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PRIVATE & CONFIDENTIAL
SUMMARY OF THE KEY MATTERS DISCUSSED AT THE SIXTH ANNUAL GENERAL MEETING OF MSM MALAYSIA HOLDINGS BERHAD HELD AT BANQUET HALL 1, LEVEL B2, MENARA FELDA, PLATINUM PARK, NO. 11, PERSIARAN KLCC, 50088 KUALA LUMPUR ON MONDAY, 15 MAY 2017 AT 11.00 A.M.
PRESENT
Board of Directors:
YB Tan Sri Hj. Mohd Isa Dato’ Hj Abdul Samad Chairman Non-Independent Non-Executive Director
YBhg. Dato’ Zainal Haji Ismail Independent Non-Executive Director
YBhg. Dato’ Rosini Abd Samad Independent Non-Executive Director
YBhg. Datuk Lim Thean Shiang Independent Non-Executive Director
YBhg. Dato’ Hajjah Rosni Haji Zahari Independent Non-Executive Director
YBhg. Dato’ Mohammad Fakhruddin Haji Mohd Ariff Independent Non-Executive Director
YB Datuk Noor Ehsanuddin Mohd Harun Narrashid Non-Independent Non-Executive Director
YBhg. Dato’ Zakaria Arshad Non-Independent Non-Executive Director ABSENT WITH APOLOGY
YBhg. Datuk Hanapi Suhada Non-Independent Non-Executive Director IN ATTENDANCE
Ms. Koo Shuang Yen Company Secretary
Encik Abd Rashid Atan Company Secretary BY INVITATION : SENIOR MANAGEMENT TEAM
Encik Mohamad Amri Sahari @ Khuzari President/Group Chief Executive Officer
Puan Aznur Kama Azmir Chief Financial Officer SHAREHOLDERS AND PROXIES
A total of 1,074 members comprising of shareholders and proxies, representing 620,882,973 ordinary shares or 88.32% of the total issued and paid-up capital of MSM, registered for MSM’s 6th AGM as per the Attendance Summary issued and verified by MSM’s Share Registrar, Messrs Symphony Share Registrars Sdn Bhd. EXTERNAL AUDITORS : MESSRS PRICEWATERHOUSECOOPERS (“PwC”)
Encik Azizan Zakaria
Mr. Teoh Chee Kean
Ms. Law Pei Yee
Ms. Aqilah Ratna Juwita
MSM MALAYSIA HOLDINGS BERHAD (Incorporated in Malaysia Company No. : 935722–K)
MSM MALAYSIA HOLDINGS BERHAD (935722-K) 6th Annual General Meeting held on 15 May 2017
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POLL ADMINISTRATOR
Messrs Symphony Share Registrars Sdn Bhd INDEPENDENT SCRUTINEERS
Messrs Deloitte Enterprise Risk Services Sdn Bhd led by Encik Megat Mohamad Faisal Khir Johari (Lead Independent Scrutineer) The Meeting commenced with a recitation of the Doa by Tuan Mohd Fadhil Md Hussin.
The Master of Ceremony introduced the Board of Directors, Senior Management and the Company
Secretaries of MSM Malaysia Holdings Berhad (“MSM”) that were present to the Meeting, to the
members of the floor.
1.0 CHAIRMAN’S WELCOMING ADDRESS
YB Tan Sri Hj. Mohd Isa Dato’ Hj Abdul Samad as the Chairman (“Tan Sri Chairman”) then
welcomed all present at the Sixth Annual General Meeting (“6th AGM”/“Meeting”) of MSM.
Tan Sri Chairman also informed all members present that YBhg. Datuk Hanapi Suhada
apologized for not being able to attend today's meeting due to his unsatisfactory health
condition.
2.0 CHAIRMAN AS APPOINTED PROXY
Tan Sri Chairman informed the members of the floor that as at 11.00 a.m :-
a. a total of 12 shareholders holding a total of 359,717,348 shares in MSM has
appointed him, the Chairman of the 6th AGM to represent them as their proxies in
this Meeting; and
b. he, as Chairman of the 6th AGM has also been appointed as the corporate
representative of two (2) major shareholders of MSM, namely Felda Global
Ventures Holdings Berhad and Felda Global Ventures Sugar Sdn Bhd which hold
51% of the total paid up share capital of the Company.
In this connection, Tan Sri Chairman represented 51.17% of the shareholdings of MSM for
the purpose of this 6th AGM.
3.0 QUORUM OF MEETING
Tan Sri Chairman informed that the requisite quorum was present for the 6th AGM of MSM
pursuant to Article 64 of the Articles of Association of the Company and called the
Meeting to order at 11.00 a.m.
4.0 NOTICE OF MEETING
With the permission of the Meeting, Tan Sri Chairman proceeded with the agendas of the
Meeting.
MSM MALAYSIA HOLDINGS BERHAD (935722-K) 6th Annual General Meeting held on 15 May 2017
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Tan Sri Chairman informed that the Notice convening the 6th AGM of MSM had been
circulated to the shareholders together with the 2016 Annual Report on 20 April 2017.
He put forward the Notice convening the 6th AGM to be taken as read.
