and to inculcate a culture of responsibility in all aspects of the Company’s business. It therefore adopts a business approach to create shareholder value by embracing opportunities and managing risks deriving from economic, environmental and social developments.

The Board has adopted a Corporate Economic, Environmental and Social Responsibility (“CEESR”) Policy in which its main objective is to make clear to all stakeholders what the Group mean by CEESR and how the Group proposes to work towards achieving it.

1.5 Access to information and advice

The Board is supplied with relevant information and reports on financial, operational, corporate, regulatory, business development and audit matters, by way of Board reports or upon specific requests, for informed decision making and effective discharge of the Board’s responsibilities.

The Board meets at least once quarterly to review and approve the quarterly results of the Group for announcement. The Board also attends additional meetings to be convened on an ad-hoc basis as and when necessary to consider corporate proposals or business issues that require the urgent decision of the Board. Senior Management staffs are invited to attend the Board meetings where necessary to provide the Board with detailed explanations and clarifications on issues that are being considered during the Board meetings.

The notice of a Directors’ meeting is given in writing at least seven (7) days prior to the meeting. The Board’s deliberation, in terms of the pertinent issues discussed at the meetings in arriving at the decisions and conclusions thereof in discharging the Board’s duties and responsibilities are properly recorded by the Company Secretaries. Board papers and agenda items are to be circulated at least three (3) days prior to the meeting or such other period as deemed appropriate by the Board.

The key roles of the Company Secretaries are to provide unhindered advice and services to the Directors, as and when the need arises to enhance the effective functioning of the Board and to ensure regulatory compliance.

The Directors may seek advice from the Management on issues pertaining to their respective jurisdictions. The Directors may also interact directly with, or request further explanation, information or updates on any aspect of the Company’s operations or business concerns from the Management.

As the Group’s quarterly results is one of the regular annual schedule matters which is tabled to the Board for approval at the quarterly Board Meetings, memorandum on close period for trading in the Company’s securities are circulated to Directors, principal officers and employees who are deemed to be privy to any price-sensitive information in advance whenever the close period is applicable based on the targeted date of announcement of the Group’s quarterly results. In year 2016, none of the Directors dealt in the Company’s securities during closed period.

The Board has access to the advice and services of the Company Secretaries, who are experienced and capable of carrying out the duties to which the post entails and may upon a written request to the Chairman to obtain independent professional advice at the Company’s expense as and when necessary. The removal of Company Secretaries, if any, would be decided by the Board.

1.6 Qualified and competent Company Secretaries

Both Company Secretaries of the Company have legal qualifications, and are qualified to act as Company Secretary under Section 235(2) of the Companies Act 2016 (“CA”). Both of them are Fellow/Associate members of the Malaysian Institute of Chartered Secretaries and Administrators (“MAICSA”). The Company Secretaries provide support to the Board in fulfilling its fiduciary duties and leadership role in shaping the Corporate Governance of the Group.

The Company Secretaries constantly keep themselves abreast of the evolving capital market environment, regulatory changes and developments in corporate governance through attendance at relevant conferences and training programmes. They have also attended the relevant continuous professional development programmes as required by the Companies Commission of Malaysia or MAICSA for practising company secretaries. The Board is satisfied with the performance and support rendered by the Company Secretaries to the Board in discharging its functions.

The Company Secretaries are also accountable to the Board and are responsible for the following:-

(a) Advising the Board on matters related to Corporate Governance and the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“MMLR”).
(b) Ensuring that Board procedures and applicable rules are observed.
(c) Maintaining records of the Board and ensuring effective management of the Company’s statutory records.
(d) Preparing comprehensive Minutes to document Board proceedings and ensuring conclusions are accurately recorded.
(e) Assisting the communications between the Board and Management.
(f) Providing full access and services to the Board and carrying out other functions deemed appropriate by the Board from time to time.
(g) Preparing agendas of the Board and Board Committees’ Meetings and co-coordinating the preparation of the Board papers.

