Top Banner
HOMERITZ CORPORATION BERHAD (Company No. 805792-X) | Annual Report 2014 FURNITURE INSPIRATION Stylish and suits our taste Take it from dream to reality
32

HOMERITZ CORPORATION BERHAD

Dec 22, 2021

Download

Documents

dariahiddleston
Welcome message from author
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Page 1: HOMERITZ CORPORATION BERHAD

HOMERITZ CORPORATION BERHAD (Company No. 805792-X) | Annual Report 2014

furniture

InspIratIon

Stylish and suits our taste

Take it from dream to reality

Page 2: HOMERITZ CORPORATION BERHAD

HOMERITZ CORPORATION BERHAD(Company No. 805792-X)

Corporate Structure

Home Upholstery Industries Sdn Bhd (“HUI”)

100%U. S. Furniture

Manufacturing Sdn Bhd(“USF”)

100%Embrace Industries

Sdn Bhd (“EISB”)

65%

Contents01 Corporate Information 02 Managing Director’s Statement 04 Financial Highlights 05 Board Of Directors’ Profile

07 Statement On Corporate Social Responsibility 08 Statement On Corporate Governance 18 Audit Committee Report 22 Statement On Risk Management And Internal Control

24 Statement On Directors’ Responsibilities

25 Additional Compliance Information

26 Directors’ Report

30 Statement By Directors 30 Statutory Declaration 31 Independent Auditors’ Report 33 Statements Of Financial Position 34 Statements Of Profit Or Loss And Other Comprehensive Income

35 Statements Of Changes In Equity

37 Statements Of Cash Flows 39 Notes To The Financial Statements 82 List Of Properties 84 Analysis Of Shareholdings 86 Notice Of Annual General Meeting 88 Statement Accompanying Notice Of Annual General Meeting Proxy Form

Page 3: HOMERITZ CORPORATION BERHAD

Corporate Information

AUDIT COMMITTEE

ChairmanMohd Khasan Bin Ahmad(Independent Non-Executive Director)

MembersDatuk Tay Puay Chuan (Independent Non-Executive Director)Teo Seng Kuang(Independent Non-Executive Director)

NOMINATING COMMITTEE

ChairmanDatuk Tay Puay Chuan (Independent Non-Executive Director)

MembersMohd Khasan Bin Ahmad(Independent Non-Executive Director)Teo Seng Kuang(Independent Non-Executive Director)

REMUNERATION COMMITTEE

ChairmanTeo Seng Kuang(Independent Non-Executive Director)

MembersMohd Khasan Bin Ahmad(Independent Non-Executive Director)Datuk Tay Puay Chuan (Independent Non-Executive Director)

SENIOR INDEPENDENT NON EXECUTIVE DIRECTOR

Datuk Tay Puay Chuan (Independent Non-Executive Director)

COMPANY SECRETARY

Pang Kah Man (MIA 18831)

AUDITORS

Crowe Horwath (AF 1018)Chartered AccountantsNo. 8, 2nd FloorJalan Pesta 1/1Taman Tun Dr Ismail 1Jalan Bakri84000 Muar, Johor

REGISTRAR

Tricor Investor & Issuing House Services Sdn Bhd (11324-H) (Formerly known as Equiniti Services Sdn Bhd)Level 17, The Gardens North TowerMid Valley City, Lingkaran Syed Putra59200 Kuala LumpurTelephone number : 603 2264 3883Facsimile number : 603 2282 1886

REGISTERED OFFICE

No. 7, 1st FloorJalan Pesta 1/1Taman Tun Dr Ismail 1Jalan Bakri84000 Muar, JohorTelephone number : 606 9541 705Facsimile number : 606 9541 707

PRINCIPAL PLACE OF BUSINESS

Lot 8726 PTD 6023Batu 8 Kawasan Perindustrian Bukit Bakri84200 Muar, JohorTelephone number : 606 9865 000Facsimile number : 606 9860 942

PRINCIPAL BANKERS

AmBank (M) BerhadHSBC Bank (Malaysia) Berhad

WEB-SITE ADDRESS

www.homeritzcorp.com

DATE OF LISTING

19 February 2010

STOCK EXCHANGE LISTING

Main Market of Bursa Malaysia Securities BerhadStock Name : HOMERIZStock Code : 5160Sector : Consumer Products

BOARD OF DIRECTORS

Chua Fen Fatt(Managing Director)

Tee Hwee Ing(Executive Director)

Mohd Khasan Bin Ahmad(Independent Non-Executive Director)

Datuk Tay Puay Chuan (Independent Non-Executive Director)

Teo Seng Kuang(Independent Non-Executive Director)

1Homeritz Corporation Berhad (Company No. 805792-X) • ANNUAL REPORT 2014

Page 4: HOMERITZ CORPORATION BERHAD

GROUP’S PERFORMANCE REVIEW

Our Group’s revenue and profits have been steadily growing since FYE 2011. FYE 2014 has been another strong year for our Group, building further on good performance in FYE 2013. Our Group’s revenue for FYE 2014 rose by 12.6% to RM127.18 million compared to RM112.91 million recorded in FYE 2013. The increase of revenue in FYE 2014 was attributed by the increase in volume of product sold and strengthening in US Dollar (“USD”). As of the improvement in revenue and strengthening in USD against Ringgit Malaysia (‘RM”), the profit before tax (“PBT”) for FYE 2014 had improved 28.6% to RM26.45 million compared with FYE 2013.

On a per share basis, our Group made basic earnings per share (“EPS”) of 10.12 cents in FYE 2014 versus 7.56 cents in FYE 2013. In FYE 2014, total shareholders’ equity stood at RM92.15 million and net asset per share was RM0.46.

During the year under review, the Group focused in its core business of design, manufacture, and sale of upholstered home furniture which includes upholstered sofas, upholstered dining chairs and upholstered bed frames. We continue diversifying our customer’s base spanning across more than 50 countries, including Europe, Australia, New Zealand, North and South America, South Africa and the Middle East.

DIVIDENDS

The Board of Directors is proposing a final single tier tax-exempt dividend of 15.5% equivalent to 3.10 cents per share amounting to RM6.2 million for FYE 2014. The proposed final dividend is subject to shareholders’ approval in the forthcoming Annual General Meeting.

The total dividend paid and proposed by the Company in respect of the FYE 2014 is 25.5 % of par value (equivalent to 5.10 cents per share) amounting to approximately RM10.2 million. This represents about 50% of the consolidated net profit attributable to owners of the Company for FYE 2014.

Dear valued shareholders,

On behalf the Board of Directors, it is my pleasure to present to you the Annual Report and the Audited Financial Statements of Homeritz Corporation Berhad for the financial year ended 31 August (“FYE”) 2014.

Managing Director’s Statement

Homeritz Corporation Berhad (Company No. 805792-X) • ANNUAL REPORT 20142

Page 5: HOMERITZ CORPORATION BERHAD

OUTLOOK AND PROSPECTS

Our Group is operating in global economic uncertainties as well as facing increases in its raw materials costs and fluctuation in foreign exchange rates.

Moving forward, our Group will continue to remain focused in its core business and continuing to develop new products, new design for existing products, derive better cost efficiencies and effective cost management across all functions. Our Group will continue diversifying its customer’s base and broadening geographical coverage into other regions.

Barring unforeseen circumstances, the Board expects that our Group will continue to be profitable in the financial year ending 2015.

APPRECIATION

On behalf of the Board of Directors, I would like to express my heartfelt appreciation to fellow board members and management team for their untiring efforts and invaluable contributions to the continued growth and success of our Group. The gratitude and thanks are also extended to our business associates, suppliers, bankers, customers, regulatory bodies, shareholders for their ongoing support and assistance. Let us continue to strive together in many years to come.

With Best Wishes

CHUA FEN FATTMANAGING DIRECTOR

Australasia

North America

Europe

CentralAmerica

South America

South Africa

Middle East

Japan

HOMERITZ CORPORATION BERHAD

3Homeritz Corporation Berhad (Company No. 805792-X) • ANNUAL REPORT 2014

Page 6: HOMERITZ CORPORATION BERHAD

Financial Highlights

REVENUE(RM’000)

109,

969

89,8

26 103,

246

112,

905

127,

176

2010 2011 2012 2013 2014

EqUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY (RM’000)

57,2

44

62,8

85 72,7

85 81,4

03 92,1

50

2010 2011 2012 2013 2014

PROFIT ATTRIBUTABLE TO OWNERS OF THE COMPANY (RM’000)

20,0

55

10,8

12

14,7

00

15,1

18

20,2

47

2010 2011 2012 2013 2014

NET ASSETS PER SHARE (RM)

0.46

0.29 0.