5.0 MEETING OUTLINE
Tan Sri Chairman then provided an outline on the conduct of the 6th AGM:-
a. firstly, the President/Group Chief Executive Officer (Group CEO) of MSM, Encik
Mohamad Amri Sahari shall present the Company’s Performance Report for the
financial year ended 31 December 2016;
b. secondly, the questions received from the Minority Shareholders Watchdog Group
(“MSWG”) will be read together with the response;
c. the Meeting shall continue with questions from the Shareholders, Proxies or
Corporate Representatives before proceeding to a poll on all the resolutions; and
d. the Meeting shall be concluded, once the Chairman announced the results of the
poll.
6.0 VOTING PROCEDURES
Tan Sri Chairman highlighted, in conjunction with the amendments to the Main Market
Listing Requirements by Bursa Malaysia Securities Berhad on 24 March 2016, as one of the
measure to strengthen the corporate governance practices of listed issuers was to mandate
poll voting for all resolutions intended to be moved at any general meeting held on or after 1
July 2016.
Hence, in accordance to Paragraph 8.29A of the Main Market Listing Requirements of Bursa
Malaysia Securities Berhad, all resolutions set out in the Notice of this AGM shall be put to
vote by poll.
Each proposed resolution will require a proposer and a seconder from the members of the
floor. Those resolutions shall be opened to the members for discussion, if any, after which
it will then be put to vote by way of poll after all resolutions have been read.
Tan Sri Chairman reminded the poll proceedings shall be conducted after dealing with all
the business of the meeting. He then continued to announce that in line with the
recommended best practices in corporate governance, the poll voting will be conducted on a
poll through electronic voting (“e-Polling”), as MSM believes that this would result in a fair
and more accurate reflection of the views of shareholders through an efficient and
transparent process. In addition, this practice would enforce greater shareholders’ rights,
and it is consistent with the principle of “one share one vote”.
Tan Sri Chairman added that that the e-Polling is a more simplified process but in no way
affects shareholders’ voting rights or ability to ask questions.
MSM MALAYSIA HOLDINGS BERHAD (935722-K) 6th Annual General Meeting held on 15 May 2017
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Tan Sri Chairman also informed that MSM has appointed Symphony Share Registrars Sdn
Bhd as Poll Administrator to conduct the polling process and Deloitte Enterprise Risk
Services Sdn Bhd as Independent Scrutineers to verify the poll results. The e-Polling process
will commence after dealing with all the resolutions of the meeting.
Hence, Tan Sri Chairman exercised the powers conferred under Article 68 of the Articles
of Association of the Company for the Chairman to demand a poll for all resolutions.
7.0 PRESENTATION OF FINANCIAL PERFORMANCE FOR THE FINANCIAL YEAR ENDED
31 DECEMBER 2016 (“FINANCIAL PERFORMANCE”)
Tan Sri Chairman then invited Encik Mohamad Amri Sahari @ Khuzari (“Encik Amri
Sahari”), the Group CEO of MSM to present the financial performance of the Company and
accordingly, provide the questions received from MSWG together with the answers.
7.1) Financial Highlights
a) Revenue in 2016 stood at RM2.658 billion with a 15% increase on year-to-
year basis.
b) The Company recorded its Profit after Tax (“PAT”) of RM121.0 million, a
drop of 56% compared to 2015. The drop contributed in the decrease in
earnings per share of 17 cents as compared to 39 cents for the previous
year.
c) The significant drop in profitability was mainly contributed by the drastic
increased in raw sugar price and weakening of the Malaysian Ringgit
(“MYR”) against US Dollar (“USD”).
d) As at the end of 2016, the Company’s total assets were valued at RM3.23
billion, while its total liabilities were at RM1.24 billion. Net assets per share
recorded at RM2.83 per share.
e) The Company’s gearing ratio increased from 17% in 2015 to 26% in 2016.
f) The Company’s cash and cash equivalents increased from RM124.0 million
in 2015 to RM338.0 million at closing of 2016.
7.2) Operational Highlights
a) The Company’s sales were divided into two (2) main segments; Domestic
and Export.
b) In 2016, 87% of the sugar was sold in domestic market, while the remaining
13% was exported to various countries such as Singapore, Hong Kong,
Bangladesh, New Zealand and Australia.
c) Sales in domestic market, which comprised of wholesale and industry
increased by 29,276 MT or 3% in 2016.
d) Export segment, on the other hand decreased by 21% or equivalent to
35,097 MT.
MSM MALAYSIA HOLDINGS BERHAD (935722-K) 6th Annual General Meeting held on 15 May 2017
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e) Export allocation in 2016 was reduced in order to fulfil the increase in
domestic demand – this was given higher priority as it offered better
margin.
f) Overall, the total sales volume in 2016 stood at 1.028 million MT, almost flat
year on year basis.
g) In term of production, the Company produced 1.117 million MT of sugar in
2016, which was the highest ever recorded since its inception.
h) Production volume increased by 8% in 2016 as compared to 2015.
i) Despite the increased gas price and labour cost in 2016, the Company still
managed to contain the refining cost at a level almost equivalent to the 2015
figures. As such, it was achieved as a result of continuous improvement
efforts as well as aggressive cost cutting measures that were put in place
throughout the year.
j) It took collective team effort to achieve the improvement and Encik Amri
Sahari took the opportunity to give due credit to the Management team and
its staff that had worked hard for the Company.