1.7 Board Charter

The Company has established a Board Charter to promote high standards of corporate governance and the Board Charter is designed to provide guidance and clarity for the Directors and Management with regard to the role of the Board and its Committees. Key matters reserved for the Board include the approval of strategic issues and planning formulation of policies, material acquisitions and disposal of assets, approval of financial statements, financing and borrowing activities, monitoring of financial and operating performance, reviewing the procedures to identify principal risks and ensuring regulatory compliance and implementation of appropriate internal controls and mitigating measures, establishing succession planning, overseeing the development and implementation of an investor relations programme and reviewing the adequacy and integrity of the management information system and risk management and internal controls system of the Group.

The Board Charter is reviewed periodically by the Board or at least once every two years to ensure it complies with legislations and best practices, and remains relevant and effective in light of the Board’s objectives. In November 2015, the Board reviewed and approved certain revisions to the Board Charter, which included the enhancement of the role of the Board, role of the Chairman, Directors’ Code of Conduct to ensure the document remains relevant and consistent with the Board’s approved policy and procedures.

A copy of the Board Charter is published in the Company’s website at www.masteel.com.my/Investor Relations/ Board Charter.

The Company has also put in place various policies such as Corporate Disclosure Policy and Procedure, Succession Planning Policy, Whistle Blower Policy, Risk Management Policy and Corporate Economic, Environment and Social Responsibility Policy and these policies are reviewed periodically by the Board.

STRENGTHENING COMPOSITION OF THE BOARD

2.1 NC

The NC comprises three (3) members which all of whom are Independent Non-Executive Directors:-

Encik Muhammad Hanizam bin Hj. Borhan – Chairman
Mr Ng Wah Lok – Member
Mr Roy Thean Chong Yew – Member

The Board takes note that MCCG 2012 recommended that the Chairman of the NC should be a Senior Independent Director. The Board has decided that it is not necessary as the NC comprises all Independent Directors and there is no overlapping of roles of the NC Chairman and the Board Chairman as the positions are held by separate individuals.

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

The NC is responsible for annual assessment of Board’s required mix of skill, experience, quality and core competencies of the Directors, annual assessment of the effectiveness of the Board as a whole and the contribution of each individual Director.

The effectiveness of the Board Committees is assessed in terms of composition, required mix of skills, experience, structure and processes, accountabilities and responsibilities, as well as the effectiveness of the Chairman of the respective Board Committees.

The NC also approved the performance criteria for the assessment of individual Directors through the Directors’ Self and Peer Assessment questionnaire under five (5) main areas, i.e. Character, Experience, Integrity, Competence and Time Commitment.

The NC is also responsible for assessing the nominees and making recommendations for new appointments to the Board considering the skills, knowledge, professionalism required by the Group. The actual decision as to who should be nominated will be the responsibility of the full Board after considering the recommendations of the Committee. The Company Secretaries will ensure that all appointments are properly made; all the necessary information is obtained as well as all legal and regulatory obligations are met.

Any appointment of a new Director to the Board or Board Committee is recommended by NC for consideration and approval by the Board. Pursuant to Section 205(3)(b) of the CA and the Company’s Articles of Association, one-third of the Directors for the time being shall retire from office at each Annual General Meeting (“AGM”). A retiring Director shall be eligible for re-election. The Company’s Articles of Association also provide that all Directors shall retire at least once in three (3) years.

Directors who are appointed by the Board during the financial year are subject to re-election by the shareholders at the next AGM held following their appointments.

All Directors have complied with the restrictions on the number of directorships in public listed companies as prescribed under the MMLR. The Directors observe the recommendation of the Code that they are required to notify the Chairman of the Board before accepting any new directorship and to indicate the time expected to be spent on the new appointment.

The Board values, expects and leverages the unique contributions of people with diverse backgrounds, experiences, ethnicity, age and perceptions. The Board is presently of the view that there is no necessity to fix a specific gender diversity policy as the appointment of any Directors should be based on their merit, qualification and working experience.

