PANTECH GROUP PPA P€¦ · Jalan Platinum Utama Kawasan Perindustrian Pasir Gudang Zon 12B 81700 Pasir Gudang Johor Darul Takzim, Malaysia Email: [email protected] PANTECH CORPORATION

A N N U A L R E P O R T 2 0 1 4

annua

l rep

ort 2014

One-Stop Centerfor Pipes, Valves, Fittings

PANTECH GROUPPANTECH GROUP

PANAFLO CONTROLS PTE LTD(200413822 D)

Singapore OfficeNo 22Pioneer Crescent #02-06 West Park Biz Central Singapore 628556 Tel: +65 6562 3048Fax: +65 6562 3148Email: [email protected]

PANTECH INTERNATIONAL (KSA) SDN BHD(890670-K)PTD 204334Jalan Platinum UtamaKawasan Perindustrian Pasir GudangZon 12B81700 Pasir GudangJohor Darul Takzim, MalaysiaEmail: [email protected]

PANTECH CORPORATION SDN BHD(176321-P)

Johor Bahru Head OfficePTD 204334Jalan Platinum UtamaKawasan Perindustrian Pasir GudangZon 12B81700 Pasir GudangJohor Darul Takzim, MalaysiaTel: +607 259 7979 Fax: + 607 256 7588/5789Email: [email protected]

Shah Alam OfficeNo. 3, Jalan Trompet 33/8Seksyen 33, 40400 Shah AlamSelangor Darul Ehsan, MalaysiaTel : +603 5192 7995Fax : +603 5192 7992Email : [email protected]

Pulau Indah (Warehouse Office)Persiaran Port Klang FZ 7, Jalan FZ 6-P1Port Klang Free Zone / KS 1242920 Pulau IndahSelangor Darul Ehsan, MalaysiaTel : +603 3101 3767Fax : +603 3101 4767

PANTECH (KUANTAN) SDN BHD(191606 U)Lot 5, Jalan Industri Semambu 2Kawasan Perindustrian Semambu25350 KuantanPahang Darul Makmur, MalaysiaTel: +609 568 7550Fax: +609 568 7553Email: [email protected]

Cert. No. KLR0404021

MS ISO/IEC 17021:2011OSH 18072007 CB 02

Cert. No. MY12/00913.01

MS ISO/IEC 17021:2011EMS 12072004 CB 03

SG12/03893.01 MY12/00912.01

PANTECH STEEL INDUSTRIES SDN BHD(509731-A)

ManufacturerLot 13258 & 13259Jalan Haji Abdul MananOff Jalan Meru42200 KaparSelangor Darul Ehsan, MalaysiaTel: +603 3393 1633Fax: +603 3392 8966Email: [email protected]

PANTECH STAINLESS & ALLOY INDUSTRIES SDN BHD(733428-W)

ManufacturerPTD 204334Jalan Platinum UtamaKawasan Perindustrian Pasir GudangZon 12B81700 Pasir GudangJohor Darul Takzim, MalaysiaTel: +607 251 8888Fax:+607 251 9999Email: [email protected]

NAUTIC STEELS LIMITED,UNITED KINGDOM(02302004)

ManufacturerNautic House, Claymore,Tame Valley Industrial Estate,Tamworth, Staffordshire,England, B77 5DQ



Cert. No. LRQ 0921634

PPA PP

ISO 9001 : 2008Cert No: SNG 6003354

ISO 14001 : 2004Cert No: SNG 6019422

ISO 18001 : 2007Cert No: SNG 6019422

Pantech Group Holdings Berhad (733607-W)2

Financial HighlightsCorporate InformationGroup StructureDirectors’ ProfileExecutive Chairman’s StatementManagement Review of Operations

and Financial ResultsCorporate Social Responsibility ActivitiesCorporate EventsAudit Committee ReportStatement on Risk Management

and Internal Control

010203040609

12141619

c o n t e n t sCorporate Governance StatementAdditional Compliance StatementFinancial StatementsList of PropertiesNotice of Eighth Annual General MeetingAnalysis of ShareholdingsAnalysis of ICULS HoldingsAnalysis of Warrant HoldingsProxy Form

212832

132133137140142 FYE

28 Feb 2014

575,61096,27275,22754,63754,638

113,909426,229690,465426,229195,915

10.028.53

24,9164.400.75

Ringgit Malaysia (RM'000)

RevenueEBITDAProfit Before TaxProfit After TaxProfit Attributable to ShareholdersPaid-Up CapitalShareholders' EquityTotal AssetsTotal Net Tangible AssetsTotal BorrowingsBasic Earnings Per RM0.20 Share (sen)Diluted Earnings Per RM0.20 Share (sen)Total Net Dividend DeclaredNet Dividend Per RM0.20 Share (sen)Net Tangible Assets Per Share (RM)

GROUP FIVE-YEAR SUMMARY

PBT margin improved to

13.06%

NTA stands at

RM426.23 milliontranslating to a

NTA/share of RM0.75

Total net dividend declared for FYE2014 is

RM24.92 million,representing

45% of our PAT

Rev

enue

RM

’000

401,578

10

335,779

11

434,604

12

635,663

13

575,610

14

Pro

fit

Aft

er T

axat

ion

RM

’000

50,871

10

28,980

11

34,223

12

56,063

13

54,637

14

Ear

ning

per

Sha

rese

n

13.60

10

6.45

11

7.60

12

11.73

13

10.02

14

Sha

reho

lder

s’ E

qui

tyR

M’0

00

232,891

10

317,268

11

337,230

12

377,019

13

426,229

14

FYE28 Feb 2010

401,57878,02366,75850,87150,87175,000

232,891390,775232,891119,560

13.60N/A

15,7164.200.62

FYE28 Feb 2011

335,77948,19137,36928,98028,99490,387

317,268522,054317,268141,657

6.456.15

13,7223.300.70

FYE29 Feb 2012

434,60462,90547,19834,22334,23290,530

337,230596,573337,230192,770

7.605.91

15,7283.500.74

FYE28 Feb 2013

635,663102,115

80,25556,06356,066

102,201377,019699,222377,019256,455

11.739.19

23,7954.600.74

Financial HighlightsCorporate InformationGroup StructureDirectors’ ProfileExecutive Chairman’s StatementManagement Review of Operations

and Financial ResultsCorporate Social Responsibility ActivitiesCorporate EventsAudit Committee ReportStatement on Risk Management

and Internal Control

010203040609

12141619

c o n t e n t sCorporate Governance StatementAdditional Compliance StatementFinancial StatementsList of PropertiesNotice of Eighth Annual General MeetingAnalysis of ShareholdingsAnalysis of ICULS HoldingsAnalysis of Warrant HoldingsProxy Form

212832

132133137140142 FYE

28 Feb 2014

575,61096,27275,22754,63754,638

113,909426,229690,465426,229195,915

10.028.53

24,9164.400.75

Ringgit Malaysia (RM'000)

RevenueEBITDAProfit Before TaxProfit After TaxProfit Attributable to ShareholdersPaid-Up CapitalShareholders' EquityTotal AssetsTotal Net Tangible AssetsTotal BorrowingsBasic Earnings Per RM0.20 Share (sen)Diluted Earnings Per RM0.20 Share (sen)Total Net Dividend DeclaredNet Dividend Per RM0.20 Share (sen)Net Tangible Assets Per Share (RM)

GROUP FIVE-YEAR SUMMARY

PBT margin improved to

13.06%

NTA stands at

RM426.23 milliontranslating to a

NTA/share of RM0.75

Total net dividend declared for FYE2014 is

RM24.92 million,representing

45% of our PAT

Rev

enue

RM

’000

401,578

10

335,779

11

434,604

12

635,663

13

575,610

14

Pro

fit

Aft

er T

axat

ion

RM

’000

50,871

10

28,980

11

34,223

12

56,063

13

54,637

14

Ear

ning

per

Sha

rese

n

13.60

10

6.45

11

7.60

12

11.73

13

10.02

14

Sha

reho

lder

s’ E

qui

tyR

M’0

00

232,891

10

317,268

11

337,230

12

377,019

13

426,229

14

FYE28 Feb 2010

401,57878,02366,75850,87150,87175,000

232,891390,775232,891119,560

13.60N/A

15,7164.200.62

FYE28 Feb 2011

335,77948,19137,36928,98028,99490,387

317,268522,054317,268141,657

6.456.15

13,7223.300.70

FYE29 Feb 2012

434,60462,90547,19834,22334,23290,530

337,230596,573337,230192,770

7.605.91

15,7283.500.74

FYE28 Feb 2013

635,663102,11580,25556,06356,066

102,201377,019699,222377,019256,455

11.739.19

23,7954.600.74

FINANCIAL HIGHLIGHTS

1annual report 2014

BOARD OF DIRECTORS

Dato’ Chew Ting LengExecutive Chairman / Group Managing Director

Dato’ Goh Teoh KeanGroup Deputy Managing Director

Mr. Tan Ang AngExecutive Director

Mr. To Tai WaiExecutive Director

Mr. Tan Sui HinSenior Independent Non-Executive Director

Mr. Loh Wei TakIndependent Non-Executive Director

Tuan Haji Yusoff Bin MohamedIndependent Non-Executive Director

Datuk Faizoull Bin AhmadNon-Independent Non-Executive Director

Ms. Ng Lee LeeExecutive Director

SHARE REGISTRAR

MEGA CORPORATE SERVICES SDN. BHD. (Company No.: 187984-H)Level 15-2, Bangunan Faber Imperial CourtJalan Sultan Ismail 50250 Kuala LumpurTel No. : 03-2692 4271Fax No. : 03-2732 5388

PRINCIPAL BANKERS

AmBank (M) BerhadAmIslamic Bank BerhadCIMB Bank BerhadCIMB Islamic Bank BerhadCitibank BerhadHong Leong Bank BerhadHong Leong Islamic Bank BerhadHSBC Amanah Malaysia BerhadHSBC Bank Malaysia BerhadHSBC Bank PlcOCBC Bank (Malaysia) BerhadThe Bank of Nova Scotia BerhadUnited Overseas Bank LimitedUnited Overseas Bank (Malaysia) Berhad

SOLICITORS

Adi Radlan & Co.Ng Kee Chong & Co.