31

0.36

0.41

2010 2011 2012 2013 2014

Homeritz Corporation Berhad (Company No. 805792-X) • ANNUAL REPORT 20144

Financial Year End

2010RM’000

2011RM’000

2012RM’000

2013RM’000

2014RM’000

Revenue 109,969 89,826 103,246 112,905 127,176

Profit before tax 21,689 12,036 17,673 20,566 26,450

Profit after taxation 20,055 11,072 16,750 17,941 24,303

Profit attributable to owners of the Company

20,055 10,812 14,700 15,118 20,247

Equity attributable to owners of the Company

57,244 62,885 72,785 81,403 92,150

Deposit, bank and cash balance 19,595 11,705 24,472 34,710 51,586

Number of ordinary shares of RM0.20 each assumed to be in issue (‘000)

200,000 200,000 200,000 200,000 200,000

Net assets per share (RM) 0.29 0.31 0.36 0.41 0.46

Page 7: HOMERITZ CORPORATION BERHAD

CHUA FEN FATT Managing Director Aged 44, Malaysian

Chua Fen Fatt was appointed to the Board on 2 November 2009. He is one of the founders of HUI in 1997 and since then, he has been the driving force in the Group and has been instrumental in the success, growth and development of the Group. He has had more than 27 years of hands-on experience in the furniture industry particularly in the upholstered home furniture. Throughout his working career, he has worked in different levels and capacities and involved in various aspects of the industry, from being a production operator to sample maker and product designer.

Prior to setting up of HUI, he was also involved in the sub-contracting of upholstered home furniture activities and started his own manufacturing business, Home Sofa Industries, in 1996. Over the years, he has accumulated various technical know-how and expertise in the art of manufacturing and designing upholstered home furniture.

As the Managing Director, he provides the Group with its corporate vision and business strategies and is primarily responsible for the overall business, strategic planning, design and development, and the entire operations of the Group.

Currently, he does not hold any directorship in any other public companies.

TEE HWEE INGExecutive DirectorAged 43, Malaysian

Tee Hwee Ing was appointed to the Board on 2 November 2009. She is the co-founder of HUI together with Chua Fen Fatt in 1997. Prior to joining the Group, she worked with UOB Card Centre (Singapore) and Avenue Securities Sdn Bhd in 1990 and 1992 respectively. She has over 17 years of working experience in the upholstered home furniture industry. As the Executive Director, she is primarily responsible for the overall corporate and administrative functions of the Group.

Currently, she does not hold any directorship in any other public companies.

MOHD KHASAN BIN AHMAD Independent Non-Executive Director Aged 53, Malaysian

Mohd Khasan Bin Ahmad was appointed to the Board on 2 November 2009. He is also the Chairman of the Audit Committee and a member of the Nominating and Remuneration Committees of the Company. Mohd Khasan obtained a diploma in Accountancy and later graduated with a degree in Accountancy from Universiti Teknologi Mara. He is a member of the Malaysian Institute of Accountants (MIA). He served Bank Negara Malaysia for a period of about 7 years from 1986, the last 2 years of which he was seconded to the Capital Issues Committee (CIC) as its Principal Assistant Secretary. Subsequently, he joined the Securities Commission in 1993 for a period of about 5 years and his last capacity was an Assistant Manager in its Issues and Investment Division. During the tenure of his above appointments, he was involved in reviewing various corporate exercises, ranging from initial public offerings, mergers and acquisitions, reverse take-overs, issuance of bonds and other capital raising exercises.

He left the Securities Commission and joined the private sector in 1997. Currently, he sits on the Boards of Ta Win Holdings Berhad, Crest Builder Holdings Berhad and Farm’s Best Berhad as Independent Non-Executive Director. He also sits on the Board of several other private limited companies.

Board Of Directors’ Profile

5Homeritz Corporation Berhad (Company No. 805792-X) • ANNUAL REPORT 2014

Page 8: HOMERITZ CORPORATION BERHAD

Board Of Directors’ Profile (Cont’d)

DATUK TAY PUAY CHUANIndependent Non-Executive Director Aged 50, Malaysian

Datuk Tay Puay Chuan was appointed to the Board on 2 November 2009. He is also the Chairman of the Nominating Committee and a member of the Audit and Remuneration Committees of the Company. He started his career with the Polis Di Raja Malaysia, Bukit Aman in 1987 and later left the police force as a Police Inspector in 1992. He joined Fajar Sawmill Sdn Bhd as a Factory Manager from 1992 to 1997. In 1997, he obtained a Bachelor of Law (Honours) degree from University of London, United Kingdom. He was called to the Bar and admitted as an advocate and solicitor in 1998. He was the partner in Fazilah, Ong Chee Seong & Associates from 1998 to 2003 until he set up his own legal practice, Tay Puay Chuan & Co in Muar, Johor in 2003.

Currently, he sits on the Boards of Sern Kou Resources Berhad and Guan Chong Berhad as Independent Non-Executive Director.

TEO SENG KUANGIndependent Non-Executive DirectorAge 44, Malaysian

Teo Seng Kuang was appointed to the Board on 5 January 2012. He is also the Chairman of the Remuneration Committee and a member of the Audit and Nominating Committees of the Company. He received his Master of Business Administration from Honolulu University, Hawaii, USA in 2003. He has a background of more than 15 years of working experience in management related position in sectors/industries such as manufacturing, electronic and furniture. He is a member of the Malaysian Institute of Management (“MIM”) and member of Financial Planning Association of Malaysia (“FPAM”). He has served as an Operation Director of Xin Guang Premier Corporation Sdn Bhd since 2004.

Currently, he does not hold any directorship in any other public companies.

Notes to Board of Directors’ Profile:

1. Tee Hwee Ing is the spouse of Chua Fen Fatt. Save as disclosed, none of the directors has any family relationship with any director of the Company.

2. All directors does not have conflict of interest with the Company and has not been convicted for any offences within the past ten (10) years other than for traffic offences, if any.

3. Please refer to the analysis of shareholdings of this Annual Report for the details of the directors’ shareholdings in the Company.

4. Details of number of Board meetings attended by directors during the financial year are set out in page 13 of this Annual Report.

6 Homeritz Corporation Berhad (Company No. 805792-X) • ANNUAL REPORT 2014

Page 9: HOMERITZ CORPORATION BERHAD

Statement On Corporate Social ResponsibilityOur Group has recognised and acknowledged the importance of a corporate culture that emphasizes good corporate social responsibility (“CSR”) and corporate citizenship. While delivering sustainable and growing stakeholders value through the core business, our Group also contributes and provides for the betterment of the employee welfare, market place and community.

COMMUNITY

During the financial year, our Group contributed to the community through donations made to the below parties:

• Pertubuhan Kebajikan Warga Muar Johor• Persatuan Kebajikan Xin Ling

ENVIRONMENT

Our Group promotes environmentally-conscious work practices in order to reduce environmental impact, enhance energy efficiency and recycling whenever possible. Generally, the upholstered furniture manufacturing industry does not have any major environmental issues or concerns because there are no emissions of noxious gases or production of toxic fluids or industrial wastes. Our manufacturing wastes such as saw dust and leather cuttings are relatively minor, and we easily eliminate such waste in a hygienic and orderly manner, in accordance with guidelines and regulations as stipulated by the Department of Environment (“DOE”).

MARKET PLACE

Our Group recognises that our ability to produce consistently high quality products is critical to the success of our business. As such, we place extensive and substantial emphasis on the ultimate quality of our products and maintain stringent quality control throughout our manufacturing processes. This enables us to produce high quality products to satisfy the demands and expectations of highly-demanding international customers. Being a manufacturer of export goods, we are required to adhere to the product quality requirements of countries in which we export to. These include, but are not limited to fire safety, fumigation and dye test requirements. To ensure that we keep ourselves updated with knowledge of the latest product quality requirements in such countries, we are a member of the Malaysian External Trade Development Corporation (MATRADE) whereby any updates or information on such requirements would be disseminated to members via email. In addition, we also work closely with our customers to ensure that our products are in proper compliance with prevailing local requirements or quality standards.

WORKPLACE

Our Group believes that human capital development is very important to ensure that we have the right and relevant skill set and knowledge in ensuring business sustainability and growth. As such, we have conducted trainings with emphasis on quality for the staff to improve further their quality of work and workplace. Health and Safety at the workplace is also another area of importance to us.