The NC meets as and when required. The NC met once in the financial year ended 31 December 2016, which were attended by all NC members.

The activities undertaken by the NC Committee for the financial year ended 31 December 2016 were as follows:-

(a) Reviewed, assessed and considered the appointment of Mr Lau Yoke Leong as Chief Financial Officer (“CFO”) and recommended the same to the Board for approval.

(b) Reviewed, assessed and considered the appointment of Mr Ong Teng Chun as a member of the RMC in place of Mr Lee Kean Binh who resigned as a member of the RMC of the Company on 30 September 2015 and recommended the same to the Board for approval.

(c) Conducted annual assessment on the effectiveness of the Board and Committees covering areas such as Board structure and operation, management relationship with the Board, Board’s role and responsibilities, the required mix of skills and experience of the Directors, time commitments, skills, characters, experiences, integrity and competencies to effectively discharge the role as a Director and reported the findings in the Board meeting.

Upon completion of the assessment, the NC noted that the Board and its Committees are considered to be fully effective and have the right composition and sufficient knowledge of related areas. Overall the quality of individual Director was considered strong and the Directors were found to possess the relevant qualifications, knowledge, experience and ability to understand the technical requirements, risk and management of the Company’s business. In addition, the Directors have demonstrated a willingness to devote time and effort to the affairs of the Company while acting in good faith and with integrity at all times.

(d) Reviewed and assessed the independence of the Independent Directors of the Company.

Based on the evaluation results, the NC concluded that each Independent Directors has fulfilled the independence criteria set out in the MMLR and they continue to demonstrate their independence through their engagement in all meetings, providing objective challenge to the Management and bringing independent judgment to decisions taken by the Board.

(e) Reviewed, considered and recommended to the Board for approval, the re-election of Directors who retire by rotation pursuant to Company’s Articles of Association at the forthcoming 45th AGM. The Directors standing for retirement by rotation and subject to re-election at the forthcoming AGM are Dato’ Ikhwan Salim bin Dato’ Haji Sujak and Encik Muhammad Hanizam bin Hj. Borhan.

(f) Reviewed and assessed the independence of Mr Ng Wah Lok and Encik Muhammad Hanizam bin Hj. Borhan, who have served the Company as Independent Directors for more than nine (9) years to continue serving as Independent Director and recommended to the Board for consideration.

(g) Reviewed and discussed the succession planning of the Company.

(h) Reviewed and discussed the suitable training programme for continuous development of Directors.

(i) Reviewed and recommended to the Board for approval, the revised NC’s terms of reference in compliance with the latest amendments to the MMLR.

The terms of reference of the NC is available for reference on the Company’s website at www.masteeel.com.my/Investor Relations/Nomination Committee.

2.3 Remuneration policies and procedures

The objective of the Group is to ensure that the Group attracts and retains Directors of calibre needed to run the Group successfully. The responsibilities for developing the remuneration policy and determining the remuneration packages of Executive Directors lie with the RC. Nevertheless, it is the ultimate responsibility of the Board to approve the remuneration of these Directors.

The RC comprises three (3) members which all of whom are Independent Non-Executive Directors:-

Dato’ Ikhwan Salim bin Dato’ Haji Sujak – Chairman
Mr Ng Wah Lok – Member
Mr Roy Thean Chong Yew – Member

The duties and responsibilities of the RC are as follows:-

(a) To recommend to the Board the remuneration of the Executive Directors and Non-Executive Directors in all
its forms. The determination of remuneration packages of Executive Directors and Non-Executive Directors including Non-Executive Chairman, should be a matter for the Board as a whole where the individuals concerned shall abstain from discussion of their own remuneration.

(b) To review the Board remuneration policies and procedures which shall be disclosed in the Annual Report. Remuneration of the Board shall be aligned with the business strategy and long-term objectives of the Company, and to reflect the Board’s responsibilities, expertise and complexity of the Company’s activities.