AUDITORS

Messrs SJ Grant Thornton(Member of Grant Thornton International Ltd)Chartered Accountants Unit 29-08, Level 29, Mailbox 227Menara Landmark12, Jalan Ngee Heng80000 Johor Bahru

STOCK EXCHANGE LISTING

Main Market Bursa Malaysia Securities Berhad

STOCK CODE: 5125

AUDIT COMMITTEE

ChairmanMr. Tan Sui Hin

MembersMr. Loh Wei TakTuan Haji Yusoff Bin Mohamed

REMUNERATION COMMITTEE

ChairmanTuan Haji Yusoff Bin Mohamed

MembersDato’ Chew Ting LengMr. Tan Sui Hin

NOMINATION COMMITTEE

ChairmanMr. Loh Wei Tak

Members Mr. Tan Sui HinTuan Haji Yusoff Bin Mohamed

COMPANY SECRETARIES

Ms. Lim Seck Wah (MAICSA NO.: 0799845)Ms. Liang Siew Ching (MAICSA NO.: 7000168)

REGISTERED OFFICE

Level 15-2, Bangunan Faber Imperial CourtJalan Sultan Ismail 50250 Kuala LumpurTel : 03-2692 4271Fax : 03-2732 5388

Pantech Steel Industries Sdn. Bhd.

Pantech Stainless & Alloy Industries Sdn. Bhd.

Panaflo Controls Pte. Ltd.

JC Flow Controls Pte. Ltd.

Nautic Steels Sdn. Bhd.

Pantech International (KSA) Sdn. Bhd.

Nautic Steels (Holdings) Limited

Nautic Steels Limited

Pantech Corporation Sdn. Bhd.100%

100%

100%

100%

100%

100%

90%

100%

100%

70%

100%

40%

Pantech (Kuantan) Sdn. Bhd.

Pantech Realty Sdn. Bhd. (Formerly known as Jayee Holdings Sdn. Bhd.)

Tuah Nusa Sdn. Bhd.


CORPORATE INFORMATION

BOARD OF DIRECTORS

Dato’ Chew Ting LengExecutive Chairman / Group Managing Director

Dato’ Goh Teoh KeanGroup Deputy Managing Director

Mr. Tan Ang AngExecutive Director

Mr. To Tai WaiExecutive Director

Mr. Tan Sui HinSenior Independent Non-Executive Director

Mr. Loh Wei TakIndependent Non-Executive Director

Tuan Haji Yusoff Bin MohamedIndependent Non-Executive Director

Datuk Faizoull Bin AhmadNon-Independent Non-Executive Director

Ms. Ng Lee LeeExecutive Director

SHARE REGISTRAR

MEGA CORPORATE SERVICES SDN. BHD. (Company No.: 187984-H)Level 15-2, Bangunan Faber Imperial CourtJalan Sultan Ismail 50250 Kuala LumpurTel No. : 03-2692 4271Fax No. : 03-2732 5388

PRINCIPAL BANKERS

AmBank (M) BerhadAmIslamic Bank BerhadCIMB Bank BerhadCIMB Islamic Bank BerhadCitibank BerhadHong Leong Bank BerhadHong Leong Islamic Bank BerhadHSBC Amanah Malaysia BerhadHSBC Bank Malaysia BerhadHSBC Bank PlcOCBC Bank (Malaysia) BerhadThe Bank of Nova Scotia BerhadUnited Overseas Bank LimitedUnited Overseas Bank (Malaysia) Berhad

SOLICITORS

Adi Radlan & Co.Ng Kee Chong & Co.

AUDITORS

Messrs SJ Grant Thornton(Member of Grant Thornton International Ltd)Chartered Accountants Unit 29-08, Level 29, Mailbox 227Menara Landmark12, Jalan Ngee Heng80000 Johor Bahru

STOCK EXCHANGE LISTING

Main Market Bursa Malaysia Securities Berhad

STOCK CODE: 5125

AUDIT COMMITTEE

ChairmanMr. Tan Sui Hin

MembersMr. Loh Wei TakTuan Haji Yusoff Bin Mohamed

REMUNERATION COMMITTEE

ChairmanTuan Haji Yusoff Bin Mohamed

MembersDato’ Chew Ting LengMr. Tan Sui Hin

NOMINATION COMMITTEE

ChairmanMr. Loh Wei Tak

Members Mr. Tan Sui HinTuan Haji Yusoff Bin Mohamed

COMPANY SECRETARIES

Ms. Lim Seck Wah (MAICSA NO.: 0799845)Ms. Liang Siew Ching (MAICSA NO.: 7000168)

REGISTERED OFFICE

Level 15-2, Bangunan Faber Imperial CourtJalan Sultan Ismail 50250 Kuala LumpurTel : 03-2692 4271Fax : 03-2732 5388

Pantech Steel Industries Sdn. Bhd.

Pantech Stainless & Alloy Industries Sdn. Bhd.

Panaflo Controls Pte. Ltd.

JC Flow Controls Pte. Ltd.

Nautic Steels Sdn. Bhd.

Pantech International (KSA) Sdn. Bhd.

Nautic Steels (Holdings) Limited

Nautic Steels Limited

Pantech Corporation Sdn. Bhd.100%

100%

100%

100%

100%

100%

90%

100%

100%

70%

100%

40%

Pantech (Kuantan) Sdn. Bhd.

Pantech Realty Sdn. Bhd. (Formerly known as Jayee Holdings Sdn. Bhd.)

Tuah Nusa Sdn. Bhd.

3annual report 2014

GROUP STRUCTURE


DATO’ CHEW TING LENGExecutive Chairman / Group Managing Director

Dato’ Chew Ting Leng, Malaysian, aged 59, is one of the co-founders of the Group. He has more than 30 years of experience in the PVF solutions industries. He was appointed as Group Managing Director and Executive Chairman of Pantech Group Holdings Berhad (PGHB) on 11 November 2006 and 13 November 2006 respectively.

He is a member in the Remuneration Committee.

He does not hold any directorships in any other public companies.

DATO’ GOH TEOH KEANGroup Deputy Managing Director

Dato’ Goh Teoh Kean, Malaysian, aged 58, graduated with Diploma in Commerce (Financial Accounting) from Tunku Abdul Rahman College.

He has more than 20 years of experience in the PVF solutions industry. He is one of the co-founders of the Group and was appointed as the Group Deputy Managing Director on 11 November 2006. He is responsible for the financial functions of the Group.


TAN ANG ANGExecutive Director

Mr Adrian Tan, Malaysian, aged 58, was appointed as the Executive Director on 11 November 2006. He is responsible for the overall operation and performance of the Group’s manufacturing business and is also the Managing Director of Pantech Steel Industries Sdn. Bhd., Pantech Stainless & Alloy Industries Sdn. Bhd. and Nautic Steels Limited. He obtained his professional Diploma from the Chartered Institute of Marketing in 1989.


TO TAI WAIExecutive Director

Mr David To, Malaysian, aged 43, was appointed as the Executive Director on 11 November 2006. He started his career in Pantech Corporation Sdn. Bhd. since 1989 and has more than 20 years of experience in the PVF solution industries. He is primarily responsible for the domestic, international and project sales activities of the Group’s trading division and trading operation in Malaysia.


NG LEE LEEExecutive Director

Ms Ng Lee Lee, Malaysian, aged 47, was appointed as the Executive Director on 8 May 2013. She started her career in Pantech Corporation Sdn. Bhd., since 1990. She is primarily responsible for the human resources, administration and project sales division.

She does not hold any directorships in any other public companies.

TAN SUI HINSenior Independent Non-Executive Director

Mr Tan Sui Hin, Malaysian, aged 64, was appointed as an Independent Non-Executive Director on 30 November 2006. He graduated with a Diploma in Mechanical Engineering from Ungku Omar Polytechnic in 1971. He has more than 35 years of experience in the manufacturing and building engineering field.

He was appointed the Senior Independent Director with effective from 19 June 2014.

He is the Chairman of the Audit Committee and a member of both the Nomination and Remuneration Committees.


DIRECTORS’ PROFILE

5annual report 2014

LOH WEI TAKIndependent Non-Executive Director

Mr Loh Wei Tak, Malaysian, aged 41, was appointed as an Independent Non-Executive Director on 30 November 2006. He is a qualified accountant and a member of the Malaysian Institute of Accountants. He completed his Bachelor of Business Degree (Majoring in Accounting) from Monash University, Melbourne, Australia in 1994 and was admitted to Certified Practicing Accountant from Australia in 1998. In 2000, he was admitted as a Chartered Accountant to the Malaysian Institute of Accountants.