Our Group has set up a Work Safety Committee to develop policies and maintain a safe and healthy workplace for all its employees, contractors and visitors. Conducting fire drill trainings, meetings, periodic inspections on fire fighting equipment and prevention programs are carried out to continuously alert the employees on the importance of the safety and hygiene conditions of the workplace.

7Homeritz Corporation Berhad (Company No. 805792-X) • ANNUAL REPORT 2014

Page 10: HOMERITZ CORPORATION BERHAD

The Board of Directors (“Board”) recognises the importance of good corporate governance in ensuring that the interest of the Group, shareholders and other stakeholders are protected.

The Board is fully dedicated to continuously evaluating the Group’s corporate governance practices and procedures with a view to ensure the principles and recommendations in corporate governance as stipulated by the Malaysian Code on Corporate Governance 2012 (“MCCG 2012”) are applied and adhered to safeguard shareholders’ investments and protect the interests of all stakeholders.

This statement thus describes the position of the Group in regard to each of the eight (8) principles and twenty six (26) recommendations made in the MCCG 2012, noting and explaining exceptions as they arise.

APPLICATION OF PRINCIPLES AND RECOMMENDATIONS

Principle 1: Establish Clear Roles and Responsibilities

1.1 The Board should establish clear functions reserved for the board and those delegated to management

The Board has established a Board Charter (“the Charter”) that has set out the roles, responsibilities and powers of the Board, taking into account corporate governance obligations, best practices, and relevant regulations. The Board reviews the Charter from time to times and as necessary to ensure consistency and compliance with regulatory and legal requirements, which shall take precedence over any stipulation of the Charter.

The details of the Charter are accessible through Group’s website at www.homeritzcorp.com.

1.2 The Board should establish clear roles and responsibilities in discharging its fiduciary and leadership functions

1.2.1 Reviewing and adopting a strategic plan for the Group

The Board considers, and after discussion and amendment as required, approves strategic plan proposed by management. All Board’s decisions are recorded in the minutes, including the deliberation for each decision, along with actions to be taken and the individuals responsible for implementation. Relevant Board decisions are communicated to Senior Management for implementation with a reasonable timeframe.

1.2.2 Overseeing the conduct of the Group’s business

The Board shall meet quarterly and at any such times as it deems necessary to fulfill its responsibilities. The Board is provided with an agenda and comprehensive board papers on a timely basis prior to board meetings. This is to ensure the Directors to discharge their duties and responsibilities competently and in a well-informed manner. The Company Secretary records all the deliberations including pertinent issues, the substance of inquiries and responses, Board members’ suggestions and the decision made in the Minutes of the Board meetings. The Minutes of every Board meeting are also circulated to the Directors for their perusal prior to confirmation of the Minutes at the following Board meeting.

1.2.3 Identifying principal risks and ensuring the implementation of appropriate internal controls and mitigation measures.

The Board acknowledges that it is responsible for ensuring that a sound system of risk management and internal control is maintained and that it has reviewed the effectiveness of these systems to safeguard shareholders’ interest and the Group’s assets. Further details of the Group’s system of internal controls are set out in the Statement on Risk Management and Internal Control section of this Annual Report.

Statement On Corporate Governance

8 Homeritz Corporation Berhad (Company No. 805792-X) • ANNUAL REPORT 2014

Page 11: HOMERITZ CORPORATION BERHAD

1.2.4 Succession planning

The Board recognises the importance to attract and retain key management personnel. Hence, the Board has made concerted efforts to identify and groom middle management at all key areas as an integral part of the management succession plan. The plan also includes offering a competitive remuneration package to and providing training and career development opportunities for employees in all key functions of the Group’s operations.

1.2.5 Overseeing the development and implementation of a shareholder communications policy for the Group.

The Group acknowledges the need for investors to be informed of all material business and corporate developments affecting the Group. The channels of communication to shareholders for information of the Group are as follow:

i. announcement of quarterly results on quarterly basis;ii. the issue of the Company’s Annual Reports;iii. announcements to Bursa Malaysia Securities Berhad;iv. ad-hoc press statements and interviews, where appropriate; andv. Group’s website at www.homeritzcorp.com.

The Board welcomes shareholders’ participation at the Annual General Meeting, which serves as an important means for shareholders’ communication. Notice of the Annual General Meeting and Annual Reports are sent to shareholders twenty one (21) days prior to the meeting. Shareholders are encouraged to attend and participate at the Annual General Meeting by raising questions on the resolutions being proposed or on the Group’s business operations in general.

1.2.6 Reviewing the adequacy and the integrity of the management information and internal controls system of the Group.

The Board acknowledges its overall responsibility for maintaining a sound system of internal controls that provides reasonable assessment of effective and efficient operations, internal financial controls and compliance with laws and regulations as well as with internal procedures and guidelines. The effectiveness of the systems of internal controls of the Group is reviewed periodically by the Audit Committee. Further details of the Group’s system of internal controls are set out in the Statement on Risk Management and Internal Control section of this Annual Report.

1.3 The Board should formalise ethical standards through a code of conduct and ensure its compliance

The Group has put in place a whistle-blowing policy and a summary of the Code of Conduct is viewable on the Group’s website.

1.4 The Board should ensure that the Group’s strategies promote sustainability

The Board reviews operational practices which impact on sustainability of environment, governance and social aspects of its business on a regular basis. The Group’s ESG (Environmental, Social and Governance “ESG”) policy is published on the Group’s website.

1.5 The Board should have procedures to allow its members access to information and advice

The Board has full, unrestricted and timely access to all information pertaining to the Group’s business affairs. All members of the Board have access to the advice and services of the Company Secretary and are entitled to obtain professional opinions or advice from external consultants when the need arises at the expense of the Group. The Company Secretary attends all Board meetings and is responsible for ensuring that Board procedures as well as statutory and regulatory requirements relating to the duties and responsibilities of the Directors are complied with.

Statement On Corporate Governance (Cont’d)

9Homeritz Corporation Berhad (Company No. 805792-X) • ANNUAL REPORT 2014

Page 12: HOMERITZ CORPORATION BERHAD

Statement On Corporate Governance (Cont’d)

1.6 The Board should ensure it is supported by a suitably qualified and competent Company Secretary

It is the Board’s responsibility to retain the services of a competent Company Secretary. The Board is assisted by the Nominating Committee in the appointment and assessment of the Company Secretary, as specified in its Term of Reference.

The Board is supported by a suitably qualified and competent Company Secretary in discharging its roles and responsibilities. Every Board member has ready and unrestricted access to the advice and the services of the Company Secretary in ensuring the effective functioning of the Board. The Company Secretary also ensures compliance of listing and related statutory obligations and procedures are followed and minimises deviation. The Directors are also regularly updated and advised by the Company Secretary on new statutory and regulatory requirements issued by regulatory authorities, and the resultant implications to the Company and the Directors in relation to their duties and responsibilities. The Company Secretary is experienced, competent and knowledgeable on new statutes and directives issued by regulatory authorities. The Company Secretary briefs the Board on proposed contents and timings of material announcements to be made to the Bursa Malaysia Securities Berhad (“Bursa Securities”).

1.7 The Board should formalise, periodically review and make public its board charter

The Charter was formalized in July 2013 and will be reviewed from time to time. The Charter is displayed on the Group’s website.

Principle 2: Strengthen Composition

2.1 The Board should establish a Nominating Committee which should comprise exclusively of Non-Executive Directors, a majority of whom must be independent

The Nominating Committee was established on 02 November 2009 and consists of the following members:

Director Designation Directorship

Datuk Tay Puay Chuan Chairman Independent Non-Executive Director Mohd Khasan Bin Ahmad Member Independent Non-Executive Director Teo Seng Kuang Member Independent Non-Executive Director

The Nominating Committee operates under its terms of reference and had two (2) meeting convened during financial year under review.

The main functions of the Nominating Committee include the following:-

• to identify and recommend to the Board suitable nominees for appointment to the Board and Board Committees;

• to assess the effectiveness of the Board, the Board Committees, the contribution of each Director and the Company Secretary on an on-going basis;

• to review regularly the board structure, size and composition and make recommendations to the Board with regard to any adjustments that are deemed necessary;

• to consider in making its recommendations, candidates for directorships proposed by the Executive Directors or any other senior executive or any other Director or Shareholder;

10 Homeritz Corporation Berhad (Company No. 805792-X) • ANNUAL REPORT 2014

Page 13: HOMERITZ CORPORATION BERHAD

Statement On Corporate Governance (Cont’d)

• to assist the Board in its annual review of its required mix of skills and experience and other qualities, including core competencies of which Non-Executive Directors should bring to the Board;

• to recommend to the Board the continuation in service of Executive Director(s) and Director(s) who are due for retirement by rotation;

• to assess the independence of the Independent Directors annually; and

• to review the training needs for the Directors’ regularly, and disclose details in the annual report as appropriate.