(c) To review Executive Directors’ scope of service contracts, if any.

During the financial year under review, the RC convened two (2) meetings. The details of attendance of the
members of RC at those meetings are as follows:-

In respect of the financial year under review, the RC had reviewed the remuneration for the Executive Directors, which reflects the level of risk, responsibility as well as the performance of the Company and considered the packages are well within the industry norm. The RC had also reviewed the fees for Non-Executive Directors, which reflects the experience and level of responsibilities undertaken by the individual Non-Executive Director concerned.

The transparency and accountability aspects of corporate governance as applicable to Directors’ remuneration recommended by the best practices of the MCCG 2012 are deemed appropriately complied with the following disclosures:-

1. The Directors’ fees for the financial year ended 31 December 2016 of RM119,000 is subject to the approval by shareholders at the forthcoming AGM of the Company.

2. The aggregate remuneration of Directors paid during the financial year under review for the Company and the Group is as follows:-

REINFORCE OF INDEPENDENCE

3.1 Annual Assessment of Independence

The Board, through the NC has conducted an assessment on the Independent Directors and the Independent Director who exceeds cumulative term of nine (9) years shall seek for shareholders’ approval in the AGM for continuity in serving the Board.

The Independent Directors play a crucial role in exercising independent judgment and objective participation in the proceedings and decision making process of the Board. The Board is satisfied that the current Board composition fairly reflects the interests of minority shareholders.

3.2 Tenure of Independent Directors

In line with the MCCG 2012, the tenure of an Independent Director should not exceed a cumulative term of nine (9) years. However, an Independent Director may continue to serve on the Board subject to the Director’s re-designation as a Non-Independent Director. In exceptional cases and subject to assessment by the NC, the Board may recommend for an Independent Director who has served a consecutive or cumulative term of nine (9) years to remain as an Independent Director subject to shareholders’ approval.

The Independent Directors, namely Mr Ng Wah Lok and Encik Muhammad Hanizam bin Hj. Borhan have served the Company as Independent Directors for a cumulative term of more than nine (9) years. The Board has via the NC conducted an annual performance evaluation and assessment on the Independent Directors and is of the opinion that they remain objective and independent in expressing their views. The Board will be seeking the shareholders’ approval in the forthcoming AGM for Mr Ng Wah Lok and Encik Muhammad Hanizam bin Hj. Borhan to continue as Independent Directors of the Company. The justifications for their continuation as Independent Directors are disclosed in the Notice of the AGM.

3.3 Separation of positions of the Chairman and Managing Director

There is a clear division of responsibilities between the Chairman and MD/CEO to ensure that there is a balance of power and authority, as set out in the Board Charter. The Independent Non-Executive Chairman, Dato’ Ikhwan Salim Bin Dato’ Haji Sujak is responsible for the leaderships, effectiveness, conduct and governance of the Board while the MD/CEO, Dato’ Sri Tai Hean Leng @ Tek Hean Leng is entrusted by the Board on the daily running of the business and implementation of the Board’s policies and decisions.

3.4 Board Composition and Balance

The Board currently has seven (7) members, comprising three (3) Executive Directors and four (4) Independent Non-Executive Directors. The Chairman of the Board is an Independent Non-Executive Director who carries out a leadership role in the conduct of the Board and its relations with shareholders and stakeholders. This composition satisfies the requirement of MCCG 2012 and the MMLR for the Chairman to be a non-executive member of the Board and Independent Non-Executive Directors to make up more than half of the Board membership respectively.

The composition of the Board ensures that the Independent Non-Executive Directors will be able to exercise independent judgment on the affairs of the Company. They play a strong and vital role in entrenching good governance practices in the affairs of the Group through their participations in the NC, RC, AC and RMC respectively.

The Executive Directors are directly responsible for the day-to-day management of the business and operations for procuring new business and for the commercial and corporate performance of the Company.