He is the Chairman of the Nomination Committee and member of the Audit Committee.


TUAN HAJI YUSOFF BIN MOHAMEDIndependent Non-Executive Director

Tuan Haji Yusoff Bin Mohamed, Malaysian, aged 63, was appointed as an Independent Non-Executive Director on 10 August 2007. He graduated from University Kebangsaan Malaysia with a Bachelor Degree in Economics (Hons).

He is the Chairman of the Remuneration Committee and a member of both the Audit and Nomination Committees.


DATUK FAIZOULL BIN AHMADNon-Independent Non-Executive Director

Datuk Faizoull Bin Ahmad, Malaysian, aged 54, was appointed as a Non-Independent Non-Executive Director on 11 June 2013. He graduated from Virginia Commonwealth University, United States with a Master in Public Administration.

He joined FELDA as an Administrative Officer from 1986 until 2003. Subsequently he was promoted to Assistant General Manager, FELDA Wilayah Persekutuan in 2003 and General Manager, FELDA Wilayah Persekutuan in 2005.

He was promoted as Director, Department of Innovation and Development for new generation, FELDA in 2010. He relinquished position as Deputy Director General (Community Development) and assumed the position of Director General of FELDA since 2011 until to date.

He currently sits on the Board of Felda Global Ventures Holdings Berhad, MSM Malaysia Holdings Berhad and Iris Corporation Berhad, all listed on Bursa Malaysia Securities Berhad.

OTHER INFORMATION:-

Directors Shareholdings

Details of Directors’ Shareholdings in the Company are as disclosed on page 34 of the Annual Report 2014.

Family relationship with Directors and/or Major Shareholders

Dato’ Chew Ting Leng and his spouse, Datin Shum Kah Lin are substantial shareholders of Pantech Group Holdings Berhad (“PGHB”) by virtue of their substantial shareholdings in CTL Capital Holding Sdn. Bhd. pursuant to Section 6A of the Companies Act 1965.

Dato’ Goh Teoh Kean and his spouse, Datin Lee Sock Kee are substantial shareholders of PGHB by virtue of their substantial shareholdings in GL Management Agency Sdn. Bhd. pursuant to Section 6A of the Companies Act 1965.

Conflict of Interest

All Directors have no family relationship with each other or major shareholders of PGHB. They have no conflict of interest with PGHB.

Conviction of Offences

All Directors have no convictions of offences within the past 10 years save for traffic offences, if any.

Attendance at Board Meetings

The attendance of the Directors is disclosed in the Corporate Governance Statement on page 24 of the Annual Report 2014.

DIRECTORS’ PROFILEcont’d

Dear Shareholders,

It is once again my pleasant duty to report the performance of Pantech Group Holdings Berhad. The year 2013 was a year of hesitancy among numerous companies, where a more cautious approach was adopted.


EXECUTIVE CHAIRMAN’S STATEMENT

7annual report 2014

EXECUTIVE CHAIRMAN’S STATEMENTcont’d

The quality of our products have proven itself as attested by the oil and gas projects entrusted to us, the approvals by the world’s leading oil and gas companies, and certifications we earned. Going forward, we will continue to serve the oil and gas sector regardless whether it is marine, onshore, offshore, upstream, midstream or downstream. Our strategy is to be well-placed to meet any piping needs of this industry.

Malaysia being our main base, continued to be our main revenue contributor, accounting for 51% of Group revenue. This was lower than the 60% recorded in FY2013 due to a sluggish oil and gas project implementation domestically. To counter this, the Trading Division focussed on other available projects.

Our footprint is now in 60 countries globally, in countries in the Americas, Europe including the Scandinavian nations, Africa, Middle East, Central Asia and Asia, to the Pacific countries.

The new head office completed ahead of schedule and the shift to the singular address took place in September 2013. Operating from a site where trading, manufacturing, warehousing and corporate administration are now integrated has provided Pantech Group improved management over overall operations. Planning ahead, Pantech Group holds a land bank of 7 acres on this same site for future expansion.

Pantech Group has prepared ahead for the Goods and Services Tax (GST) implementation next year by upgrading our accounting software, including extensive groundwork that will ready us to comply with the GST requirements when the time comes.

Pantech Group has been building strength on our foundational capability of being a One Stop Center for pipes, valves and fittings to the oil and gas industry. To this end, we have enlarged our expertise and experience to supply to onshore, offshore and subsea requirements. From carbon steel fittings to high frequency induction long bends, and now from stainless steel pipes to fittings, and various Nickel Alloy fittings, Pantech Group is consolidating on the position to supply with shortest turnaround time as possible. Our inventory of items stood at 30,000 items, and value-wise, comparable at RM251.20 million as at 28 February 2014 to RM259.20 million as at 28 February 2013.

For the financial year ended 28 February 2014, Pantech Group registered a net profit of RM54.64 million on the back of RM575.61 million revenue. This revenue was RM60.05 million year-on-year lower. However, the net profit was comparable to the RM56.06 million net profit registered in the preceding year. This translated to an improvement in net profit margin from 8.8% in the financial year before to 9.5% in this financial year.

This margin improvement was due to the strategy to move towards higher value niche products and also progress in our endeavour to achieve operational excellence; increasing productivity and efficiency while keeping a tight reign on cost and expenses.

Our business growth is linked closely to that of the oil and gas industry. The weaker domestic demand from the oil and gas sector which saw slower project execution in turn reduced the demand for piping solutions. This resulted in our Trading Division registering lower than expected revenue. The Trading Division accounted for 53.8% of our FY2014 revenue.

The easing on the trading front was slightly offset by the increased demands our manufactured products. The Manufacturing Division which has 3 plants - located in Pasir Gudang and Klang in Malaysia and Tamworth in United Kingdom - accounted for 46.2% of FY2014 revenue. This Trading:Manufacturing revenue ratio of 54:46 in FY2014 as compared to 60:40 in FY2013, moved towards an increase in manufacturing contribution, and is in line with Pantech Group’s strategy of achieving 50:50 revenue ratio by 2015.

Most of Pantech Group’s customers are in the oil and gas business. As per the years before, this economic driver sector was our main revenue contributor, and we envision this trend to continue for the foreseeable future. 66% of FY2014 revenue came from the oil and gas sector.


EXECUTIVE CHAIRMAN’S STATEMENTcont’d

Our focus is to develop the core competencies of Pantech Group. Our established brand name is an asset which we will reinforce as we seek to make deeper inroads into our core industry and geographical markets. With demand for fuel as the main energy source remaining unabated, we are confident that the demand for our pipes, valves and fittings as well as services will remain. We are constantly strengthening ourselves to meet the evolving business environment which exacts high standards and precision at competitive pricing. It is by having a finger on the pulse of development that we can meet these market demands and ensure the Group’s continued profitability for loyal shareholders.

Rewarding shareholders for the support and loyalty has been a belief that Pantech Group practise since our listing in 2007. For FY2014, the total dividend payout will come up to RM24.92 million or 45% of our total net profit for the year, should the proposed final dividend of 1.00 sen be approved by our loyal shareholders. Prior to this, Pantech Group has paid RM19.2 million in 3 single tier interim dividends in October 2013, and January and April 2014.

CORPORATE GOVERNANCE

Doing business with integrity and the ethical way is a core value that we hold close. We believe in mutual respect with our customers and business partners, and building trust by providing our utmost best in products and services in our dealings. We consciously build the Pantech brand on reliability on our word, character, ability, strength and truth of our business. These are values that transcend any product or service we offer.

Page 21 to 27 details our corporate governance statement and reports.

ACKNOWLEDGEMENTS

I would like to record my deepest appreciation to the shareholders, board of directors, management, staff, customers and business partners of Pantech Group for another year of strong belief and unwavering support. The progress of Pantech Group is without doubt powered by each and every one of you who have the interest of the group at heart.

The oil and gas sector is one of the National Key Economic Areas under the Economic Transformation Programme which has been identified to fuel Malaysia’s growth. The awarding of production sharing contract by the national oil and gas company, as well as the pace pick-up in the development of RAPID are all positive factors for Pantech Group. We will continue to work hard to grow the group and deliver value to shareholders.

Dato’ Chew Ting Leng (Jimmy)Executive Chairman

9annual report 2014

MANAGEMENT REVIEW OF OPERATIONS AND FINANCIAL RESULTS

FINANCIAL

Revenue contribution from the trading and manufacturing divisions drew closer to the targeted 50:50 by 2015 ratio. The Trading Division recorded a revenue of RM309.96 million or 53.8% of the total revenue for FY2014. Weaker local sales demand translated into a 19% lower segmental revenue as compared to the last financial year.

The Manufacturing Division, on the other hand, recorded RM265.65 million in revenue or 46.2% of the total revenue for FY2014. This was an increase of 5.8% in segmental revenue vis-a-vis FY2013. Overall, manufacturing experienced an increase in local and export demand last year and an expansion in product range. Pantech Group is pleased to report that the Manufacturing Division was able to increase output from all our manufacturing plants to meet this demand and translate them into sales.

The revenue contribution quantum from our manufacturing entities in Malaysia and the United Kingdom was 80% and 20% respectively. This is in line with expectation where the Malaysian manufacturing operation remains the main revenue driver in the manufacturing division. Going forward, we anticipate the Malaysian manufacturing companies to continue to lead in Pantech Group’s manufacturing division.