7.3) Company’s Major Cost
a) Based on the presentation slides, the Company’s raw material i.e. raw sugar
was at 80% of the total cost.
b) The balance 20% of the total cost had been derived from the production
cost, general administration and distribution cost.
c) As the Company imports 100% of its raw material, the Company is
subjected to market fluctuations of global raw sugar commodity price.
d) Currently, the Company’s raw sugar mainly imported from Brazil, Australia
and Thailand.
e) In addition, the Company had also been exposed to the volatility of foreign
exchange as the purchase of raw material was in USD, in the quantum of
between USD400 to USD480 million annually.
7.4) Sensitivity Analysis
The sensitivity analysis of three (3) major factors affecting the Company’s
business operation were as follows:-
a) Domestic Selling Price
For every RM100 per metric ton charged on domestic selling price will
impact RM71.0 million of the Company’s PAT.
b) Raw Material Price (Raw Sugar Price)
For every USD0.01 per pound charged on raw sugar price will impact the
Company’s bottom line by RM54.0 million.
c) Foreign exchange of MYR against USD
For every MYR0.10 could vary the Company’s profitability by RM30 million.
MSM MALAYSIA HOLDINGS BERHAD (935722-K) 6th Annual General Meeting held on 15 May 2017
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7.5) Raw Material Cost Comparison between year 2016 and 2015
a) In 2016, as MYR weakened, the Company hedged its USD requirement at
average exchange rate of 4.10, which showed an increase of 7% year on
year.
b) Further to that, raw sugar cost had increased drastically by 26%, from
15.04c/lb in 2015 to 18.90c/lb in 2016.
c) Thus, in MYR significance, a hike from RM1,291.00 per metric ton to
RM1,735.00 per metric ton, or equivalent to 34% increase in raw material
cost, after factoring the impact of weakening MYR against USD.
d) Additional cost of RM444.00 to purchase every one metric ton of raw sugar
in 2016 as compared to the previous year, which had significantly reduced
its margins as well as the drop in its profitability for financial year 2016
against 2015.
7.6) Outlook for 2017
a) It was highlighted that 2017 will be yet another challenging year for the
MSM Group, as the Company and Group would be facing continuous
fluctuations of global raw sugar price, as well as the pressure on the foreign
exchange rate.
b) Despite this, the Management remains committed to maintain the
Company’s position as market leader in domestic market while growing its
export presence.
c) The Company will also be pushing through various cost-cutting measures to
bring down the cost and to optimise its assets utilisation, further supported
by the prudent management of Capital Expenditure throughout 2016
d) In the near proximity, the Management shall be adopting asset-light
investment approach as the Company wishes to focus on the growing of its
export market from the huge investment made in the Company’s new
refinery in Johor Bahru.
7.7) Update on Johor Refinery
a) The new refinery located at Tanjung Langsat, Johor Bahru was on track for
completion in the first half of 2018.
b) As at 30 April 2017, the project was 45% completed.
c) The Management continues to be committed to complete the project within
the approved budget of USD259.0 million.
d) The additional 1.0 million tonne capacity from the refinery will be a catalyst
to strengthen MSM’s export market and gradually, become a global sugar
player by 2020.
Upon completion of the presentation, Tan Sri Chairman invited the members of the floor
to raise any questions in relation to the performance of the Company.
Since there was no question from the floor, Tan Sri Chairman proceeded with the Meeting
agenda.
MSM MALAYSIA HOLDINGS BERHAD (935722-K) 6th Annual General Meeting held on 15 May 2017
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8.0 QUESTIONS RECEIVED FROM MSWG TOGETHER WITH THE RESPONSES FROM
MANAGEMENT
Members were informed that MSWG had submitted a series of questions to MSM prior to
the 6th AGM and the questions and responses from Management of MSM were presented
and read to the members of the floor for their notation – details attached as "Annexure
A" to the Minutes.
9.0 QUESTIONS AND ANSWERS FROM SHAREHOLDERS DURING MEETING
PROCEEDINGS
9.1 Prior to moving on to the agenda of the Meeting, Tan Sri Chairman invited the
attendees to come forth with any further questions pertaining to the Presentation
of Financial Performance of the Company for the year ended 31 December 2016
or other questions regarding the business of MSM Group of Companies.
9.2 Tan Sri Chairman further notified that only the Shareholders, Proxy or Corporate
Representatives are entitled to speak and raise questions. Tan Sri Chairman
further clarified that should any of the Shareholders, Proxy or Corporate
Representatives have questions, they are to approach the microphone provided
and announce their full name clearly and clarify whether they are a Shareholder,
Proxy or Corporate Representative before asking the question.
9.3 Puan Lya Rahman then proceeded to seek further clarifications on few issues. The
issues together with Board responses are as per the attached "Annexure B".
9.4 Other than Puan Lya Rahman, there were two (2) other shareholders raised their
questions. The questions and the responses from the Board and Management are
as per attached "Annexure B".
9.5 On the conclusion of the Questions and Answers session, Tan Sri Chairman
thanked the shareholders of the Company for their questions and comments.
9.6 Tan Sri Chairman then continued with the Meeting notifying all members that
each resolution tabled requires a Proposer and a Seconder before voting by way e-
polling is conducted once all agendas have been tabled.
9.7 Tan Sri Chairman requested that Proposer and Seconder for each resolution to
state their name in full clearly using the microphones provided and to additionally
state their status on whether they were a Shareholder, Proxy or Corporate
Representative.