 

FOSTER COMMITMENT

4.1 Time Commitment

The Directors are to devote sufficient time and effort to carry out their responsibilities. It is also the Board’s policy for Directors to notify the Chairman of the Board before accepting any new directorships notwithstanding that the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) allow a Director to sit on the boards of up to 5 listed issuers.

During the financial year ended 31 December 2014, five (5) board meetings were held and details of attendance
of members are as follows:

Directors Number of
Attendance Achieved 
Percentage
(%) 
Dato’ Ikhwan Salim bin Dato’ Haji Sujak
– Independent Non-Executive Chairman
5/5 100
Dato’ Sri Tai Hean Leng @ Tek Hean Leng
– MD/CEO
5/5 100
Mr Roy Thean Chong Yew
– Independent Non-Executive Director
5/5 100
Lau Yoke Leong
– Executive Director
5/5 100
Mr Ong Teng Chun
– Executive Director
5/5 100
Ng Wah Lok
– Independent Non-Executive Director
4/5 80
Muhammad Hanizam bin Hj. Borhan
– Independent Non-Executive Director
5/5 100

The Board is satisfied with the level of time commitment given by the Directors towards fulfilling the roles and responsibilities which is evidenced by the satisfactory attendance record of the  irectors at Board meetings.

4.2 Directors’ training

The Board, via the NC, assesses the training needs of each of its Directors on an ongoing basis, by determining areas that would best strengthen their contributions to the Board.

All members of the Board have completed the Mandatory Accreditation Programme prescribed by Bursa Malaysia Securities Berhad (“Bursa Securities”) as required by the MMLR. In addition, an orientation programme will be held for newly appointed Directors to enable them to familiarise themselves with the Group’s business and operation. The Senior Management had also briefed the Directors on general economic, industry and technical developments from time to time.

The Directors have individually or collectively attended various training programme during the financial year ended 31 December 2016, amongst others, the following:-

The Directors will continue to attend relevant training courses to further enhance their skills and knowledge to enable them to discharge their responsibilities more effectively.

The Company Secretaries facilitate the organisation of internal training programmes and keep Directors informed of relevant external training programmes. The Company Secretaries also circulate the relevant guidelines on statutory and regulatory requirements from time to time for the Board’s reference and brief the Board quarterly on these updates at Board meetings.

The External Auditors also briefed the Board members on any changes to the Malaysian Financial Reporting Standards (“MFRS”) that affect the Group’s financial statements during the year.

UPHOLD INTEGRITY IN FINANCIAL REPORTING

5.1 Compliance with applicable financial reporting standards

The Board aims to present a balanced, clear and meaningful assessment of the Company’s financial position and prospects in all their reports to the shareholders, investors and regulatory authorities. This assessment is primarily provided through the annual financial statements and quarterly announcements of financial results to the shareholders as well as the Management Discussion and Analysis in the Annual Report.

The Board is assisted by the AC to oversee the Group’s financial reporting processes and the quality of its financial reporting and to ensure that the financial statements of the Group comply with applicable financial reporting standards in Malaysia. Such financial statements comprise the quarterly financial report announced to Bursa Securities and the annual statutory financial statements. A statement by the Board of its responsibilities as set out in this Annual Report.

5.2 Assessment of sustainability and independence of external auditors

The Board upholds the integrity of financial reporting by the Company. As such, it has established procedures, via the AC, in assessing the suitability and independence of the External Auditors. Such procedures entail the provision of assurance by the External Auditors, confirming that they are, and have been, independent throughout the conduct of the audit engagement with the Company in accordance with the independence criteria set out by the Malaysian Institute of Accountants.

In safeguarding and supporting External Auditors’ independence and objectivity, the Company has established an External Auditors’ Assessment Policy to spell out the selection process of new External Auditors, restrict the type of non-audits services that can be provided by the External Auditors and the approval process related to it.

The Board has determined that the provision of non-audit service contracts which cannot be entered into with the External Auditors include management consulting, strategic decision, internal audit and policy and standard operating procedures documentation. The Board was of view that the objectivity and independence of the External Auditors are not in any way impaired by reason of the non-audit services provided to the Group.