In terms of profitability, the segment profit before finance cost and interest income for manufacturing was higher at 17.5% this year as compared to 11.5% in FY2013 due to better product mix and positive contribution from Pantech Stainless & Alloy Industries Sdn. Bhd. (“PSA”). Based on our knowledge of the industry, the Group moved the production focus towards outputting more added value products such as niche fittings and certain types of fittings that command higher margins due to its technicalities and specialisation needs.

One of our key focuses as outlined prior to this, is to meet the market needs for niche products. To this end, Pantech Steel Industries Sdn. Bhd. (“PSI”) has done well. The strategy to move to niche products bore results as reflected in the increase in profit contribution from this manufacturing arm.

Going forward in FY2015, the Group is looking forward to an increased positive contribution from PSA which turned black in FY2014. This optimism is buoyed by production focus which now includes stainless steel fittings in addition to stainless steel pipes. This re-balancing of stainless steel pipes with stainless steel fittings production diminishes the recent outcome of the anti-dumping suit by International Trade Administration of the Department of Commerce of the United States of America where exports of welded stainless steel pipes from Malaysia, Thailand and Vietnam are now subjected to anti-dumping duty.

PSA which started with stainless steel pipes production in 2011 is today seeing 15% of its production dedicated to the higher value items of stainless steel fittings. PSA’s fittings are also finding excellent market acceptance overseas - 70% of its production are exported. In FY2013, only 40% of its fittings are exported. These developments are encouraging indeed after the steep learning curve that PSA encountered in its first two years of operation.

Overall, the Group recorded a paradoxical but positive outcome of comparable profit on a lower revenue. The Profit Before Tax (PBT) margin improved from 12.63% in FY2013 to 13.06% in FY2014 due to the niche product offerings by PSI and boost from more sales of PSA’s fittings. This resulted in the Group posting a RM54.64 million net profit, which was RM1.4 million lower than FY2013 net profit despite the 9.4% or RM60 million drop in revenue.

The financial period of 1 March 2013 to 28 February 2014 was period of executing strategies for Pantech Group, which featured the move to the new corporate head office in September 2013.

Pantech Group’s Manufacturing Division saw increased demand for the diversified fittings range, while the Trading Division experienced a slower demand on the domestic front due to tender reviews by oil and gas players. The strategy set two years ago to balance trading and manufacturing contributions bore fruit and helped put the Group business on an even keel and finished the financial year on a strong profit note. Pantech Group is looking forward to another year of sustained profitability despite anticipation of challenging environments of cost scrutiny and possible delays in projects in the oil and gas industry.


MANAGEMENT REVIEW OF OPERATIONS AND FINANCIAL RESULTScont’d

The stringent cost control measures adopted at the beginning of 2012 enabled Pantech Group to reign in expenses. FY2014 experienced the full impact of the minimum wage policy and we are pleased to report that Pantech Group managed to keep the cost of labour within expectations. Finance cost saw a reduction of approximately RM2.2 million while administration expenses went down by approximately RM45,000.

We will continue to strive for Operational Excellence even more so now that trading, manufacturing, warehousing and corporate office are integrated onto a single address in Zone 12B in Pasir Gudang.

The gearing level of the Group as at 28 February 2014 was 0.46 as compared to 0.68 as at the end of the last financial year. By utilising on hand working capital cash, we were able to reduce the working capital borrowings and this resulted in this lower gearing.

As a Group, managing our working capital efficiently to maintain a healthy cash flow is an important aspect of our financial management. This effort has enabled us to improve our financial performance such as reflected in the reduced interest cost among others. We are cognisant of the profound need to closely monitor our financial strength to be in the position to capitalise on opportunities that might arise.

Sharing our wealth with shareholders has always been a mainstay of our approach towards business. To this end, Pantech Group plans to pay out a total of 4.40 sen per ordinary share for FY2014. Of this, 3.40 sen has been paid out in 3 tiers throughout the financial year:

- The first interim dividend of 1.20 sen for every RM0.20 ordinary share was announced on 24 July 2013 and paid out on 22 October 2013.

- The second interim dividend of 1.20 sen for every RM0.20 ordinary share was announced on 23 October 2013 and paid out on 16 January 2014.

- The third interim dividend of 1.00 sen for every RM0.20 ordinary share was announced on 22 January 2014 and paid out on 16 April 2014.

The final single tier dividend of 1.00 sen per ordinary share has been proposed and is subject to shareholders’ approval at the Eighth Annual General Meeting on 28 August 2014. Upon approval, the total dividend payout will stand at RM24.92 million or 45% of the Group’s net profit. Whilst Pantech Group does not have an official dividend policy, track record shows that we have consistently rewarded loyal shareholders who put their trust over the years with us with a dividend payout averaging above 40%.

CAPACITIES AND MANUFACTURING

Increasing production capacity and outputting the right product mix to meet market demands are the current priorities at our manufacturing plants. At a total combined capacity of 36,200 metric tonnes per annum as at 28 February 2014, Pantech Group has increased capacity by 2,700 metric tonnes per annum. The three manufacturing plants of PSI, PSA and Nautic Steels Limited are running at optimised 88%, 80% and 75% output respectively.

The PSI plant in Klang which produces carbon steel fittings and high frequency induction long bends have ramped up enhancements to its production and productivity to record 2,500 metric tonnes increase in capacity. PSI’s capacity now stands at 21,000 metric tonnes per annum.

Meanwhile at PSA, the production now outputs a good mix of 3/8-inch to 16-inch stainless steel pipes and 1/2-inch to 12-inch stainless steel fittings. Of PSA’s 14,400 metric tonnes capacity, 15% are dedicated to production of high value stainless steel fittings.

The fittings production capability at Nautic was also rejuvenated via the installation of cutting-edge machine with advanced technologies. The capacity expansion at Nautic took place as planned with operations at the second site commencing and new machine commissioned in October 2013 to increase output from 600 metric tonnes last year to 800 metric tonnes per annum.

As we near our target of manufacturing playing an equal role with trading in Pantech Group’s growth, we will expand our capacity in accordance with market developments. Continuously meeting both upstream and downstream piping solutions needs of the oil and gas industry - be it from our manufacturing or our trading division - is our main aim.

MARKET

Our home base, Malaysia, continues to be a key market focus. However, with footprint in 60 countries, our approach remains to build firm market presence in all these countries. Pantech Group is continuously strengthening the relationship with our customers in these countries, and growing a larger footprint within these markets. The deeper market knowledge arising from these bonds contributes to us reading the market product needs and potential more accurately, and is instrumental in shaping our development to provide solutions that meet the needs of each market.

11annual report 2014

MANAGEMENT REVIEW OF OPERATIONS AND FINANCIAL RESULTScont’d

Whilst Pantech products are now used in all the continents of the world except Antartica, both North and South America are our most active foreign markets. Our export to South America in particular has been growing. We are confident that the Pantech brand will continue to grow recognition of as more oil and gas giants there become acquainted with our quality and ability to supply solutions that meet their stringent requirements.

Upholding the effort to create a brand presence in the market that matters, Pantech Group continued to participate in relevant oil and gas exhibitions in Malaysia and overseas. Of these, there were two notable exhibitions that were new to Pantech Group - an engineering exhibition in Myanmar and a stainless steel exhibition in The Netherlands. These marketing events serve multiple purposes. In addition to sourcing for new leads, the exhibitions provided a good avenue for Pantech Group to have a finger on the pulse of the latest developments in the industry and country or region, while building and strengthening existing relationship.

Pantech Group was present in 4 oil and gas exhibitions in the financial year under review:

- 2nd Sabah Oil & Gas Conference (SOGCE) in Kota Kinabalu, Sabah, Malaysia on 16 - 17 April 2013

- 14th Oil, Gas & Petrochemical Engineering Exhibition (OGA 2013) in Kuala Lumpur, Malaysia on 5 - 7 June 2013

- Global Engineering Myanmar 2013 in Yangon, Myanmar on 13 - 15 June 2013

- Stainless Steel World 2013 in Maastrict, The Netherlands on 12 - 14 November 2013

OUTLOOK AND CHALLENGES

Pantech Group is fully engaged in optimising the strategies which are now in progress. In Malaysia, the re-energising of the Refinery and Petrochemical Integrated Development (RAPID) project augurs well for Pantech Group. Pantech Group is optimistic of being one of the beneficiaries of the spillovers from the project which is located just down the road from our integrated operations in Pasir Gudang, Johor.

The business environment is also becoming more uncertain and competitive. The market is watching the developing geopolitical crisis in particular countries with oil and gas interest, with increasing trepidation. While closer back home, the influx of cheaper products have caused some customers to be excited. In this aspect, our established track record as a total solutions provider that has shored up years of technical know-how has given us the edge in competitive pitch. With Pantech Group’s ability to provide complete systems, we are increasingly being depended on for our project management capability.

Pantech Group will continue to enhance our reputation as a specialist manufacturer of niche products and grow our expertise and name in project management in the Trading Division. Our goal is to reinforce our One Stop Pipes, Valves and Fittings solutions provider status as we remain resolute to increase revenue and sustain profitability for shareholders.

Good governance, ethical practices and responsible citizenship hold the key to the future of businesses today.


Business is powered by people. A good working relationship with employees is critical to the success of any business. As such, our Corporate Social Responsibility (CSR) trust is centred on the welfare of the employees and the society.