10.0 MEETING PROCEEDINGS
Tan Sri Chairman then proceeded with the businesses on the Agenda of the 6th AGM.
MSM MALAYSIA HOLDINGS BERHAD (935722-K) 6th Annual General Meeting held on 15 May 2017
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11.0 POLL ANNOUNCEMENT RESULTS
Tan Sri Chairman informed the shareholders that the polling results for Resolutions 1 to 11 have been duly verified by Deloitte Enterprise Risk Services Sdn Bhd, the appointed Scrutineers and announced the results which are as below :-
Resolution
*Approved/
Not
Approved
For Against
No. of
Shares %
No. of
Shares %
Ordinary Resolution No. 1 Approved 537,073,734 99.9997 1,500 0.0003
Ordinary Resolution No. 2 Approved 537,062,534 99.9992 4,100 0.0008
Ordinary Resolution No. 3 Approved 491,503,134 91.5162 45,563,500 8.4838
Ordinary Resolution No. 4 Approved 440,587,034 99.9988 5,300 0.0012
Ordinary Resolution No. 5 Approved 440,597,234 99.9993 3,000 0.0007
Ordinary Resolution No. 6 Approved 440,577,234 99.9993 3,100 0.0007
Ordinary Resolution No. 7 Approved 440,577,334 99.9993 3,000 0.0007
Ordinary Resolution No. 8 Approved 440,597,234 99.9993 3,000 0.0007
Ordinary Resolution No. 9 Approved 537,072,634 99.9996 2,000 0.0004
Ordinary Resolution No. 10 Approved 537,073,134 99.9997 1,500 0.0003
Ordinary Resolution No. 11 Approved 440,598,134 99.9995 2,000 0.0005
12.0 CONCLUSION
12.1 Tan Sri Chairman thanked to all shareholders for their presence and participation at the 6th AGM of MSM.
12.2 Tan Sri Chairman then declared the 6th Annual General Meeting of MSM Malaysia
Holdings Berhad concluded at 1.20 p.m.
ANNEXURE A
QUESTIONS FROM MINORITY SHAREHOLDER WATCHDOG GROUP (MSWG) TOGETHER WITH RESPONSES FROM THE COMPANY
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STRATEGIC/FINANCIAL
Question 1 :
The Sales Analysis on Page 47 showed that the sales volume for export and industries for
FY2016 were lower compared with FY2015 while sales volume for domestic market had
increased.
a) Given that one of the functions of MSM Dubai that was opened in February 2016 is to
undertake sugar trading activities for Middle East & North Africa region and
neighbouring Asia Pacific region, what was the reason for the drop in export sales?
b) Would the Board foresee significant impact on the export sales of the Company from
the abolishment of EU sugar quota system by end of 2017?
c) Despite that the sales volume for domestic market had increased in FY2016, we noted
that the domestic market share for the Company had declined from 65% in FY2015 to
60% in FY2016. What was the reason for the decline in market share?
d) In April 2016, the Government had halted the issuance of import permit (AP) for sugar.
Would the Board see the increase in domestic and local industries sales, moving
forward?
e) The price of refined sugar was reviewed and increased from RM2.84 to RM2.95 per kg
from 1 March 2016. How was this impact the domestic and industries sugar
consumption?
Answer 1 :
a) Other than handling export sales, the main purpose of MSM Dubai is to better position the
Group by procuring raw sugar in bulk hence enable the refineries to lower down their costs
and at the same time improve the sugar trade flows and sugar purchase arrangement
previously done individually by the respective refineries.
As the government halted the issuance of sugar approved import permit (AP) in April 2016,
we reduced our export sales allocation in order to fulfil local requirement, which is our
main priority.
Strategies are in motion to improve the demand from export customers in 2017 and also in
preparation of the upcoming additional volume availability from our near refinery in 2018.
b) EU liberalisation shall allow its sugar prices to reflect the international sugar prices.
Nonetheless, the narrowing gap between the European and the world prices neither
guarantee a lower sugar price nor will it confirm the benefit it may bring to the EU food and
beverage industry. Taking cognisant of this interesting development, MSM will expedite its
export programme enhancement for the current year and implement marketing strategy to
the specific key markets in conjunction with the additional tonnage coming out from the
Johor Refinery.
ANNEXURE A
QUESTIONS FROM MINORITY SHAREHOLDER WATCHDOG GROUP (MSWG) TOGETHER WITH RESPONSES FROM THE COMPANY
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c) MSM market share is usually within the range of 60% - 65% annually which includes both
domestic and industries segment for approximately 1 million MT per annum of refined
sugar sold locally. Two key factors underpinning the stability of MSM’s market share in
FY2016 are; the movement of the international raw sugar price and the market volatility
facing the sugar business globally and changes to industries segment pricing which reflects
NY#11 raw sugar price. This offers a level playing field for both local sugar producers
based on total sugar consumption of 1.5 million MT per annum in Malaysia.
d) Having invested a huge amount of CAPEX for its refineries, the government’s move to cease
the issuance of import permit (AP) is welcomed. This is expected to provide cushion and in
part increase our sales in the months ahead by protecting the domestic market from being
diluted by the influx of foreign sugar and at the same time allow the local refiners to focus
on their business of ensuring a steady sugar supply for the nation.
e) Effective 1 March 2017, the Ministry of Domestic Trade, Cooperatives and Consumerism
(KPDNKK) issued a federal gazette setting the ceiling price of refined sugar increased by
11sen/kg. While we welcomed the Government’s move for the price increase, it is still
insufficient for us to offset the volatility in raw sugar price and foreign exchange. We
anticipate domestic consumption to remain flat in FY2017.