RECOGNISE AND MANAGE RISKS

6.1 Sound framework to manage risks

The RMC comprises three (3) members as follows:-

Mr Ng Wah Lok – Chairman
Dato’ Sri Tai Hean Leng @ Tek Hean Leng – Member
Mr Ong Teng Chun – Member

The RMC assists the Board in establishing a sound internal control framework to manage risks with the overall responsibility for overseeing the risk management activities of the Group and approving the appropriate risk management procedures and measurement methodologies across the Group.

The principal roles and functions of the RMC are summarised as follows:

(a) To review and recommend appropriate risk management strategies, policies and risk tolerances in line with the Company’s business objectives for the Board’s approval.
(b) To ensure the implementation of the risk management framework and review the adequacy and integrity of the same in identifying, assessing and managing risk and in establishing the Company’s risk appetite.
(c) To discuss with the Management on action to be taken to improve the risk management framework based on the risk identified in the risk management reports.
(d) To consider and evaluate other matters as judged appropriate by the Committee or as authorized by the Board.
(e) To submit all recommendations and findings of the Committee to the Board for approval and notification.
(f) To evaluate the Group process that has in place for assessing and continuously improving internal controls and systems, particularly those related to areas of significant business risk.
(g) To work with the CFO and Group Internal Audit Department (“IAD”) in the preparation of the Statement on Risk Management and Internal Control for inclusion in the Company’s Annual Report and to recommend the same for the approvals of the Committee and Board.
(h) To overseeing the management of principal business risks and significant/material economic, environmental and social risks.
(i) To ensure the resources and processes are in place to enable the organization to achieve its sustainability commitments and targets.
(j) To review the disclosures statements relating to management of sustainability matters of the Company in the Annual Report.

The Board has engaged an external consultant to assist in developing an Enterprise Risk Management (“ERM”) policy, including risk strategy and structure, risk reporting structure and risk assessment process.

The following had been performed by the external consultant in carrying out their work:-

(i) Assist in developing an ERM policy, including risk strategy and structure, risk reporting structure and risk assessment process.
(ii) Objectives and goals setting, including strategic and business objectives, risk appetite and the link between the Group’s vision and mission.
(iii) Carry out an overall business process analysis.
(iv) Determine the risk parameters.
(v) Perform the risk assessment process.
(vi) Document the risk profile.
(vii) Establish the risk action plan.

6.2 Internal audit function

The Board has established an internal audit function within the Group, which is independent of the operations of the respective operating units. The principal role of the department is to undertake independent regular and systematic reviews of the system and internal control so as to provide reasonable assurance that such system continue to operate satisfactorily and effectively. It is the responsibility of the IAD to provide the AC with independent and objective report on the state of internal control of the various operating units within the Group and the extent of compliance of the units with Group’s established policies and procedures as well as relevant statutory requirements. The internal audit reports are presented together with the Management’s response and proposed action plans to the AC quarterly.

The details of the Company’s internal control within the Group as set out in the Statement on Risk Management and Internal Control of this Annual Report.

ENSURE TIMELY AND HIGH QUALITY DISCLOSURE

7.1 Corporate Disclosure Policy

The Company is committed to provide clear, accurate and timely disclosure of all material information pertaining to its performance and operations to its stakeholders and the general public. The Company has in place a Corporate Disclosure Policy which serves to provide guidance to the relevant persons on the disclosure requirements and the manner in which the material information is to be disseminated and confidential information maintained.

7.2 Leverage on information technology for effective dissemination of information

The Company has established a website at www.masteel.com.my from which shareholders as well as members of the public may access the latest information on the operations and activities of the Group as well as the information required by Bursa Securities.

The Company ensures timely release of the financial results on a quarterly basis to provide an overview of the Group’s performance and operations to its shareholders. The Company also makes timely announcements for the information of its shareholders and the general public of any corporate maneuvers in accordance with the MMLR.