WORKPLACE

We believe that the treatment of our staff reflects the principles valued in the Group. In 2013, the principles valued revolved around workplace safety and employee recognition.

Safety

Under Workplace Safety focus, fire drill exercises were held in Pantech Steel Industries Sdn. Bhd. (“PSI”), Pantech Corporation Sdn. Bhd. (“PCSB”) and Pantech Stainless & Alloy Industries Sdn. Bhd. (“PSA”). These activities served as a refresher to train the staff on how to react to emergencies. A demonstration on the correct technique of using fire extinguisher was held and the staff were given the opportunity for hands-on practice.

The fire drill exercises were coupled with elements of first aid course. This included training in the following: CPR, abdominal thrust for choking and Automated External Defibrillator (AED) for sudden cardiac arrest. Learning a systematic approach to dealing with conditions such as bleeding, burn, shock, fracture, spinal injuries and other common injuries also formed part of the training course.

Back-to-school Programme

Support and appreciation were the two concerns of Pantech’s Workplace Recognition activities. The Back-to-school programme aims to tackle the financial burden associated with school education. In Malaysia, every school-going child of Pantech’s staff received a new school bag and basic stationeries for primary and secondary school. Pantech Group gave RM100 Tesco vouchers for every primary school-going child and RM120 for every secondary school-going child respectively.

CORPORATE SOCIAL RESPONSIBILITY ACTIVITIES

Good governance, ethical practices and responsible citizenship hold the key to the future of businesses today.


Establishing healthy relationships

An Annual Dinner where all the staff of PCSB, PSA and Panaflo Controls Pte. Ltd. (“PNF”) could come together is both relationship-building and appreciation in nature. Such a night was held in Johor, where staff located down south gathered and long service staff of 5 years, 10 years and 15 years received tokens of appreciation. Likewise, a similar evening in Shah Alam was held for staff of PSI.

According to the Roman poet Virgil, “the greatest wealth is health”. To encourage staff to exercise and stay healthy, two badminton courts and unlimited supply of shuttlecocks were provided every week for PCSB and PSA employees. This helps to build teamwork, which leads to good relationship among the staff. As Pantech Group comprises many different departments, this activity encourages interactions among people from all departments.

Care for the elderly

The civilization of society is evident in the way we treat our aged and less privileged. We are pleased that our staff joined forces with the management to visit and deliver basic food items to 41 folks at Sunrise Care Centre Sdn Bhd in Johor, which is also better known as Rebina House. After spending time with occupants of the home, the employees had the pleasure of seeing faces lit up when RM10 red packets were handed to each of the old folks.

Care for the less fortunate

We believe that everyone is entitled to basic needs. Hence, our company supports the less fortunate by providing provision to the underprivileged families and sick children. For instance, PSI aided the family of a boy born with congenital epilepsy by providing them with milk powder. In addition, PSI also extended housekeeping training and basic needs to an underprivileged family with 7 children in Ijok. Pantech Group hopes that our little contributions can help alleviate their financial burden.

Our aspiration is to foster an environment where employees are deeply committed and highly motivated as we operate in a society that cares for the living.

CORPORATE SOCIAL RESPONSIBILITY ACTIVITIEScont’d

Stainless Steel World 201312 - 14 November 2013

Maastrict, The Netherlands

Global Engineering Myanmar 201313 - 15 June 2013

Tatmadaw Exhibition Center, Yangon

OTC Asia 2014 (Offshore Technology Conference Asia)

25 - 28 March 2014

Kuala Lumpur Convention Centre, Malaysia

Tube and Wire 2014 7 - 11 April 2014

Fairground Dusseldorf, Germany


CORPORATE EVENTS

Stainless Steel World 201312 - 14 November 2013

Maastrict, The Netherlands

Global Engineering Myanmar 201313 - 15 June 2013

Tatmadaw Exhibition Center, Yangon

OTC Asia 2014 (Offshore Technology Conference Asia)

25 - 28 March 2014

Kuala Lumpur Convention Centre, Malaysia

Tube and Wire 2014 7 - 11 April 2014

Fairground Dusseldorf, Germany


CORPORATE EVENTScont’d


The primary objective of the Audit Committee is to assist the Board in the effective discharge of its fiduciary responsibilities for corporate governance, financial reporting process and system of internal control.

The Audit Committee have adopted practices aimed at maintaining appropriate standards of responsibility, integrity and accountability to all the Company’s shareholders.

MEMBERSHIP

The Audit Committee is appointed by the Board and comprises exclusively of Independent Non-Executive Directors:-

Chairman

Mr. Tan Sui Hin : Senior Independent Non-Executive Director

Members

Haji Yusoff Bin Mohamed : Independent Non-Executive DirectorMr. Loh Wei Tak : Independent Non-Executive Director

AUTHORITY

The Committee shall, in accordance with a procedure to be determined by the Board and at the cost of the Company:-

a) have authority to investigate any matter within its terms of reference;

b) have adequate resources and unrestricted access to any information from both internal and external auditors and all employees of the Group in performing its duties;

c) have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity;

d) be able to obtain external legal or other independent professional advice and to invite outsiders with relevant experience to attend, if necessary; and

e) be able to convene meetings with the external auditors, the internal auditors or both, excluding the attendance of other directors and employees of the Company, whenever deemed necessary.

MEETINGS

The Chairman shall call a meeting of the Audit Committee if a request is made by any committee member, any Executive Director, or the external auditors.

A minimum of two members present shall form a quorum provided both of whom present are independent directors. The Committee shall meet with the external auditors and/or internal auditors without the presence of the executive board members at least once a year. The Company Secretary shall act as Secretary of the Audit Committee or in her/his absence, another person authorized by the Chairman of the Audit Committee.

There were five (5) Audit Committee meetings held during the financial year 2014. The details of attendance of Committee members are as follows:-

Name of Committee Members Designation Attendance

Mr. Tan Sui Hin Chairman 5/5

Haji Yusoff Bin Mohamed Member 5/5

Mr. Loh Wei Tak Member 4/5

AUDIT COMMITTEE REPORT


RESPONSIBILITIES AND DUTIES OF THE AUDIT COMMITTEE

The duties and responsibilities of the Committee shall include:-

a) To review and recommend the appointment of external auditors, the audit fee and any questions of resignation or dismissal including the nomination of person or persons as external auditors;

b) To review with the external auditors, the audit plan and audit report;

c) To review with the external auditors, their evaluation on the effectiveness of the system of internal controls;

d) To review the assistance and cooperation given by the employees of the Company to the external auditors;

e) To review the adequacy of the scope, functions, competency and adequacy of resources of the internal audit functions and authority to carry out its work;

f) To review the internal audit programme, processes and findings of the internal audit processes or investigation undertaken and whether or not appropriate corrective actions are taken on the recommendations of the internal audit function;

g) To review the quarterly results and annual financial statements, prior to their submission for consideration and approval by the Board of Directors, focusing particularly on:-

(i) changes in or implementation of major new or revised accounting policies;

(ii) significant and unusual events; and

(iii) compliance with accounting standards and other legal and regulatory requirements;

h) To review any related party transaction and conflict of interests situation that may arise within the company or group including any transaction, procedure or course of conduct that raises questions of management integrity;

i) To review the competency, professionalism and independency of the external auditors; and

j) To verify the allocation of options pursuant to a share scheme for employees at the end of each financial year.

SUMMARY OF ACTIVITIES OF THE AUDIT COMMITTEE

In line with the Terms of Reference of the Audit Committee, the following activities were carried out by the Audit Committee during the financial year ended 28 February 2014 in discharging its functions and duties:-

a) Reviewed the External Auditors’ scope of work and audit plans for the financial year under review;

b) Reviewed the results of audit and the audit report;

c) Reviewed and approved the Internal Audit Plan and the Internal Audit Report;

d) Reviewed the quarterly and annual financial statements of the Group prior to submission to the Directors for their perusal and approval. This was to ensure compliance of the financial statements with the provisions of the Companies Act, 1965, Malaysian Financial Reporting Standards, International Financial Reporting Standards and applicable Listing Requirements of Bursa Malaysia Securities Berhad;

e) Reviewed the unaudited quarterly financial results announcements and made recommendations to the Board of Directors for approval; and

f) Considered and recommended to the Board the re-appointment of External Auditors and their fees.

AUDIT COMMITTEE REPORTcont’d


INTERNAL AUDIT FUNCTION

The Group has outsourced its internal audit function to an independent professional consulting firm to assist the Audit Committee in discharging their responsibilities and duties. The role of the internal audit function is to undertake independent, regular and systematic reviews of the system of internal controls so as to provide reasonable assurance that such systems continue to operate satisfactory and effectively.

The professional fee incurred in respect of the internal audit function for the financial year ended 28 February 2014 was RM96,000.00.

The detail of internal audit functions during the period under review is stated in the Statement on Risk Management and Internal Control of this Annual Report. During the period under review, the Internal Auditors carried out the following activities:-

a) Presented and obtained approval from the Audit Committee the annual internal audit plan, its audit strategy and scope of audit work;

b) Performed audits according to the annual internal audit plan, to review the adequacy and effectiveness of the internal control system, compliance with policies and procedures and reported ineffective and inadequate controls and made recommendations to improve their effectiveness; and

c) Performed follow-up reviews in assessing the progress of the agreed management’s action plans and report to the management and Audit Committee.