2.2 The Nominating Committee should develop, maintain and review the criteria to be used in the recruitment process and annual assessment of Directors

The Nominating Committee’s Terms of Reference specifies in details its duties and functions, which relate to the recruitment of Directors and the criteria used and procedures in their selection and in evaluating the overall effectiveness of the Board.

2.3 The Board should establish formal and transparent remuneration policies and procedures to attract and retain directors

The Remuneration Committee was established on 02 November 2009 and consists of the following members:

Director Designation Directorship

Teo Seng Kuang Chairman Independent Non-Executive Director Mohd Khasan Bin Ahmad Member Independent Non-Executive Director Datuk Tay Puay Chuan Member Independent Non-Executive Director

The Remuneration Committee operates under its terms of reference and had one (1) meeting convened during financial year under review. The main functions of the Remuneration Committee include the following:-

• to consider and recommend to the Board the remuneration framework for Executive Directors;

• to formulate the remuneration packages to attract, retain and motivate Executive Directors of the quality required to manage the business of the Group successfully;

• to act in line with the directions of the Board of Directors; and

• to consider and examine such other matters as the Remuneration Committee considers appropriate. The remuneration and entitlements of the Non-Executive Directors shall be a matter to be decided by the Board as a whole with the Director concerned abstained from deliberation and voting on his individual remuneration.

The Remuneration Committee adopts the principles recommended by the MCCG 2012 in determining the Directors’ remuneration whereby the Executive Directors’ 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, expertise and the level of responsibilities undertaken. The Directors’ fees are subject to the approval of the shareholders of the Company at the Annual General Meetings.

11Homeritz Corporation Berhad (Company No. 805792-X) • ANNUAL REPORT 2014

Page 14: HOMERITZ CORPORATION BERHAD

Details of Directors’ remuneration paid and payable to the Directors of the Company for the financial year ended (“FYE”) 31 August 2014 by category and successive bands of RM50,000 are as follows:

Executive Non-Executive Directors Directors Total (RM) (RM) (RM)

Allowances 8,400 12,600 21,000Bonuses 216,000 - 216,000EPF 205,200 - 205,200Fee - 100,800 100,800Salaries 864,000 - 864,000SOCSO 1,240 - 1,240Benefits-in-kind 53,150 - 53,150

1,347,990 113,400 1,461,390

Number of Directors Executive Non-Executive Directors Directors Total

RM 1 - RM 50,000 - 3 3RM 600,001 - RM 650,000 2 - 2

Details of individual Director’s remuneration are not disclosed in this report as the Board is of the view that the above Directors’ remuneration disclosure by band and analysis between Executive and Non-Executive Directors has appropriately served the accountability and transparency aspects of the MCCG 2012.

Principle 3: Reinforce Independence

3.1 The Board should undertake an assessment of its Independent Directors annually

The Board has adopted the legal and regulatory definition of Independent Directors as specified in the Main Market Listing Requirements of Bursa Malaysia. All the Directors have given their undertakings to comply with the Main Market Listing Requirements (“Listing Requirements”) and the Independent Directors have confirmed their independence in writing.

The Nominating Committee is specifically tasked to assess the independence of Independent Directors upon admission, annually and when any new interest or relationship develops.

3.2 The tenure of an Independent Director should not exceed a cumulative term of nine (9) years.

The Board has implemented a nine (9) year policy for Independent Directors, in line with Recommendation 3.2 of the MCCG 2012. Upon completion of the nine years, an Independent Director may continue to serve on the Board subject to the Director’s re-designation as a Non-Independent Director.

3.3 The Board will justify in the notice convening the Annual General Meeting and submit for shareholders’ approval the retention of all Independent Directors who have served the Group for an aggregate of more than nine (9) years at every Annual General Meeting

In the event the Board intends to retain an Independent Director who has served the Group for an aggregate of more than nine (9) years, it would have to justify in the notice convening the Annual General Meeting and seek shareholders’ approval the retention of such Independent Director at every Annual General Meeting. As at the date of this Statement, none of the Independent Directors has reached nine years of service since their appointment as Directors.

Statement On Corporate Governance (Cont’d)

12 Homeritz Corporation Berhad (Company No. 805792-X) • ANNUAL REPORT 2014

Page 15: HOMERITZ CORPORATION BERHAD

3.4 The positions of Chairman and Chief Executive Officer (“CEO”) should be held by different individuals, and the Chairman must be a Non-Executive member of the board

Due to the relatively small size of the Group, the Board is of the view that the current size and composition is optimum and well balanced, and caters effectively to the scope of the Group’s operations. Hence, the Board does not intend to appoint an Independent Chairman and CEO to the Board.

3.5 The Board must comprise a majority of Independent Directors where the Chairman of the Board is not an Independent Director

The Board currently consists of five (5) members comprising two (2) Executive Directors and three (3) Independent Non-Executive Directors. In this respect, the Company complies with the requirement of the Listing Requirements of Bursa Securities for Independent Non-Executive Directors to make up at least one-third (1/3) of the Board membership.

Notwithstanding that the Board does not have an independent Chairman and CEO, it is of the opinion that its strong representation of high caliber Independent Non-Executive Directors provides the necessary balance in ensuring that the strategies proposed by the Management are fully discussed and deliberated, and the interests of the shareholders, employees, customers, suppliers and other stakeholders are taken into consideration.

Datuk Tay Puay Chuan also performs the role as the Senior Independent Director to facilitate communications with any shareholders and stakeholders whose concerns could be inappropriate to be dealt with by the Managing Director or the Executive Director.

Principle 4: Foster Commitment

4.1 The Board should set out expectations on time commitment for its members and protocols for accepting new directorships All the Directors are expected to devote sufficient time to carry out their responsibilities and are required to notify the Board before accepting any new directorships. The Board ordinarily schedules four meetings in a year. This is evidenced by the attendance record of the Directors at Board Meetings during the financial year under review, as set out in the table below:

Directors Directorship Number of Meetings Attended

Chua Fen Fatt Managing Director 5/5Tee Hwee Ing Executive Director 5/5Mohd Khasan Bin Ahmad Independent Non-Executive Director 5/5Teo Seng Kuang Independent Non-Executive Director 5/5Datuk Tay Puay Chuan Independent Non-Executive Director 5/5

Where any directions or decisions are required expeditiously or urgently for the Board between the regular meetings, special meetings of the Board will be convened by the Company Secretary, after consultation with the Managing Director. The agenda for the meeting of the Board is set by the Company Secretary in consultation with the Managing Director.

Notwithstanding that no specific quantum of time has been fixed, all the Board members must be able to commit sufficient time to the Company’s matters and are required to notify the Board before accepting any new directorships. To ensure the Directors have the time to focus and fulfill their roles and responsibilities effectively, one criterion as agreed by the Board is that they must not hold directorships at more than five public listed companies (as prescribed in Paragraph 15.06 of Listing Requirements).

Statement On Corporate Governance (Cont’d)

13Homeritz Corporation Berhad (Company No. 805792-X) • ANNUAL REPORT 2014

Page 16: HOMERITZ CORPORATION BERHAD

4.2 The Board should ensure its members have access to appropriate continuing education programme

The requirement to undertake continuing education is built into the Charter and the training undertaken by the Directors are reviewed by the Nominating Committee annually. All the Directors have attended the Mandatory Accreditation Programme. Details of training programme attended by the Directors during the financial year under review are set out as below:

Directors Training Programme Attended

Chua Fen Fatt • Seminar Pekerja Asing 2013 • GST Training

Tee Hwee Ing • GST Training • GST Awareness Programme

Mohd Khasan Bin Ahmad • Enhanced Understanding of Risk Management and Internal Control for CFOs, IAs and ROs • GST Training

Teo Seng Kuang • SME GST Application Workshop

Datuk Tay Puay Chuan • GST Training • Strategy for corporate sustainability under economic pressure

Principle 5: Uphold Integrity In Financial Reporting

5.1 The Audit Committee should ensure financial statements comply with applicable financial reporting standards

This requirement is built into Terms of Reference of the Audit Committee which states particularly that the Audit Committee should review the financial statements to ensure that the Group is in compliance with accounting standards, the regulations of the Companies Act, 1965, Listing Requirements and other legislative and reporting requirements.