Question 2 :
We noted that the Company imports 100 percent of its raw sugar and cost accounts for 80
percent of the Company’s total operating cost.
In view that the price of raw sugar is subject to factors that are mostly not within the control
of the Company, would the Company consider re-venture into sugar cane plantation, if not in
Malaysia, in foreign countries which have more conducive environment for sugar cane, in
order to have a better control over the price and quality of the raw material?
Answer 2 :
In short term and mid-term strategy, we wish to remain focus in our core business, i.e. in sugar
refining activities. Going upstream or cane plantation will require heavy investment, therefore
MSM will be selective on any new investment opportunities to be undertaken.
Question 3 :
As reported in the Business Operation Analysis and Strategic Review for Supply Chain
Management and Distribution, due to limitation of skillset and inefficiencies caused by ageing
infrastructure and technologies, non-core backroom process would continue to be outsourced.
Heavy expenses would be required to upgrade the ageing infrastructure and technologies.
a) What would be the amount expected to be incurred on the upgrading works and what is
the timeline set for the work?
ANNEXURE A
QUESTIONS FROM MINORITY SHAREHOLDER WATCHDOG GROUP (MSWG) TOGETHER WITH RESPONSES FROM THE COMPANY
Page 3 of 7
b) How would the outsourcing strategies affect the cost structure and total operating cost
of the Division?
Answer 3 :
a) We expect minimal upgrading costs as we are looking into outsourcing strategy for our
logistics division.
b) S&D cost is one of the many operating costs that are being tracked in our continuous effort to
improve the Group’s overall profitability. With regard to S&D, the cost elements which are
being considered for outsourcing are the whole fleets and logistical arrangement with
regards to movement of refined sugar. With the distribution plan managed by the
outsourced company, MSM will focus on its core competency of processing and refining of
quality refined sugar and this will enable MSM to serve its customers better and achieved
their value proposition.
Question 4 :
We noted that the Lost Time Injury (LTI) in FY2016 for Raw Sugar Refining Division was 73
days and the KPI set was 96 days.
a) What was the average cost per LTI day?
b) What was the major cause of the accidents that leads to LTI?
c) How was the LTI of the Company compared with other companies in the industries?
d) Could the Board share the health and safety management system of the Company?
e) What is the budget allocated for effective implementation of the workplace health and
safety management?
Answer 4 :
a) The average cost per LTI days for the two refineries is RM178.91 derived by the total cost of
RM 26,300 divided by 147 LTI days. The total cost is derived from the number of Medical
Leave taken multiplied by the salary per individual involved. 73 days stated in the annual
report is the average LTI days for the group.
b) The two major types of incidents were workers slipped, tripped or fell; and workers being
hit or struck by object.
The root cause for majority of cases was due to unsafe acts by workers. We are tackling this
issue by continuous improvement of our worksite and improved our staff safety awareness
through scheduled training, compulsory Personal Protective Equipment and implement
safety walkabouts. In order to be continuously certified, we engage in periodical OHSAS
9001 (Occupational Health Safety Management System) audits. It is mandatory for everyone
entering our sites to go through a safety briefing.
ANNEXURE A
QUESTIONS FROM MINORITY SHAREHOLDER WATCHDOG GROUP (MSWG) TOGETHER WITH RESPONSES FROM THE COMPANY
Page 4 of 7
c) For manufacturing industry with heavy machineries, LTI is normally more than 100 days.
d) The Health and Safety Management System is satisfactory and is in place and functioning
within the company. The available In House System and Policies are in compliance with the
OSHA Act 1994 and in summary the followings has been implemented.
a. Safety Policies implemented and committed by the top management.
b. Safety Committee has been formed with meetings held every quarter
c. Employing DOSH green book certified Safety and Health Officer (SHO)
d. Adhere to industry standard for safety by providing training and audits. Namely OHSAS
9001 Training
e. Monthly reports for management review
f. Walkabout and safety audit
g. Engagement with FGV Group Safety
e) Sufficient budget is allocated for the health and safety awareness programme, scheduled
training, tools and personal protective equipment (PPE) of about RM 500,000.00 a year.
CORPORATE GOVERNANCE
Question 1 :
We noted that the cost for internal audit for FY2016 was approximately 30% lower compared
with FY2015.
What was the reason for lower cost incurred for Internal Audit Department?
Answer 1 :
The internal audit cost is being charged to MSM Group through management fees mechanism. In
the year of service i.e. FY2016, the charging is based on budgeted audit man-days. Further to the
finalisation of the audited account and tax return, the final amount to be charged will be reflected
accordingly.
In terms of the audit services being delivered for FY2016, the number of Budgeted Man-days of
404 is lower than the 2015 Actual Man-days of 523.
In this regard, the actual fee for FY2015 was RM1,430,139 as compared to FY2016 Budget of
RM1,387,258 which is consistent with the lower audit fees disclosed.
Question 2 :
Under Resolution 3, Company seeks shareholders’ approval for the payment of a portion of
Directors’ fees payable to the Non-Executive Directors up to an amount of RM1,350,000 from 1
January 2017 until the next Annual General Meeting of the Company.
a) Could the Board provide the computation in arriving at the amount RM1,350,000 based
on the note to the Resolution and the number of existing Directors?