EMPLOYEES’ SHARE OPTION SCHEME (“ESOS”)

The allocations of options were reviewed and verified by the Audit Committee to ensure compliance with the allocation criteria determined by the Option Committee and in accordance with the By-Laws of the ESOS.

ESOS granted to Non-Executive Directors

A breakdown of the options offered to the Non-Executive Directors pursuant to the ESOS in respect of the financial year under review are as follows:-

No. of options

No. NamesGranted on 03.03.2010 Exercised

Expired/ Forfeited

Unexercised as at

28.02.2014

1. Tan Sui Hin 250,000 (200,000) - 50,000

2. Haji Yusoff Bin Mohamed 250,000 - - 250,000

3. Loh Wei Tak 250,000 (200,000) - 50,000

ESOS granted to Directors and Senior Management

Pursuant to the Company’s ESOS By-Laws, not more than 50% of the Company’s shares available under the scheme shall be allocated to Directors and Senior Management. At the commencement of the scheme on 3 March 2010, the Company has granted 44.88% of ESOS to its Directors and senior management staffs.

There is no new option been granted during the financial year.

AUDIT COMMITTEE REPORTcont’d


STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

The Malaysian Code on Corporate Governance stipulates that the Board of Directors of a listed company should maintain a sound system of internal control to safeguard shareholders’ investment and the Company’s assets. The system of risk management and internal control covers not only financial controls but operational and compliance controls as well. This Statement on Risk Management and Internal Control is made pursuant to paragraph 15.26(b) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad.

Pursuant to Paragraph 15.23 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, the Group has requested that the external auditors to review this Statement on Risk Management and Internal Control in accordance with Recommended Practice Guide (“RPG”) 5 issued by the Malaysian Institute of Accountants. The Board is pleased to note that external auditors find this Statement to be consistent with their understanding of the risk management and internal control processes implemented by the Group during their review.

BOARD RESPONSIBILITY

The Board acknowledges its overall responsibility for the Group’s system of risk management and internal control and has in place an on-going process for identifying, evaluating and monitoring the significant risks affecting the achievement of its business objectives and strategies during the financial year and up to the date of approval of this statement for inclusion in the annual report. The system is designed to manage rather than eliminate the risk of failure to achieve business objectives and strategies, and can only provide reasonable but not absolute assurance against material misstatement, loss and fraud.

The Board also takes into consideration the need to balance the business risks and the potential returns to stakeholders in its daily operations, with the dynamic business climate it operates in. The Board recognises the need for a concerted effort from the management, head of department and senior staff members in ensuring that the integrity, effectiveness and adequacy of the control mechanism are monitored and maintained throughout the financial period.

ENTERPRISE RISK MANAGEMENT FRAMEWORK

During the financial year, the Group monitored significant risks and implement risk mitigation strategies on an ongoing basis through its Executive Directors, management and Risk Management Committee (“RMC”) within its risk appetite.

The Board has set up a Risk Management Committee (“RMC”) which comprises of Executive Directors and Senior Management of the Group. Executive Directors, senior management personnel and Departmental Heads are responsible for managing the risks of their respective business units, operational units and departments. Significant issues and risks are discussed during Executive Group Directors Meeting and management meetings which are attended by Executive Directors and senior management personnel. This process has been in place during the year under review and up to the date of approval of this statement for inclusion in the annual report.

INTERNAL AUDIT FUNCTION

The internal audit function has been outsourced by the Group to a professional firm, who reports directly to the Audit Committee on its findings and recommendations for improvements. An internal audit charter and internal audit plan has been submitted and approved by the Audit Committee.

For the financial year under review, the internal auditors have carried out their review according to the approved internal audit plan. The review covered the assessment on the adequacy and effectiveness of the Group’s risk management and internal control system. Upon completion, the internal audit observations, recommendations and management comments were reported to the Audit Committee. The Audit Committee reviews internal control matters and updates the Board on significant issues for the Board’s attention and action.

Total cost incurred for the internal audit function in respect of the financial year ended 28 February 2014 was RM96,000.


KEY ELEMENTS OF THE GROUP’S INTERNAL CONTROL SYSTEM

The key elements of the Group’s internal control system comprise the following:

l Responsibilities of the Board and management are defined to ensure effective discharge of roles and responsibilities;

l The Board and the Audit Committee meet every quarter to discuss matter raised by Management and/or Internal Audit on business and operational matters including potential risks and control issues;

l The Board has established and documented a Schedule of Matters Reserved for the Board to facilitate the effective reporting and operation of the Board at regular Board meeting. Major capital investment, acquisition, disposals or any other transaction not in the ordinary course of business exceeding a certain threshold must be referred to the Board for approval;

l Management reports to the Board on material findings and/or variances, if any, and the Board will review their implications to the Group and advise accordingly;

l Annual budgeting process is in place and performance is monitored on an ongoing basis;

l Senior Management attends Management meetings on a regular basis to address budgets, operational and financial performance, business planning, control environment and other key issues;

l Key personnel from respective subsidiaries provide monthly reports to the corporate office on the subsidiaries’ performance.

l Communication line has been established between subsidiaries, business units, divisions and employees through internal memorandums, staff briefings and operational meetings to achieve the Group’s overall business objectives;

l Close and active involvement of the Executive Directors in the day-to-day business operations of the Group; and

l Health, Safety and Environmental Committee has been established in order to review and ensure compliance with occupational safety and health policies and procedures on a continuous basis.

CONCLUSION

In reviewing the risk management and internal control system of the Group, the Board has, through the Audit Committee, received reports from External Auditors and Internal Auditors in relation to findings on risk and internal audit control system. The Board has also received reasonable assurance from the Group Managing Director and Group Deputy Managing Director that the Group’s risk management and internal control system is operating adequately and effectively, in all material respects.

No major weaknesses in internal control were noted that may have resulted in any material losses, contingencies or uncertainties that would require disclosure in the Group’s annual report.

The Board is of the opinion that the internal control system in place is adequate and effective at its current level of operations and will continuously strive to enhance the Group’s system of risk management and internal control in safeguarding stakeholders’ interest, shareholders’ investment and Group’s assets.

STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROLcont’d


CORPORATE GOVERNANCE STATEMENT

The Board of Directors (“the Board”) of Pantech Group Holdings Berhad (“Pantech” or “the Company”) recognises and subscribes to the importance of the principles and recommendations set out in the Malaysian Code on Corporate Governance 2012 (“the Code”) as a key factor towards achieving an optimal governance framework and process in managing the business and operational activities of the Company and its subsidiaries (“the Group”).

The Board believes that good corporate governance practices are pivotal towards enhancing business prosperity and corporate accountability with the ultimate objective of realizing long-term shareholder value, whilst taking into account the interests of other stakeholders. Hence, the Board is fully dedicated to continuously appraise the Group’s corporate governance practices and procedures to ensure that the principles and recommendations in corporate governance are applied and adhered to in the best interests of the stakeholders.

The Statement below sets out the manner in which the Group has applied the principles of the Code and the extent of compliance with recommendations advocated therein.

PRINCIPLE 1 - ESTABLISH CLEAR ROLES AND RESPONSIBILITIES OF THE BOARD AND MANAGEMENT

The Board recognises the key role it plays in charting the strategic direction of the Company and has assumed the following principal responsibilities in discharging its fiduciary and leadership functions:

• reviewing and adopting a strategic plan for the Company, addressing the sustainability of the Group’s business;

• overseeing the conduct of the Group’s business and evaluating whether or not its businesses are being properly managed;

• identify principal business risks faced by the Group and ensuring the implementation of appropriate internal controls and mitigating measures to address such risks;

• ensuring that all candidates appointed to senior management positions are of sufficient calibre, including the orderly succession of senior management personnel;

• overseeing the development and implementation of a shareholder communications policy, including an investor relations programme for the Company; and

• reviewing the adequacy and integrity of the Group’s internal control and management information systems.

To assist in the discharge of its stewardship role, the Board has established Board Committees, namely the Audit Committee, Nomination Committee, Remuneration Committee and Risk Management Committee, to examine specific issues within their respective terms of reference as approved by the Board and report to the Board with their recommendations. The ultimate responsibility for decision making, however, lies with the Board.

Board Charter

The Board had formalized and approved the Board Charter. The Board Charter will be reviewed as and when to ensure that it remains consistent with the Board’s objectives and best practices. The Board Charter can be accessed at the Company’s website at www.pantech-group.com.

Code of Conduct and Whistle-Blower Policy

The Company does not adopt the Code of Conduct and Whistle-Blower policy. The Board has always conducted themselves in an ethical manner while executing their duties and function. The Board believes in open management that any issues of concern can be channeled to Senior Independent Director or Executive Directors for appropriate action.

Sustainability of Business

The Board is mindful of the importance of business sustainability and, in conducting the Group’s business, the impact on the environmental, social and governance aspects is taken into consideration. The Board takes heed of go green save energy by implement several internal guidelines on sustainability.


CORPORATE GOVERNANCE STATEMENTcont’d

PRINCIPLE 1 - ESTABLISH CLEAR ROLES AND RESPONSIBILITIES OF THE BOARD AND MANAGEMENT cont’d

Supply of, and Access to, Information

The Board is supplied with relevant information and reports on financial, operational, corporate, regulatory, business development and audit matters, by way of Board reports or upon specific requests, for decisions to be made on an informed basis and effective discharge of Board’s responsibilities.