The Board aims to present a balanced, insightful and timely assessment of the Group’s financial position and prospects by ensuring quality financial reporting through the annual audited financial statements and quarterly financial results to its stakeholders, in particular, shareholders, investors and the regulatory authorities. The Audit Committee assists the Board in overseeing the Group’s financial reporting processes and the accuracy, consistency and the application of accounting standards and policies; and for reasonableness and prudence in making estimates, statements and explanation prior to submission to the Board for its approval.

The Board is responsible to ensure that the financial statements are properly drawn up in accordance with the provisions of the Companies Act, 1965 in Malaysia and applicable approved Financial Reporting Standards issued by the Malaysian Accounting Standards Board so as to give a true and fair view of the state of affairs of the Group and of the Company as at the end of the financial year and of the results of their operations and cash flows for the year ended on that date. A statement by the Directors of their responsibilities in preparing the financial statements is set out separately on page 24 of this Annual Report.

Statement On Corporate Governance (Cont’d)

14 Homeritz Corporation Berhad (Company No. 805792-X) • ANNUAL REPORT 2014

Page 17: HOMERITZ CORPORATION BERHAD

5.2 The Audit Committee should have policies and procedures to assess the suitability and independence of external auditors

The Board, through the Audit Committee maintains a formal and transparent relationship with the Group’s External Auditors in seeking valuable professional advice and in ensuring compliance with the applicable approved Financial Reporting Standards issued by the Malaysian Accounting Standards Board in Malaysia.

The Audit Committee is delegated with the task of assessing whether the External Auditors are suitable for re-appointment, of which the competency and independence are key considerations. This is spelt out in the Terms of Reference of the Audit Committee

Accordingly, the Audit Committee had on 2 December 2014, assessed the independence of Messrs. Crowe Horwath (“CH”) as External Auditors of the Company as well as reviewed the level of non-audit services to be rendered by CH to the Company for the financial year under review. Having satisfied itself with their technical competency and audit independence and fulfillment of criteria as set out in the External Auditors Assessment and Independence Policy, the Audit Committee recommended their re-appointment to the Board, upon which the shareholders’ approval will be sought at the forthcoming Seventh Annual General Meeting.

Principle 6: Recognise And Manage Risk

6.1 The Board should establish a sound framework to manage risks The Board recognizes that identification and prioritization of the Group’s business risks is a critical element of a broader risk management program. As an on-going process, significant business risks faced by the Group are identified and evaluated and consideration is given on the potential impact of achieving the business objectives. This includes examining principal business risks in critical areas, assessing the likelihood of material exposures and identifying the measures taken to mitigate, avoid or eliminate these risks. Further details of the Group’s risk management framework are set out in the Statement on Risk Management and Internal Control section of this Annual Report.

6.2 The Board should establish an internal audit function which reports directly to the Audit Committee

The Board recognises that effective monitoring on a continuous basis is a vital component of sound internal control systems. The Group has an out-sourcing arrangement with an independent internal audit service provider in relation to its internal audit function to examine and evaluate the adequacy and effectiveness of the Group’s internal control systems of the business units.

Principle 7: Ensure Timely and High quality Disclosure

7.1 The Board should ensure the Group has appropriate corporate disclosure policies and procedures

The Board has established a Corporate Disclosure Policy which serves as a guide to ensure broad dissemination of material information in a comprehensive, accurate and timely manner and in accordance with all applicable legal and regulatory requirements. This aims to promote effective communication with shareholders and encourage their participation and feedback at the Annual General Meetings. Not only is this policy established to comply with the requirements of Main Market Listing Requirements of Bursa Securities pertaining to continuing disclosure, but it also adopts the recommendations as recommended in the MCCG 2012. The Board ensures that the Group complies with all the applicable corporate disclosure laws and regulations.

Statement On Corporate Governance (Cont’d)

15Homeritz Corporation Berhad (Company No. 805792-X) • ANNUAL REPORT 2014

Page 18: HOMERITZ CORPORATION BERHAD

7.2 The Board should encourage the Group to leverage on information technology for effective dissemination of information

The Board supports the use of information technology for the effective dissemination of information. The Group has established a website at www.homeritzcorp.com which has served as a useful reference source of information to the shareholders, investment analysts, business partners and other stakeholders

Principle 8: Strengthen Relationship between the Group And Shareholders

8.1 The Board should take reasonable steps to encourage shareholder participation at general meetings

The Board values the participation of shareholders at general meetings and recognises their contributions as valuable feedback for the conduct of the Group’s businesses. Notice of the Annual General Meeting and Annual Reports are sent to shareholders at least twenty one (21) days prior to the meeting.

This would allow the shareholders to make necessary arrangements to attend and participate either in person, by corporate representative, by proxy or by attorney together with the Notice of Annual General Meeting, which provides information to shareholders with regard to, among others, details of the Annual General Meeting, their entitlement to attend the Annual General Meeting, the right to appoint proxy and also qualification of proxy.

In line with Paragraph 7.21A(2) of Listing Requirements for further promoting participation of members through proxies, the Chairman of the Annual General Meeting will brief the members, corporate representatives and proxies present of their right to speak and vote on the resolutions set out in the Notice of the 7th Annual General Meeting dated 30 December 2014. The Articles of Association further entitles a member to vote in person, by corporate representative, by proxy or by attorney. Essentially, a corporate representative, proxy or attorney shall be entitled to vote both on a show of hands and on a poll as if they were a member of the Company.

8.2 The Board should encourage poll voting

At the commencement of all general meetings, the Chairman of the Annual General Meeting will inform the shareholders of their rights to a poll voting. All the resolutions set out in the Notice of the Annual General Meeting are put to vote by a show of hands. Separate resolutions are proposed for substantially separate issues at the meeting and the Chairman declares the number of proxy votes received, both for and against each separate resolution where appropriate. From 2013 onwards, the Group shall endeavour, whenever possible, to put to vote of substantive resolutions at the Annual General Meeting by poll. The outcome of the Annual General Meeting will be announced to Bursa Securities on the same meeting day.

8.3 The Board should promote effective communication and proactive engagements with shareholders

The Board values dialogue with both institutional and individual investors, and recognises that timely and equal dissemination of relevant information should be made to these groups without favouring one group over another. Management meets with shareholders and investment analysts from time to time to explain the group’s strategy, performance and major developments, and to receive feedback. The proceedings of the 7th Annual General Meeting will include the Chairman’s briefing on the Company’s overall performance for the financial year under review, the presentation of the external auditors’ unqualified report to the shareholders, and a Q&A session during which the Board members and senior management will interact and converse with shareholders at the 7th Annual General Meeting within the bounds of propriety. To maintain a high level of transparency and enable the Board to effectively review and address any issues or concerns, shareholders may direct their queries and/or concerns to the Senior Independent Non-Executive Director via a dedicated electronic mail.

Statement On Corporate Governance (Cont’d)

16 Homeritz Corporation Berhad (Company No. 805792-X) • ANNUAL REPORT 2014

Page 19: HOMERITZ CORPORATION BERHAD

COMPLIANCE STATEMENT

The Board is pleased to report that this Statement provides the corporate governance practices of the Group with reference to the MCCG 2012. The Board considers and is satisfied that the Group has fulfilled its obligations under the broad principles as set out in the MCCG 2012. However, the Board has reserved several of the Recommendations and their Commentaries and has rationalized and provided justifications as below for the deviations in this Statement. Nevertheless, the Group will continue to strengthen its governance practices to safeguard the best interests of its shareholders and other stakeholders.

Deviations from the Recommendations on the MCCG 2012

Recommendation 2.2

The Nominating Committee should develop, maintain and review the criteria to be used in the recruitment process and annual assessment of Directors.

Deviation

The Board does not set the limit for gender diversification of its board composition as the appointment of Directors is based on merits without giving regards to the gender of the appointed Directors. All this while, the Board recognises the value of female members of the Board. The female representation in the Board consists of 20% of the number of the Directors.

This Statement was presented and approved at the meeting of the Board on 2 December 2014.

Statement On Corporate Governance (Cont’d)

17Homeritz Corporation Berhad (Company No. 805792-X) • ANNUAL REPORT 2014

Page 20: HOMERITZ CORPORATION BERHAD

COMPOSITION AND MEMBERS

The Current Audit Committee comprises three (3) members of the Board which are all Independent Non-Executive Directors.