STRENGTHEN RELATIONSHIP BETWEEN COMPANY AND SHAREHOLDERS

8.1 Encourage shareholder participation at general meetings

The AGM is the principal forum for dialogue with shareholders. Shareholders are provided with an opportunity to participate in the question and answer session in which shareholders may raise questions pertaining to the business activities of the Company. The Directors are available to respond to questions from shareholders at the AGM.

8.2 Poll voting

The Board noted that pursuant to Paragraph 8.29A of MMLR, the Company must ensure that any resolution set out in the Notice of any general meeting is to be voted by poll. Also, the Recommendation 8.2 of MCCG 2012 states that the Board should encourage poll voting.

At the previous AGM of the Company held on 29 June 2016, the Chairman had notified the shareholders on the demand for a poll on all resolutions as set forth in the Agenda of the previous AGM for the interest of all shareholders.

The Board will continue to adopt poll voting for all resolutions set out in the Notice of the AGM of which the votes cast will be validated by an independent scrutineer. The outcome of all resolutions proposed at the AGM is to be announced to Bursa Securities at the end of the meeting day while a summary of the key matters discussed at the AGM shall be published on the Company’s website as soon as practicable after the conclusion of the AGM.

8.3 Effective Communication and Proactive Engagement

The Board recognizes the importance of maintaining transparency and accountability to its shareholders as a key element of good corporate governance and thus, maintains a high level of disclosure and communication with its shareholders through disclosure to Bursa Securities and to the press.

The Board has put in place a Corporate Disclosure Policy and Procedure to ensure compliance with the disclosure requirements as stipulated in the MMLR and also to set out the persons authorised and responsible to approve and disclose material information to shareholders and stakeholders.

The Company’s website, www.masteel.com.my is accessible by the shareholders, investors and members of the public to obtain information on the Company’s press releases, corporate information, operation activities and financial performance.

The Board has identified Mr Ng Wah Lok as the Senior Independent Non-Executive Director, to address any valid and appropriate issues raised by shareholders, via his email address at nwl@masteel.com.my.

DIRECTORS’ RESPONSIBILITY STATEMENT

The Board is required to present the financial statements for each financial year which have been made out in accordance with the applicable approved accounting standards and give a true and fair view of the state of affairs, the results and cash flows of the Group and the Company.

The Board is satisfied that in preparing the financial statements of the Group and of the Company for the financial year ended 31 December 2016, the Group has used the appropriate accounting policies and applied them consistently and supported by reasonable prudent judgement and estimates, adopted to include new and revised MFRSs where applicable. The Board is also of the view that relevant approved accounting standards have been followed in the preparation of these financial statements.

The Board has also taken all such necessary steps to ensure that proper internal controls are in place to safeguard the assets of the Group and to detect and prevent fraud and other irregularities.

ADDITIONAL COMPLIANCE INFORMATION

1. UTILISATION OF PROCEEDS

The Company did not implement any fund raising exercise during the financial year under review.

2. SHARE BUY-BACK

The Company had obtained its shareholders’ approval at the Company’s Annual General Meeting held on 29 June 2016 in respect of the share buy-back of up to 10% of the issued and paid up share capital of the Company.

During the financial year under review, the Company had bought back from the open market 563,000 of its issued Ordinary Shares listed on the Main Market and retained as treasury shares. A monthly breakdown of treasury shares bought back during the financial year under review is set out below:-

During the financial year, Masteel has not resold or cancelled any shares bought-back. As at 31 December 2016, the Company held 1,213,800 shares as treasury shares.

3. AUDIT AND NON-AUDIT FEES

The amount of audit and non-audit fees incurred for the services rendered to the Company and the Group by the External Auditors during the financial year under review are as follows:-

4. MATERIAL CONTRACTS

There were no material contracts entered by the Company and its subsidiary involving Directors and/or major shareholders’ interest during the financial year ended 31 December 2016.

This Statement is made in accordance with a resolution of the Board dated 13 April 2017.

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