Good practices have been observed for timely dissemination of meeting agenda, including the relevant Board and Board Committee papers to all Directors prior to the Board and Board Committee meetings, to give effect to Board decisions and to deal with matters arising from such meetings. The Executive Directors and/or other relevant Board members furnish comprehensive explanation on pertinent issues and recommendations by Management. The issues are then deliberated and discussed thoroughly by the Board prior to decision making.

In addition, the Board members are updated on the Company’s activities and its operations on a regular basis. All Directors have access to all information of the Company on a timely basis in an appropriate manner and quality necessary to enable them to discharge their duties and responsibilities.

Senior Management of the Group and external advisers are invited to attend Board meetings to provide additional insights and professional views, advice and explanations on specific items on the meeting agenda. Besides direct access to Management, Directors may obtain independent professional advice at the Company’s expense, if considered necessary, in furtherance of their duties.

Directors have unrestricted access to the advice and services of the Company Secretary to enable them to discharge their duties effectively. The Board is regularly updated and advised by the Company Secretary who is qualified, experienced and competent on statutory and regulatory requirements, and the resultant implications of any changes therein to the Company and Directors in relation to their duties and responsibilities. The Company Secretary, who oversees adherence with board policies and procedures, briefs the Board on the proposed contents and timing of material announcements to be made to regulators. The Company Secretary attends all Board and Board Committees meetings and ensures that meetings are properly convened, and that accurate and proper records of the proceedings and resolutions passed are taken and maintained accordingly. The removal of Company Secretary, if any, is a matter for the Board, as a whole, to decide.

PRINCIPLE 2 - STRENGTHEN COMPOSITION OF THE BOARD

As at the date of this report, the Board consists of nine (9) members, comprising of an Executive Chairman who is also the Group Managing Director, one (1) Group Deputy Managing Director, three (3) Executive Directors, three (3) Independent Non-Executive Directors and one (1) Non-Independent and Non-Executive Director. This composition fulfills the requirements as set out under the Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa”), which stipulate that at least two (2) Directors or one-third of the Board, whichever is higher, must be Independent. The profile of each Director is set out in this Annual Report. The Directors, with their differing backgrounds and specializations, collectively bring with them a wide range of experience and expertise in areas such as finance; accounting and audit; corporate affairs; and marketing and operations.

Nomination Committee – Selection and Assessment of Directors

A Nomination Committee has been established, with specific terms of reference, by the Board, comprising exclusively Independent Non-Executive Directors as follows:

Chairman Mr. Loh Wei Tak Independent Non-Executive Director

Members Mr. Tan Sui Hin Senior Independent Non-Executive Director Haji Yusoff Bin Mohamed Independent Non-Executive Director



PRINCIPLE 2 - STRENGTHEN COMPOSITION OF THE BOARD cont’d

Nomination Committee – Selection and Assessment of Directors cont’d

The Nomination Committee is primarily responsible for recommending suitable appointments to the Board, taking into consideration the Board structure, size, composition and the required mix of expertise and experience which the Director should bring to the Board. It assesses the effectiveness of the Board as a whole, the Board Committees and the contribution of each Director, including Non-Executive Directors.

The final decision on the appointment of a candidate recommended by Nomination Committee rests with the whole Board. The Board is entitled to the services of the Company Secretary who would ensure that all appointments are properly made upon obtaining all necessary information from the Directors.

During the financial year, the Nomination Committee met once, attended by all members, to assess the balance composition of Board members based on merits, Directors’ contribution and Board effectiveness. The Company has no policy on gender diversity or target set but believes in merits and commitment of its Board members. The Nomination Committee assesses the Board members on an objective basis for both genders.

Directors’ Remuneration

A Remuneration Committee has been established by the Board, comprising a majority of Non-Executive Directors as follows:

Chairman Haji Yusoff Bin Mohamed Independent Non-Executive Director

Members Dato’ Chew Ting Leng Executive Chairman/Group Managing Director Mr. Tan Sui Hin Senior Independent Non-Executive Director

The Remuneration Committee has been entrusted by the Board to determine that the levels of remuneration are sufficient to attract and retain Directors of quality required to manage the business of the Group. The Remuneration Committee is entrusted under its terms of reference to assist the Board, amongst others, to recommend to the Board the remuneration of the Executive Directors. In the case of Non-Executive Directors, the level of remuneration shall reflect the experience and level of responsibilities undertaken by the Non-Executive Directors concerned. In all instances, the deliberations are conducted, with the Directors concerned abstaining from discussions on their individual remuneration. During the financial year under review, the Committee met once attended by all members.

Details of Directors’ remuneration for the financial year ended 28 February 2014 are as follows:

Remuneration (RM)

Executive Directors 6,556,425

Non-Executive Directors 158,000

Total 6,714,425

The remuneration paid to the Directors, analysed in the following bands, is as below:-

Range of Remuneration (RM) Executive Non-Executive

50,000 and below - 4

600,000 – 650,000 1 -

950,000 - 1,000,000 1 -

1,400,000 - 1,450,000 1 -

1,700,000 - 1,750,000 1 -

1,800,000 - 1,850,000 1 -

There is no service contract made between any Director and the Company or its subsidiary companies.



PRINCIPLE 3 – REINFORCE INDEPENDENCE OF THE BOARD

The roles of the Chairman and Group Managing Director are held by the same Director. This departs from the Recommendation 3.4 of the Code which stipulates that the positions of Chairman and Chief Executive Officer should be held by different individuals and that the Chairman must be a Non-Executive member of the Board. However, the Board believes that for its current size, it is more expedient for the two roles to be held by the same person as long as there are pertinent checks and balance to ensure no one person in the Board has unfettered powers to make major decisions for the Company unilaterally. As such, the Board is of the view that the significant composition of Non-Executive Directors, which is close to the current Board’s size, provides for the relevant check and balance.

The Executive Chairman is responsible for ensuring the adequacy and effectiveness of the Board’s governance process and acts as a facilitator at Board meetings to ensure all Directors participate and deliberated at all Board meetings and that no Board member dominates discussion. As the Group Managing Director, supported by fellow Executive Directors, he implements the Group’s strategies, policies and decision adopted by the Board and oversees the operations and business development of the Group.

The Independent Non-Executive Directors bring objective and independent views, advice and judgment on interests, not only of the Group, but also of shareholders and stakeholders. Independent Non-Executive Directors are essential for protecting the interests of shareholders and can make significant contributions to the Company’s decision by giving rationale and fair view and to decide impartially.

The Board recognizes the importance of establishing criteria on independence to be used in the annual assessment of its Independent Non-Executive Directors. Although the definition on independence according to the Listing Requirements of Bursa is used, the Board review and assess the independence of its Independent Directors annually based on their conduct, argue on the matters objectively and make decision rationally and other independence criteria to, inter-alia, include the nine (9)-year tenure for Independent Non-Executive Directors in its Board Charter.

PRINCIPLE 4 – FOSTER COMMITMENT OF DIRECTORS

The Board ordinarily meets at least six (6) times a year, scheduled well in advance before the end of the preceding financial year to facilitate the Directors in planning their meeting schedule for the year. Additional meetings are convened when urgent and important decisions need to be made between scheduled meetings. Board and Board Committee papers which are prepared by the Management, provide the relevant facts and analysis for the convenience of Directors. The meeting agenda, the relevant reports and Board papers are furnished to Directors and Board Committee members well before the meeting to allow the Directors sufficient time to peruse for effective discussion and decision making during meetings. At the quarterly Board meetings, the Board reviews the business performance of the Group and discusses major operational and financial issues. The Chairman of the Audit Committee informs the Directors at each Board meetings of any salient matters noted by the Audit Committee and which require the Board’s attention or direction. All pertinent issues discussed at Board meetings in arriving at the decisions and conclusions are properly recorded by the Company Secretary by way of minutes of meetings.

Board Meetings

There were Six (6) Board meetings held during the financial year ended 28 February 2014, with details of Directors’ attendance set out below:

Meetings Attended(out of 6 held)

Dato’ Chew Ting Leng Executive Chairman/Group Managing Director 6/6Dato’ Goh Teoh Kean Group Deputy Managing Director 6/6Mr. Tan Ang Ang Executive Director 6/6Mr. To Tai Wai Executive Director 6/6Ms. Ng Lee Lee Executive Director 4/4Mr. Tan Sui Hin Senior Independent Non-Executive Director 6/6Mr. Loh Wei Tak Independent Non-Executive Director 6/6Haji Yusoff Bin Mohamed Independent Non-Executive Director 6/6Datuk Faizoull Bin Ahmad Non-Independent Non-Executive Director 2/4



PRINCIPLE 4 – FOSTER COMMITMENT OF DIRECTORS cont’d

Board Meetings cont’d

It is the practice of the Company for Directors to devote sufficient time and efforts to carry out their responsibilities. All Board members are required to notify the Chairman before accepting any new directorships notwithstanding that the Listing Requirements of Bursa allow a Director to sit on the boards of 5 listed issuers. Such notification is expected to include an indication of time that will be spent on the new appointment.

Directors’ Training – Continuing Education Programmes

The Board is mindful of the importance for its members to undergo continuous training to keep abreast with changes to regulatory requirements and the impact such regulatory requirements have on the Group.

All the Directors of the Company have attended the Mandatory Accreditation Programme conducted by Bursatra Sdn Bhd within the stipulated timeframe required in the Listing Requirements during the financial year ended 2014.