The members of the Audit Committee, their respective designations and directorship are as follows:-

• Mohd Khasan Bin Ahmad Chairman, Independent Non-Executive Director

• Datuk Tay Puay Chuan Member, Independent Non-Executive Director

• Teo Seng Kuang Member, Independent Non-Executive Director

TERM OF REFERENCE

Objectives

The primary objective of the Audit Committee is to assist the Board in fulfilling their responsibilities relating to accounting and reporting practices of the Company and each of its subsidiaries (collectively referred to as “the Group”). In addition, the Audit Committee will:-

• oversee and appraise the quality of the audit conducted by the Group’s External Auditors and the Internal Auditors in order to strengthen the confidence of the public in the Groups’ reported results;

• maintain, by scheduling regular meetings, open lines of communication amongst the Board, the External Auditors and the Internal Auditors, to exchange view and information as well as to confirm their respective authority and responsibilities;

• review related party transactions entered into by the Group to ensure that such transactions are undertaken on the Group’s normal commercial terms and that the internal control procedures with regards to such transactions are sufficient;

• provide assistance to the Board in fulfilling its fiduciary responsibilities relating to the Group’s administrative, operating and accounting controls; and

• act upon the Board’s request to investigate and report on any issues or concerns on the management of the Group.

Composition

The Audit Committee shall be appointed by the Board from among their number and compose no fewer than three (3) members. All members of the Audit Committee must be Non-Executive Directors with a majority of them being Independent Directors.

At least one (1) member of the Audit Committee:-

• must be a Member of the Malaysian Institute of Accountants (MIA); or

• if he is not a Member of MIA, he must have at least three (3) years’ working experience and:-- he must have passed the examinations specified in Part 1 of the 1st Schedule of the Accountants Act 1967; or- he must be a Member of one of the Associations of Accountant specified in Part II of the 1st Schedule of the

Accountants Act 1967; or

Audit Committee Report

18 Homeritz Corporation Berhad (Company No. 805792-X) • ANNUAL REPORT 2014

Page 21: HOMERITZ CORPORATION BERHAD

Audit Committee Report (Cont’d)

• he must have:-- a degree/masters/doctorate in accounting or finance and at least three (3) years’ post qualification experience in

accounting or finance; or- at least seven (7) years’ experience being a chief financial officer of a corporation or having the function primarily

responsible for the management of the financial affairs of a corporation.

The members of the Audit Committee shall elect a Chairman from among their number who shall be an Independent Non-Executive Director. No Alternate Director is appointed as a member of the Audit Committee.

In the event that if a member of the Audit Committee vacates office resulting in the total number reduced to below three (3), the Board shall, within three (3) months of that event, appoints a new member to make up the minimum number of three (3).

Meetings

The Audit Committee will meet at least once quarterly and such additional meetings as the Chairman shall decide in order to fulfill its duties. In addition, the Chairman may call a meeting if a request is made by any Committee Member, the Group’s Managing Director, the External Auditors or the Internal Auditors where applicable.

Senior managements, representatives of the External Auditors and Internal Auditors should normally be invited to attend Audit Committee Meetings. Other Board Members may attend meeting upon the invitation of the Audit Committee. However, the Audit Committee should meet with the External Auditors without Executive Board Members present at least twice a year.

The Company Secretary shall be the secretary of the Committee and shall be responsible for keeping the minutes of meetings of the Committee, and circulating them to Committee Members and to other members of the Board. A quorum for a meeting shall be two (2) members, with the majority of the members present shall be Independent Directors. The Audit Committee must prepare an Audit Committee Report at the end of the financial year in the Annual Report of the Group which summaries the Audit Committee’s activities during the financial year and the related significant findings.

Authority

The Audit Committee is authorised to investigate any activity of the Group within its Terms and Reference and all employees shall be directed to co-operate with any request made by the Audit Committee. The Audit Committee shall have unrestricted access to all information pertaining to the Group and have direct communication channels with the external and internal Auditors, and to the senior management of the Group. The Audit Committee shall be empowered to engage persons or experts having special competence as necessary to assist the Audit Committee in fulfilling its responsibilities.

Duties and Responsibilities

The duties and responsibilities of the Audit Committee shall be as follows:-

• to consider and recommend the nomination and appointment of the External Auditors, the audit fees, the questions of their resignation or dismissal and any other related matters;

• to oversee all matters pertaining to audit including the review of the audit plan and audit report with the External Auditors;

• to review the financial statements of the Group, and to discuss problems and reservations arising from the interim and final results, and any matters that the External Auditors may wish to discuss (in the absence of the management where necessary);

• the Chairman of the Audit Committee to engage on a continuous basis with senior management such as the Chairman, the CEO, the Finance Director, the External Auditors as well as the Internal Auditors in order to be kept informed of matters affecting the Group ;

19Homeritz Corporation Berhad (Company No. 805792-X) • ANNUAL REPORT 2014

Page 22: HOMERITZ CORPORATION BERHAD

• in relation to the internal audit function:- review the adequacy of the scope, function, competency and resources of the internal audit function, and that it

has the necessary authority to carry out its works; and- review the internal audit programme and results of the internal audit process and where necessary ensure that

appropriate action is taken on the recommendations of the internal audit function;

• to review any related parties transactions that may arise within the Group;

• to review the application of corporate governance principles and the extent of the Group’s compliance with the Recommendations set out under the MCCG 2012;

• to consider all areas of significant financial risk and arrangement in place to contain those risks to acceptable levels;

• to ensure that the Group is in compliance with the regulations of the Companies Act, 1965, Main Market Listing Requirements of Bursa Securities and other legislative and reporting requirements;

• to identify and direct any special project or investigate and to report on any issues or concerns in regards to the management of the Group; and

• such other functions as may be agreed by the Audit Committee and the Board.

SUMMARY OF ACTIVITIES

A total of five (5) Audit Committee meetings were held for FYE 2014. The details of attendance of each Audit Committee member are as follows:

Name of Members Attendance

Mohd Khasan Bin Ahmad 5/5Datuk Tay Puay Chuan 5/5Teo Seng Kuang 5/5

The main activities undertaken by the Committee during the financial year under review included the following:

• reviewed the unaudited quarterly financial results of the Group prior to making recommendations for the Board’s approval and subsequent announcements;

• reviewed the potential related party transaction and any conflict of interest situation that may arise within the Company or the Group including any transaction, procedure or course of conduct that raises questions of management integrity;

• reviewed and evaluated factors relating to the independence of the External Auditors. The Audit Committee worked closely with the External Auditors in establishing procedures in assessing the suitability and independence of the External Auditors, in confirming that they are, and have been, independent throughout the conduct of the audit engagement with the Group in accordance with the independence criteria set out by the International Federation of Accountants and the MIA;

• considered and recommended to the Board of Directors the appointment of the External and Internal Auditors and payments of fees;

• reviewed the internal audit planning, internal audit reports, audit findings, audit recommendations made and management’s responses to these recommendations and actions taken to improve the system of internal control and procedures;

• reviewed with the External Auditors the audit planning memorandum covering the audit objectives and approach, audit plan, key audit areas and relevant technical pronouncements and accounting standards issued by Malaysian Accounting Standards Board;

• reviewed with the External Auditors the audit review memorandum covering the results of the audit of the audited financial statements and audit report in particular, accounting issues and significant audit adjustments arising from the external audit;

Audit Committee Report(Cont’d)

20 Homeritz Corporation Berhad (Company No. 805792-X) • ANNUAL REPORT 2014

Page 23: HOMERITZ CORPORATION BERHAD

• reviewed the annual financial statements of the Group prior to submission to the Board for consideration and approval;• reviewed the application of Corporate Governance principles and the extent of the Group’s compliance with the

Recommendations set out under the MCCG 2012;• reviewed the Statement on Risk Management and Internal Control for disclosure in this Annual Report; and• reviewed the Annual Report to ensure adherence to legal and regulatory reporting requirements and appropriate

resolution of all accounting matters requiring significant judgement.

INTERNAL AUDIT FUNCTION

The Board acknowledges that it is responsible for maintaining sound systems of internal control which provide reasonable assessment of effective operations, internal financial controls and compliance with laws and regulations as well as with internal procedures and guidelines.

The Group has engaged an external independent consultant to carry out the internal audit function to assist the Audit Committee in maintaining sound systems of internal control. The internal audits were undertaken to provide independent assessment on the accuracy, efficiency and effectiveness of the Group‘s internal control systems.

An overview of the Group’s approach in maintaining sound systems of internal control is set out in the Statement on Risk Management and Internal Control on pages 22 to 24 of this Annual Report.