ANNEXURE A
QUESTIONS FROM MINORITY SHAREHOLDER WATCHDOG GROUP (MSWG) TOGETHER WITH RESPONSES FROM THE COMPANY
Page 5 of 7
b) What was the reason for the Company to seek shareholders’ approval for a portion of
Directors’ fees payable to Non-Executive Directors instead of full amount of the fees and
what would be the total fees payable proposed for the period?
Answer 2 :
a) The computation in arriving at the amount of RM1,350,000 for the proposed payment of a portion of Directors’ fees payable to the Non-Executive Directors from 1 January 2017 to the next AGM of the Company (18 months) is as follows :
BOARD
MONTHLY (RM)
2017 (1.1.2017 – 31.12.2017)
(RM)
2018 (1.1.2018 – 30.6.2018)
(RM)
TOTAL (RM)
1 Chairman 20,000 240,000 120,000 360,000
11 Board Members 5,000 660,000 330,000 990,000
TOTAL 1,350,000
The above portion of Directors’ fees payable was calculated for the maximum numbers of Directors allowed that is 12 Board members as per Article 84 of the Company’s Articles of Association and for the period of 18 months from 1 January 2017 till the next AGM which to be held no later than 30 June 2018. To-date, MSM has a total of 9 Directors of which all are Non-Executive Directors.
b) The total annual fees payable proposed for the 18-month period from 1 January 2017 to 30
June 2018 will be as below:
Summary of directors fees payable in RM
Monthly fee Annual Fee Grand total Chairman 360,000 112,500 472,500 Directors 990,000 990,000 1,980,000 1,350,000 1,102,500 2,452,500
Breakdown of directors fee payable FY2017 - mid FY2018
Fees No. of pax
2017 2018 Total
12 months 6 months Chairman Monthly fee 20,000 1 240,000 120,000 360,000
Annual fee 75,000 1 75,000 37,500 112,500 Subtotal (A) 472,500
Directors Monthly fee 5,000 11 660,000 330,000 990,000 Annual fee 60,000 11 660,000 330,000 990,000
Subtotal (B) 1,980,000 TOTAL (A+B) 2,452,500
ANNEXURE A
QUESTIONS FROM MINORITY SHAREHOLDER WATCHDOG GROUP (MSWG) TOGETHER WITH RESPONSES FROM THE COMPANY
Page 6 of 7
Resolution 3 seeks shareholders’ approval to pay a portion of the Directors’ fees on monthly basis as below : i) Non-Executive Chairman : RM20,000/month ii) Non-Executive Director : RM5,000/month
The Board is of the view that it is just and equitable for the Directors to receive fees on a monthly basis after they have discharged their responsibilities and rendered their services to the Group throughout the Relevant Period.
Question 3 :
Under Resolution 4, the Company seeks shareholders’ approval for payment of benefits payable to the Non-Executive Directors up to an amount of RM1,780,000 from 1 January 2017 until the next Annual General Meeting of the Company.
Please provide the amount allocated to each director for the period compared with the amount paid in 2016 showed on Page 87 of the Annual Report.
Answer 3 :
The benefits payable to the Non-Executive Directors up to an amount of RM1,780,000 for the period from 1 January 2017 until the next Annual General Meeting of the Company was calculated for the maximum numbers of Directors allowed that is 12 Board members as per Article 84 of the Company’s Articles of Association. To-date, MSM has a total of 9 Directors of which all are Non-Executive Directors.
Based on the estimated amount payable mentioned under Resolution 4, the amount allocated to each director for the period of 18 months from 1 January 2017 until the next annual general meeting of the company compared to the amount paid in FY2016 is as stated in the next slide :
Director
Benefits FY 2016 (12 months)
Benefits FY2017/2018 (18 months)
Meeting allowance
(RM)
Benefit-in-kind & Other benefits
(RM)
Meeting allowance
(RM)
Benefit-in-kind & Other benefits
(RM)
Tan Sri Hj Mohd Isa Dato Hj Abdul Samad
16,000 - 36,000 282,775 (including RM265,080 the Company car allowance)
Dato’ Zainal Hj Ismail 48,016 30,000 72,000 62,695
Dato’ Hajjah Rosni Haji Zahari
50,016 33,765 72,000 62,695
Datuk Noor Ehsanuddin Mohd Harun Narrashid
20,000 30,000 54,000 62,695
Datuk Lim Thean Shiang 24,000 30,000 66,000 62,695
Dato’ Rosini Abd Samad 50,016 33,765 66,000 62,695
Datuk Hanapi Suhada 12,000 - 48,000 62,695
ANNEXURE A
QUESTIONS FROM MINORITY SHAREHOLDER WATCHDOG GROUP (MSWG) TOGETHER WITH RESPONSES FROM THE COMPANY
Page 7 of 7
Datuk Zakaria Arshad (appointed on 1 April 2016)
14,000 - 84,000 (including RM12,000
subsidiary Board meeting)
17,695
Dato’ Mohammad Fakhruddin Haji Mohd Ariff (appointed on 21 November 2016)
2,000 - 66,000 62,695
Dato’ Mohd Emir Mavani Abdullah (resigned on 1 April 2016)
6,000 - - -
Dato’ Sheikh Awab Sheikh Abod (deceased on 14 April 2016)
- 141,968 - -
SUB TOTAL 242,048 299,498 564,000 739,335
Add: Estimation for 3 additional directors
- - 144,000 188,085
Add: Board Tender Committee of 4 members
- - 144,000 -
TOTAL 541,546 1,779,420 *
* rounded up as RM1,780,000
Question 4 :
We noted that Datuk Hanapi Suhada has attended only 5 out of 8 Board Meetings (63%).