During the year, all Board Members have attended pertinent training as below:-

Name of Director Date Training attended

(a) Dato’ Chew Ting Leng 28 August 2013 Business Performance Management

(b) Dato’ Goh Teoh Kean 28 August 2013 Business Performance Management29 October 2013 Economic & Market Update – QE Taper Off (Emerging Asia

in for a Rough Ride)7 November 2013 Budget 2014 Highlights19 February 2014 Corporate Seminar 2014 and Global Market Outlook

(c) Mr. Tan Ang Ang 21 August 2013 Advocacy Sessions on Corporate Disclosure for Directors of Listed Issuers

28 August 2013 Business Performance Management

(d) Mr. To Tai Wai 28 August 2013 Business Performance Management

(e) Ms. Ng Lee Lee 3-4 July 2013 Mandatory Accreditation Program (MAP)28 August 2013 Business Performance Management

(f) Mr. Tan Sui Hin 28 August 2013 Business Performance Management

(g) Mr. Loh Wei Tak 28 August 2013 Business Performance Management25 November 2013 2014 Budget Seminar – Key Budget Changes and their

Implications10 December 2013 Competency-based Performance Appraisal & Coaching for

High Performance

(h) Haji Yusoff Bin Mohamed 28 August 2013 Business Performance Management

(i) Datuk Faizoull Bin Ahmad 2-3 September 2013 RSPO Certified Sustainable Palm Oil Meeting and Seminar

Throughout the year, the Directors also received updates and briefings, particularly on regulatory, industry and legal developments, including information on significant changes in business and procedures instituted to mitigate such risks.

The External Auditors also briefed the Board members on any changes to the Malaysian Financial Reporting Standards that would affect the Group’s financial statements during the financial year under review. The Directors continue to undergo relevant training programmes to further enhance their skills and knowledge in the discharge of their stewardship role.

The Company Secretaries also update the Board Members on the relevant guidelines on statutory and regulatory requirements from time to time.



PRINCIPLE 5 – UPHOLD INTEGRITY IN FINANCIAL REPORTING BY COMPANY

It is the Board’s commitment to present a balanced and meaningful assessment of the Group’s financial performance and prospects at the end of each reporting period and financial year, primarily through the quarterly announcement of Group’s results to Bursa, the annual financial statements of the Group and Company as well as the Chairman’s statement and review of the Group’s operations in the Annual Report, where relevant. A statement by the Directors of their responsibilities in the preparation of financial statements is set out in the ensuing paragraph.

Statement of Directors’ Responsibility for Preparing Financial Statements

The Board is responsible to ensure that the financial statements are properly drawn up in accordance with the provisions of the Companies Act, 1965, Malaysian Financial Reporting Standards and International Financial Reporting Standards so as to give a true and fair view of the financial position of the Group as at the end of the financial year and of the financial performance and cash flows of the Group for the financial year then ended.

The Directors are satisfied that in preparing the financial statements of the Group for the year ended 28 February 2014, the Group has adopted suitable accounting policies and applied them consistently, prudently and reasonably. The Directors also consider that all applicable approved accounting standards have been followed in the preparation of the financial statements, subject to any material departures being disclosed and explained in the notes to the financial statements. The financial statements have been prepared on the going concern basis.

The Directors are responsible for ensuring that the Group keeps sufficient accounting records to disclose with reasonable accuracy, the financial position of the Group and which enable them to ensure that the financial statements comply with the Companies Act, 1965.

Audit Committee

In assisting the Board to discharge its duties on financial reporting, the Board has established an Audit Committee, comprising wholly Independent Non-Executive Directors, with Mr Tan Sui Hin as the Committee Chairman. The composition of the Audit Committee, including its roles and responsibilities, are set out in the Audit Committee Report of this Annual Report. One of the key responsibilities of the Audit Committee in its specific terms of reference is to ensure that the financial statements of the Group and Company comply with applicable financial reporting standards in Malaysia. Such financial statements comprise the quarterly financial report announced to Bursa and the annual statutory financial statements.

As the Board understands its role in upholding the integrity of financial reporting by the Company, it will take steps to revise the Audit Committee’s terms of reference by formalizing a policy on the types of non-audit services permitted to be provided by the external auditors of the Company so as not to compromise their independence and objectivity, including the need for the Audit Committee’s approval in writing before such services can be provided by the external auditors.

In assessing the independence of external auditors, the Audit Committee will in future require written assurance by the external auditors, confirming that they are, and have been, independent throughout the conduct of the audit engagement with the Company in accordance with the independence criteria set out by the International Federation of Accountants and the Malaysian Institute of Accountants.

PRINCIPLE 6 – RECOGNISE AND MANAGE RISKS OF THE GROUP

The Company has established a Risk Management Committee (“RMC”) and is headed by the Executive Director and members of key management team of the respective division. The Board delegates to the RMC the responsibility for evaluating, reviewing and monitoring the vital enterprise risks that affecting the business and operations as an on-going basis. The Board is committed to the development and implementation of an effective Enterprise Risk Management framework (“ERM”) to assist the Group to manage all key businesses risk with the intent to strengthening the risk management and internal control system as a whole.

Continuous efforts will be made to monitor and re-assess the existing ERM framework in regards to maintaining a proper system of managing risks as well as the related control activities.



PRINCIPLE 6 – RECOGNISE AND MANAGE RISKS OF THE GROUP cont’d

The internal audit function of the Group is outsourced to an independent professional firm, whose work is performed with impartiality, proficiency and due professional care, and in accordance with the International Professional Practices Framework of the Institute of Internal Auditors, which sets out professional standards on internal audit. It undertakes regular reviews of the adequacy and effectiveness of the Group’s system of internal controls and risk management process, as well as appropriateness and effectiveness of the corporate governance practices. The Internal Audit Function reports directly to the Audit Committee. Further details on the internal audit function can be seen in the Audit Committee Report and the Statement on Risk Management and Internal Control in this Annual Report.

PRINCIPLE 7 – ENSURE TIMELY AND HIGH qUALITY DISCLOSURE

The Board is aware of the need to establish corporate disclosure policies and procedures to enable comprehensive, accurate and timely disclosures relating to the Company and its subsidiaries to be made to the regulators, shareholders and stakeholders. On this basis, the Board has formalized pertinent policies and procedures not only to comply with the disclosure requirements as stipulated in the Listing Requirements of Bursa, but also setting out the persons authorised and responsible to approve and disclose material information to regulators, shareholders and stakeholders.

To augment the process of disclosure, the Board has earmarked a dedicated section for corporate governance on the Company’s website where information on the Company’s announcements to the regulators, the Board Charter, rights of shareholders and the Company’s Annual Report may be accessed.

PRINCIPLE 8 – STRENGTHEN RELATIONSHIP BETWEEN THE COMPANY AND ITS SHAREHOLDERS

Shareholder participation at general meeting

The Annual General Meeting (“AGM”), which is the principal forum for shareholder dialogue, allows shareholders to review the Group’s performance via the Company’s Annual Report and pose questions to the Board for clarification. At the AGM, shareholders participate in deliberating resolutions being proposed or on the Group’s operations in general. At the last AGM, a question & answer session was held where the Chairman invited shareholders to raise questions with responses from the Board.

The Notice of AGM is circulated at least twenty one (21) days before the date of the meeting to enable shareholders to go through the Annual Report and papers supporting the resolutions proposed. Shareholders are invited to ask questions both about the resolutions being proposed before putting a resolution to vote as well as matters relating to the Group’s operations in general. All the resolutions set out in the Notice of the last AGM were put to vote by show of hands and duly passed. The outcome of the AGM was announced to Bursa on the same meeting day.

Communication and engagement with shareholders

The Board recognises the importance of being transparent and accountable to the Company’s investors and, as such, has various channels to maintain communication with them. The various channels of communications are through the quarterly announcements on financial results to Bursa, relevant announcements and circulars, when necessary, the Annual and Extraordinary General Meetings and through the Group’s website at where shareholders can access pertinent information concerning the Group.

This Statement is issued in accordance with a resolution of the Board dated 19 June 2014.


ADDITIONAL COMPLIANCE STATEMENT

1. SHARE BUY-BACKS

Details of the share bought-back by the Company during the financial year are set out below:-

MonthNo. of Shares

purchased

Price per share (RM) Total Consideration

(RM)Lowest Highest Average

June - 2013 50,000 0.910 0.910 0.910 45,832.65

January - 2014 100,000 0.900 0.900 0.900 90,657.00 At the end of the financial year, a total of 3,452,300 ordinary shares at RM0.20 each were retained as treasury

shares. There was no sale or cancellation of treasury shares during the financial year.

2. OPTIONS, WARRANTS OR CONVERTIBLE SECURITIES ISSUED AND EXERCISED

Employees’ Shares Options Scheme (“ESOS”) The Company does not offer any options to the eligible employees of the Company under ESOS during the

financial year.

The ESOS will be expired by 2 March 2015.

Irredeemable Convertible Unsecured Loan Stocks 2010/2017 (“ICULS”)

During the financial year, a

Documents

PANTECH GROUP PPA P€¦ · Jalan Platinum Utama Kawasan Perindustrian Pasir Gudang Zon 12B 81700 Pasir Gudang Johor Darul Takzim, Malaysia Email: [email protected] PANTECH CORPORATION