Audit Committee Report(Cont’d)

21Homeritz Corporation Berhad (Company No. 805792-X) • ANNUAL REPORT 2014

Page 24: HOMERITZ CORPORATION BERHAD

INTRODUCTION

The Board is pleased to present below its Statement on Risk Management and Internal Control of the Group for the financial year under review until the date of approval, prepared in accordance with the Guidelines for Directors of Listed Issuers on the issuance of Statement on Risk Management and Internal Control pursuant to paragraph 15.26(b) of the Main Market Listing Requirements released by Bursa Securities.

BOARD RESPONSIBILITY

The Board acknowledges that it is responsible for ensuring that a sound system of risk management and internal control is maintained and that it has reviewed the effectiveness of these systems to safeguard shareholders’ interest and the Group’s asset.

During the financial year under review, the Managing Director and Group Accountant have provided assurance to the Board that the Group’s risk management and internal control systems have been operated adequately and effectively, in all materials aspects, based on the risk management framework and practices adopted by the Group.

However, in view of limitations that are inherent in any systems of risk management and internal control, such systems are designed to manage, rather than eliminate, the risk of failure to achieve business objectives of the Group and can only provide reasonable rather than obsolete assurance against material misstatement or loss.

RISK MANAGEMENT FRAMEWORK

The Board considers risk management to be fundamental to good management practice and a significant aspect of corporate governance. Effective management of risk will provide an essential contribution towards the achievement of the Group’s strategic and operational objectives and goals.

Risk management forms an integral part of the Group’s decision making and routine management, and are incorporated within the strategic and operational planning processes at all levels across the Group.

In order to achieve a sound system of risk management and internal control, the board and management ensure that the risk management and control framework is embedded into the culture, processes and structures of the Group and to the achievement of its business objectives.

The Board affirms that there is an on-going process for identifying, evaluating and managing the significant risks faced by major companies in the Group. The results of this process, including risk mitigating measures taken by Management to address key risks identified, are periodically reviewed by the Board.

The other features of the Group’s risk managements systems include the following:

• Policies, procedures, guidelines, templates and the likes are being developed to assist in ensuring an awareness of what is an acceptable level of risk and that risks and opportunities are managed consistently and effectively across the Group;

• The risk registers are used as one of the business tools to highlight the risks exposures and their risks mitigation. The risk registers are updated as and when there are changes to business environment or regulatory guidelines;

• The Heads of department are required to undertake risk assessments against their business plan strategies and other significant activities and to maintain risk registers that reflect an appropriate risk profile; and

• Periodic operational/management meetings are held to ensure that the risks identified are monitored and related internal controls are communicated to the management.

Statement On Risk Management And Internal Control

22 Homeritz Corporation Berhad (Company No. 805792-X) • ANNUAL REPORT 2014

Page 25: HOMERITZ CORPORATION BERHAD

Statement On Risk Management And Internal Control (Cont’d)

INTERNAL CONTROL SYSTEM

Internal Audit Function

The Board recognises that effective monitoring on a continuous basis is a vital component of sound internal control systems. The Group has an out-sourcing arrangement with an independent internal audit service provider in relation to its internal audit function to examine and evaluate the adequacy and effectiveness of the Group’s internal control systems of the business units. The internal audit adopts a risk-based approach and prepares its audit strategy and plan based on the risk profiles of individual business units of the Group. These plans are updated and approved by the Audit Committee regularly. The internal audit appraises and contributes towards improving the Group’s risk management and control systems, and reports to the Audit Committee on a regular basis. The professional fee incurred for the internal audit function in respect of FYE 2014 was RM22,500.

The other features of the Group’s systems of internal control include the following:

• Written communication of the Company values, the expected code of conduct, policies and procedures;

• Clearly defined objectives and term of reference of the board of directors and its committees;

• Clear organisation structure with delineated reporting lines;

• The Audit Committee reviews the quarterly financial results, annual report, audited financial statements, Group’s risk profile and internal control issues identified by the External Auditors, Internal Auditors and the management. The Audit Committee also monitors the implementation of the recommendations proposed by the External Auditors and Internal Auditors;

• A reporting system where information on financial performance and key business indicators are provided to the Audit Committee and the Board on a quarterly basis for review;

• Periodic management meetings are held to provide a forum where management undertakes overall responsibility for periodic reviews to identify, discuss and resolve key operational issues, to further improve its effectiveness;

• Appointment of staff is based on the required level of qualification, experience and competency to fulfill their responsibilities. Training and development is provided for selected staff to further enhance their skills and capabilities. In addition, a formal employee appraisal to evaluate and measure employee’s performance and their competency is performed at least once a year.

REVIEW OF THE STATEMENT BY EXTERNAL AUDITORS

As required by paragraph 15.23 of the Main Market Listing Requirements of Bursa Securities, the External Auditors have reviewed this Statement on Risk Management and Internal Control for inclusion in the annual report of the Group for FYE2014. Their review was performed in accordance with the Recommended Practice Guide (“RPG”) 5 issued by the Malaysian Institute of Accountants.

The External Auditors have opined to the Board that nothing has come to their attention that causes them to believe that this Statement intended to be included in the annual report is not prepared, in all material aspects, in accordance with the disclosures required by paragraphs 41 and 42 of the Statement on Risk Management and Internal Control: Guidelines for Directors of Listed Issuers to be set out, nor is factually inaccurate.

RPG 5 does not require the External Auditors to and they did not 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 system.

23Homeritz Corporation Berhad (Company No. 805792-X) • ANNUAL REPORT 2014

Page 26: HOMERITZ CORPORATION BERHAD

Statement On Risk Management And Internal Control (Cont’d)

Statement On Directors’ Responsibilities In Relation To The Audited Financial Statements

CONCLUSION

The Board has reviewed the adequacy and effectiveness of the system of risk management and internal controls, and that relevant actions have been or are being taken, as the case may be, to remedy the significant weaknesses identified from the review, which was largely based on the outcome of observations raised by the Internal Auditors and External Auditors directly to the Audit Committee.

The Board is of the view that the risk management and internal control systems are satisfactory and report that there were no significant internal control deficiencies or weaknesses that resulted in material losses or contingencies that would require disclosure in the Group’s Annual Report for the financial year under review.

This statement was approved at the meeting of the Board on 2 December 2014.

The Directors are responsible for the preparation of financial statements for each financial year. They are responsible for ensuring that these financial statements give a true and fair view of the state of affairs of the Group and of the Company and the results and cash flows of the Group and of the Company for the financial year then ended. The financial statements are prepared on a going concern basis, in accordance with applicable approved accounting standards and comply with the provisions of the Companies Act, 1965. It is the duty of the Directors to review the appropriateness of the basis before adopting the financial statements and present them before the Annual General Meeting together with their Report and the Auditors’ Report thereon.

The Directors are responsible for ensuring that proper accounting and other records are kept to sufficiently explain the transactions recorded. In preparing the financial statements, the Directors are required to exercise judgment to make certain estimates that are reasonable, prudent and relevant to be incorporated in the financial statements. The Directors are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps to prevent and detect fraud and other irregularities.

This above statement is approved at the meeting of the Board on 2 December 2014.

24 Homeritz Corporation Berhad (Company No. 805792-X) • ANNUAL REPORT 2014

Page 27: HOMERITZ CORPORATION BERHAD

1. Utilisation of Proceeds from Issuance of Initial Public Offering (“IPO”)

The Company did not raise funds through any corporate proposal during the financial year under review.

2. Share Buy-back

The Company did not enter into any share buy-back transactions during the financial year under review.

3. Options, Warrants or Convertible Securities

The Company did not issue any options, warrants or convertible securities during the financial year under review.

4. American Depository Receipt (ADR) or Global Depository Receipt (GDR) Programme

The Company did not sponsor any ADR or GDR programme during the financial year under review.

5. Sanctions and / or Penalties Imposed

There were no public sanctions and / or penalties imposed on the Company and its subsidiaries, Directors or Management by the relevant regulatory bodies during the financial year under review.

6. Non-Audit Fees

The amount of non-audit fees incurred for the services rendered to the Group by the External Auditors for the financial year under review amounted to RM2,500.00.

7. Variations in Results

There were no variations of 10% or more between the audited results and unaudited results of the Group for the financial year. The Company and its subsidiaries did not issue any profit estimates, forecast or projection for the financial year under review.

8. Profit Guarantee

No profit guarantee was provided by the Company or its subsidiaries during the financial year under review.