What was the reason for him not being able to attend the meeting held during the year given that the Board Meetings for the financial year ended 31 December 2016 were scheduled in advance in November 2015 as stated in the Corporate Governance Statement? Answer 4 :
Datuk Hanapi Suhada has given great commitment by actively participated in all meetings that he attended since his appointment to the Board on 7 October 2015. However in FY2016, he attended 5 out of 8 meetings (63%) due to his health conditions.
ANNEXURE B
QUESTIONS AND ANSWERS FROM SHAREHOLDERS DURING MEETING PROCEEDINGS
Page 1 of 5
A. Puan Lya Rahman, the Representative from MSWG further enquired the Directors on the
following matters:-
Question 1 :
Agenda 4, Resolution 3 of the Notice in relation to the portion of Directors’ Fees
payable to the Non-Executive Directors amounting to RM1,350,000. Puan Lya Rahman
highlighted that the Directors’ Fees was derived based on the composition of twelve
(12) Directors which is the maximum number of Directors allowed under the Article 84
of the Company’s Articles of Association.
Her enquiries were :
a) whether the Board has any plan to appoint three (3) additional Directors for the
period and what would be the justification for having additional Directors
taking into consideration that the current Board size which is considered not
small; and
b) the purpose of splitting the monthly fees and annual fees which in turn would
then require a separate approval from the Shareholders.
Answer 1 :
a) In answering Puan Lya Rahman, Tan Sri Chairman informed that the Board is
expecting to appoint one (1) additional female Director in the near future in line with
the regulator’s recommendation that the Board must have at least 30% female
directors, whereas the other two (2) additional Directors will be considered by the
Board later.
Based on Tan Sri Chairman’s response above, Puan Lya Rahman further
commented that the fees payable for Directors’ should not be based on 12
Directors.
b) Puan Aznur Kama Azmir, the Chief Financial Officer (“CFO”) clarified that MSM has
started to implement the splitting of monthly fee and annual fee since its listing to
Main Board of Bursa Malaysia in 2011.
Question 2 :
Based on Puan Aznur’s response above, Puan Lya Rahman sought further clarification
on the necessity to split up the Directors’ monthly fees and annual fees since the
Directors’ fees even without the new Companies Act still subject to the shareholders’
approval.
Answer 2 :
Encik Abd Rashid Atan, the Company Secretary responded to Puan Lya Rahman’s question
that with the implementation of the Companies Act, 2016 effective from 31 January 2017,
there are grey areas and MSM was following Bursa Malaysia’s practice. He further
explained that the reason the Directors’ fees is split into monthly and annual fees is
because the Company does not categorise it as monthly allowance but instead treat it as
fees. As for transparency, Encik Abd Rashid Atan said that a comparison between the
approved fees and the actual monthly fees paid will be tabled to the shareholders and be
disclosed in the Annual Report accordingly.
ANNEXURE B
QUESTIONS AND ANSWERS FROM SHAREHOLDERS DURING MEETING PROCEEDINGS
Page 2 of 5
Question 3 :
Puan Lya Rahman sought further clarification on Resolution 2 Agenda 3 in regards to
the payment of Directors’ fees of RM1.322 million for the financial year ended 31
December 2016 whether this was also paid monthly? If yes, then to her it is more a
ratification rather than an approval.
Answer 3 :
Encik Abd Rashid Atan responded that part of the total Directors’ fees referred to in
Resolution 2 was already paid on a monthly basis since January 2016.
Question 4 :
Puan Lya Rahman continued to enquire in relation to Agenda 5, Resolution 4 to the
Chairman of the Remuneration Committee. She questioned that the Directors’ Benefits
have been increased substantially in some Directors’ benefit payable increased more
than 100% for each Director, i.e. Tan Sri Chairman has been given car allowance of
approximately RM20,000 per month.
Pn. Lya Rahman enquired YBhg. Dato’ Zainal Haji Ismail, the Chairman of the
Remuneration Committee to provide the justification for the recommendation by the
Remuneration Committee seeing as the performance of MSM has not met expectations.
Answer 4 :
YBhg. Dato’ Zainal Haji Ismail, the Chairman of Remuneration Committee clarified that
based on the responsibilities borne by the Directors, the Remuneration Committee finds
the increase in Directors’ Benefits was justifiable.
En. Abd Rashid Atan, the Company Secretary further added that the Directors’ Benefits
budget allocation also included the budget for the Board Tender Committee, even though
the Board Tender Committee has yet to be set up. He also stated that the medical expenses,
insurance coverage for medical and Directors’ and Officers’ Liability Insurance have also
been included in the Directors’ Benefits.
Question 5 :
Puan Lya Rahman enquired explanation for the lesser number of the budgeted man
days on Internal Audit services as opposed to the actual man days in 2015 and
requested affirmation from the Board on whether this was due to expected less
Internal Audit work or whether it was a result of cost cutting measures?
Answer 5 :
Puan Aznur Kama Azmir, the Chief Financial Officer (“CFO”) explained that with regards to
the number of man days spent by Internal Audit on the audit of the Company, 2016
reflected a higher number of man days as compared to 2015 but recorded a lower total fee
due to cost cutting measures. Additionally, she added that the total fee was higher than the
budgeted.
ANNEXURE B
QUESTIONS AND ANSWERS FROM SHAREHOLDERS DURING MEETING PROCEEDINGS
Page 3 of 5
On behalf of the Company, Encik Abd Rashid Atan, the Company Secretary informed
that the Company shall take note of the comments by Puan Lya Rahman to provide a
more transparent disclosure for the benefit of the shareholders.
B. Mr P.Y. Lim, a shareholder of the Company raised the following concerns:-
Question 1 :
The issue regarding the Directors fees was brought up in the previous year Annual
General Meeting. The Chairman of the Remuneration Committee was requested to
provide the benchmark used in determining the Directors’ fees/allowances.
Answer 1 :
Encik Abd Rashid Atan, the Company Secretary clarified that comparing to the current
market, MSM’s directors’ fees is within the range but on the higher side. However,
compared to the previous year, the proposed fees payable is RM900,000 lower which
reduced by approximately RM200,000 for Chairman and RM100,000 for each of the
directors. Tan Sri Hj. Mohd Isa Dato’ Hj Abdul Samad, the Chairman advised that the
Directors had contributed in accordance to their respective specialties.
Question 2 :
Mr P.Y. Lim requested for further explanation on the reasons behind the requirement
to have such a large number of Directors sitting on the Board in view of the Company
having only one (1) core business.
Answer 2 :
Encik Abd Rashid Atan explained that the Directors’ fee was budgeted for 12 Board
members is because MSM might need to increase its number of Directors in the near future.
But definitely as mentioned Chairman, MSM need at least one (1) more lady director as to
adhere to the requirement imposed by the regulator. The approved budgeted figures
however, will be tabled in next coming AGM to show the comparison between the
approved budgeted figures as opposed to the actual payment made up to June 2018.
Question 3 :
Earnings Per Share has dropped by 50%, in light thereof, it was enquired on the
remedial actions that the Board has taken to recover from the loss.
Answer 3 :
Encik Mohamad Amri Sahari, the Group Chief Executive Officer advised that Earnings Per
Share has dropped due to higher raw sugar prices as well as the strengthening of USD
against Ringgit Malaysia whereas the ceiling price has already been set by the government
which in turn does not allow the Company to price the product based on the targeted
margin.
ANNEXURE B
QUESTIONS AND ANSWERS FROM SHAREHOLDERS DURING MEETING PROCEEDINGS
Page 4 of 5
Question 4 :
Sugar purchase being 80% of the total cost of the Company, whether the Company has
a policy to hedge against the fluctuation of the raw sugar price and foreign exchange.
He further enquired on whether the Sugar Contract is a physical or non-physical
contract.
Answer 4 :
Encik Mohamad Amri Sahari informed that in terms of the raw sugar purchase, MSM is on
100% physical.
Pn. Aznur Kama Azmir, the Chief Financial Officer of the Company added that the Company
hedge back to back upon the arrival of the raw sugar shipments.
Question 5 :
With sugar plantation having ceased since year 2011 to be replaced by palm oil trees
and rubber trees and in light of 6 years having passed which is the time required for
the trees to mature and bear fruit, it was enquired on why the revenue derived from
the palm oil and rubber trees was not reflected in the Annual Report. Additionally, the
Key Indicator Index (KPI) set for rubber tree replanting has only been recorded at 26%
as compared to the targeted KPI set of 100%. Mr P.Y. Lim enquired on why the
replanting of rubber trees was so slow. He also enquired for information on the age
profile of MSM’s rubber and oil palm plantation.
Answer 5 :
Encik Mohamad Amri Sahari, the Group Chief Executive Officer commented that the
Company’s former sugar plantation now consisted of 101 hectares of Palm Oil Trees and
another approximately 3,000 hectares of Rubber Trees. The harvesting of the palm oil
trees started last year and for the rubber trees is targeted to start mid this year, by July.
Pn. Aznur Kama Azmir added that the revenue contribution derived from rubber trees and
oil palms was too little and did not warrant a separate disclosure since it is not required in
accordance with the respective accounting standards. She further confirmed the revenue
derived from the harvest of palm trees is nearly RM500,000.00 and that the rubber trees
would subsequently be harvested in July.
Question 6 :
Referring to Page 140 of the Annual Report, a further explanation on the Inventory
Write Down of RM13.20 million and the Provision of Onerous Contracts of RM16.6
million was requested.
Answer 6 :
Puan Aznur Kama Azmir commented that the Inventory Written Down was based on the
following conditions:-
i) Market fluctuation on raw sugar price;
ii) Net realisable value of inventory;
iii) Provision of contract; and
iv) Comparison of the client’s price against the market price.
ANNEXURE B
QUESTIONS AND ANSWERS FROM SHAREHOLDERS DURING MEETING PROCEEDINGS
Page 5 of 5
Provision for the onerous contracts is when the company compare again the contract price
that the company has locked with customers against the current raw sugar price. Basically
the provision is because of the movement of the commodity prices.