9. Material Contracts

During the financial year under review, there were no material contracts entered into by the Company and its subsidiaries involving Directors’ and / or substantial Shareholders’ interests.

Additional Compliance Information

25Homeritz Corporation Berhad (Company No. 805792-X) • ANNUAL REPORT 2014

Page 28: HOMERITZ CORPORATION BERHAD

Directors’ Report

The directors have pleasure in submitting their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 August 2014.

PRINCIPAL ACTIVITIES The Company is principally engaged in the business of investment holding and the provision of management services. The principal activities of the subsidiaries are disclosed in Note 5 to the financial statements.

There have been no significant changes in the nature of these principal activities during the financial year.

RESULTS Group Company RM RM Profit for the financial year 24,303,054 9,462,107 Attributable to : Owners of the Company 20,247,048 9,462,107 Non-controlling interests 4,056,006 - 24,303,054 9,462,107 In the opinion of the directors, the results of the operations of the Group and of the Company during the financial year have not been substantially affected by any item, transaction or event of a material and unusual nature.

DIVIDENDS

Dividends paid or declared by the Company since the end of the previous financial year were as follows :

(a) A final single tier tax-exempt dividend of 13.75% equivalent to 2.75 sen per ordinary share amounting to RM 5,500,000 which was proposed in respect of financial year ended 31 August 2013 and dealt with in the previous director’s report, was approved by the shareholders at the Annual General Meeting held on 19 February 2014 and subsequently paid on 17 March 2014. The payment was made to the shareholders whose name appeared in the Company’s Record of Depositors on 21 February 2014.

(b) A first interim single tier tax-exempt dividend of 5.00% equivalent to 1.00 sen per ordinary share amounting to RM 2,000,000 in respect of the financial year ended 31 August 2014 was declared on 28 April 2014 and subsequently paid on 13 June 2014. The payment was made to the shareholders whose name appeared in the Company’s Record of Depositors on 28 May 2014.

(c) A second interim single tier tax-exempt dividend of 5.00% equivalent to 1.00 sen per ordinary share amounting to RM 2,000,000 in respect of the financial year ended 31 August 2014 was declared on 24 July 2014 and subsequently paid on 12 September 2014. The payment was made to the shareholder’s whose name appeared in the Company’s Record of Depositors on 2 September 2014.

The Board of Directors proposed a final single tier tax-exempt dividend of 15.50% equivalent to 3.10 sen per ordinary share amounting to RM 6,200,000 in respect of the financial year ended 31 August 2014. This dividend is subject to the shareholders’ approval at the forthcoming Annual General Meeting and has not been included as a liability in the financial statements. Such dividend, if approved by the shareholders, will be accounted for in equity as an appropriation of retained profits for the financial year ending 31 August 2015.

Homeritz Corporation Berhad (Company No. 805792-X) • ANNUAL REPORT 201426

Page 29: HOMERITZ CORPORATION BERHAD

Directors’ Report (Cont’d)

RESERVES AND PROVISIONS

There were no material transfers to or from reserves or provisions during the financial year save as disclosed in the financial statements.

ISSUES OF SHARES AND DEBENTURES

There were no issue of shares and debentures during the financial year.

OPTIONS GRANTED OVER UNISSUED SHARES

No options have been granted by the Company to any person to take up any unissued shares of the Company during the financial year.

DIRECTORS

The directors who served since the date of the last report are as follows :

Chua Fen FattTee Hwee Ing (f)Mohd Khasan Bin AhmadDatuk Tay Puay ChuanTeo Seng Kuang

DIRECTORS’ INTERESTS

According to the register of directors’ shareholdings, the interests of directors holding office at the end of the financial year in shares of the Company and its related corporations are as follows :

Number of Ordinary Shares of RM 0.20 Each Balance at Sold/ Balance at 01.09.2013 Bought Transferred 31.08.2014

Chua Fen Fatt - Direct 71,839,800 - (3,000,000) 68,839,800 - Indirect (1) 71,839,800 - (3,000,000) 68,839,800 Tee Hwee Ing (f) - Direct 71,839,800 - (3,000,000) 68,839,800 - Indirect (1) 71,839,800 - (3,000,000) 68,839,800 Mohd Khasan Bin Ahmad 20,000 - - 20,000 Datuk Tay Puay Chuan - Direct 20,000 - - 20,000 - Indirect (1) 60,000 - (60,000) - Teo Seng Kuang - Direct 82,500 - - 82,500 - Indirect (2) 23,000 - - 23,000

Notes :

(1) Deemed interest by virtue of his/her spouse’s interests in the Company.

(2) Deemed interest by virtue of his nominee’s interest in the Company.

By virtue of their interests in the shares of the Company, Mr. Chua Fen Fatt and Madam Tee Hwee Ing are also deemed to have an interest in the shares of its subsidiaries to the extent that the Company has an interest.

27Homeritz Corporation Berhad (Company No. 805792-X) • ANNUAL REPORT 2014

Page 30: HOMERITZ CORPORATION BERHAD

Directors’ Report (Cont’d)

DIRECTORS’ BENEFITS

Since the end of the previous financial year, none of the directors has received or become entitled to receive any benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by the directors as disclosed in Note 19 to the financial statements) 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.

During and at the end of the financial year, no arrangements subsisted to which the Company was a party, whereby the directors of the Company might acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.

OTHER STATUTORY INFORMATION

(a) Before the statements of financial position and statements of profit or loss and other comprehensive income of the Group and of the Company were made out, the directors took reasonable steps :

(i) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and have satisfied themselves that there were no known bad debts to be written off and that no allowance for doubtful debts had been made ; and

(ii) to ensure that any current assets which were unlikely to realise their values as shown in the accounting records in the ordinary course of business had been written down to an amount which they might be expected so to realise.

(b) At the date of this report, the directors are not aware of any circumstances :

(i) which would necessitate the writing off of bad debts or the setting up of allowance for doubtful debts in respect of the financial statements of the Group and of the Company ; or

(ii) which would render the values attributed to current assets in the financial statements of the Group and of the Company misleading ; or

(iii) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate ; or

(iv) not otherwise dealt with in this report or financial statements of the Group and of the Company which would render any amount stated in the financial statements misleading.

(c) At the date of this report, there does not exist :

(i) any charge on the assets of the Group and of the Company which has arisen since the end of the financial year which secures the liabilities of any other person ; or

(ii) any contingent liability in respect of the Group and of the Company which has arisen since the end of the financial

year.

(d) In the opinion of the directors :

(i) no contingent or other liability has become enforceable, or is likely to become enforceable within the period of twelve months after the end of the financial year which will or may affect the ability of the Group and of the Company to meet their obligations as and when they fall due ; and

(ii) no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of the operations of the Group and of the Company for the financial year in which this report is made.

Homeritz Corporation Berhad (Company No. 805792-X) • ANNUAL REPORT 201428

Page 31: HOMERITZ CORPORATION BERHAD

AUDITORS

The auditors, Messrs. Crowe Horwath, have expressed their willingness to continue in office.

Signed on behalf of the Board in accordance with a resolution of the directors :

CHUA FEN FATTDirector

TEE HWEE ING (f)Director

Muar, Johor Darul TakzimDate : 2 December 2014

Directors’ Report (Cont’d)

29Homeritz Corporation Berhad (Company No. 805792-X) • ANNUAL REPORT 2014

Page 32: HOMERITZ CORPORATION BERHAD

Statement By DirectorsPursuant to Section 169(15) of the Companies Act, 1965

Statutory DeclarationPursuant to Section 169(16) of the Companies Act, 1965

We, the undersigned, being two of the directors of Homeritz Corporation Berhad, do hereby state that, in the opinion of the directors, the financial statements set out on pages 33 to 80 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 at 31 August 2014 and of the financial performance and cash flows of the Group and of the Company for the financial year ended on that date.

The supplementary information set out in Note 31 to the financial statements on page 81, 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 on behalf of the Board in accordance with a resolution of the directors :

CHUA FEN FATTDirector

TEE HWEE ING (f)Director

Muar, Johor Darul TakzimDate : 2 December 2014

I, CHUA FEN FATT, the director primarily responsible for the financial management of Homeritz Corporation Berhad, do solemnly and sincerely declare that the financial statements and supplementary information set out on pages 33 to 81 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 }the abovenamed CHUA FEN FATT at }Muar in the state of Johor Darul Takzim }on 2 December 2014 }

Before me : CHUA FEN FATT Lim Pei Ling (No. J238)Commissioner for Oaths

Homeritz Corporation Berhad (Company No. 805792-X) • ANNUAL REPORT 201430